Home > Coal mine blast gives industry black eye

Coal mine blast gives industry black eye

by Open-Publishing - Monday 9 January 2006
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Un/Employment Catastrophes USA

By Steve James

NEW YORK (Reuters) - The blast that killed 12 miners in a West Virginia mine has given coal mining a black eye just as the long-stagnant industry had begun turning a profit after decades of red ink.

Analysts and industry experts said on Wednesday that the disaster, in which the 12 missing men were at first mistakenly reported alive, could have a negative impact on recruitment at a time when the industry is short of skilled workers.

However, they did not believe the explosion — initially believed to have been caused by a lightning strike — would have a major impact on the financial results of the mine’s owner, International Coal Group Inc. (ICO.N: Quote, Profile, Research), or the health of the coal mining industry in general.

"There are short-term costs related to rescue efforts but it will probably have more of a psychological than a financial effect," said Richard Price, managing director of Westminster Securities in St. Louis.

Since October, the U.S. Mine Safety and Health Administration issued 50 citations to the Sago mine, in central West Virginia, including citations for accumulation of combustible materials such as coal dust and loose coal.

In 2005, the Sago mine lost a total of 17.04 days of production as a result of nonfatal accidents. The national average for that type of mine is 6.54. In 2004 the mine lost 15.90 days, compared with a national average of 5.66.

Price said the citations were mostly for minor violations. "They were not so egregious that they had to shut down the mine. Historically, coal-mining was much more risky."

He also pointed out that ICG, whose chairman is financier Wilbur Ross, a specialist in buying out companies in distressed industries, only acquired the mine last year. The Sago mine was previously owned by Anker Coal Group Inc., one of two coal producers ICG acquired in 2005.

"Anker was in bankruptcy, so it was operating under marginal financial conditions," said Price.

The United Mine Workers of America said the Sago miners were not union members.

Coal industry analyst Ian Synnott, of Natexis Bleichroeder, said it was too early to say what the long-term implications of the accident would be for ICG’s (ICO.N: Quote, Profile, Research) financial results.

"The big picture for investors is what will it do for production," said Synnott. "What will it mean for supply and demand and pricing?" Coal prices are at all-time highs, driven in part by surging global steel and other industrial demand.

Synnott, who does not cover ICG’s stock, said much would depend on how long production at the Sago mine is shut down after rescue efforts. "It would remove some production from an already tight market," he said of the mine, which produces around 800,000 tons a year.

"ICG is sufficiently well capitalized and has Street money behind them that this will have no material effect," said Price, noting that the Sago mine represented only about 2 percent to 3 percent of ICG’s total production.

Consol Energy (CNX.N: Quote, Profile, Research) and Arch Coal (ACI.N: Quote, Profile, Research) both shut major mines in recent years with little long-term financial impact, he said. "These kind of events do occur, but the Street’s (negative) view of the events lasted a couple of days."

Price said he believed the explosion would have little effect on recruitment in an industry already known to be dangerous. "These are still the highest paying jobs around in places like West Virginia."

But Jim Thompson, editor of the industry newsletter Coal & Energy Price Report, disagreed. "It can’t be good for ICG or the coal industry in general in terms of labor, especially when the industry was already short.

"This is a damaging blow to the company and a damaging blow to the industry," he said. "The industry is not as a dangerous as it once was, but that image still exists of a dark and dangerous place to work. This only contributed."

But he agreed that despite a chronic shortage of skilled miners, especially in Central Appalachia, "there are still not many comparable jobs with pay and benefits."

ICG stock fell more than 3 percent on the New York Stock Exchange. It was down 31 cents, or 3.31 percent, at $9.05 in Wednesday morning trading.

http://today.reuters.com/business/N...

Forum posts

  • Whats new that’s simply the human cost of working underground. Having done it for three years I’m familiar with:

    1) union pitted against non union
    2) older workers vs younger ones...clamping down on citing dangerous conditions
    3) immigrants or native miners vs locals
    4) bosses and workers ignore safety to keep job
    5) safety inspections visits known ahead of time, inadequate nos. of inspectors
    6)guys like Jack Abramoff who lobby for the companies
    7)deregulation and down sizing of compliance
    8) fines which are cheaper to pay than remedy infraction, a joke
    9)hangovers and Monday mornings are peak accident/error days
    10)doing mickey mouse jobs when injured to keep stats and insurance rates low.
    11)in some cases "the working class can kiss my ass I got a Foreman’s job at last"
    12) and so on...

    CNN calls Sago "Hope and Heartbreak" less dramatic but more realist would be "Causes and Catastrophes"...but that’s venturing into areas where the MSM dare not go.

    After the CEO, The Governor and his lovely wife finished their eulogies came:

    Wilbur saying the organization was contributing $2 million toward a trust fund, requested OTHERS to add to the pot, then the coup de grace, all management fees would be waived!!! Who is this guy ???

    .. multi billionaire investor Wibur Ross.. known..as a "vulture investor."..Business Week profile.. vulture investing is "a corner of the finance world dominated by big personalities who rise to prominence in times like these, the bust after a boom."..not usually interested in long term involvement..preferring instead to get improved returns and a fast exit by reselling the "distressed" companies at a profit..involve some form of restructuring.. new management, cutting corners so that profits will increase, or new sales strategies are the favored "improvements." After these.. vulture investors then sell investments for a profit, usually to even larger companies. As the Business Week article puts it, "ultimately he (Ross) makes money from others’ misfortune.
    http://www.counterpunch.org/jacobs01042006.ht

    As my grandfather would say "its worse than a tragedy its an error" and then he would add "and of course we’re going to see to it that this never happens again"

    No salutations this time simply, jt

    The company has also offered to pay one weeks salary for the time lost, another magnanimous contribution toward the "The American Dream."