"The third quarter typically is a weak quarter for us, the more so this quarter because of the unanticipated expense related to the Loveridge mine," said J. Brett Harvey, president and chief executive officer.
"There were several highlights that were significant, however," he continued. "Compared with the third quarter last year, we reduced our pre-tax loss by 56%, total debt has been reduced more than 36%, our gas segment continues to produce record production and profits, and coal prices for our coal improved for the fourth straight quarter."
Harvey said that United States energy markets remain favorable for both coal and gas.
"The warmer weather during the latter half of the summer kept inventories of coal at manageable levels," he said. "The continued tightness of coal supplies, particularly in the eastern United States, has supported coal prices through the quarter."
Total sales and sales of company-produced coal (including production from equity affiliates) each declined by 1.1 million tons period-to-period reflecting the closure at year-end 2002 of the Dilworth and Windsor mines when economically mineable reserves were depleted and reflecting the sale in February 2003 of the company's Canadian mining assets. These sales losses were offset, in part, by higher sales of coal from McElroy and several other mines that had been idled for some or all of the September 2002 period.
Coal sales prices averaged $US28.14 per ton, up 3.4% period-to- period, while the averaged realized price of company-produced coal, which reflects prices on a production basis rather than a sales basis, was $US28.11, an improvement of 3.5%.
Operating costs per ton of coal produced (including equity affiliates) increased 2.5%, and total costs per ton of coal produced increased 3.2%. Operating costs and total costs on a unit basis increased mainly due to higher active and retired employee medical benefits.
A charge to expense in the third quarter of approximately $0.16 per diluted share (pre-tax) was taken for unanticipated expenditures necessary to make
Alterations to the ventilation system at the Loveridge Mine after the February fire cost $0.16 per diluted share (pre-tax). The cost of extinguishing the fire originally was estimated to be $0.10 per diluted share (pre-tax).
Loveridge Mine has resumed development work with all four of its continuous mining machine sections and is expected to begin longwall production in April 2004.
Coal and gas demand for the remainder of the year are expected to be normal with inventories at coal-fired power plants and gas in storage at appropriate levels for this time of year, according to Harvey
Coal supplies are expected to remain tight as production and financial problems continue to affect the industry with overall production capacity lower than it has been in the past, Harvey said.
"Without question, we are stretched at the moment for coal production," he said. "This is largely the result of depletions and the sale of our Canadian mines. We are running our remaining mines hard, and although their output is up in the quarter-to-quarter comparison, we really need more capacity in our system to achieve consistent results."
Harvey said he expect the capacity constraints to ease next year as the company completes several major projects that will increase production.
"The expansion of McElroy Mine, the resumption of longwall production at Loveridge Mine, and the completion of a large underground storage bunker at Bailey Mine should give us more operating flexibility and reduce the need to run the mines as hard as we have been."
These projects are expected to increase company production by at least 10% next year.
