Photo by: Reuters
TORONTO (miningweekly.com) – Coal miner Walter Energy on Tuesday said that it planned to idle its Canadian coal mines in the face of weak metallurgical coal prices, placing more than 695 jobs on the line.
The Birmingham, Alabama-based ‘pure-play’ metallurgical coal producer for the global steel industry, which has coal operations in the US, Canada and UK, said that it would place its Wolverine mine (located near the district municipality of Tumbler Ridge) on idle status effective immediately.
At Brazion, which includes the Brule and Willow Creek mines, near the district municipality of Chetwynd, only the Brule mine would continue to function. However, it too would be shuttered by July.
Walter Energy said that it would continue to operate its preparation plants at the affected mines to complete processing mined coal in its inventory.
The company reported that for 2013, Wolverine, which produces mid-volatile hard coking coal, produced 1.6-million metric tons, and the Brazion mines produced about 1.9-million metric tons of low-volatile pulverized coal injection and 100 000 metric tons of hard coking coal.
As of December 31, Walter Energy had about 1.1-million metric tons of coal in inventory in Canada.
“These coal reserves remain valuable assets. However, given the current met coal pricing environment, our best course of action at this time is to idle these operations until we can achieve reasonable value from these reserves,” CEO Walter Scheller III said.
The company expects to incur severance charges of about $7-million in the second quarter in connection with idling the mines.
"These layoffs are particularly unfortunate because our employees have worked very hard to keep these mines competitive in the face of daunting market conditions,” Scheller said.
Coal miners were dealing with low coal prices across the board.
Steelmaking metallurgical coal and electricity-generating thermal coal were suffering from weak prices owing to low demand and surplus supply for the past year, which had forced Walter Energy and other miners to rein in spending to cope with the weak prices.
Walter Energy in February reported a smaller-than-expected fourth-quarter loss owing to cost cuts, and forecast a slight improvement in demand for metallurgical coal in 2014.
The company's outlook was in contrast to that of other US miners such as Arch Coal and Alpha Natural Resources, which expected an improvement in demand for electricity-generating thermal coal rather than metallurgical coal.
Walter Energy’s TSX-listed shares closed 5.52% higher on Tuesday at C$8.99 apiece.