Coal sales revenue for 1Q15 decreased by US$14.5 million (13.1%) to US$96.3 million, as compared to US$110.9 million at the same time last year. This is reported to be due to an unfavourable volume variance of approximately US$18.3 million y/y, a result of production and delivery issues during the current quarter, resulting from the inclement weather experienced in western Kentucky. This was partially offset by a favourable price variance of roughly US$3.8 million due to customer mix and higher y/y contract prices.
Cost of coal sales declined 12.5% to US$78.8 million in 1Q15, from US$90.1 million in the same period in 2014. On a per short ton basis, cost of coal sales increased from US$38.24/short t during the same period in 2014, to US$40.08/short t. This increase is appropriated to smaller productivity and inefficiencies encountered at all of the company’s mines, resulting from poor weather conditions.
Adjusted EBITDA for 1Q15 saw a decline to US$13.1 million from US$15.7 million for the same time in 2014.
Lewis Creek underground mine
Lewis Creek underground mine has experienced ongoing mine difficulties since July 2013, which led to a decision in August 2014 to not continue only mine the eastern portion of the reserve. The company completed mining in March 2015 and has begun extracting the equipment. The closure has led the company to accelerate depreciation of the remaining net book value of the captialised costs associated with the original development of the mine. Total expense documented during 1Q15 to write-off the remaining asset was approximately US$6.3 million, which is included as a component of depreciation, depletion, and amortisation expense.
New underground mine
Armstrong is developing an additional underground mine at its Parkway mine complex: the Survant underground mine, which will produce coal from the West Kentucky #8 seam. Development is expected to be completed during 1H15. Since 31 December 2014, there was 59.7 million short t of proven and probable reserves at the Survant underground mine. Coal mined from the mine will be processed at the Parkway preparation plant before shipment to the ultimate customer.
The company predicts coal sales for 2015 will be between 8.4 million and 8.6 million short t. Forecasted production for 2015 is lower than actual production during 2014 due to the closure of the Lewis Creek underground mine in early 2015 and lower production at the company’s opencastoperations. The company anticipate less sales due to lower utility demand resulting from lower natural gas prices and utilities retiring coal-fired plant capacity due to new regulations. From 1 May 2015, Armstrong currently will have 8.4 million short t priced and committed for 2015 at an average price of US$47.67/short t. Capital expenditures in 2015 are currently estimated to be in a range of US$28 – US$31 million, related primarily to the development of a new mine to replace capacity that is depleting over the next several years.
Edited by Harleigh Hobbs.
Read the article online at: https://www.worldcoal.com/mining/15052015/armstrong-energy-announce-earnings-for-1q15-2276/