An overburden collapse that trapped a highwall miner at one of its Ohio mines in August cost the Columbus, Ohio-based company about 40,000 tons of production Most of that tonnage was expected to be made up before the end of December, however, Greg Honish, Oxford’s senior vice president of operations, told analysts during a November conference call to discuss earnings.
“Fourth-quarter highwall production is expected to be quite strong,” he said. “We were able to quickly replace the trapped highwall miner equipment and resume production. That, along with the addition of a third highwall miner in late October, should enable us to make up most of the production loss from the third quarter during the fourth quarter.”
As it was, Oxford saw its total output dip to 1.54 million tons in the July-September period, down from 1.77 million tons a year earlier. Sales also fell, to 1.67 million tons from 1.92 million tons in the third quarter of 2012, and Oxford lost $5.1 million during the quarter, compared with a loss of $3 million in the year-ago period.
Unfortunately for Oxford, the highwall miner incident was not its only challenge. Conditions in the scrubbed U.S. electric utility market that Oxford largely serves also remained difficult.
Although natural gas prices, at historically low levels in early 2012, have drifted higher in 2013, causing some generators to switch back to coal from gas and burning down some bulging coal stockpiles, “this has not yet translated into increased demand,” said Charles Ungurean, Oxford’s president and CEO. “Further, we continue to face an unfriendly regulatory environment.”
The good news for Oxford, though, is the company’s customer relationships “remain strong,” Ungurean said.
For all of 2013, Oxford projected total production of 6.1 million tons to 6.3 million tons, with total sales of 6.6 million tons to 6.8 million tons. The projected average selling price was $50.75 to $51.25 per ton, and the projected average production cost was $43.75 to $44.25 per ton.
Oxford’s sales volume for the balance of 2013 is fully committed and priced. For 2014, the company had 5 million tons committed as of November, of which 3.3 million tons were priced, according to Ungurean. The other 1.7 million tons were based on market indices.
“In spite of the challenging conditions in our region, we are optimistic that we will be able to further increase our sales commitments by year’s end,” Ungurean said.
To experience real improvement in 2014, he added, “we will need to see further declines in utility stockpiles and cooperation from the weather this winter. That being said, we believe we are well-positioned for when the market turns.”
By the end of December, Oxford was expected to complete its slow withdrawal from the high-sulfur Illinois Basin. The company acquired several surface mines in Muhlenberg County, Ky., nearly three years ago and had plans to grow its IB business.
But in early 2012, Big Rivers Electric Corp. terminated an 800,000 tons per year contract with Oxford, a decision that forced Oxford to begin idling mines in western Kentucky. Oxford also filed a breach of contract lawsuit against Big Rivers, a Henderson, Ky.-based generation and transmission cooperative. The suit is pending in Ohio County Circuit Court in Hartford, Ky.
