Net loss for Arch Coal in Q3

Arch Coal has reported a net loss of US$ 128.4 million in the third quarter of 2013.

Excluding non-cash accretion of acquired coal supply agreements and asset impairment costs, Arch’s Q3 adjusted net loss was US$ 1.8 million, compared to a net income of US$ 41.8 million in the same quarter last year.

Revenues totalled US$ 791.3 million in the third quarter on modestly higher sales volumes than the same period in 2012. The results include a US$ 115.7 million pre-tax gain from the sale of Arch’s Canyon Fuel assets.

Challenging global markets

Arch Coal CEO, John Eaves, commented: “Arch is successfully navigating challenging global coal markets by controlling costs and capital spending and effectively managing liquidity. From an operational perspective, were are pleased to have delivered the best cost performance in the Powder River Basin since 2010. We also significantly enhanced our financial flexibility with the Canyon Fuel sale – and ended September with US$ 1.4 billion in cash”.

Between January and September 2013, Arch Coal generated adjusted EBITDA of US$ 387.6 million compared with US$ 617.3 million over the same nine month period last year. Revenues declined largely due to lower metallurgical coal profits.

Canyon Fuel sale

Arch completed the sale of its Canyon Fuel subsidiary in August, and received net cash proceeds of US$ 423 million. The sale included the Sufco and Skyline longwall mines and the Dugout Canyon continuous miner operation as well as a total of 105 million t of coal reserves in Utah.

The company also recorded asset impairment charges of US$ 200.4 million in Q3 2013. The charges mainly relate to the reduction in the carrying value of the Hazard thermal mining complex in eastern Kentucky due to ongoing weak thermal market conditions in Appalachia.

Patriot Coal deal

In October, Arch Coal entered into an agreement with Patriot Coal to acquire the Guffey metallurgical coal reserve property from Patriot for US$ 16 million. The addition of these reserves will enable Arch to recover up to an incremental 8 million t of coal at the Leer mine, extending the estimated mine life by nearly three years.

"As part of our effort to re-align the asset portfolio, Arch continues to execute its plan to divest non-core assets and reserves, idle operations or trim production in response to market conditions, and concentrate on core operations that will drive our profitability as coal markets improve," said Eaves. "We are also pursuing value-enhancing growth initiatives in our strategic areas of focus. One such example is the Guffey acquisition, which represents a unique, synergistic, bolt-on opportunity that extends the reserves and mine life at Leer, one of our key metallurgical coal operations."

Safety achievements

During Q3 2013, seven of Arch's operations and facilities attained ‘A Perfect Zero’ – a dual accomplishment of operating without a single environmental violation or reportable safety incident. Arch's efforts will be honoured with two national safety awards for exemplary 2012 safety achievements.

In addition, several of the company's subsidiaries reached new safety milestones during the three months ended 30th September. In August, the Coal Creek mine in Wyoming and the Hazard complex in Kentucky each completed 1 million employee hours without a lost-time incident. In September, the West Elk mine in Colorado achieved 2 million employee hours without a lost-time incident.

Outlook

Arch Coal now expects thermal sales volumes for the year to be in the range of 134 million to 137 million t. The company has lowered its metallurgical sales expectations, and now expects to ship between 6.9 million and 7.3 million t into coking coal and pulverized coal injection (PCI) markets during 2013.

Adapted from press release by Katie Woodward

Read the article online at: https://www.worldcoal.com/coal/29102013/net_loss_for_arch_coal_199/