Consol's 2008 high

HIGHER productivity and increased coal prices in 2008 helped US producer Consol Energy report several records for fiscal year 2008, including net income of $442.5 million.
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At Consol Energy's Robinson Run mine.

Donna Schmidt

For the three-month period ended December 31, the company’s net income was $US176 million, well over the year-ago period’s $7 million. Revenue was also up to $1.12 billion, versus 2007’s final quarter result of $918.6 million.

Officials for Consol said the quarter was financially and operationally strong, and it ended the fiscal year similarly.

“Coupled with the strength in coal prices, coal operations delivered record margins for the quarter," said president J Brett Harvey.

He attributed the quarter-to-quarter sales jump to higher production from the Buchanan mine in Virginia that faced geologic issues earlier in the year.

The average realised price of produced coal was up 27.6%, or $11.22 per ton, due to jumps in market prices. Production, meanwhile, increased by 1.7 million tons, or 10.8%, thanks also to Buchanan’s rebound.

Like other producers in the industry, Consol incurred rising costs during the year.

In the period-to-period comparison, Consol’s total costs rose by 12.6%, or $4.42/t, while operating costs increased $3.67/t, or 13.9%, due to higher labour, supply and maintenance expenses.

Costs increased on the back of factors such as new regulations, including costly enhancements to seals, additional roof control supplies for areas with subpar roof conditions, and the utilisation of a new and non-combustible temporary roof support that cost more than previously used conventional wood supports.

Consol said it would limit capital spending in the first part of 2009 to cope with a shaky economic environment.

“The company expects to continue expenditures on projects, such as overland belt projects or longwall face extensions,” officials said.

“However, the company does not expect to commit the entire authorised capital budget for coal until it has a clearer understanding of the state of the economy and demand for coal.

“All other coal capital expenditures will be treated as discretionary and will be evaluated over the course of the year.”

The company showed optimism in its production targets, however, estimating 2009 calendar year tonnage of 65Mt. For the first quarter, production is anticipated to total approximately 16Mt.

“Consol Energy's low-cost position in coal and gas production should allow us to remain financially strong even as the world moves through this period of global economic discontinuity," said Harvey.

“We expect to aggressively manage coal production at our mines, carefully maintain our relatively low inventory levels, and maximise our cash flows during this period of tight credit markets and cloudy economic outlook."