Idled production at the West Elk longwall mine in Colorado has been blamed for the net loss of $US15 million announced by Arch Coal for the quarter ended March 2000. Arch is the second largest coal producer in the United States and provides the fuel for approximately 6% of the electricity generated in that country.

Mining operations stopped in January during a longwall move after the detection of combustion-related gases. Arch expects to receive compensation for the production loss under a business interruption insurance.

Revenues for the quarter totaled $US357.8 million and coal sales totaled 27.8 million tons, compared to $US421.1 million and 27.7 million tons in the first quarter of 1999. Arch said the change in revenues reflect the company's strategic decision to increase its emphasis on lower-cost and lower-priced production in the Powder River Basin of Wyoming.

Operations at West Elk continue to focus on extinguishing the combustion and resuming normal operations. Water-tight seals have been constructed in the affected area of the mine which has been flooded with water. Since then, combustion-related gas readings inside the mine have reportedly declined dramatically and were currently below normal levels. Arch has received approval the Mine Safety and Health Administration to re-enter the mine and complete the longwall move. Normal mining operations are expected to resume by the end of June.

"The difficult conditions that have prevailed in U.S. coal markets in recent months had an adverse impact on our performance for the quarter," said Steven F. Leer, Arch Coal's president and chief executive officer.

Apart from West Elk each of the mines performed well and made good progress in their ongoing efforts to reduce costs and improve productivity, Leer said with the largest mine, Black Thunder, setting shipping and production records for the quarter while also effectively managing costs.

"Our goal is to increase production at Black Thunder by roughly 20% this year to approximately 60 million tons, a level we expect to maintain for the foreseeable future," Leer said. "We are right on target to achieve that goal."

Arch said demand for Powder River Basin coal has more than doubled in the past decade and continues to grow at a far higher rate than that of the coal market overall.

Like rival group CONSOL Energy (see "CONSOL lifts earnings in 3rd quarter"), Arch predicts improving coal prices on the back of increased electricity demand in the U.S.

"While we are not pleased with our first-quarter results, we have achieved significant improvements in the performance of our major mines," Leer said. "We are well on our way to resuming production at West Elk and the Black Thunder mine is performing at record levels."

"Over time, the demand for electricity is certain to grow, spurred by economic expansion and the ongoing shift to digital-age technologies," he added. "A substantial percentage of that growth will be supplied by coal, which is by far the lowest-cost fuel for electric generation. As a producer of low-sulfur coal exclusively and the operator of some of the finest assets in the industry, Arch Coal is very well positioned to compete."