Grande Cache Coal Corp. is cutting 100 jobs and slashing output over the next six months from 1.3 million tonnes to 975,000 tonnes to deal with a drop in steel demand that has led customers to defer metallurgical coal purchases.
"The continued uncertainty in the marketplace and further indications of lower demand for coal has led us to our decision to reduce production in the short term," said president and CEO Robert Stan.
"It is unfortunate that these measures have to be taken, however they are necessary and prudent, and will allow us to preserve capital and better position the corporation to weather the current downturn and succeed in the next recovery."
The company warned last month that demand for its products amonmg steelmakers in Asia was falling as the world economic slump worsens. Now it says it has received "further indications" from its customers that shipments originally scheduled for delivery by March 31, will be deferred into fiscal 2010 and that the amount of coal required is expected to be reduced "at least in the initial months of fiscal 2010."
Production levels will be reassessed on an ongoing basis as coal contracts are negotiated for 2010.
The company, with about 300 workers, operates a surface mine and an underground mine near the town of Grande Cache, about 360 kilometres west of Edmonton, Alberta.
It has applied for regulatory approval to develop two additional surface mines all on the same site outside Grande Cache.
"The corporation will focus on mining existing operations where production costs may be minimized and the greatest level of cash flow can be realized based on negotiated prices for fiscal 2010, while at the same time continuing to seek regulatory approval for the two additional surface mines," the company said on Wednesday.
Last week, Grande Cache said that it expects average sales price per tonne to be US$210 to $220 per tonne for the current coal year which ends on March 31. However analysts say coal prices are expected to drop to about US$100 to US$150 per tonne for the upcoming coal year.
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