Alpha Natural Resources Inc. (NYSE:ANR) said Feb. 3 coal production will be reduced at certain mines in the Central Appalachia region due to slumping market demand.
Alpha subsidiaries in Kentucky and West Virginia will idle four mines immediately and two others between now and early 2013, while several other mines will alter work schedules or reduce the number of production crews. In total, 10 mining operations are affected, four in eastern Kentucky and six in southern West Virginia.
When completed, the adjustments are expected to reduce annual coal production by about 4 million tons, most of which originates on the CSX Transportation rail system. The total includes about 2.5 million tons of thermal coal and 1.5 million tons of lower quality, high-vol metallurgical coal. Eastern Kentucky operations will scale back thermal coal production by about 1.5 million tons while the remaining reductions will occur in southern West Virginia.
“A business decision like this is so difficult because it impacts people and their families, but adverse market conditions left us no choice,” said Alpha CEO Kevin Crutchfield. “Several mines are encountering weak demand for their products. We examined all options but in the end these operations had to do what was necessary to preserve a sustainable business plan in a challenging environment. In the days ahead, we will be examining all aspects of costs across our entire value chain, including cost reduction reviews with all key stakeholders.”
More use of cheap natural gas by electric utilities is helping to in part drive these shutdowns, Alpha said. Also, a series of federal regulatory actions have prompted utilities to implement plans for shutting down a number of generating stations that have traditionally run on coals sourced from Central Appalachia. Alpha is evaluating the financial statement treatment and impact of these actions and plans to give further updates on the production adjustments and its outlook for the thermal and metallurgical coal markets during its earnings conference call on February 24.
“Tremendous credit goes to these miners and support personnel who worked diligently, day after day, to safely and productively supply coal to our customers,” said Kurt Kost, Alpha’s president in charge of the company’s mining operations. “We’re going to do everything we can to help transition these employees who have been so dedicated to their jobs. All employees will receive consideration for other job openings within the Alpha family of companies.”
Alpha, which in June 2011 took over dominant Central Appalachia producer Massey Energy, is one of America’s premier coal suppliers with coal production capacity of greater than 120 million tons a year. Alpha is the nation’s leading supplier and exporter of met coal used in the steel-making process and is a major supplier of thermal coal to electric utilities and manufacturing industries across the country. The company, through its affiliates, employs approximately 14,000 people and operates about 150 mines and 33 coal preparation facilities in Northern and Central Appalachia, plus the Powder River Basin.