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Arch Coal posts company results

World Coal,

US miner Arch Coal Inc reported a smaller-than-expected quarterly loss as it cut costs.

The company said it expected costs in the Powder River Basin (PRB) and Appalachian region, which account for the bulk of its coal production, to fall in 2015, reflecting an improved rail performance, the impact of lower diesel prices and a full year of steady production at its low-cost Leer mine in West Virginia.

Arch Coal said cash costs fell to US$16.46/t in 4Q14, down from US$18.10/t a year earlier.

The company also said it expected capital expenditure of US$145 million – US$160 million in 2015. It recorded capital expenses of US$147.2 million in 2014.

Arch Coal forecast full-year coal sales of 130.3 million – 143 million t in 2015, compared with full-year sales of 134.4 million t in 2014.

The company sold about 35.2 million t of coal in 4Q14, up from 32.3 million t a year earlier.

Arch Coal also said it would suspend its annual dividend to preserve current levels of liquidity as coal prices stay weak.

The dividend suspension would result in minimal savings of US$2 million/yr, Cowen & Co analyst Daniel Scott wrote in a note to clients.

The company said its net loss for the quarter included a non-cash income tax charge of US$169 million and a pension curtailment gain of US$26.9 million as it froze its employee pension plan benefits.

Revenue rose 3.6% to US$745.2 million, above the average analyst estimate of US$729 million.

Arch made significant strides in pursuit of the company's ultimate goal of operating without a single environmental violation or reportable safety incident in 2014. The company's safety performance tied its best record in company history with a total-incident rate 8% lower than its 2013 rate. In addition, Arch's operations made significant improvements in environmental stewardship in 2014, driving the company to its second-best environmental performance in history - representing a nearly 30% improvement over its 2013 rate.

The West Elk mine in Colorado continued its streak of zero SMCRA violations for the 15th consecutive year, while the Viper operation in Illinois worked more than 500 000 employee hours injury free.

"These achievements reflect our dedication to continuous improvement in our core values each and every year," said Paul A. Lang, Arch's executive vice president and chief operating officer. "I am extremely proud of our employees for their ongoing commitment to our philosophy of operating safely and responsibly."

Market trends

Arch estimates that coal maintained approximately 40% of the US power generation market in 2014. With a mild start to winter, domestic coal consumption ended the year roughly flat, resulting in coal stockpiles at US generators of 145 million t, a level on par with year-end 2013. On a regional basis, PRB-served power plants ended the year with an estimated 60 days of supply – 8% lower than the regional, year-end average.

For 2015, Arch expects domestic market fundamentals to remain challenging, due to the impact of mild winter weather on coal consumption and natural gas pricing and inventories. In addition, new regulations slated to take effect during the year could impact up to 25 million t of annualised gross coal demand. In light of these developments, Arch expects declines in domestic coal use of 50 million to 60 million t for 2015, and projects that a meaningful amount of uneconomic production will rationalise. Internal estimates suggest that, along with other basins declining, Central Appalachia output will fall to an unprecedented 100 million t in 2015.

Edited from various sources by Sam Dodson

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