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Analyzing Major Coal Mining Companies’ Cost Performance

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Cost of sales per ton

Depending on the mining method, the cost of coal (KOL) mining varies across major coal mining companies. In general, the cost of mining coal from underground mines will be higher compared to mining in opencast mines. Therefore, it’s reasonable to compare the cost growth rate on a per ton basis instead of the actual cost figures.

For 2Q16, Alliance Resource Partners’ (ARLP) cost of sales per ton was $31.0—compared to $35.8 in 2Q15. Peabody Energy’s (BTUUQ) costs increased from $23.1 per ton of coal sold in 2Q15 to $25.0 per ton of coal sold in 2Q16.

Arch Coal’s (ACIIQ) cost per ton sold increased from $18.5 in 2Q15 to $21.5 in 2Q16. Westmoreland Coal’s (WLB) cost of sales per ton came in at $24.2—compared to $21.5 in 2Q15.

However, Cloud Peak Energy’s (CLD) cost per ton sold fell marginally from $10.8 in 2Q15 to $10.5 in 2Q16.

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YoY change

Of all the major coal mining companies, Alliance Resource Partners’ cost of sales per ton fell the most in 2Q16. The company reported a 14% decline on a YoY basis. It was followed by Cloud Peak Energy’s 2% decline in the cost of coal sold on a per ton basis.

The cost per ton sold of Arch Coal, Peabody Energy, and Westmoreland Coal rose by nearly 16%, 8%, and 13%, respectively.

Arch Coal’s costs were the highest

The increase in Arch Coal’s cost of sales per ton is primarily due to the lower shipments volume in 2Q16. As discussed earlier, Arch Coal reported the steepest fall in 2Q16 shipments among its peers. Lower shipments will result in higher fixed costs per ton of coal sold.

Next, we’ll compare major coal companies’ operating performance in 2Q16.

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