Massey Energy reports $16.5 million income

Oct 29, 2009 (The Charleston Gazette - McClatchy-Tribune Information Services via COMTEX) -- MEE | Quote | Chart | News | PowerRating -- CHARLESTON, W.Va. -- Massey Energy reported $16.5 million in net income, or 19 cents per share, during the three months ending Sept. 30, according to an 8-K report Massey filed with the U.S. Securities and Exchange Commission on Wednesday morning.

Massey produced 8.7 million tons of coal during those three months, compared to 10.3 million tons during the same period in 2008.

But revenues from coal dropped to $535.5 million during this year's third quarter, down from $666.4 million in 2008.

During the past three months, Massey earned a "cash margin" of $11.98 per ton of coal, which sold at an average of $61.79 per ton.

Massey's new SEC filing also reported continued global economic weaknesses are hurting international coal markets and U.S coal producers.

Today, Massey controls most of this country's metallurgical coal reserves and exports much more of that coal than any other company.

The 8-K filing also reported:

--Utilities in the southeastern U.S. burned 18 percent less coal during the first eight months of 2009, compared to the same period in 2008.

--Coal stockpiles at electric power plants increased by 69 percent since August 2008.

--Global crude steel output dropped by 18 percent during the first eight months of 2009, according to the World Steel Association.

--Coal production in Central Appalachia dropped by 11 percent during the first nine months this year.

The federal Energy Information Administration predicts coal markets will continue to be affected by dropping demand for electric power and the use of more natural gas to generate electricity.

But rising costs of natural gas might make coal more competitive, the new 8-K report states.

And in August, Chinese steel production rose by 22 percent, which might mean there will be increasing demand for U.S. metallurgical coal exports in coming months.

But "continuing economic volatility and uncertainty make long-term forecasting difficult," the report adds.

Massey's new 8-K filing also mentions the $267.4 million payment it made to Wheeling-Pittsburgh Steel last December for failing to provide metallurgical coal to the Northern Panhandle steel producer.

A Wheeling-Pitt lawsuit asserted Massey failed to fulfill its long-term coal supply contract with Wheeling-Pitt in order to sell that same coal at higher prices to China.

Don Blankenship, Massey's chairman and chief executive officer, said, "We are pleased to have increased our cash balance by over $100 million during the quarter, even though it was partially offset by the deposit of a $72 million appeal bond related to the Harman litigation."

In June, the U.S. Supreme Court ordered the West Virginia Supreme Court to rehear the Harman case, ruling that Justice Brent Benjamin should have stepped down from the case because Blankenship spent more than $3 million of his own money to help elect him in 2004.

In August 2002, a Boone County jury ruled Massey illegally took over a long-term coal contract Harman and its owner, Hugh Caperton, had to supply coal from its Virginia coal mining operations to LTV Corp., a steel producer in Pittsburgh.

The West Virginia Supreme Court is expected to issue a new ruling in the Harman case before the end of the year. With interest, the 2002 verdict could be worth up to $85 million.

Reach Paul J. Nyden at pjnyden@wvgazette.com or 304-348-5164.

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