New year, new plan for Grande Cache

CANADIAN producer Grand Cache Coal has announced several changes to its business plan for the new fiscal year, including production cutbacks, in light of the weak market and more forecasted drops in global steel use.
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Image courtesy of Grand Cache Coal

Donna Schmidt

For the year beginning April 1, 2009, the company anticipates a sales volume of 1.1-1.3 million tonnes, a “significant amount” of which has already been contracted. The sold tonnage includes a portion of carryover from the fiscal 2008-09 year and at last year's contracted price.

“Current year price settlements are in keeping with other announced settlements in the industry,” the producer said.

“Negotiations are continuing with the remaining historical customers of the corporation, as well as with prospective new customers.”

The company sold 1.06Mt in the last fiscal year, including 110,000t in the final quarter.

To keep a balance on stockpiles for this fiscal year, Grand Cache said it would curtail production at its mines for a series of two-week periods in May, July and December. Those adjustments would aid it in meeting anticipated demand.

The producer also has a careful watch on its capital expenditure for the coming year, with planned spending at approximately $C67 million. Of this, $20 million has been earmarked for the development of the No. 8 surface mine and the No. 12B underground operation.

Another $28 million of its budget has been sliced off to cover the surface mine’s equipment.

“[The mine’s] equipment was ordered in 2008 for delivery early in 2009 and was subsequently deferred to the fall of 2009. The fiscal 2010 capital expenditures are expected to be funded by cash flow from operations and equipment leases,” it said.

Grande Cache said it would continue to aggressively pursue new markets and spot sales despite “bleak” global steel outlook for the 2009 calendar year.

"[The outlook] has resulted in reduced demand and lower prices for metallurgical coal, which are being reflected in contract settlements for fiscal 2010,” president Robert Stan said.

“We continue to have a strong balance sheet and a focused operational plan and believe our company is well positioned to be successful in the current economic climate. While there is a lot of uncertainty in the metallurgical coal industry today, we believe that demand and pricing will stabilise and we continue to permit new areas, increase productivities and expand our customer base to position our company for future growth when market conditions improve."