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Coal miner Patriot Coal Corporation ( ) , on Friday, said geological issues at its two longwall mines and the closure of a thermal mine are likely to affect production in the third quarter. Highlighting the problems faced at its mines the company tweaked its third quarter production projection, expecting to lose about 450,000 tons.
Patriot said longwall moves at both the Federal and Panther mines, which were scheduled to take place in the third quarter, were delayed causing production declines. At the Federal longwall, geologic challenges caused delays in the start of the move, while equipment issues impacted the restart process. Put together, this lowered production at the mine for over six weeks during the quarter. At Panther, difficult geology is expected to result in lower volumes in the third quarter, in addition to the scheduled longwall move.
Apart from the longwall delays, Patriot also closed a West Virginia mine in the Big Mountain complex, after the roof collapsed in August. The roof fall at the thermal coal mine is believed to have emanated from the earthquake tremors felt near Washington D.C. in August 2011.
Due to the production fall, Patriot sees average cost per ton for its Appalachian operations to be several dollars higher than the mid-$70s guidance provided for the third quarter. At the end of the second quarter, Patriot had forecast sales volumes in the range of 31 to 32 million tons for full-year 2011, including metallurgical coal sales of at least 8 million tons.
Looking into the rest of 2011, Patriot now plans to provide forecasts for the rest of the year in October when it announces its third quarter financial results.
Based in St. Louis, Missouri, Patriot Coal is a leading coal producer in the eastern United States, having 14 mining complexes in Appalachia and the Illinois Basin. The company primarily competes with Penn Virginia Resource Partners L.P. ( PVR - Analyst Report ) and Peabody Energy Corp. ( BTU - Analyst Report ) .
Patriot Coal currently has a short-term Zacks #3 Rank (Hold rating). We maintain our Neutral recommendation on the stock.
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