James River Coal posts big Q3 loss, hopes for market turnaround

James River Coal Co. (NASDAQ: JRCC), a major coal producer in Central Appalachia with a presence in the Indiana coal business, said Nov. 7 that it had net loss of $20.6m or $0.59 per diluted share for the third quarter of 2012 and a net loss of $62m or $1.78 per diluted share for the nine months ended Sept. 30.

Included in the third quarter results is a gain of $22.2m from the repurchase of outstanding notes in open market purchases. The 2012 results are compared to net loss of $3.7m or $0.11 per diluted share for the third quarter of 2011 and net loss of $10.5m or $0.33 per diluted share for the nine months ended Sept. 30, 2011.

James River Chairman and CEO Peter Socha said: “We are very pleased to have the uncertainty of the U.S. presidential election behind us. We believe that this issue caused a temporary slowdown in economic growth both in the United States and globally. The slowdown in growth, combined with warm weather last winter, has contributed to an unusually weak market for thermal and metallurgical coal. Hopefully, this condition will be corrected shortly.”

Socha added: “Despite the soft coal markets, we continue to be pleased with the performance of our mine operations team. They made a series of adjustments to their operating plans in response to the current markets. In the financial area, we decided to take the opportunity to reduce our debt at very advantageous market prices due to external events. We believe that we were able to successfully balance our desire for a strong and liquid balance sheet with a window of opportunity that was available to us.”

The company and its contractors produced 2.2 million tons of coal in the third quarter, down from 2.8 million tons in the year-ago quarter. The total coal available to ship, which includes production and outside coal purchases, was 2.9 million tons in the third quarter, down from 3.1 million tons in the same period of 2011.

The company produced 7.6 million tons in the first nine months of this year, breakeven with the same period in 2011. It had total coal available to ship in the first nine months of this year of 9 million tons, up from 8.5 million tons in the first nine months of 2011.

In its third quarter earnings presentation, the company said that to reduce production this year it’s actions included:

  • Idled all eastern Kentucky operations for one week in July;
  • Idled all Central Appalachia operations for one day in August; and
  • Idled one contract metallurgical coal mine.

The company also noted that in Central Appalachia it has begun development of the Stacy’s Branch surface mine and of a 1.5 million-ton met coal mine which will replace existing met mines. At the Indiana operations, the company completed an upgrade of the Freelandville Prep Plant and began shipments from the Hurricane East surface mine.

As of Nov. 6, the company had the following agreements to ship coal at a fixed and known price. Priced tons in Central Appalachia in 2013 do not include approximately 1,100,000 tons of met coal that have been sold but not yet priced. The prices for the Midwest are minimum base price amounts adjusted for projected fuel escalators. About 200,000 tons of the Midwest coal for 2012 has been moved to 2014.

2013

Central Appalachia, 3.4 million tons ($74.04/ton); Midwest/Indiana, 2.3 million tons ($45.25/ton).

2014

Central Appalachia, 300,000 tons ($75.75/ton); Midwest/Indiana, 900,000 tons ($47.64/ton).

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.