8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 8, 2010

WESTMORELAND COAL COMPANY

(Exact name of registrant as specified in its charter)

Delaware	001-11155	23-1128670
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

2 North Cascade Avenue, 2nd Floor, Colorado Springs, CO	80903
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (719) 442-2600

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition

On November 8, 2010, Westmoreland Coal Company (the “Company”) issued a press release announcing its financial results for the three months ended September 30, 2010. A copy of this press release is attached hereto as Exhibit 99.1 and is incorporated by reference herein.

On November 8, 2010, beginning at 10:00 a.m. Eastern Time, the Company hosted a conference call with investors to discuss the Company’s financial and operating results for the three months ended September 30, 2010. The conference call was made available to the public via conference call and webcast. The transcript of the conference call is attached hereto as Exhibit 99.2.

The information in this Current Report on Form 8-K and the Exhibits attached hereto are being furnished and shall not be deemed “filed” for purpose of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

Item 9.01. Financial Statements and Exhibits

(d) Exhibits

Exhibit No.		Description
	99.1	Press Release dated November 8, 2010
	99.2	Transcript of Investor Conference Call

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	WESTMORELAND COAL COMPANY
Date: November 12, 2010	By:	/s/ Kevin A. Paprzycki
		Kevin A. Paprzycki,
		Chief Financial Officer (a duly authorized officer)

EXHIBIT INDEX

Exhibit No.		Description
	99.1	Press Release dated November 8, 2010
	99.2	Transcript of Investor Conference Call

EX-99.1

EXHIBIT 99.1

Westmoreland Reports
Third Quarter 2010 Results

Colorado Springs, Colorado — November 8, 2010 — Westmoreland Coal Company (NYSE Amex:WLB) reports its third quarter 2010 results.

Highlights:

• Total revenues were $124.1 million for the quarter, 10.4% higher than revenues for the same period in the prior fiscal year. Year to date revenues increased 11.6% over 2009, from $339.0 to $378.2 million.

• Third quarter 2010 net income applicable to common shareholders was $2.5 million ($0.23 per basic and diluted share), compared to a net loss applicable to common shareholders in the third quarter 2009 of $7.8 million ($0.77 per basic and diluted share), an increase of 132.1%. Year to date 2010 net income was $0.2 million, compared to a year to date net loss of $20.7 million in 2009 (an improvement of $2.12 per basic and diluted share).

• Operating income increased $17.6 million (180.4%) during the quarter from a loss of $9.8 million to an operating profit of $7.8 million. Year to date operating income increased $34.9 million (171.0%) from a loss of $20.4 million to an operating profit of $14.5 million.

• The company recorded a net expense of $0.4 million during the third quarter 2010 related to the valuation of the conversion feature in its convertible debt. In the third quarter of 2009, the Company recorded income of $1.2 million on the conversion feature. The company recorded a net expense of $0.9 million during the first nine months of 2010 related to the conversion feature valuation, compared to $5.2 million of income on the conversion feature in 2009.

• Westmoreland continued its strong safety performance into the third quarter of 2010 with reportable and lost time incident rates better than the national average for surface operations.

“I am pleased to announce that the third quarter was our second straight profitable quarter and third straight quarter where operating income increased over the prior year quarter” said Keith E. Alessi, Westmoreland’s President and CEO. “All of our mining operations increased their financial performance over the second quarter due to productivity improvements and cost control. Our ROVA power facilities also turned in a strong performance for the quarter. The results generated by our operations, combined with cost reductions in heritage costs, contributed to a $2.5 million net income for the third quarter and a positive net income for the year to date. During the quarter we successfully performed a major upgrade to our computer systems, on time and under budget. This combined with other initiatives performed earlier in the year, has resulted in all of our mining operations being on a common and up-to-date information technology platform. During the quarter, two of our mines received safety awards from the state of Montana and after quarter end we were pleased that our ROVA power facilities were also recognized for their outstanding safety record. We are committed to running a safe and efficient business.”

