On Massey’s books, Falcon holds reserves of about 5.5 million tons of coal. But depending on the mining technique employed, the reserve could yield up to 17Mt.

The company will make a profit of $19 million on the sale after taxes, and is divesting the asset in order to focus on core reserves.

Looking to the third quarter, Massey said it expected to make shipments of 9.4Mt, with an average cash cost per ton of $42-43 and an average sales price per ton of about $49.

“Clearly, low volume is the primary cause of our higher costs," said Massey chief Don Blankenship, noting that tons sold were not high enough to bring costs down to previous projections.

The company said the shortfall was due to both longwall and surface mine performance. The shortfall in longwall tons was primarily higher-priced metallurgical coal, therefore negatively impacting the projected average sales price per ton.

Underground challenges included a more difficult re-start at the Aracoma longwall than was anticipated.

At the surface operations, the completion of the dragline project, a 14-month undertaking that included complete dismantling and reassembly, took several weeks longer than anticipated.

“Despite these difficulties, we are encouraged by the significant steps forward we have made in the third quarter to date, including the re-start of the Aracoma longwall, the start-up of our dragline and moves by two of our longwalls to more geologically attractive panels," Blankenship said.

For the full year, Massey now projects shipments of 39-40Mt, an average cash cost per ton of $41.50 to $42 and average sales price per ton of $48.50 to $49. Other income is projected to be in the range of $75-80 million for full year 2006, including the gain from the sale of the Falcon reserves.

The Massey board has engaged the investment banking firm of Goldman Sachs to assist in an operational review.