* Trimming 2012 capital expenditure
* Slowing West Virginia, Wales project expansions
* Stock up over 3.1 percent
By Steve James
Aug 2 Walter Energy, which specializes
in the mining of steelmaking coal, said it is cutting capital
expenditure this year and slowing some expansion projects in the
United States and Britain because of cloudy steel industry
It is also focusing on lowering costs at its U.S. and
Canadian mines as margins have been squeezed by a recent drop in
prices for Walter's metallurgical and hard coking coals.
"The macro global economic uncertainty has hurt the outlook
for global steel production," said Chief Executive Officer Walt
Scheller. "We must clearly pay attention to the developments in
Asia, particularly China demand, along with world supply over
the coming months."
His comments to Wall Street analysts on a conference call on
Thursday came a day after Walter reported its second-quarter
profit dropped sharply but still beat analysts' estimates.
The company's stock rose 3.1 percent to $35.45 in early
afternoon trading on the New York Stock Exchange on Thursday.
During Thursday's call, Chief Financial Officer Bill Harvey
said Walter Energy was trimming its capital spending for this
"In the (second) quarter, we spent $125 million of capital
expenditures and have spent $246 million for the first six
months of the year.
"Given the current economic uncertainties, we have now
reduced this (2012 total) to $400 million, or about $150 million
for the balance of the year.
"We are slowing the pace of several growth projects while
maintaining optionality and investing in high return projects,"
CEO Scheller expanded on the capital cutback, saying the
company had slowed its growth projects in West Virginia.
"We had intended to start another couple of units up at our
Maple mine, those have been delayed, we pulled that capital
out," he said, adding it would mean the loss of 250,000 tonnes
of production this year and half a million tonnes in 2013.
Maple, east of Charleston, West Virginia, comprises one
underground mine, one surface pit and a processing plant.
"We are also slowing our project down in Wales," Scheller
said, referring to Walter's anthracite operations near Neath, in
South Wales, that supplies the Port Talbot steel plant.
"We had expected some tonnes from that operation this year
and by slowing down, we're looking into whether or not those
tonnes will come on line late '13 or 2014."
Scheller said Walter had a goal of bringing down costs at
its U.S. mines to $100 per tonne by the end of the year and to
$130 per tonne in Canada.
In the second quarter, Walter said its costs for producing
hard coking coal were $107 per tonne in the U.S. and $144 in
Canada and Britain. Average selling prices in the quarter were
$201 per tonne -- a drop of 11 percent from the first quarter.
The company maintained its 2012 production target of 11.5
million to 13.0 million tonnes of metallurgical coal.