Coal Segment

The following table shows comparative coal revenues, operating income (loss) and production between periods:

	Three Months Ended September 30,
						Increase / (Decrease)
	2010		2009			$		%
	(In thousands)
Revenues	$	100,482	$	91,708		$	8,774		9.6	%
Operating income (loss)		8,869		(78	)		8,947		11470.5	%
Tons sold — millions of equivalent tons		6.5		5.8			0.7		12.1	%

Our coal segment revenues increased primarily due to an increase in tons sold due to customer shutdowns in 2009, price increases under existing coal supply agreements, and the start of new agreements including the new cost-plus contract with our Rosebud Mine’s Unit 1&2 buyers.

Coal segment’s operating income was $8.9 million in the third quarter of 2010 compared to an operating loss of $0.1 million in the third quarter of 2009. This $8.9 million increase was primarily driven by the factors increasing revenue described above and strong cost management performance.

Power Segment

The following table shows comparative power revenues, operating income and production between periods:

	Three Months Ended September 30,
					Increase / (Decrease)
	2010		2009		$		%
	(In thousands)
Revenues	$	23,598	$	20,696	$	2,902		14.0	%
Operating income		5,059		680		4,379		644.0	%
Megawatts hours — thousands		439		389		50		12.9	%

Third quarter 2010 power segment revenues increased to $23.6 million compared to $20.7 million in third quarter 2009. This $2.9 million increase is primarily from increased megawatt hours sold as a result of a planned maintenance outage occurring in the third quarter of 2009. A comparable outage did not occur in 2010.

Power segment’s operating income increased to $5.1 million in the third quarter of 2010 compared to $0.7 million in the third quarter of 2009. This $4.4 million increase was primarily from increased megawatt hours sold and decreased maintenance expenses as a result of the planned maintenance outage discussed above.

Heritage Segment

Third quarter 2010 heritage operating expenses were $4.7 million compared to $8.3 million in the third quarter of 2009. This $3.6 million decrease was primarily due to the agreement we entered into to modernize the method by which prescription drugs are provided to our retirees. In addition, while we continue to work towards further heritage cost reductions, selling and administrative costs decreased due to reduced expenses associated with cost containment efforts. Finally, we experienced a favorable change in the valuation of our Black Lung liabilities due to changes in discount rates.

Corporate Segment

Corporate segment’s operating expenses for the third quarter of 2010 decreased to $1.4 million compared to $2.1 million in the third quarter of 2009, primarily as a result of ongoing cost control efforts.

Other Income (Expense) and Income Tax Expense (Benefit)

The Company’s other expense for the third quarter of 2010 increased to $5.1 million compared with $3.4 million of expense for the third quarter of 2009. This is primarily due to the $0.4 million of 2010 expense and the $1.2 million of corresponding income recognized in 2009 from the valuation of the conversion feature in our convertible debt, and related amortization of debt discount.

The Company’s third quarter 2010 income tax expense was $0.3 million compared with $4.2 million of benefit in the third quarter of 2009. This is primarily due to a $4.5 million non-cash tax benefit recognized in 2009.

Cash Flow from Operations

Cash provided by operating activities increased $10.1 million in the nine months ended September 30, 2010, compared to the nine months ended September 30, 2009. The $23.5 million increase in net income significantly contributed to the increase in cash provided by operating activities in the nine months ended September 30, 2010, which was offset by a $15.1 million decrease in cash receipts due to a scheduled decrease in the payments ROVA collects from its customer.

Liquidity

As a result of significant increases in operating profits, a decrease in the Company’s heritage health benefit costs, its ability to access funds from WRI’s revolving line of credit and an increase in WRI’s term debt, the Company anticipates that its cash from operations and available borrowing capacity will be sufficient to meet its cash requirements for the foreseeable future. The Company projects that the margin by which it will be able to meet its cash requirements will increase over the remainder of 2010 and into 2011. The Company’s projections assume WRI’s renewal of its revolving line of credit prior to its November 18, 2010 expiration. WRI is currently in discussions with its lender concerning this renewal.

The Company believes it can satisfy its liquidity needs for the foreseeable future without relying on proceeds from sales of assets or securities or other capital-raising transactions.

Safety

Safety performance at Westmoreland mines continues to be significantly better than the national average for surface operations. Westmoreland mines had reportable and lost time incident rates year to date through the third quarter of 0.98 and 0.74 versus the national surface mine rates of 1.89 and 1.29, respectively. The reportable incident rate for 2010 compared favorably to the third quarter 2009 rate of 1.40. The lost time rate for the third quarter of 2009 was slightly better than 2010 at 0.64.

