Massey Energy Provides 2010 Guidance Update and Affirms 2011 Outlook

RICHMOND, Va., Sept. 16 /PRNewswire-FirstCall/ -- Massey Energy Company (NYSE: MEE) today provided an update on its public guidance regarding its expectations for 2010 and 2011 operating results.  

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The Company expects 2010 operating results to be at the low end of its previously announced guidance range.

"Our operations have continued to struggle since April," said Don Blankenship, Massey's Chairman and CEO.  "As we have noted earlier, increasingly stringent enforcement actions by MSHA across our operations and throughout the Central Appalachian region have resulted in lost shifts and loss of productivity.  In addition, our Revolution longwall mine was idled in June for a planned longwall move but has remained down pending approval of its ventilation plan.  As a result of these and other factors, we now expect our third quarter shipments to approximate 10 million tons and we expect to report an operating loss for the quarter."

For the full year 2010, the Company now expects to ship approximately 39 million tons of coal at an average price of approximately $71.00 per ton.  The average cash cost(1) of tons shipped is expected to approximate $60.00 per ton.

Massey also expects 2010 Depletion, depreciation and amortization expense to approximate $400 million, which includes approximately $45 million in amortization of above market sales contracts acquired with Cumberland Resources.

"We remain confident that we will achieve operational improvements going forward," Blankenship stated.  "As the Upper Big Branch investigation winds down, we have refocused management time and attention on our ongoing operations and we are initiating actions to improve productivity and re-establish operating consistency in all our mines. In addition, our early negotiations with metallurgical coal customers give us reason to expect pricing in 2011 will be favorable to what we have realized in 2010.  Our guidance for 2011 remains unchanged."

Within the next several weeks Massey anticipates several key operational improvements including restarting the Revolution longwall mine, restarting the Sprouse Creek processing plant, bringing the new state-of-the-art Zigmond processing plant on line and starting production at its Laurel Creek property.  

The Revolution mine was idled for a longwall move in June but has remained idled while a new ventilation plan is being negotiated with MSHA. Production is expected to recommence during the fourth quarter of 2010. Revolution is planned to produce approximately 1.3 million tons of high quality metallurgical coal annually.

The Sprouse Creek processing plant is part of the Rawl Sales resource group.  It had been previously idled and has now been refurbished and modernized.  The plant will process metallurgical coal mined at the Round Bottom surface mine using a highwall miner system and the Long Pole deep mine in the Alma seam.

The Zigmond processing plant is a new, state-of-the-art high efficiency processing plant designed to process 1,200 tons per hour.  It will service the multiple mines including Hernshaw, Cedar Grove and Highland surface mines and the Aracoma deep mines.  It replaces the Bandmill plant which was lost to a fire in August 2009.

The Laurel Creek property was acquired in a reserve trade from Foundation Coal in July 2009.  Immediate plans call for a single section underground mine which will produce approximately 375,000 tons of high quality thermal coal from the Coalburg seam annually.  The coal will be processed and shipped through the Company's Delbarton processing plant.  Production at the mine is expected to begin late in the fourth quarter of 2010 or early in 2011.

Massey will announce its third quarter 2010 results on October 26, 2010 after the market closes.

Guidance Summary

Massey does not intend to update this forecast and actual results for the third quarter of 2010 may be affected by factors other than what is discussed above. Going forward, Massey plans to maintain its established practice of providing guidance on an annual basis in conjunction with its quarterly earnings releases."

Note 1:  Cash Cost/Ton guidance estimates for 2010 and 2011 exclude charges related to the UBB mine tragedy and selling, general and administrative costs.

Company Description

Massey Energy Company, headquartered in Richmond, Va., with operations in West Virginia, Kentucky and Virginia, is the largest coal producer in Central Appalachia and is included in the S&P 500 Index.

