Cliffs still cutting back West Virginia steam coal output to match market

Cleveland-based Cliffs Natural Resources Inc. (NYSE: CLF) (Paris: CLF) said July 25 that it still plans to reduce production at its Toney Fork thermal coal mine in southern West Virginia to align volume with current market demand.

As a result, Cliffs’ full-year 2012 North American Coal sales and production volumes are expected to be about 6.9 million tons and 6.2 million tons, respectively, the company noted in its second-quarter earnings statement. Sales volume mix is anticipated to be approximately 4.6 million tons of low-vol metallurgical coal and 1.5 million tons of high-vol met coal, with thermal coal making up the remainder of the expected sales volume.

Cliffs had said June 15 that it is reducing its full-year 2012 thermal coal sales and production volume expectations from 1.1 million tons to about 800,000 tons at the Toney Fork surface mine.

Cliffs said in the July 25 earnings statement that it is maintaining its North American Coal 2012 revenues-per-ton expectation of approximately $130-$135. The company is increasing its cash-cost-per-ton expectation to $110-$115, from $105-$110. The increase is driven by the higher proportion of met coal sales volume, which carries a higher cash cost per ton. Full-year 2012 depreciation, depletion and amortization is expected to be about $13 per ton.

For the second quarter of 2012, North American Coal sales volume was 1.5 million tons, a 21% increase from the 1.3 million tons sold in the year-ago quarter. The increase was primarily driven by significantly higher year-over-year sales volume from Cliffs’ low-vol met coal mines, which achieved meaningfully higher year-over-year production volumes. Partially offsetting the increase was lower sales from Cliffs’ Toney Fork thermal coal mine in West Virginia.

North American Coal’s second-quarter 2012 revenues per ton were up slightly to $120.32 versus $118.65 in the second quarter of 2011. The increase was primarily driven by sales mix, as second-quarter 2012 included a higher proportion of premium low-vol met coal sales. The increase was largely offset by lower year-over-year market pricing for all coal products.

Cash cost per ton in the second quarter decreased to $110.72 from $113.91 in the comparable quarter last year. Second-quarter 2012 cash costs per ton benefited from higher fixed cost leverage, partially offset by a longwall move at the Pinnacle mine in Wyoming County, W.Va.

Listed with the U.S. MIne Safety and Health Administration under Cliffs Logan County Coal LLC are the Saunders prep plant, the Elk Lick tipple, the Toney Fork surface job and four deep mines. Toney Fork produced 506,668 tons in the first half of this year and 1.2 million tons in all of 2011, according to MSHA data.

Cliffs’ two premier coal mines are the Pinnacle longwall job in West Virginia and Oak Grove longwall mine in Jefferson County, Ala.

  • Pinnacle, listed with MSHA under Pinnacle Mining Co. LLC, produced 1 million tons in the first half of this year and 1.2 million tons in all of 2011, when it had issues with carbon monoxide in the mine.
  • Oak Grove, which was hurt for much of 2011 by a spring tornado that knocked out its prep plant, is listed with MSHA under Oak Grove Resources LLC. It produced 905,604 tons in the first half of this year and 526,267 tons in all of 2011.
About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.