Cloud Peak Energy’s Q2 results included positive notes; however, like other coal miners, the company has been affected by adverse mining conditions.
The company’s Antelope Mine, Wyoming, US, received the 2013 State of Wyoming Reclamation Award. The coal mine has effectively restored reclamation areas to native cool and warm season plant communities.
Cloud Peak Energy was also pleased to announce that the Bureau of Indian Affairs approved the exploration and lease agreements between the company and the Crow Tribe of Indians.
Injuries to minesite employees decreased by 20% compared to the full year 2012. Cloud Peak Energy employs almost 1400 full-time minesite workers.
Coal shipments remained level at 20.1 million t from Cloud Peak Energy’s three operated mines, compared to the same figure over Q2 2012.
The company announced that coal shipments in Q2 effected by weather interruptions, unplanned power plant outages and the impact of production interruptions during maintenance downtime.
Colin Marshall, president and CEO, commented, “After successfully completing several large scheduled maintenance outages in the second quarter, we anticipate higher shipment rates in the second half to meet our contracted positions. With higher shipments, we expect to be able to run at lower costs per ton in the second half of the year thereby increasing our profitability compared to our year-to-date performance. We were very pleased to receive the BIA approval of agreements with the Crow Tribe, and we will now proceed with our evaluation of the many development alternatives available to us.”
Total revenue declined by 3.8% in Q2, Cloud Peak Energy announced. This was driven by a 19.6% decline in revenues from the company’s logistics services business, due to lower international prices for seaborne delivered coal. The company noted revenues from delivered coal were particularly negatively effected by low prices on Asian deliveries.
During Q2 2013, the Newcastle benchmark price averaged approximately US$ 86/t, compared to US$ 96/t in 2012.
Revenue was also effected by higher costs caused by the timing of several large planned maintenance outages completed during the quarter.
Realised prices/t of coal were slightly lower than 2012 figures. Q2 2013 realised price/t was US$ 13.05, compared to US$ 13.11 in 2012.
The company suggested this was due to the impact of consistently low coal prices since 2011.
Cloud Peak suggested that the domestic US environment has shown signs of improvement during the Q2 with recovering coal burn and decreasing coal stockpiles in the Powder River Basin (PRB). In addition, natural gas prices have remained at a level where most plants consuming PRB coal are economically able to dispatch coal.
However, PRB forward prices have remained low. Winter weather lasted through April, creating strong demand. PRB inventories were estimated at 78 million t at the end of June, down from 98 million t in June of 2012. There has been a significant increase in utility contracting during the quarter with many customers looking to rebuild their forward contracted positions after letting them decline significantly last year. So far the increased contracting has not overcome the capacity overhang created by last year’s decreased demand.
The company said it was optimistic that the steady coal burn and continued reduction in PRB inventories will lead to prices moving higher later in the year.
Adapted from press release by Samuel Dodson
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