Arch Coal has announced a net loss of $US5.2 million, or US14c per share, for the third quarter ended September 30, 2000, compared with a net loss of $U1.8 million for the same quarter last year.
"Market conditions for US coal strengthened markedly during the quarter," said Steven Leer, Arch Coal's president and chief executive officer. "However, as previously indicated, Arch entered the period with nearly all of its tonnage committed for the remainder of 2000. As a result, our third-quarter performance did not reflect the improved pricing environment.
"On the positive side, 15% of our projected production in 2001 and 30% of our projected tonnage in 2002 is currently open to market price movements, which should enable us to capitalise on this more attractive pricing environment."
Leer also noted that historically the company incurs higher-than-normal maintenance costs during the period, since major maintenance projects at several Arch mines are timed to coincide with periods when the mines are operating on reduced schedules due to miners' vacations.
Reduced output at West Elk, which resumed production on July 12 and began ramping up to normal levels of production, also had an adverse impact on the quarter.
Revenues for the quarter totalled $US359.3 million and coal sales totalled 26.8 million tons, compared to $US382.2 million and 28.0 million tons in the third quarter of 1999. The change in revenues is due in part to reduced production at the West Elk mine, and to Arch's increased emphasis on lower-cost and lower-priced production in the Powder River Basin of Wyoming.
For the nine months ended September 30, 2000, Arch recorded a net loss of $US22.4 million, compared to net income of $US2.1 million for the first nine months of 1999. Revenues totalled $US1.1 billion and coal sales totalled 79.4 million tons for the first nine months of 2000, vs. $US1.2 billion and 82.7 million tons for the same period of 1999.
Longwall operations at the West Elk mine in Gunnison County, Colorado, resumed during the quarter and began ramping up to normal levels of productivity. "As a result of limited production during the first six weeks of the quarter, West Elk again had a sizable operating loss," Leer said. "However, we are now confident that its fire-related difficulties are in the past."
The company said that since May, prices for low-sulphur eastern coal products have increased 10%-15%. Western pricing has improved as well, although not as dramatically. "While we are sold out for the remainder of 2000, we are in a strong position to capitalise on these positive pricing trends as we commit our available coal for 2001 and thereafter," Leer said.
"The demand for coal-fired electric generation is growing strongly, and we possess one of the largest and most attractive reserve positions in the industry," he continued. "With West Elk back on line and most of our other mines performing well, we are optimistic that we can continue to generate high levels of cash flow and improve our balance sheet still further in coming quarters."
Arch Coal is the second largest coal producer in the US, with subsidiary operations in West Virginia, Kentucky, Virginia, Wyoming, Colorado and Utah. Through these operations, Arch Coal provides the fuel for approximately 6% of the electricity generated in the United States.