Income from Arch operations reached $82.2 million compared with $34.2 million in the prior-year period.
“By effectively managing our controllable costs, Arch has succeeded in expanding its operating margins and earnings on a year-over-year basis," Arch president and chief operating officer John W Eaves said.
“However, as expected, Arch's operations during the third quarter of 2006 were affected by three scheduled longwall moves, as well as continuing rail challenges and generally weaker pricing conditions in the marketplace.”
In the Powder River Basin, sales volume increased 2.1 million tons in the third quarter of 2006 compared with the third quarter of 2005, driven by improved rail service and the restart of Coal Creek.
Rail track upgrades adjacent to Arch's Black Thunder mine are near completion and are expected to increase rail capacity and operational efficiency at the mine.
During the quarter, Arch invested $25 million in DKRW Advanced Fuels LLC and acquired a 25% equity interest in the company.
“We believe our strategic partnership with DKRW Advanced Fuels will allow Arch to play a formative role in the emerging CTL [coal-to-liquid] industry by effectively leveraging our position as a leading coal producer,” the company said.
Arch also purchased a one-third interest in Illinois-based Knight Hawk Coal for about $15 million in cash and 30Mt of coal reserves.
Looking ahead, the recent weakness in US coal markets has prompted Arch to lower fourth quarter 2006 and full year 2007 production levels.
“While the long-term outlook for US coal markets remains extremely bright, near-term factors have served to dampen market demand and depress pricing,” the company said.
Targeted production for full year 2007 has been reduced by about 10Mt, to 140Mt in 2007.