The St Louis-based miner reported a loss of $US1 million for the quarter, compared with a profit of $20 million for the December 2004 quarter.
During the quarter Arch restructured its Central Appalachian operations and completed a strategic transaction in the Powder River Basin involving the sale of three Central Appalachian operating subsidiaries to Magnum Coal Company.
“This strategic restructuring will enable us to focus on a select group of Central Appalachian operations – including the Mountain Laurel complex currently in development – that we believe can provide a real and sustainable competitive advantage over time,” said Arch chief Steven F Leer.
Arch is still working to return the West Elk mine to normal operations after being idled in late October following the detection of combustion-related gases. The mined-out area where the elevated readings were detected has been permanently sealed.
One continuous miner system started production at the end of January and the second is scheduled to restart in the next few days, Arch said. The longwall is expected to resume production around March 1.
The West Elk outage and rail disruptions in the Powder River Basin had a negative impact on production and sales. Average costs in the Western Bituminous Region were up by approximately $US5 per tonne while poor rail service reduced shipments at Black Thunder by an estimated two to three million tonnes.
The company also announced it had started work on reopening the Coal Creek mine at an estimated $50 million. The mine, idled in mid-2000, is the only idle mine located on the joint line rail system in the Powder River Basin. Arch is currently upgrading and re-erecting an idle dragline with annual production of 15 million tonnes planned.
“We view Coal Creek as one of the most strategic expansion opportunities in the entire US coal industry,” said John W Eaves, Arch’s executive vice-president and chief operating officer.
“Demand for Powder River Basin coal is outstripping the industry’s ability to produce it. Because the coal-handling infrastructure and some of the mobile equipment are already in place, we will be able to ramp up Coal Creek quickly with a relatively modest level of capital investment.”
Total capital expenditure in 2006 is expected to be up to $US575 with $120 million earmarked for the development of the Mountain Laurel mining complex in southern West Virginia. Approximately $15 million is set aside to complete development of the North Lease longwall mine at the Skyline complex in Utah, scheduled to ramp up to full production in mid-2006.
Arch also had a record safety performance for the second year. The company’s lost-time incident rate declined by 37%, to 0.88 incidents per 200,000 hours worked, about four times better than the national coal industry average.
“While I consider our safety performance to be Arch’s single most significant accomplishment in 2005 – ranking among the best of all of America’s heavy industries – we remain firmly committed to continuous improvement in this area,” Leer said. “The only performance we should be willing to accept is zero lost-time incidents at every one of our mines, every single year.”
The company predicted robust coal demand and continuing supply constraints with utilities making efforts to restore stockpiles to targeted levels.
Arch currently expects earnings of between $3.50 and $4.25 per share, and adjusted EBITDA of $550-610 million, for its full year ended December 31, 2006.