Additional Information

Investors should refer to the attached Consolidated Statements of Operations and Summary Financial Information, and the Company’s Form 10-Q for the period ended September 30, 2010, for additional information.

Westmoreland Coal Company is the oldest independent coal company in the United States. The Company’s coal operations include coal mining operations in Montana, North Dakota and Texas. Its power operations include ownership of the two-unit ROVA coal-fired power plant in North Carolina. For more information about Westmoreland Coal Company visit www.westmoreland.com.

Forward-Looking Information

This news release contains “forward-looking statements.” Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects” and similar references to future periods. Examples of forward-looking statements include, but are not limited to, statements we make regarding our projection that the margin by which we will be able to meet our cash requirements will increase over the remainder of 2010 and into 2011, our expectation that we will not need to rely on proceeds from the sale of assets or securities or participate in other capital raising transactions to satisfy liquidity needs for the foreseeable future and our expectation that our cash from operations and available borrowing capacity will be sufficient to meet our cash requirements for the foreseeable future.

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you therefore against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include political, economic, business, competitive, market, weather and regulatory conditions and the following:

• changes in our postretirement medical benefit and pension obligations and the impact of the recently enacted healthcare legislation;

• changes in our black lung obligations, changes in our experience related to black lung claims, and the impact of the recently enacted healthcare legislation;

• our potential inability to renew WRI’s revolving line of credit by November 18, 2010;

• our potential inability to expand or continue current coal operations due to limitations in obtaining bonding capacity for new mining permits;

• our potential inability to maintain compliance with debt covenant and waiver agreement requirements;

• the potential inability of our subsidiaries to pay dividends to us due to restrictions in our debt arrangements, reductions in planned coal deliveries or other business factors;

• risks associated with the structure of ROVA’s contracts with its lenders, coal suppliers and power purchaser, which could dramatically affect the overall profitability of ROVA;

• the effect of EPA inquiries and regulations on the operations of ROVA;

• the effect of mark-to-market accounting on the conversion feature of our convertible debt due to volatility in our stock price;

• the effect of prolonged maintenance or unplanned outages at our operations or those of our major power generating customers;

• future legislation and changes in regulations, governmental policies and taxes, including those aimed at reducing emissions of elements such as mercury, sulfur dioxides, nitrogen oxides, particulate matter or greenhouse gases; and

• the other factors that are described in “Risk Factors” under Part II, Item 1A of our third quarter 2010 Form 10-Q and under Part I, Item 1A of the 2009 Form 10-K.

Any forward-looking statements made by the Company in this news release speaks only as of the date on which it was made. Factors or events that could cause the Company’s actual results to differ may emerge from time-to-time, and it is not possible for them to predict all of them. The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise, except as may be required by law.

# # #

Contact: Keith Alessi (719) 442-2600

Westmoreland Coal Company and Subsidiaries
Consolidated Statements of Operations
(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2010			2009			2010			2009
	(In thousands, except per share data)
Revenues	$	124,080		$	112,404		$	378,152		$	338,982
Cost, expenses and other:
Cost of sales		94,208			95,434			296,366			282,867
Depreciation, depletion and amortization		10,964			11,533			33,435			32,561
Selling and administrative		8,930			10,214			28,578			31,820
Heritage health benefit expenses		4,241			7,438			11,550			21,446
Loss (gain) on sales of assets		165			(12	)		256			(58	)
Other operating income		(2,267	)		(2,452	)		(6,519	)		(9,249	)
		116,241			122,155			363,666			359,387
Operating income (loss)		7,839			(9,751	)		14,486			(20,405	)
Other income (expense):
Interest expense		(5,756	)		(5,755	)		(17,245	)		(17,271	)
Interest income		603			684			1,380			2,362
Other income		17			1,698			907			5,782
		(5,136	)		(3,373	)		(14,958	)		(9,127	)
Income (loss) before income taxes		2,703			(13,124	)		(472	)		(29,532	)
Income tax benefit from operations		285			(4,210	)		149			(5,406	)
Net income (loss)		2,418			(8,914	)		(621	)		(24,126	)
Less net loss attributable to noncontrolling interest		(435	)		(1,417	)		(1,878	)		(4,447	)
Net income (loss) attributable to the Parent company		2,853			(7,497	)		1,257			(19,679	)
Less preferred stock dividend requirements		340			340			1,020			1,020
Net income (loss) applicable to common shareholders	$	2,513		$	(7,837	)	$	237		$	(20,699	)
Net income (loss) per share applicable to common shareholders:
Basic	$	0.23		$	(0.77	)	$	0.02		$	(2.10	)
Diluted		0.23			(0.77	)		0.02			(2.10	)
Weighted average number of common shares outstanding:
Basic		10,849			10,244			10,676			9,850
Diluted		10,911			10,244			10,758			9,850

