UPDATE 1-Arch Coal reports smaller-than-expected loss on cost controls

Tue Jul 29, 2014 9:51am EDT

(Adds details from statement, background, share movement)

July 29 (Reuters) - Miner Arch Coal Inc reported a smaller-than-expected quarterly loss as operating costs per ton fell 7 percent, sending its shares up as much as 7 percent in early trading.

Arch Coal, like other U.S. miners, is struggling with dismally low coal prices and has been trying to cut costs and lower production of low-margin metallurgical, or steel-making, coal.

Lack of proper rail links to western U.S. states and a harsher-than-usual winter in North America, which disrupted transportation, has also added to coal miners' woes.

Last week, Arch Coal said it would idle its Cumberland River coal complex in Kentucky and Virginia, lowering its full-year metallurgical coal volumes by about 200,000 tons.

The company on Tuesday cut its sales volume targets for 2014 to reflect the effects of the transportation bottlenecks and the impact of a fall in steel production.

Arch Coal cut its thermal sales volumes forecast for 2014 to 124-130 million tons from 124-132 million tons.

It had already lowered its met coal sales forecast last week to 6.3-6.9 million tons from 6.3-7.3 million tons.

The company is turning its focus to producing metallurgical coal from its low-cost assets in Appalachia, where it has eight mines.

Arch Coal's net loss widened to $97 million in the second quarter ended June 30 from $72.2 million a year earlier.

Excluding items its loss of 46 cents per share was narrower than the average analyst estimate of a loss of 49 cents per share, according to Thomson Reuters I/B/E/S.

The company's operating costs per ton fell to $20.55 from $21.19.

Sales fell 7 percent to $713.8 million, missing the average analyst estimate of $714.6 million.

Arch Coal's shares were up 6 percent at $3.03 in early trading, slightly lower than its Tuesday high of $3.05. (Reporting By Kanika Sikka; Editing by Ted Kerr and Savio D'Souza)