Canyon Fuel Company, a subsidiary of Arch Coal Inc. (ACI), has resumed coal production at its Dugout Canyon Mine in Carbon County, Utah. The production has been restarted with all mining equipment, including the main long-wall mining system. Following the detection of a small increase in carbon monoxide levels, coal production at this mine was stopped on Apr 29, 2010.
Dugout Canyon mine has 275 employees producing low-sulfur bituminous coal. During the first quarter of 2010, the mine’s production contributed 2% to Arch’s total production. The mine produced approximately 200,000 tons of low-sulfur bituminous coal per month in the first quarter of 2010. The mine’s closure for about a month will put the company under pressure to achieve its production target in the upcoming quarter. However, due to the restart of production, Arch is expected to achieve its targets for the remainder of 2010.
Dugout Canyon mine is situated in the Western Bituminous region, which sold 4.1 million tons of coal in the first quarter of 2010, down 0.7 million tons compared with fourth-quarter 2009 due to weak market conditions and a long-wall move in the region.
Arch Coal sold 37.5 million tons in first-quarter 2010, substantially up from 30.6 million tons sold in the year-ago period. For full year 2010, Arch Coal expects sales volume from company-controlled operations to be in the range of 147 million to 155 million tons and sales of metallurgical and pulverized coal injection (PCI) coal to be 6 million to 7 million tons.
The company anticipates achieving the higher metallurgical coal sales range by virtue of shifting coal to the more profitable metallurgical and PCI markets from the previously planned steam sales as well as pricing its uncommitted metallurgical coal volumes.
Arch Coal’s well-capitalized and low-cost operations provide a competitive edge over smaller players in the industry. Also, the company’s dominant market position enables it to be prudent with coal contracting. Arch Coal’s profitability is heavily tied to the price it realizes from selling coal extracted from its mines. Decreased demand for steel and electricity caused by the global slowdown had pushed coal prices down from 2008.
Arch’s main competitors include Massey Energy Co. (MEE), Peabody Energy Corp. (BTU) and CONSOL Energy Inc. (CNX).
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