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James River Coal Co. reports smaller than expected loss

World Coal,

James River Coal Co. has released its Q2 financial results, reporting a loss that was smaller than initially expected.

The company introduced cost-cutting measures to mitigate the weak market for coal. Costs at the company declined by 36% in Q2.

Total coal shipments fell 26% to 2.16 million t in Q2, while price/t declined 22% to US$ 69.72/t.

James River Coal sells both metallurgical and thermal coal.

View from analysts

Reuters reported that Analysts at Tudor, Pickering Holt & Co views the company’s low cash burn in Q2 as positive. James River Coal’s available liquidity rose slightly to US$ 108.8 million by the end of June 2013, from US$ 107.2 million as of March 31.

The company’s liquidity had caused concern, with analysts warning James River Coal’s cash balance would struggle to last longer than three to four quarters, unless the market for coal improved.

A weak demand for both metallurgical and thermal coal is damaging coal mining companies. James River Coal warned of prolonged weakness in the metallurgical coal market, caused by a slowdown in growth in China, coupled with oversupply of metallurgical coal.

CEO Peter Socha said in a statement that, “The [metallurgical coal] markets have clearly weakened in the past several months.”

Low demand, new regulation and competition from natural gas

The company has also been negatively affected by a low demand for thermal coal in the US as utilities in the country make the change from coal to cheaper natural gas.

Meanwhile, the threat of regulation from the Obama administration could discourage the use of coal.

Despite President Barack Obama’s plan to introduce new carbon emissions rules for US power plants, James River Coal said that thermal coal markets could improve later this year and into 2014.

Socha continued in his statement to say, “Things are still interesting in the coal industry. [James River Coal] continues to be pleased with mine operations, which are doing an excellent job of managing their people, costs, capital and assets during a difficult time in the coal industry.”

“The coal markets have continued to be soft. The Thermal markets are still weak, but we can see several factors that may lead to improvement later this year and into 2014,” Sacha said.

Several US coal miners, including Alpha Natural Resources, Arch Coal and Peabody Energy Corp., reported significant losses in Q2, appearing to have suffered more from weak prices than James River Coal.

Socha indicated that the company would continue to take steps to cut costs and mitigate the effects of low prices. “We have started to take definitive action to strengthen the balance sheet and improve our liquidity position,” Socha concluded.

Edited from various sources by Sam Dodson

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