Massey focuses on reducing costs

WITH a profitable 2006 under its belt, Massey Energy will concentrate on reducing costs at its operations with the idling of certain mines and putting behind it the Aracoma fire and high employee turnover.
Massey focuses on reducing costs Massey focuses on reducing costs Massey focuses on reducing costs Massey focuses on reducing costs Massey focuses on reducing costs

The longwall crew of Massey Energy's Logan's Fork. Courtesy Massey Coal Services/Studio 19 Photography - E.M. Mazzocchi.

Angie Tomlinson

"We are seeing signs that the labour shortage in Central Appalachia that resulted in much of our productivity decline in the last few years is improving," Massey chief Don Blankenship said on the company’s 2006 cash costs of $US42.33 per ton.

He also said the company’s turnover rate had trended down over the past three months.

Massey expects to realise productivity gains in 2007, with the company already choosing to idle certain marginal operations representing about 1.9Mt in 2006, and continues to examine productivity and margins going forward.

During the 2006 fourth quarter, coal revenues increased 11% to $471.7 million, while net income was $10.7 million.

The company achieved record produced coal revenues for 2006 of $1,902.3 million on sales revenue per ton of $48.71.

“The full benefit of strong market pricing during 2006 will be realised by Massey over the next several years," Blankenship said.

“The company currently has cumulative committed sales of approximately 87 million tons of coal over the next three years at an average realisation of over $50 per ton."

Massey has produced coal commitments of 40.8Mt for 2007 and expects to sell additional tons as market conditions warrant.

Sales commitments for 2007 are projected at an average realisation on priced tons of approximately $51/t.

Looking ahead, Massey said while short-term coal demand has weakened, it believes fundamentals for strong domestic coal demand remain intact.

“US economic expansion, the high price of alternative fuels and increased momentum to develop coal-based alternative fuels all position coal well for the future.

“Demand for metallurgical coal remains strong. Continued weakness in the US dollar and Australian supply shortfalls have supported demand in the export market for US metallurgical coal.”

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