NON-GAAP FINANCIAL MEASURES:  "Average cash cost per ton" is calculated as Cost of produced coal revenue (excluding Selling, general and administrative expense and Depreciation, depletion and amortization), divided by the number of produced tons sold.  Although Average cash cost per ton is not a measure of performance calculated in accordance with accounting principles generally accepted in the United States ("GAAP"), we believe that it is useful to investors in evaluating us because it is widely used in the coal industry as a measure to evaluate a company's control over its cash costs.  Average cash cost per ton should not be considered in isolation or as a substitute for measures of performance in accordance with GAAP.  In addition, because Average cash cost per ton is not calculated identically by all companies, the presentation here may not be comparable to other similarly titled measures of other companies.

FORWARD-LOOKING STATEMENTS:  Certain statements in this press release constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are intended to come within the safe harbor protection provided by those sections. Any forward-looking statements are also subject to a number of assumptions regarding, among other things, future economic, competitive and market conditions. These assumptions are based on facts and conditions as they exist at the time such statements are made as well as predictions as to future facts and conditions, the accurate prediction of which may be difficult and involve the assessment of circumstances or events beyond the Company's control. The Company disclaims any intent or obligation to update these forward-looking statements unless required by securities law, and the Company cautions the reader to not rely on them unduly. Caution must be exercised in relying on forward-looking statements including disclosures that use words such as "believe," "anticipate," "expect," "estimate," "intend," "may," "plan," "project," "will," and similar words or statements that are subject to risks, trends and uncertainties that could cause the Company's actual results to differ materially from the expectations expressed or implied in such forward-looking statements. Factors potentially contributing to such differences include, among others: the Company's cash flows, results of operation or financial condition; the successful completion of acquisition, disposition or financing transactions;  the impact of the Upper Big Branch mine explosion and the effect thereof on our business; our ability to successfully integrate the operations we acquire, including as a result of the acquisition of Cumberland; governmental policies, laws, regulatory actions and court decisions affecting the coal industry or our customers' coal usage; legal and administrative proceedings, settlements, investigations and claims and the availability of insurance coverage related thereto; inherent risks of coal mining beyond our control, including weather and geologic conditions or catastrophic weather-related damage; inherent complexities make it more difficult and costly to mine in Central Appalachia than in other parts of the United States; our production capabilities to meet market expectations and customer requirements; our ability to obtain coal from brokerage sources or contract miners in accordance with their contracts; our ability to obtain and renew permits necessary for our existing and planned operations in a timely manner; the cost and availability of transportation for our produced coal; our ability to expand our mining capacity; our ability to manage production costs, including labor costs; adjustments made in price, volume or terms to existing coal supply agreements; the worldwide market demand for coal, electricity and steel; environmental concerns related to coal mining and combustion and the cost and perceived benefits of alternative sources of energy such as natural gas and nuclear energy; competition among coal and other energy producers, in the United States and internationally; our ability to timely obtain necessary supplies and equipment; our reliance upon and relationships with our customers and suppliers; the creditworthiness of our customers and suppliers; our ability to attract, train and retain a skilled workforce to meet replacement or expansion needs; our assumptions and projections concerning economically recoverable coal reserve estimates; our failure to enter into anticipated new contracts; future economic or capital market conditions; foreign currency fluctuations; the availability and costs of credit, surety bonds and letters of credit that we require; the lack of insurance against all potential operating risks; our assumptions and projections regarding pension and other post-retirement benefit liabilities; our interpretation and application of accounting literature related to mining specific issues; our assumptions concerning economically recoverable coal reserve estimates, and the successful implementation of our strategic plans and objectives for future operations and expansion or consolidation.

Additional information concerning these and other factors can be found in press releases and Massey's public filings with the Securities and Exchange Commission, including Massey's Annual Report on Form 10-K for the year ended December 31, 2009, which was filed on March 1, 2010 and subsequently filed interim reports.  Massey's filings are available either publicly, on the Investor Relations page of Massey's website, www.masseyenergyco.com, or upon request from Massey's Investor Relations Department: (866) 814-6512 (toll free).  For further information, please visit Massey's website at www.masseyenergyco.com.

SOURCE Massey Energy Company

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