Foundation coal shipments increase in first quarter

Foundation coal shipments increase in first quarter

Washington (Platts)--27Apr2006

Good news kept coming for Foundation Coal in the first quarter. The company
had a 29% increase in sales revenues over the same period in 2005, while net
income was up 66%.

In Q1 2006, the company's sales revenues reached $387.6 million, compared with
$300.0 million in Q1 2005, and net income was $31.3 million (67cts/diluted
share), compared with $18.9 million (41cts/diluted share) in Q1 2005.

The strong financial news resulted from increased coal shipments, reaching
18.5 million short tons in Q1 2006, compared with 17.3 million st in Q1 2005,
and an increase of $3.54/st in average per-ton sales realizations. Most of
that increase ($2.77/st) came from higher coal prices.

The remainder of the year looks strong for coal, Foundation Chairman and CEO
James Roberts said during the company's earnings call Wednesday. Inventories
remain low at utilities, particularly in the western US, and the recent TXU
announcement of plans to build additional power plants burning Powder River
Basin coal in Texas means there will be a strong demand for PRB coal while
further taxing the railroad system. The Texas plants are a "very positive
announcement, ... very good for the entire Powder River Basin and particularly
good for the 8,400 [Btu/lb] market."

Stronger shipments of PRB and Northern Appalachia coal and "significantly
higher prices" for new contracts as old ones expire support a strong year
ahead, he said.

Helping the company's PRB production will be the Belle Ayr mine in Wyoming,
now that a large overburden shovel and more haul trucks are in service. The
mine is expected to produce 25 million st this year, up from 20 million st in
2005.

The Wabash mine in Illinois will receive a new slope, overland conveyor and
related handling facilities over a two-year period at a cost of $50 million.
The work to be completed in the third quarter of 2007 will improve efficiency
and reduce costs.

"Getting to the face of the mine is very difficult," said Roberts. The new
slope will allow the company to seal off a portion of the expensive
maintenance area, reducing costs.

Those improvements will eventually help increase tonnage from 1.8 million st
to 2 million st, and no additional labor will be needed to get the extra
tonnage. Engineering work is now under way to reach a higher seam and pull out
an additional 500,000 to 600,000 st, he said.

Expansion in Central Appalachia is more likely to be in steam and compliance
coal, with metallurgical coal possibilities, he said.

Guidance for 2006 remains unchanged from the fourth quarter, the company said.
Production is expected to reach 13 million to 13.2 million st in 2006. Total
revenues for 2006 are projected to be $1.4 billion to $1.5 billion, net income
of $70 million to $100 million, earnings/diluted share of $1.50 to $2.15 and
capital expenditures $150 million to $170 million.

-- Charlotte Wright, charlotte_wright@platts.com

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