Westmoreland Coal Company and Subsidiaries
Summary Financial Information

	Nine Months Ended September 30,
	2010			2009
	(In thousands)
Cash Flow (Unaudited)
Net cash provided by operating activities	$	37,584		$	27,516
Net cash used in investing activities		(16,950	)		(27,371	)
Net cash used in financing activities		(15,083	)		(21,176	)
	September 30,			December 31,
	2010			2009
	(In thousands)
Balance Sheet Data (Unaudited)
Total assets	$	765,000		$	772,728
Total debt	$	243,646		$	254,695
Working capital deficit	$	(51,328	)	$	(74,976	)
Total deficit	$	(133,747	)	$	(141,799	)
Common shares outstanding		11,105			10,346

EX-99.2

EXHIBIT 99.2

Transcript of
Westmoreland Coal (WLB)
Investor Conference Call
November 8, 2010

Participants
Keith E. Alessi, President and Chief Executive Officer
Kevin A. Paprzycki, Chief Financial Officer

Presentation

Operator

Good morning, ladies and gentlemen, and welcome to Westmoreland Coal Company’s Investor Conference Call. At this time, all telephone participants are on a listen-only mode. Following the formal presentation, instructions will be given for the question and answer session which will be conducted by telephone. Web participants wishing to ask a question will need to dial in by telephone to the audio portion of the call. If anyone needs operator assistance at any time during the conference, please press the * followed by the 0 on your telephone keypad. As a reminder, this conference is being recorded today and a replay will be made available as soon as practical on the investor portion of the Westmoreland website through November 23, 2010.

Management’s remarks today may contain forward-looking statements based on the company’s current expectations and assumptions regarding its business, the economy, and future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. The company’s actual result may different materially from the result discussed in any such forward-looking statements. For a summary of risk factors and other information regarding forward-looking statements, please refer to the company’s Form 10-K for fiscal year 2009 filed with the Securities and Exchange Commission on March 12, 2010 as well as the company’s Form 10-Q for the first, second, and third quarters of 2010 filed on May 10, 2010, August 9, 2010, and November 5, 2010.

Any forward-looking statements represent the company’s view only as of today and should not be relied upon as representing its views as of any subsequent dates. While the company may elect to update forward-looking statements at some point in the future, it specifically disclaims any obligation to do so even if estimates change and therefore, you should not rely on these forward-looking statements as representing the company’s view as of any date subsequent to today.

Mr. Keith E. Alessi, President and Chief Executive Officer of Westmoreland Coal Company, will be delivering today’s remarks. Thank you, Mr. Alessi, you may begin.

Keith E. Alessi — Westmoreland Coal Company — President and Chief Executive Officer

Thank you. Keith Alessi here in Colorado Springs along with Kevin Paprzycki, our CFO.

I’m not going to go into a great detail on the quarter. I think the press release and the 10-Q speak to the result. We, obviously, were very happy with the results for the quarter. I know I’ve had a chance to meet individually or talk with many of the folks that are probably on the call today and as a result, there really isn’t any new news in these numbers. Clearly, our cost containment efforts continue to pay off. We had a very good quarter across the board in all of our operations in terms of volume. The coal operations performed very well and ROVA performed very well during the quarter. As indicated in the press release, we continue to be very happy with the safety record that our people continue to put up; that’s very important to us.

One of the things I would want to caution people against would be to extrapolate these results either over the next quarter or in the next year and the reason I say that is the nature of our business is such that in any given quarter, a specific customer could be having a routine maintenance outage; we didn’t have any of those during the third quarter, everything kind of came together very nicely.

