CanAm Coal reports higher output, mine issues in Q2 2014

Alabama producer CanAm Coal said in an Aug. 29 financial report that it now operates four mines (Knight, Old Union 2, Posey Mill 2 and Powhatan), with a fifth mine, Gooden Creek 2, expected to open in 2014.

The second quarter of this year was characterized by strong sales volumes and revenue on the one hand and difficult operating conditions on the other hand, the company added. Volumes continued their upward trend and were up 18,078 tons (+11%) compared to Q1 2014 and up 17,545 tons (+10%) as compared to Q2 2013.

Increased sales volumes were the result of strong coal shipments to the utility company as they are rebuilding inventory following the harsh winter conditions in January and February of this year. This performance was partly offset by reduced shipments to one industrial customer as a result of an extended shutdown of one of its furnaces.

Revenue for the quarter was $17.5m, an increase of approximately $1m (+6%) over Q1 2014 and $1.9m (+12%) over Q2 2013. This increase was mainly the result of increased sales volumes and the appreciation in the U.S. dollar. This increase was partly offset by lower average realized pricing as a result of the mix of coal shipments (utility versus industrial customers) during the quarter.

Operationally the company experienced a number of challenges at the Old Union 2 and Powhatan mines as a result of geological inconsistencies in the coal seams which resulted in overall lower coal recovery rates and therefore lower coal production.

Also, and more importantly, the company had forecasted 14,000 tons of production from the Gooden Creek 2 mine in the second quarter but was unable to secure all of the necessary permits to open up this mine despite its efforts to fully comply with all the regulatory requirements including the proposed purchase of stream mitigation credits. As a result, overall coal production was lower than forecasted and the company supplemented its production with the purchase of some 17,000 tons of coal from third party coal producers. This allowed the company to meet its sustained and increased demand for its coal from its customers.

Operating cost for the second quarter, including the cost associated with purchasing coal, were $10.8m or $58/ton as compared to $9.3m in Q2 2013 or $55/ton. Despite the operational challenge, this increase was mainly the result of the appreciation in the U.S. dollar and Q2 operating costs in U.S. dollar terms were actually slightly lower than in Q2 2013 ($53/ton vs $54/ton). Operating cost in the quarter were higher than the company’s target of <US$50 per ton.

For the six month period ended June 30, 2014, the company achieved sales volume, revenue and EBITDA from operations of 354,000 tons, $34m and $5.3m, respectively which represented an improvement over the prior year of 36,000 tons (+11%), $4.5 million (+15%) and $0.8 million (+18%) respectively.

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.