For the period ended June 30, revenue fell 19% to $21.3 million. For the first half of the year, the year-on-year drop was 11% to $35.3 million.
Tons sold decreased 19% for the second quarter to 522,000t. Total production in the first half dropped 12% year-on-year to 1.1 million tons.
One positive spot for Phoenix was its average revenue per tons of coal sold. For the six months ended June 30, the mean was $33.30/t, a rise from $33.02/t reported in 2008, which the company said was due to shipments made on several contracts that transitioned to pricing for 2009 once 2008 commitments were met.
“Additionally, due to renegotiating a change in quality specifications with two customers, and deferring tons shipped to another customer with a higher quality requirement into 2010, the company was able to ship a higher percentage of its sales on contracts which currently provide the highest base price realization of all its sales contracts,” Phoenix said.
Cost of sales also decreased by 20% in the quarter. For the half-year, the cost fell to $31.8 million from $38.7 million in the first six months of 2008.
Phoenix president David Wiley said the beating taken by the coal market and economic environment overall had led the company to make a landmark decision – to sell its surface mining assets in Kentucky.
"Phoenix had been committed to an aggressive growth strategy focused on the acquisition of operating mines and greenfield reserves in order to build the scale necessary to support long-term growth. However, the challenging economic environment, coupled with the downdraft in the coal market, hampered our ability to execute this strategy,” he said.
“In light of these issues, and in addition to other unexpected challenges we encountered at our surface mining operations, the board of directors and management believe it is in the best interest of shareholders to divest of these assets to a major coal producer with the scale necessary to run a profitable surface mining business."
Included in the deal are four operating surface mines as well as associated equipment, a preparation plant facility, the company’s Island Dock barge loading facility and reserve-containing property. The deal is pending and subject to closing conditions but is anticipated to close September 30.
Wiley also noted the sale, expected to total about $30 million, would better position the company for opportunities in the current market, along with its cash position and limited liabilities. In addition, the new Gryphon complex has an estimated proven and probable reserve base of 70Mt.
“We are currently engaged in advanced discussions with a number of qualified parties regarding the strategic options available to us with regard to Gryphon and the company as a whole,” Wiley said.
“[We are] evaluating options that include a joint venture to finance and operate the mine, the sale of the Gryphon reserve, or a merger of Phoenix with other operating entities."
For more information on Phoenix Coal and the new Gryphon complex, check out the August 2009 issue of Coal USA Magazine.
