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MASSEY Energy were just a hop, skip and jump away from making it into the black, posting a first quarter after tax loss of US$2.2 million. Despite the loss, performance was a vast improvement on 2003 first quarter where the Virginia-based producer registered a $17.5 million shortfall.
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Massey's Independence Coal Company. Courtesy Massey Energy.

Angie Tomlinson

Even with the buoyant domestic and international market environment, poor railway service, longwall moves and problems at the Upper Big Branch longwall impacted on profitability.

During February operating interruptions closed the Upper Big Branch mine for three days, resulting in shipping delays.

"We previously projected a weak first quarter due to sales of some lower-priced carryover tonnage, and higher costs from weather-related operational issues, shipping slowdowns and longwall moves," said CEO Don Blankenship.

"These factors, as well as other cost pressures, did impact the quarter but we were nevertheless able to contain our average cash cost per ton increase to less than 2%."

Produced coal sales volume for the quarter rose to 10.2 million tons, up 3% on the 2003 March period.

The Company said it had virtually sold out for 2004 tonnage. Assuming a return to normal rail service, Massey expected to ship between 45 and 47 million tons for the full year, at improved prices averaging between $35.50 and $36.50 per ton.

Massey projected EBITDA for the year of between $280 and $340 million. Even after utilizing cash flow to fund additional equipment purchases to respond to current market conditions, the Company estimates free cash flow during 2004 of between $20 and $75 million.

"Our investment in new equipment is already paying off in increased production capacity, which will help Massey achieve our planned increase in produced tonnage," said Blankenship.

The Company expects to ship between 12 and 14 million tons of metallurgical coal in 2004, with as much as 50% exported to customers in Canada, Brazil, Western Europe, Japan and India.

Capital spending during the quarter totaled $81.3 million, with full year estimates at between $200 and $220 million.

In the second quarter of 2004, the Company expects to ship between 11 and 12 million tons at an estimated average price per ton of between $36.00 and $36.50.

Sales commitments for 2005 total approximately 40 million tons, including about 3.5 million tons that are unpriced. Priced 2005 tonnage, including about 25 million tons of steam coal and 11 million tons of met coal, averages approximately $36.50 per ton.

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