Alpha Natural Resources, Inc announced that coal production will be reduced at certain mines in the Central Appalachia region due to market conditions that have decreased coal demand.
Alpha subsidiaries in Kentucky and West Virginia will idle four mines immediately and two others between now and early 2013, while several other mines will alter work schedules or reduce the number of production crews. Altogether 10 mining operations are affected, four in eastern Kentucky and six in southern West Virginia.
When completed, the adjustments are expected to reduce annual coal production by approximately 4.0 million tonnes, most of which originates on the CSX rail system. The total includes approximately 2.5 million tonnes of thermal coal and 1.5 million tons of lower quality, high-volatility metallurgical coal. Eastern Kentucky operations will scale back thermal coal production by about 1.5 million tonnes while the remaining reductions will occur in southern West Virginia.
Management and human resources personnel at the affected Alpha subsidiaries have met with their employees to outline potential relocation opportunities at other operations with unfilled vacancies along with wage and benefit continuation plans. Alpha expects that, once the available transfer opportunities are filled, approximately 320 employees at affiliated mining companies will be displaced within the next few weeks.
Mr Kevin Crutchfield CEO of Alpha said that "A business decision like this is so difficult because it impacts people and their families, but adverse market conditions left us no choice. Several mines are encountering weak demand for their products. We examined all options but in the end these operations had to do what was necessary to preserve a sustainable business plan in a challenging environment. In the days ahead, we will be examining all aspects of costs across our entire value chain, including cost reduction reviews with all key stakeholders."
Alpha's Central Appalachian businesses are seeing more electric utilities switch from thermal coal to natural gas to take advantage of gas prices at 10 year lows. A series of federal regulatory actions also have prompted utilities to implement plans for shutting down a number of generating stations that have traditionally run on coals sourced from Central Appalachia. Alpha is in the process of evaluating the financial statement treatment and impact of the actions announced and plans to give further updates on the production adjustments and its outlook for the thermal and metallurgical coal markets during its earnings conference call scheduled for February 24.
Mr Kurt Kost president in charge of the company's mining operations said that "Tremendous credit goes to these miners and support personnel who worked diligently, day after day, to safely and productively supply coal to our customers. We're going to do everything we can to help transition these employees who have been so dedicated to their jobs. All employees will receive consideration for other job openings within the Alpha family of companies. We're also seeking the cooperation and involvement of state employment officials and identifying employment opportunities with other coal producers in the area."