As we moved into Q4, our own ROVA facility had its normally scheduled maintenance outage. It’s now back online. That obviously impacts quarterly results. Historically, Q4 has been a challenging quarter in December specifically in our northern tier mines as we struggle at WRI with getting the railroads to deliver over the back half of that month. Almost every year, there’s a shortage of crews because of the holidays and we tend to have short shipments in December. That said, we’re very satisfied with the demand up there at WRI but I’m not so certain that we’ll ship as many tons in the quarter as we’d like. A lot of those may fall into the first quarter. So with that said, you know, we still are on track, we’re running a little bit ahead of budget internally here for the year, and we’re optimistic about 2011 as we sit here today.

The one thing I did mention in the press release that we’re as proud of is the financial results, is during the quarter we implemented a major upgrade to our computer systems. That went seamlessly. It went on time. It went under budget and that’s no small task given where this company historically has been in the IT area and that was the result of some excellent planning and hard work by a lot of people at the mines and here at the corporate office and we think that is just one further area now where we’ve locked down the controls and standardization here at corporate and we think it provides us with a very attractive scalable platform in terms of efficiencies.

That’s really the extent of my remarks this morning. I’d rather talk about the things you folks would like to talk about. So I’d ask our moderator to go ahead and open up the conversation to any questions people might have.

Operator

Thank you, Mr. Alessi. We will now conduct the question and answer session. If you would like to ask a question, please press *1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. To remove yourself from the queue you may press *2. For participants using speaker equipment it may be necessary to pick up your handset before pressing the * keys.

Our first question comes from Jeffrey Gendell with Tontine Associates. Please state your question.

Jeffrey Gendell — Tontine Associates

Hey, Keith. I just want to follow that quarterly comment that you made and if you look at this quarter and extrapolate out, I just want a little help with the extrapolation. You’ve got the new contracts out at Colstrip, those started July 1^st?

Keith E. Alessi — Westmoreland Coal Company — President and Chief Executive Officer

Those are actually January 1^st.

Jeffrey Gendell — Tontine Associates

They were January of this year, okay. And so as we extrapolate out could you just make a comment on... obviously, ROVA had a great quarter so just make a comment on... has there been a material upgrade at ROVA that will keep you going at those rates for the next six quarters, that’s A, and then B, just comment on... you’ve got the Minnesota Power reversing on January 1^st so are there any other contracts in the next 12 months that will also improve operating income on the coal side?

Keith E. Alessi — Westmoreland Coal Company — President and Chief Executive Officer

Thanks, Jeff, and good morning. On the ROVA side, we were pretty much running flat out during the quarter and had very few outage days. In a typical quarter, you’ll get a couple of days outage, you’ll get a little maintenance thing here and there. The economics of ROVA decline over time. The way that contract was set up over time, the revenue number drops off but we don’t see it increasing over the next six quarters but certainly when you minus out the effect of its outages, one of which occurred here in Q4, we think that will be a pretty stable and flat operation.

The Minnesota Power contract goes away on the first of the year. That probably represents a $5 million or $6 million drag on earnings for 2010 and the one thing I should’ve mentioned in my opening remarks that it’s a tough one for us to project, on our Black Lung and workers compensation liabilities, those are present valued. And so, as interest rates decline, we actually take charges to the P&L and year to date, we’ve probably taken almost a million dollars in charges just based on the indices that are used to calculate those present values and we expect in Q4, we probably will get as much another million dollar charge. Now the good news... that’s the bad news on interest rates. The good news is if you believe interest rates will go up in the future, every time they go up a percent I believe it’s about $1.5 million to $2 million benefit to the P&L. So that’s in our numbers, too, for the year to date, about a million dollars in charges on the interest rate adjustment.

Jeffrey Gendell — Tontine Associates

So just getting back to that Minnesota Powers, so that $5 million to $6 million loss from this year will go to zero next year if you... can you... is there any other word on whether you’ll resell those funds or that will just be $5 million to $6 million to zero.

Keith E. Alessi — Westmoreland Coal Company — President and Chief Executive Officer

Yeah. That will go $5 to 6 million to zero. Those tons are currently out of Colstrip. With the contracts, we have at Colstrip we’d prefer to sell those tons to the owners out there and those preserves have been dedicated to them. So when that runs off, that will fall to the bottom line of the Colstrip operation and by definition will fall to the benefit of the mining operation.

