Costs hit James River

LOWER production and higher costs are being cited for a 17% widened loss by Virginia producer James River Coal, according to its fourth-quarter and year-end report.
Costs hit James River Costs hit James River Costs hit James River Costs hit James River Costs hit James River

Leeco, courtesy James River Coal Company

Donna Schmidt

Its net loss totalled $US18.5 million in the fourth quarter ended December 31, and $54 million for the year overall, versus respective net losses of $15.8 million and $26.2 million last year.

Revenue also fell 10% over 2006, to $126.1 million from $139.8 million. Playing a large part were production, which slipped from 2.93 million tons in 2006's fourth quarter to 2.64Mt during the 2007 corresponding period, and coal prices, which dipped from $41.29 per ton to $40.51/t.

The company called the last two years "transitional" for it and the industry in general from a regulatory and technological perspective.

“We have changed both our mine operations and sales contracting process in response to these events,” said JRC chairman Peter Socha.

“We believe that our shareholders and other stakeholders will see the benefits of these changes in 2008 and beyond."

He cited both positive and negative influences on the company’s mining operations during the final quarter. On the plus side, James River has made changes to its portfolio to reflect changing regulatory and cost factors and has made adjustments with regards to risk management and safety.

“On the negative side, we were impacted by fewer workdays due to the timing of the Christmas holidays. We were also impacted by higher costs for maintenance and raw materials," Socha noted, adding James River was pleased overall with progress.

Looking forward, James River officials believe that the market is gaining strength and prices are on their way up, even though that momentum has not been reflected prominently in prices.

“With industrial stoker prices now over $100 per ton and steam coal prices, depending on quality and term, averaging $75 to over $90 per ton, we believe that it is appropriate to modify our sales strategy,” Socha said.

“Our new contracting strategy is to combine available coal in the second half of 2008 with customer requirements for 2009 and beyond."

Socha noted that about 19% of its anticipated 2008 Central Appalachian (CAPP) production and 89% of its 2009 CAPP production (assuming numbers mirror 2008 production figures) currently remain unpriced.

James River Coal operates six complexes in eastern Kentucky and in southern Indiana.