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To: Johnny Canuck who wrote (42567)	7/25/2005 7:36:35 PM
From: Johnny Canuck	Read Replies (1) \| Respond to of 70062

Fording Coal sees continued strong demand; equipment tires a big concern Related Symbols: T.FDG.UN 7/25/05 9:09:00 AM TORONTO (CP) - What disturbs the contented dreams of coking-coal mining executives who have just had their quarterly profits stoked by 880 per cent? Big bald tires. The global commodities boom has caused a worldwide squeeze on the massive tires needed by mining trucks and other heavy equipment, and officials of the Fording Canadian Coal Trust expressed unease Monday that a lack of tires could deflate production. The Fording trust - whose main asset is 60 per cent of the Elk Valley Coal Partnership, the world's second-largest exporter of metallurgical coal for steel mills with expected output this year of 27 million tonnes - reported late Friday that its second-quarter earnings were $123.3 million, up from $12.6 million a year ago. Revenue at the Calgary-based coal operator rose 51 per cent to $468.9 million from $309.7 million. That was largely because the Canadian-dollar price of the trust's product rose to $119 per tonne from $72, as president Jim Popowich observed in Monday's conference call with analysts and investors. "The risk of a shortage of tires continues to be high," Popowich said. "Obviously, a lack of tires will impact the ability to produce coal, and Elk Valley Coal is working hard to prolong tire life at its operations through increased emphasis on haul-road maintenance," he added. "New technologies are also being tested to monitor tire pressure and temperatures at the mines, with some good results. We're also testing a new two-piece tire that has the potential to reduce tire costs in the future." The tire pinch is likely to continue for the next year, Popowich indicated, noting that tire makers have said they expect to increase supply in the third quarter of 2006. Second-quarter production at Elk Valley Coal rose seven per cent, and the trust's share of production was 4.1 million tonnes. Net income per unit was $2.52, up from 26 cents despite a 20 per cent increase in transport costs to $146 million, reflecting a new contract with Canadian Pacific Railway and higher port rates. There also was a 10 per cent rise in production costs to $124 million, as the price of diesel fuel surged 33 per cent year-over-year, and Elk Valley also encountered higher costs for labour and for equipment repair and maintenance. Despite recent signs of slowing steel production in the U.S. and Europe, Fording predicts that supplies of metallurgical coal will be constrained at least until new mines come on stream, not expected before 2007. "Hard-coking-coal supply continues to be tight as producers are not able to bring on new (metallurgical) coal production quickly due to infrastructrure bottlenecks, equipment delays and demand for skilled labour," Gordon Eberth, vice-president of marketing, told the conference call. Eberth noted that steel producers are seeking to reduce the inventories they built up last year; "however, we see this as a short-term phenomenon." After rail service was "below Elk Valley's needs" in the first half of the year, Popowich said the new five-year agreement with Canadian Pacific "provides a commitment from CP Rail to move future volumes to meet announced expansion plans." Fording Canadian Coal Trust operates through subsidiaries involved in producing metallurgical coal and industrial minerals. The Elk Valley Coal Partnership in British Columbia operates six coal mines and is a partnership between Fording and Vancouver-based metals giant Teck-Cominco. Fording, a spinoff of the former Canadian Pacific conglomerate, employed more than 2,900 people at the end of 2004 and generated revenues of nearly $1.2 billion and profits of $150 million for that year. Fording trust units (TSX:FDG.UN) were up $2.75 or 2.2 per cent at $126.65 Monday on the Toronto Stock Exchange, where their 52-week range is between $131.67 and $55.0 {Harry: So who is the main supplier of tires???]