Jeffrey Gendell — Tontine Associates

And so the only other tonnage that would go up in the next 12 months would be any spot tons you’re doing out of Absaloka?

Keith E. Alessi — Westmoreland Coal Company — President and Chief Executive Officer

That’s correct and we’re working diligently to try to move some more tons in there. We’re optimistic that there might be a test burn in ‘11 for a customer that could potentially come on in the ‘12 timeframe. We’ve designed and engineered the Western Y which will allow us to move tons to the west. We’re just waiting to see that we’ve got demand to do that.

Jeffrey Gendell — Tontine Associates

Where would that go out of?

Keith E. Alessi — Westmoreland Coal Company — President and Chief Executive Officer

Well, we go west out of the mine. Currently, everything goes east.

Jeffrey Gendell — Tontine Associates

Right. So where... what for... I assume it would go overseas, right?

Keith E. Alessi — Westmoreland Coal Company — President and Chief Executive Officer

No, no. We don’t believe that our coal is hot enough to really go over the oceans. It would go to the West Coast for burning here in the States. We think at this time the only way our coal could be exported is if some sort of beneficiation process was done to it and that’s very expensive and we don’t have any experience in that. That’s not to say that it couldn’t happen but there’s so... the port capacity on the West Coast is so plugged up that the net coal is going to get priority over any steam coal and right now people are scrambling to try to find slots there. So I don’t think that’s a real market for us in the short term.

Jeffrey Gendell — Tontine Associates

Okay. And then one last question if you don’t mind.

Keith E. Alessi — Westmoreland Coal Company — President and Chief Executive Officer

Oh, no problem.

Jeffrey Gendell — Tontine Associates

Capital spending, you know when you were here earlier in the summer week, we had a discussion on capital spending and you guys were finishing up plans, what do you think you’re capital spending will end up this year and what will it be next year?

Keith E. Alessi — Westmoreland Coal Company — President and Chief Executive Officer

All right. It will be about the same for the two years. It will be in the 30s.

Jeffrey Gendell — Tontine Associates

So you don’t have any plans to increase that yet for next year?

Keith E. Alessi — Westmoreland Coal Company — President and Chief Executive Officer

No. In fact, most of the... probably most of the caps spending will... not most but some of the capital spending we’ll do next year will be development work. We’re pretty good shape on machinery. You know one thing I haven’t talked about in this call but we’ve talked about with people is we’re certainly making a push to acquire additional reserves and while that’s not capital spending per se it’s certainly a use of cash and were actively working on a number of... we’re actively working on a number of reserved place at this point.

Jeffrey Gendell — Tontine Associates

Okay. Thanks a lot.

Operator

Thank you. Our next question comes from Bentley Offutt with Offutt Securities. Please state your question.

Bentley Offutt — Offutt Securities, Inc.

Good morning to you.

Keith E. Alessi — Westmoreland Coal Company — President and Chief Executive Officer

Good morning.

Bentley Offutt — Offutt Securities, Inc

I have just a further question on your efforts to improve your reserves. I think you’ve commented on that in the past. I know at one time, you only had about nine or ten years of reserves, if I remember correctly. And you have made significant progress. You probably... is there anything you can say further as to where you want to take this and what you’ve been able to do so far?

Keith E. Alessi — Westmoreland Coal Company — President and Chief Executive Officer

Well, there are plenty of reserves in the areas that we operate in. We had only locked down the reserves we had basically due to financial constraints that the company had experienced in the past but were actively now moving to pick up those reserves. I think... you know some will have to do with negotiations we’re having with certain parties now but we certainly would like to pick up several hundred million tons of reserves over the next period of time here. We’ll announce when we get those things picked up. The way that normally works is we’d enter into a lease, we’d probably indicate in an 8-K that we have signed a lease on what we expect to be and we give some ballpark number to the reserves and then we’d have to drill them out and prove out what the actual numbers would be, but we got a pretty good idea what’s around us and what’s available and the cost to get them and I think for us the cost to get them is pretty reasonable just based on where we are and how they abut the areas that we currently mine.

