Grande Cache Coal cuts production, jobs
Grande Cache Coal Corp. is cutting 100 jobs and scaling back output by 25 per cent to deal with slumping steel demand that has led its customers to defer metallurgical coal purchases into 2010.
The Calgary-based miner, the latest coal company to announce cuts in the global recession, said Wednesday it will immediately pare 23 per cent of its approximately 440 staff and contract workers at its mine site in northwestern Alberta.
It also plans to slash annual production to 975,000 tonnes from 1.3 million tonnes over the next six months.
"The continued uncertainty in the marketplace and further indications of lower demand for coal has led us to our decision to reduce production in the short term," CEO Robert Stan stated in a release.
"It is unfortunate that these measures have to be taken, however they are necessary and prudent, and will allow us to preserve capital and better position the corporation to weather the current downturn and succeed in the next recovery."
The company operates a surface mine and an underground mine near the town of Grande Cache, about 360 kilometres west of Edmonton.
It has applied for regulatory approval to develop two additional surface mines all on the same site outside of Grande Cache.
Demand slowing, company warns
The company warned last month that demand was slowing and cuts were coming because its steelmaker customers, primarily in Asia, are facing tough times and lower demand for steel as the world economic slump worsens.
Metallurgical, or coking, coal is used in blast furnaces to produce steel.
On Wednesday, Grande Cache said it has received "further indications" from its customers that additional shipments originally scheduled for delivery by March 31, will be deferred until fiscal 2010.
It also said the amount of coal required is expected to be reduced "at least in the initial months of fiscal 2010."
Grande Cache said the production cut will be reassessed on an ongoing basis as coal contracts are negotiated for 2010.
Recent Q3 profit
Last week, Grande Cache reported a third-quarter profit of $36.8 million or 38 cents per share, reversing a year-ago loss of $3.4 million or five cents per share.
Revenue jumped to $91.9 million from $37.7 million, boosted by a big increase in the average sale price of a tonne of coal, rising to $254 a tonne from $85 a tonne in the same period last year.
Analysts say coal prices are expected to drop to about US$100 to $150 per tonne for the coming coal year, which is about half of where it sat at this time last year.
Grande Cache stock dropped more than eight per cent to 78 cents Wednesday on the Toronto Stock Exchange, with 2.7 million shares traded.
The stock traded at a 52-year high of $10.78 in June and a low of 49 cents in November.