October 13, 2010 / 1:14 PM / in 7 years

UPDATE 2-Grande Cache cuts view on port, mine issues; shrs fall

* Cuts FY11 coal sales volume view by about 14 pct

* Says congested ports could delay shipping volumes

* Production at a mine delayed by two months

* Q2 sales volume up 22 pct

* Shares down as much as 11 pct (Adds details, updates share movement)

BANGALORE, Oct 13 (Reuters) - Canada’s Grande Cache Coal Corp GCE.TO cut full-year sales volume forecast by about 14 percent, due to production delays at one of its mines and congestion issues at Westshore terminals, the country’s largest coal export facility on the Pacific Coast.

Grande Cache shares fell as much as 11 percent Wednesday morning, as the company became the second major Canadian coal miner after Teck Resources Ltd TCKb.TO to trim its sales volume view for the year, despite a booming demand for metallurgical coal from Asian steel mills.

In mid-September, Teck Resources lowered its full-year coal sales forecast, citing temporary capacity constraints at Westshore in Vancouver, British Columbia. [ID:nN20272204]

However, the same province houses the Ridley terminals in Prince Rupert used by Western Coal Corp WTN.TO, which last week raised its production outlook for fiscal 2011 to 6.1 million tons. [ID:nSGE6930II]

In fact, Western Coal has switched to using capesize vessels, replacing the lower-capacity panamax vessels to ship coal, which helps customers cut their per tonne shipping costs.

Grande Cache ships a majority of its coal through Westshore and said that congestion issues at the post are likely continue throughout the third and fourth quarter, and could affect the timing and volume of its shipments.

The company, which holds four coal leases in the Smoky River Coalfield in Alberta, now sees sales volumes of 1.7-1.9 million tons for fiscal 2011, below its earlier view of 2.0-2.2 million tons.

While two mines are in production, difficult operating conditions led to delays in the development of the third -- the No.8 pit -- during the July-September quarter which resulted in lower-than-expected production levels as well as extra costs.

“Challenging operating, topographical and geological conditions are also impacting the construction of roads and the development of the next two phases of operations in No. 8 pit,” the company said in a statement.

Production from these two phases was expected to start by this month, but is now delayed by about two months.

For the July-September quarter, Grande Cache sold 0.44 million tons of coal, a 22 percent increase over last year.

Average selling price of metallurgical coal in the second quarter was $186 per ton. The industry benchmark price in the third quarter was $209 per ton.

Grande Cache said it is in talks with customers and expects third quarter contract settlements will follow industry trends.

The higher costs as well as lower sales volumes, would lead to average cost of sales in fiscal 2011 being about C$110-C$115 per ton, rather than prior expectations of C$105 per ton.

Capital expenditures planned for the fiscal 2011 remain unchanged at about C$165 million.

Grande Cache shares, which have gained about a quarter of their value in last one month, were down about 3 percent to C$6.98 in the morning trade on the Toronto Stock Exchange. They hit a low of C$6.40 earlier in the session. (Reporting by Ashutosh Joshi in Bangalore; Editing by Anne Pallivathuckal, Jarshad Kakkrakandy)

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