Bentley Offutt — Offutt Securities, Inc

Okay. Just doing a quick look at your recent 10-Q, it looks like your EBITDA right now for the year is somewhere in the order of $65 million to $70 million. Does that make sense to you?

Keith E. Alessi — Westmoreland Coal Company — President and Chief Executive Officer

Yeah. I think the low 70s is where we’ll come in.

Bentley Offutt — Offutt Securities, Inc

And how about next year? Do you see... I guess your biggest improvement next year will be any change in the heritage cost if you have some successes... further successes there and the absence of the Minnesota Power. Is that correct?

Keith E. Alessi — Westmoreland Coal Company — President and Chief Executive Officer

Yes, that would be accurate. And I wanted to correct a statement I made when Jeff asked this question about capital. I said in the 30s, actually, it’s in the low 40s, would be the capital both this year and next.

Bentley Offutt — Offutt Securities, Inc

And your spending... as far as those costs, are these largely maintenance costs? Or how would you qualify these? Most of the equipment you’re pretty well up to date in.

Keith E. Alessi — Westmoreland Coal Company — President and Chief Executive Officer

Yeah, but you modernize the fleet opportunistically when you get that opportunity. Some of that results in productivity gain but it’s a combination of just either replacing it or maintaining it. I mean you maintain until it gets to get to the point where that it doesn’t make sense to maintain a piece of equipment; you go out and get another one but were not expanding the numbers of pieces of equipment. The big expenses for us and they come not every year are on the dragline, you know, every time you pull a dragline down and replace rollers or whatnot, you’re multi-million dollars in one project. We spend quite bit of money on the dragline at WRI over the last couple of years. I think the next time we go in there and spend big money is in ’13 is the next time we have a major expenditure on the dragline at WRI and at WECO the next big dragline maintenance expense looks like ’12.

Bentley Offutt — Offutt Securities, Inc

That sounds great. And congratulations for turning this company around.

Keith E. Alessi — Westmoreland Coal Company — President and Chief Executive Officer

Well, we’ve a lot of people to thank for that.

Bentley Offutt — Offutt Securities, Inc

Okay.

Operator

Thank you. Just a reminder, ladies and gentlemen, if you would like to ask a question, please press *1 on you telephone keypad. To remove yourself from the queue, please press *2.

Our next question comes from Alan Jacobs. Please state your question.

Alan Jacobs

Hey, guys. Congratulations

Keith E. Alessi — Westmoreland Coal Company — President and Chief Executive Officer

Thanks.

Alan Jacobs

Some of my questions have been answered. In terms of Minnesota Power, I think I’ve heard in the past that there was a carve out up in Colstrip where we could still sell them some coal, is that true?

Keith E. Alessi — Westmoreland Coal Company — President and Chief Executive Officer

Yeah, we’re allowed to sell a million or million and a half tons a year outside but the economics of doing that verses the economics of our current contract wouldn’t be very compelling given the markets today.

Alan Jacobs

Okay and then...

Keith E. Alessi — Westmoreland Coal Company — President and Chief Executive Officer

Alan, we’d prefer if tons like that go over to Absaloka. We put new crushers in there and we’re working on the rail situation there and any customers who’d like that we would move towards Absaloka. The economics there are better for us.

Alan Jacobs

Understood. So you want to... I know you’ve been working to move them into Absaloka, is our coal not the type that they can burn in terms of Absaloka?

Keith E. Alessi — Westmoreland Coal Company — President and Chief Executive Officer

We believe they could and we continue to have conversations with them.

Alan Jacobs

Okay. The other ... okay, that answers that question. The other issue I guess is in terms of the big picture, I know we got a bump up in Colstrip 1 and 2 in the beginning of the year and that obviously added to your good performance. I guess my question is the fact... I know we’re not like every other coal company but any analyst report I’ve seen recently predicts bumps up in the Powder River basin in ’11, ’12, ’13, pretty decent bumps based on environmental issues, safety regulations, demand, all kinds of factors that are kind of going our way at this point, I’m wondering in terms of whether the Colstrips 3 and 4 were contracts that are rolling over in Absaloka? When would you expect to see some bumps, if coal prices play out the way the analysts think they will?

