For the period ended September 30, the Virginia-based and Appalachian-focused producer reported a net loss of $US41.4 million, a significant plummet from a net income of $16.5 million in last year’s third quarter.
Revenue from produced coal was $703.7 million, versus last year’s $535.5 million. The most recent quarter’s revenue was on the sale of 9.9 million tons of coal, compared to 8.7Mt in the corresponding quarter for 2009.
Massey chairman Don Blankenship said Thursday the company was “clearly disappointed” about the results after watching its operations struggle throughout the quarter.
He cited several factors that combined to reduce Massey’s production and increase costs, including the idling of its Revolution operation from June through September and the increasingly strict federal enforcement that resulted in loss of productivity.
“Primarily as a result of these issues, productivity, as measured in feet of advance per shift in underground mines, declined by 16 per cent in the third quarter of 2010 as compared to the first quarter of 2010 prior to the UBB accident,” Blankenship said, noting that production costs per ton for the underground operations increased 13% during the same period.
"Even as the Upper Big Branch investigation continues, we have refocused management time and attention on our ongoing operations and we expect to make improvements in productivity and costs going forward,” he said.
“As a result, productivity stabilized and showed slight improvement in underground mines in each subsequent month during the third quarter … more significantly, underground productivity during the first three weeks of the fourth quarter was up by approximately 10 per cent over the third quarter average.”
The company also expects production levels to be helped along by the September 21 restart of the Revolution longwall, as well as the recent reopening of a newly modernized Sprouse Creek preparation plant.
Its new Zigmond processing facility is also anticipated to come online in December.
Looking ahead, Massey expects 2010 produced coal shipments to be approximately 38.5Mt at an average realization of $70.50/t.
Average cash cost is anticipated to be $60, excluding charges and expenses related to UBB.
Coal shipments in 2011 should be 43-47Mt, a tightening of its previous guidance primarily due to the removal of thermal coal from its production outlook.
The company said ongoing difficulty operating those mines under new regulatory requirements was cause for that decision.
Average produced coal realization in 2011 is expected to be $81-86/t. Massey has sales commitments of 38.5Mt for 2011, including 32.2Mt already sold and priced at an average $74/t; sold and priced tons includes 4Mt of met product.
Massey also noted its shipments for next year are now expected to be 10-14Mt.
In related company news, Blankenship responded to questions about the UBB mine explosion during the producer’s earnings call Wednesday morning and said dust did not play a role in the April 5 blast.
He told conference guests that the company has computer models and other evidence that supports methane gas as the sole cause of the explosion.
The company’s evidence also shows that the explosion originated at the mine’s main working face, and that dust was not involved.
The UBB explosion is still being investigated by state and federal authorities and is at the center of civil and criminal probes.
Federal regulators have maintained that its lab tests have reflected explosive amounts of dust pre-blast, and that it has inspection records showing excessive dust levels in the time just before the blast.
