Pinnacle longwall to lift productivity: Cliffs

CLIFFS Natural Resources is hoping a new automated longwall system to be installed at its Pinnacle mine in West Virginia in the next three months will improve production rates.
Pinnacle longwall to lift productivity: Cliffs Pinnacle longwall to lift productivity: Cliffs Pinnacle longwall to lift productivity: Cliffs Pinnacle longwall to lift productivity: Cliffs Pinnacle longwall to lift productivity: Cliffs

Pinnacle's plough system.

Lou Caruana

The company reduced its 2010 sales volume expectation from its legacy coal operations in West Virginia and Alabama to 2.8 million tons, from a previous expectation of 3.4Mt.

The decrease was primarily driven by adverse geological conditions at Pinnacle, which slowed production.

“This geological condition is unfortunate, but underground mining challenges are part of the inherent risks of coal mining. Fortunately, this adjustment represents a small impact to our full-year 2010 EBITDA expectations and does not alter our positive outlook for North American Coal in 2011,” Cliffs chairman, president and chief executive Joseph A. Carraba said.

Cliffs currently anticipates its North American coal division to achieve a 2010 cash margin of over $US60 million and nearly breakeven in sales margin.

It expects full-year 2010 North American coal sales volumes of 3.9Mt, with an approximate sales mix of 3.4Mt metallurgical and 500,000t thermal.

Incremental tons related to its acquisition of INR Energy's coal operations are anticipated to be approximately 500,000t metallurgical and 500,000t thermal coal.

With additional thermal coal sales from the INR coal operations acquisition (which carry lower average selling price) and lower than previously anticipated spot sales of uncommitted met coal, Cliffs said it now expects North American coal revenue per ton to be $115-120, a decrease from the prior guidance of $140-145/t.

As a result of the production volume changes and acquisition-related accounting adjustments, per-ton costs are expected to increase to $115-120/t, from the prior expectation of $110-115/t.

Costs are expected to be impacted by lower fixed cost absorption, given the decline in production at the legacy coal operations.

The revised per-ton costs include non-cash expenses of approximately $16/t of depreciation, depletion and amortization and $2/t related to acquisition accounting adjustments for the INR Energy coal operations.

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