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Revenues were up 35% to $US305.5 million while net income was $US18.9 million compared to a pro-forma net loss of $US3.9 million.

The increase in revenues was driven primarily by higher shipments and higher average realisations the company said. Coal shipments increased 12% to 17.3 million tons as the Pennsylvania mines returned to more normal operating conditions.

In the first quarter of 2004 the Cumberland Mine was idled for half of the first quarter because of a ventilation issue and the Emerald Mine undertook a panel move.

Average prices realised improved 20%, favourably affected by higher prices on recent coal supply agreements, principally in Appalachia. The company also benefited from higher quality premiums for calorific and sulphur content, due in part to historically high prices for sulphur dioxide allowances.

"We achieved outstanding results in our first full quarter as a public company, through careful execution of our business plan and our ability to capitalise on the continued strength in the coal market," said James F Roberts, Foundation Coal's president and chief executive officer.

"Our margins are among the highest we have ever achieved, as we were successful in both negotiating new higher-priced coal sales agreements and keeping our costs in check. In sum, we are on track to meet or exceed our guidance for the year."

Capital expenditures during the quarter included $US17.7 million related to the expansion of the Belle Ayr Mine in Wyoming, development of the Pax surface mine in West Virginia, addition of a continuous mining unit at the Kingston Mine in West Virginia, and the widening of the Emerald longwall face to 1450 feet.

Capital expenditure in 2005 is expected to be between $US150-$US160 million.

Foundation expects to produce 66-68Mt and is targeting $US1.135-$US1.175 billion of coal sales revenues.

"Foundation Coal is exceptionally well-positioned to take advantage of the ongoing strength in this market," said Roberts.

"Demand for our low-sulphur PRB coals is growing, while new markets are also opening up for our high-Btu Northern Appalachian products as more and more utilities elect to install scrubbers."

The company should benefit from only two longwall moves in 2005: one at Emerald in the second quarter and one at Cumberland in the third quarter. Miners' vacations, which encompasses two weeks at Emerald, Cumberland, and Wabash, and one week at most of the company's West Virginia operations, are concentrated during the month of July.

Foundation Coal Holdings is a major US coal producer with 13 coal mines and related facilities in several states including Pennsylvania, West Virginia, Illinois, and Wyoming.

The company employs approximately 2700 people and produces approximately 67Mt annually, largely for utilities generating electricity.