Alpha Natural sees restructuring to reduce annual overhead costs by $150M

theflyonthewall.com

The company said, "In the face of...market headwinds, Alpha has taken swift and decisive actions to right-size our operational footprint and our cost structure. In September, we announced a plan to reduce our annualized production rate by an additional 16M tons. These actions are being taken in a pricing environment where we estimate that the majority of U.S. thermal coal would be uneconomic to produce at today's spot market prices and, similarly, metallurgical coal has fallen to levels at which a significant percentage of worldwide supply is uneconomic. To ensure that Alpha's operations and cost-base are appropriately aligned with the current market environment, approximately 50% of the planned reduction in tonnage will come from the Powder River Basin, where the company plans to adjust production to match currently committed and priced volumes for 2013. Another 40% of the reduction will come from the higher-cost Eastern thermal coal production base in Central Appalachia, and the remainder of the cutbacks will comprise lower-quality metallurgical coal that is uneconomic in today's market. These restructuring actions began in September and will be phased in through early 2013. Once fully implemented, all of the production cutbacks and restructuring actions are expected to result in a $150M annual reduction in the company's recurring overhead costs, in addition to other cost of coal sales reductions due to mine idlings and production curtailments. This restructuring is a difficult but necessary step, impacting approximately 1,200 positions and the communities where we operate."

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