National Coal increases sales 241% in '05, but reports net loss

National Coal increases sales 241% in '05, but reports net loss

Washington (Platts)--4Apr2006

National Coal's coal sales increased 241% to 1.2 million short tons in 2005,
from 357,000 st in 2004, the company said late Friday.

Despite the increase in sales, the company still reported a net loss of $6.8
million (58cts/share) on revenue of $65.9 million, compared with a net loss of
$10.4 million ($2.60/share) on revenue of $17.0 million the year before. The
cost of sales skyrocketed to $51.1 million in 2005 from $16.3 million in 2004,
the company said.

The company changed its depreciation life of its mining equipment "from seven
years to approximately three years, increasing both the 2005 operating loss
and the 2005 net loss by $3.6 million."

The company attributed the increase in revenue to the increase in production,
the addition of three new utility customers for its Central Appalachian coal
and a 15% increase in average sales prices.

In the fourth quarter, National Coal reported revenues of $20.2 million based
on the sale of 366,450 st sold at an average of $55.01/st, compared with
revenue in the year-ago quarter of $7 million from the sale of 133,900 st at
an average price of $52.24/st. The company had a net loss of $3.3 million in
the quarter, down from a loss of $5 million a year ago.

National Coal said it plans to continue to expand coal production in 2006,
leveraging the fixed costs from its infrastructure. It will also pursue
additional long-term contacts, capitalizing on the strong price environment
for CAPP coal. It had 2006 contracts for 1.5 million st at the end of 2005.

The company said it plans to expand its Tennessee production by focusing on
owned reserves, particularly those in the New River Tract in eastern
Tennessee. In the first and second quarters of this year, National Coal will
spend $7 million to build its infrastructure through the purchase of a
railroad and to refurbish a large preparation and rail loadout facility.

NC Railroad, a newly-formed subsidiary, purchased the rail line February 28
from Norfolk Southern for $1.96 million and will spend $1 million to $1.5
million restoring the 42-mile track, National Coal said (CO 3/6). The line
should be operational by the third quarter. The company will also spend $3
million refurbishing the Baldwin prep plant and loadout in Devonia, Tennessee.

Once completed, the new infrastructure will allow National Coal to ship
250,000 st/month from its New River property. It has five approved permits for
new mining opportunities and has submitted applications for six more, the
company said.

"Our achievements in 2005 put us into position to take advantage of
opportunities for organic growth in 2006 and beyond. The business plan we
created is being executed and expanded, especially in the area of reserve
tracts we own. These assets are expected to start showing their first revenue
contributions in late Q2 2006," said Jon Nix, National Coal chairman,
president and CEO.

-- Mark E. Heckathorn, mark_heckathorn@platts.com

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