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Cost performance improves for Arch Coal in Powder River Basin

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Mar. 17 2015, Updated 1:04 p.m. ET

Revenues up

Arch Coal (ACI) generated $376.8 million from its Powder River Basin (or PRB) segment in 4Q14, up from $324.2 million in 4Q13. The increase in revenues was driven by both higher prices and higher shipments.

PRB coal producers, including Peabody Energy (BTU) and Cloud Peak Energy (CLD), signaled improvement in rail performance in 4Q14. At $1.43 billion, PRB revenues in 2014 topped 2013’s $1.39 billion driven by higher pricing. Alpha Natural Resources (ANR) is another major producer in PRB. All major American coal producers are a part of the iShares Russell 3000 ETF (IWV).

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Cost per ton increases, costs come down

While prices per ton increased during the quarter, costs came in lower than the same quarter in 2013. Cash cost per ton for the PRB segment was $10.81 in 4Q14 compared to $11.37 in 4Q13 as the company undertook cost-saving measures.

Rail issues in the region eased during 4Q14, also contributing to cost saving. The cost per ton was also lower than 3Q14’s $10.92 as the company spent less on repair and maintenance.

For 2014, the cost per ton at $11.06 came in higher than 2013’s $10.65 primarily due to rail issues.

Margin per ton

Arch Coal’s 4Q14 margins at 2.05 per ton improved substantially over 4Q13’s $0.91 per ton due to higher pricing and lower cost per ton. However, margin per ton was modestly lower than 3Q14’s $2.11 per ton, primarily due to lower pricing. PRB margins for 2014 stood at $1.80 a ton, one cent higher than 2013’s $1.79.

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