Production shortfalls hurt Patriot

SKILLED worker shortages, geologic conditions, mining permit delays and a rise in downtime due to more federal inspections all played a role in an expected production shortfall during its third quarter, Patriot Coal said Friday.
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Patriot Coal's Winchester mine.

Donna Schmidt

The producer’s volume will total about 8 million tons, 1.4Mt less than anticipated. Patriot called the issues “common to the Appalachian coal regions”, and said longwall problems also added to the shortfall.

“The scheduled longwall move in August at the Federal mine took longer than planned, and production shortfalls occurred at the Panther longwall mine due to adverse geology,” said officials, who noted that its high fixed-cost component operating meant slowing production had a significant impact on net income.

Patriot chief Richard Whiting said the company was “disappointed” in the news but that its management was focused on solutions.

“In today's strong markets, lower production obviously has a significant impact on the bottom line," he said.

"Given the moving pieces and the early stage of our month-end closing process, management plans to provide revised guidance for 2008 in conjunction with our third quarter earnings release later in October."

President Paul Vining said underground worker shortages had hit the company hard – there are about 300 open positions at the current time.

"Patriot is conducting new miner training, intensifying recruiting efforts and enhancing compensation and benefit packages to attract and retain qualified employees in this tight labour market,” Vining noted.

“Patriot is also expanding its safety organisation to accommodate the increased number of MSHA safety inspections and to deal with any issues in an expedited manner."

While Patriot said its Federal longwall move had been completed, it is still working on the mine’s difficult geologic conditions. Those same complex concerns exist at the Panther mine’s longwall as well, but crews there are moving into “more normal conditions” and mine officials expect the more favourable situation to continue through the reminder of the panel, which will wrap next March.

Mining permit delays experienced at its Hobet complex during the period have also been resolved, Whiting said.

"As announced on September 29, we have continued to rationalise our mining portfolio by idling the Jupiter complex, in order to redeploy resources to more productive and profitable operations. Looking forward, the underlying supply and demand fundamentals in the markets Patriot serves look excellent, and management believes that pricing for our products will remain very strong."

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