The earnings result for the June quarter compares to a net loss of $24 million in the same period in 2008 and a $40.7 million net loss for the six months ended June 30 last year.

 

Revenues jumped 24.7% on the producer’s sales, to $171.65 million from $137.70 in the second quarter of 2008. James River’s operating income was $17.45 million, a notable rise from the $17.45 million operating loss posted last year.

 

While prices per ton of coal sold were up across the company’s operations, central Appalachia output spiked from $52.85/t in the 2008 June quarter to $90.48/t this year. Midwest operations had costs per ton rising from $32.13/t last year to $33.25/t.

 

James River Coal chairman Peter Socha said the quarter performance was “solid” as the company continued to generate both net income and free cash flow despite the deflated coal market and overall economy.

 

“We will use this period to strengthen our financial position and to make prudent investments in all aspects of our company [and] believe our shareholders will see significant benefits from these decisions as we move from today's weak coal markets to tomorrow's stronger coal markets," he said.

 

Senior vice-president and chief operating officer CK Lane also commented on the company’s “excellent” safety and production performance.

 

“In just the last six quarters, we have cut our NFDL rate [non-fatal days lost] in half,” he said, adding that one of the company’s two mine rescue teams won first place in the Kentucky Mining Institute State Mine Rescue Competition last month.

 

“Our mines continued to perform well even while we reduced our quarterly production by approximately 300,000t. This reduction was implemented in order to better manage our inventories and match our contract sales. We were able to make this reduction by eliminating Saturday and third shift production and idling our operations for two additional days during the second quarter."

 

While it did fare better in the June quarter, James River opted to revise its guidance.

 

In central Appalachia, the company now anticipates 7000-7100t of coal will be shipped, rather than the previously expected 7400-7600t. The Midwest guidance was also reduced, from 3561t to 3100-3200t.

 

"We are updating our 2009 guidance for two primary reasons,” Socha said, the first being an announced sales contract amendment that moved some of its higher-priced tonnage from 2009 to 2011-12.

 

“The amendment also priced some new tons at $70/t for 2009-10,” he noted. “It should be emphasized that our higher-priced tons were moved into later years, not cancelled.”

 

Secondly, James River reduced its guidance in the central Appalachian region due to the market environment.

 

“Beyond our existing contract portfolio, at current market prices, we would lose money on every additional ton sold – this is not acceptable,” Socha said.

 

“However, running the mines at a less than optimal level will cause an increase in our cash costs per ton. We expect this increase to be temporary and to be reversed as we increase production in the future."