Western Cdn Coal plummets on Q2 loss

Vancouver – Western Canadian Coal‘s (WTN-T, WTN-L) 2008 second quarter is not a pretty one with the northeastern B.C. coal producer posting a whopping net loss of $43.9 million or 38 per share.

Included in the red ink is a $14.7 million write-down of a future income tax asset, a write-down of $2.8 million in inventory (due to the rising Canadian dollar) and $2.8 million for a terminated sales contract. The company also booked a $1.5 million impairment for some asset-backed commercial paper it holds and $1 million for an abandoned transaction expense.

The aftermath of the financial report saw shares of the coal company decimated in November 15th trading closing down 70%, off $1.18 at 50 apiece on volume of almost 14.7 million shares.

Western Canadian Coal also ominously acknowledged, “At current coal prices and Canadian-US dollar exchange rates, the Company does not expect to have sufficient funds in the near term to meet its financial obligations as they come due.”

Writing is on the wall it will soon need to head to the market for dollars.

“I would like to say that the search for new capital is without a doubt a top priority in the near-term for the company,” confirms company president and CEO John Hogg.

Representatives from Western Canadian’s major shareholder Cambrian Mining (CBM-L), which holds about 41.7% of the company, have been brought on as advisors for the financing process.

Coal sales of 856,000 tonnes for the second quarter – from its Wolverine (Perry Creek) and Brule mines generated revenue of $67.9 million with an average realized price of $79.27 per tonne. Unfortunately cash costs to produce and transport the coal came in at an average of $85.36 per tonne over the quarter leading to an operational loss of $13.5 million.

“Aside from the accounting adjustments recorded and the impact of the strengthening Canadian dollar has had on our results, the disappointment was in our mine performance,” states company president and CEO John Hogg. “Equipment shortages and maintenance issues all hampered production and therefore increased costs.”

Hogg says the company knows what the issues are and has a plan to fix them recently replacing some senior management, expanding its equipment fleet and working with the contract miner to improve maintenance practices.

The coal producer has also continues to face challenges in moving its product to port in Prince Rupert.

“We’ve had our railcar supply issues with CN, our rail provider,” explains Hogg. “We needed approximately 92 trains this quarter to move our coal for the second quarter we only received 80 trains. As you can expect, we are working quite closely with CN to improve this situation.”

Western Canadian Coal’s president remains optimistic on the commodity’s outlook and confirms the company is finalizing negotiations on long-term contracts. “With spot market prices for hard coking coal and PCI much higher than current contract prices, we are quite optimistic for possibly record coal prices in the upcoming coal year,” comments Hogg.