June quarter profit rose to $US69.7 million from $3.5 million in the second quarter last year. Part of Arch’s massive profit jump was attributed to the sale of some of its Central Appalachian operations at the end of last year, but the company said operating margin per ton increased substantially as lower-priced sales contracts ended and the company restructured its Central Appalachian assets.

“Arch continued to deliver solid financial results despite rail bottlenecks and weaker near-term market conditions. At the same time, we began production at our Coal Creek surface mine in Wyoming and our Skyline longwall mine in Utah, managed costs very effectively and made good progress on our ongoing process improvement initiatives,” Arch chief Steven F. Leer said.

In the Western Bituminous Region, sales volume declined 200,000 tons in the second

quarter of 2006 compared with the second quarter of 2005 as shipment timing and a longwall move impacted the quarter.

Arch’s operating margin per ton in the region increased more than 50% due to higher price realisation as well as an insurance recovery of $10 million associated with the outage of the West Elk longwall mine in late 2005 and early 2006.

When compared with the first quarter of 2006, sales volume rose by more than 400,000t due to the resumption of operations at West Elk and the start up of Skyline.

In the Powder River Basin, sales volume increased 2.1Mt in the second quarter

of 2006 compared with the second quarter of 2005, driven by improved rail service compared to the significant disruptions experienced last year. The restart of Coal Creek also contributed to 600,000t in sales.

In the second half of 2006, Arch expects its shipments to accelerate in the PRB with the

anticipated completion of additional rail infrastructure and the further ramp up of Coal Creek.

In Central Appalachia, volume comparisons between the second quarter of 2006 and the

second quarter of 2005 were impacted by the sale of some operations in December 2005.

The company said it believed certain factors affecting some Central Appalachian coal

producers may benefit the US coal industry, and Arch in particular, in coming years.

“Beset by higher costs, permitting issues and a softer pricing environment, weaker Appalachian coal producers may struggle to keep up the current pace of production.”

Major expansion projects Arch is currently working on include the start-up of the Coal Creek mine in the Powder River Basin and Skyline’s North Lease mine in the Western Bituminous Region, as well as the development of the Mountain Laurel complex in Central Appalachia.

Arch also affirmed its full-year 2006 guidance, with earnings per share expected to be between $1.87 and $2.12, on a post-split, fully diluted basis. The company held a two-for-one stock split May 15.

Total sales volume is expected to be between 135-140Mt, excluding pass-through tons of approximately 8 million associated with legacy Magnum contracts that Arch is currently servicing.

Arch anticipates three longwall moves in the third quarter of 2006 as a result of shifting two moves from June to July.

“We continue to expect strong domestic and global demand growth for coal, coupled

with supply pressures in the Appalachian basins, to exert a positive influence on coal pricing in coming years,” Leer said.

“The mild winter and spring have weakened near-term market conditions in 2006, but the energy needs of the U.S. and the rest of the world are growing dramatically. Arch believes that maintaining a significant unpriced position at this time is strategically advantageous.”