Patriot puts faith in Federal, Panther

PATRIOT Coal will continue on a major cost restructure this year as it concentrates on improving production at its Federal and Panther longwall mines.
Patriot puts faith in Federal, Panther Patriot puts faith in Federal, Panther Patriot puts faith in Federal, Panther Patriot puts faith in Federal, Panther Patriot puts faith in Federal, Panther

A Patriot Coal longwall.

Angie Tomlinson

Patriot management hasn’t been shy to slash production in the face of dwindling demand through the closure of mines, cutting back hours and deferring mine start-ups.

Earlier this month Patriot idled two mines, eliminated weekend work days at the Hobet Complex and delayed start-up at Blue Creek, eliminating 2 million tons from 2009 output.

Late last week Patriot CEO Richard Whiting said this quarter the company would continue its cost restructure and productivity improvements, including revaluating all its operations.

He said every component of the cost structure would be evaluated, such as equipment assigning, handling of maintenance programs, inventories and work schedules.

During the first quarter, performance at the Federal longwall improved month by month, with production for the quarter reaching a normalised run rate of 1Mt.

Chief financial officer Mark Schroeder said the operation had adjusted the layout of the next longwall panel to minimise the impact of the adverse geology, and expected normalised production from now on.

The Panther longwall also continued to show improvement as the quarter progressed, with first quarter production more than 35% higher than the fourth quarter. However, Schroeder said the mine was “not yet performing at an acceptable level”

“The longwall equipment on the current phase is nearing the end of its useful life. We expect further improvement after we move to the next longwall panel, which is anticipated to be early in the third quarter,” Schroeder said.

“We expect new and refurbished equipment for the next longwall panel, which will yield higher production levels during the third quarter and beyond.”

Whiting said with the hard cutting sandstone areas behind the mine, production was expected to hit an annualised rate of 3-3.5Mt.

During the first quarter, Patriot sold 8.5Mt and posted revenues of $US529 million. Cost per ton increased year-on-year mainly due to lower production at Panther and the cost of idling operations.

Patriot anticipated a cost per ton for 2009 to be $56-59 for Appalachia and $35-38 for Illinois. Coal sales are expected to be 34-36Mt.

Capital expenditure for the quarter was $20 million below budget and Patriot expects expenditure for the full year to be less than $100 million.

Whiting said despite closing several mines and cutting back production, Patriot had positioned itself to react quickly to a turnaround.

“We're well positioned with the extra equipment we have and face-ups we've already done, permits we have in hand, additional shift work we can do, weekend schedules. We have a lot of ways that we can bring on tons,” Whiting said.

“Certainly Blue Creek is standing there, ready to go. That's 1.5 million to 2 million tons of potential on an annual basis,” he said, adding it would take 60-90 days to hire workers to begin mining.

“So I think we're going to be probably as well positioned as anyone with some low-cost, new mining opportunities and dialing back up at our mines that are still running.

“So I'm feeling good about when it turns with very, probably very minimal capital.”

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