3 Min Read
* Trimming 2012 capital expenditure
* Slowing West Virginia, Wales project expansions
* Stock up over 3.1 percent
By Steve James
Aug 2 (Reuters) - 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 prospects.
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 year.
"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," Harvey said.
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.