An American coal miner that has idled mines in B.C. took a US$470 million loss in 2014, thanks to a global glut of metallurgical coal that has depressed prices.
In its fourth quarter financials, Walter Energy Inc. (TSX: WLT) reports that a dramatic drop in sales in 2014 were “primarily due to reduced sales of coal from the idled Canadian mining operations.”
Last year, Walter Energy was forced to idle three met coal mines in Tumbler Ridge and Chetwynd, putting several hundred miners out of work.
Anglo American PLC also shuttered a met coal mine in Tumbler Ridge in 2014, throwing 360 more miners and 30 contractors out of work.
Walter Energy reported a net loss of US$470 million (US$7.10 per diluted share) in 2014, following a net loss of US$359 million in 2013.
A global glut of met coal has pushed prices down from US$300 per tonne in 2011 to today’s US$117 per tonne.
The recent mine closures in B.C. have had a dramatic impact on the federally owned Ridley Terminals, which handles metallurgical and thermal coal and petroleum coke from B.C., Alberta and the U.S.
Walter Energy is the terminal’s largest customer. The curtailments in coal production in B.C. have had a dramatic impact on Ridley Terminals, which in its most recent quarterly report, expected shipments to be down nearly by half in 2014 – about 7 million tonnes, compared with 11.8 million tonnes in 2013.
And unless Walter Energy decides to take advantage of low diesel prices and a low Canadian dollar to restart one or more of its mines, Ridley Terminals could be in for another bad year, said Joe Aldina, a coal analyst for Wood Mackenzie,
“My own view is that the Ridley Terminal is going to have tough 2015 and volumes are going to be down quite bit,” he told Business in Vancouver. “Ridley’s going from a principally met coal-oriented port to having (Alberta’s) Coal Valley – the thermal coal mine – as its biggest shipper.”
Walter Energy has struggled with debt at the same time it is struggling with low prices.
“On the positive side, Walter did an excellent job of reducing costs at those Peace River operations, and they have very good assets in Alabama that produce very high quality coking coal.”
Aldina said Walter Energy’s Wolverine mine near Tumbler Ridge is the company’s best asset and therefore has the best chances of reopening – something the company might consider in light of a weak dollar and low fuel prices. That would at least generate some cash flow for the company, he said.
Coal terminals in the Lower Mainland have not had the same impacts as Ridley Terminals, since most of the met coal shipped through them comes from Teck Resources Ltd. (TSX:TCK.B), which has managed to keep all of its operating mines open, despite a huge drop in profits.
Last week, Teck reported in its year-end financials that its profits were cut in half in 2014, due to low met coal and copper prices. Teck’s profits attributable to shareholders dropped to $452 million or $0.78 per share in 2014 – down 55% compared with $1.0 billion in 2013.
