Western Canadian Coal won’t suspend Wolverine and Brule mines

Western Canadian Coal (WTN-T, WTN-L) has negotiated “sufficient” sales contracts and prices for the fiscal year ended on Mar. 31, 2010 to allow it to continue mining high quality metallurgical coal at its Wolverine and Brule mines in northeastern British Columbia.

The news sent the Vancouver-based coal miner’s shares up 21.8% or 17¢ apiece to 95¢, with 7.2 million shares changing hands.

“Despite the significant curtailments taken by our customers during the current economic environment, we are pleased to achieve coal sale prices that are the second highest on record,” John Hogg, the company’s president and chief executive, declared in a news release.

Western Canadian Coal expects to produce about 1.7 million tonnes of metallurgical coal from the two operating mines this year: about 1.2 million tonnes of hard coking coal from Wolverine and about 0.5 million tonnes of low-volatile pulverized coal injection coal from Brule. (ULV-PCI coal can replace up to 30% of the coke feed in a blast furnace and so can cut raw material costs for steelmakers, the company says on its website.)

The coal producer expects the average price for its products will be US$120 to US$125 per tonne. It has signed forward sale contracts for US$175 million at a rate of C$1.21 per US$1.00. These contracts mature each month until April 2010.

Coal sales are in US dollars, while a majority of Western Canadian Coal’s expenses are in Canadian dollars, an added benefit.

In an effort to cut operating costs and remain competitive, Western Canadian Coal has focused on removing waste rock and lowering stripping ratios at Wolverine over the past few months. Those efforts have started to pay off and the company believes Wolverine’s stripping ratio will average 12:1 next year.

The company is also taking steps to further cut costs by replacing its mining contractor at Wolverine with company employees starting next month.

Under a cash preservation plan, Western Canadian Coal also plans to limit capital expenditures in fiscal 2010 to about C$3 to $4 million.

The company’s Willow Creek mine will remain on care and maintenance.

Western Canadian Coal has traded in a range of 36¢-$10.99 per share over the last 52 weeks and has 209.7 million shares outstanding.