* Cuts production capacity by 3 million tons
* 4th-quarter adj loss $1.59/share vs est. loss $1.41
* Revenue falls 32 pct to $232.2 mln
* Shares fall as much as 14 pct to 3-month low
By Kanika Sikka
March 7 (Reuters) - James River Coal Co said it slashed production and cut jobs over the past few months to cope with weak demand and rising costs, but analysts reckon the company might still run out of cash in a few quarters if demand does not pick up.
Shares of the heavily indebted company fell as much as 14 percent to a three-month low of $2.20 after it reported a bigger-than-expected quarterly loss as sales declined for the third time in a row.
James River Coal said available liquidity as of Dec. 31 was $135.9 million, prompting analysts at Raymond James and Tudor Pickering Holt to say there could be a cash shortage within five quarters.
The Richmond, Virginia-based company's debt of $546.4 million as of Dec. 31 is almost six times its market capitalization.
Chief Executive Peter Socha said on a conference call that he had options to deal with liquidity issues, but declined to share details.
"Tough times in the coal markets have weighed on the smaller cap players, exhibited by (James River Coal's) weak quarterly report," Raymond James analyst Andrew Coleman said.
Consumption of thermal coal, used in power generation, fell to its lowest level in two decades in the United States last year as power producers moved to cheaper natural gas. Demand for steelmaking coal too has been soft.
To deal with weak demand, James River Coal cut its production capacity by about 30 percent in the Central Appalachia region in eastern United States, it said.
The company also laid off 400 people. It had 2,405 employees as of Dec. 31, 2011, the most recent period for which job data is available.
James River Coal suspended production at five underground mines and reduced output at three surface mines in Central Appalachia (CAPP), cutting capacity by 3 million tons.
Production from the region accounted for over three-quarters of the total output of 9.5 million tons in 2012.
"Without further details, we would assume that all the impinged capacity was thermal coal, likely resulting in James River selling as much met coal as thermal coal from CAPP in 2013," Brean Capital analyst Lucas Pipes said.
Peabody Energy Corp, the largest coal producer in the United States, reported a smaller-than-expected quarterly loss due to cost cuts.
U.S. thermal coal miners, primed for a recovery in demand, will have to wait for up to a year while stockpiles are run down before profiting from the fuel's return to being the cheap alternative to natural gas in power generation.
"We will not be issuing production or cost guidance at this time. There are just too many moving pieces," Socha said.
The company's net loss widened to $76.9 million, or $2.21 per share, in the fourth quarter, from $28.5 million, or 82 cents per share, a year earlier. Excluding items, it lost $1.59 per share.
Total revenue fell about 32 percent to $232.2 million.
Analysts on average had expected a loss of $1.41 per share on revenue of $244.6 million, according to Thomson Reuters I/B/E/S.
Shares of James River Coal, whose market capitalization has fallen to about $92 million from more than $1.50 billion in less than four years, were down 8 percent at $2.34 by early afternoon on the Nasdaq.