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Arch CEO promises aggressive cost control

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Arch Coal's CEO promises "aggressive cost reductions across all of our operations during the second half of the year" following the July 30 earnings release that showed a $72.2 million net loss in the second quarter.

Excluding non-cash accretion of acquired coal supply agreements and asset impairment costs, Arch's second quarter 2013 adjusted net loss was $60.5 million.

It was the third consecutive quarterly adjusted net loss for Arch, and the fifth quarter in the past six.

"During the second quarter, we achieved a sequential improvement in our earnings as we continued to manage our business effectively in the face of weak coal market conditions," said John W. Eaves, Arch's president and chief executive officer., in the earnings release."

"Arch employed strong cost control, particularly in the Powder River Basin and in Appalachia, which positively impacted our per-ton margins. Our cost reduction initiatives are generating results, and we will continue to pursue aggressive cost reductions across all of our operations during the second half of the year."

Paul A. Lang, Arch's executive vice president and chief operating officer, said, "Arch continued to decrease costs during the second quarter of 2013 and achieved lower cash costs per ton in several operating regions compared with the first quarter.

"Going forward, we believe our operations can continue to maintain and build on the strong cost performance demonstrated in the first half of the year."

Arch earned a cash margin of $8.48 per ton in the second quarter of 2013 in its Appalachian operations, an increase of 12 percent versus the first quarter. When total operating costs, which include depreciation, depletion and amortization, were calculated, Arch lost about $5.38 per ton, compared with an operating margin of $3.60 a year ago.

The average sales price per ton declined slightly over the same time period, reflecting lower prices on thermal tons, Arch said. The cash cost declined $1.46 per ton in the second quarter of 2013 versus the prior-quarter period, due to strong cost control and the impact of higher volume levels, the company reported.

Companywide, Arch reported an operating margin of 44 cents per ton. It reported margins of 54 cents in the Powder River Basin and $5.62 in its western bituminous region.

"We will continue to focus on the things we can control during the downturn, while carefully positioning ourselves for the market rebound," Eaves said in the earnings release. "We have significantly curtailed capital spending, diligently reduced costs and further streamlined our diversified asset portfolio. Moreover, since the market downturn began in late 2011, we have significantly increased our overall liquidity, with an ample cash position to use for future debt reduction as coal markets improve."