Keith E. Alessi — Westmoreland Coal Company — President and Chief Executive Officer

I concur with the analyst and it’s all the things you mentioned as well as the fact that the folks in the PRV are working in the deeper cover now and they’ve done what most people do, you go after the cheap stuff first. I would expect that we’ll see it $0.50 here and a $1.00 there, we’re not going to get a major bump over night. It would come at WRI. We have not yet entered into negotiations on the Colstrip 3 and 4. That will undoubtedly be a cost plus arrangement when we get there. The question is how much should the plus be and the plus would be a function of how much more competitive we are due to not just the cost of coal out of the PRV but what we expect to be higher rail costs. So we do have some competitive advantage that should allow us to get a decent margin but it’s not going be, you know, if PRV prices double, we certainly aren’t going to see a doubling of our margin.

Alan Jacobs

Okay. Well answered but what kind of timeframe are we looking at for any of this stuff whether it be Colstrip 3 and 4 or Absaloka? What’s your timeframe?

Keith E. Alessi — Westmoreland Coal Company — President and Chief Executive Officer

3 and 4 wouldn’t be until like the ’13 timeframe. WRI about a third of those tons roll off every year so that’s a constantly moving target there and, of course, if we are able to add any new customers there, those would be new tons there, but you got about the third of the tons open at WRI on any given year.

Alan Jacobs

Okay. Thank you. Congratulations.

Keith E. Alessi — Westmoreland Coal Company — President and Chief Executive Officer

Thanks.

Operator

Our next question comes from Greg Venit with Morgan Stanley Smith Barney. Please state your question.

Greg Venit — Morgan Stanley Smith Barney

Hi, Keith. How you’re doing today?

Keith E. Alessi — Westmoreland Coal Company — President and Chief Executive Officer

Great.

Greg Venit — Morgan Stanley Smith Barney

In the West Coast, the market for the West Coast coal, is that something that the timeframe for that could happen next year for you to have the Y in place and have to a contract or is that more a 2012 or ‘13 idea?

Keith E. Alessi — Westmoreland Coal Company — President and Chief Executive Officer

That’s a ’12 situation. We might get a test burn in ’11 but it’ll be ’12 before we’d see any meaningful tonnage going that direction.

Greg Venit — Morgan Stanley Smith Barney

Do you... if you look at the marketplace right now where these utilities are getting their coal from, do you feel like you have a competitive advantage either from a rail point of view or from a cost point of view and do you know how many contracts or what amount of tonnage are coming up for 2012 from these utilities?

Keith E. Alessi — Westmoreland Coal Company — President and Chief Executive Officer

You mean if I wanted to put up a ballpark fence around it I think we’d be really happy and excited if we could pick up a million or a million and a half tons. I don’t think our advantage is going to be as much on the rail side as it might be on the chemistry side and then I think there’s some people that would like to burn the coal that we’ve got but it’s not... I think a million or million and a half tons would be a real good homerun for us in ’12 if we could get it but I’m not handicapping that yet and we are having conversations with people. People have to do test burns but I think something of that magnitude might be available on that timeframe.

Greg Venit — Morgan Stanley Smith Barney

Okay. And then I guess the final question on the heritage cost, is there an expectation of when round two may occur where you might have some additional savings and would that impact 2011?

Keith E. Alessi — Westmoreland Coal Company — President and Chief Executive Officer

We’re working hard on a daily basis to control these costs. We’re working with the union towards that end. Clearly, the low hanging fruit was the stuff we got last year. I think we wouldn’t expect anything along that magnitude with what were discussing right now. We’re still working on trying to negotiate who’s the right population. We’re hopeful that we might be able to get some progress in that area. Cost containment on the medical side and we believe there still might be an opportunity for some legislative relief but none of those are eminent or material as I sit here today, but that could change but were not sitting here today thinking that the ’11 number is going to be substantially lower.

Greg Venit — Morgan Stanley Smith Barney

Was there anything in the health care bill that... the existing bill we have right now or that would impact lowering your costs or is this legislation that the new congress may... that they’ve talk about implementing that may help you.

Keith E. Alessi — Westmoreland Coal Company — President and Chief Executive Officer

Well, actually the healthcare legislation had a piece on there on Black Lung that probably went against us. They kind of loosened the rules around who could qualify. We’ve seen a spike in the number of claims; we don’t think a lot of them have merit. Every lawyer in West Virginia is running around trying to drum up customers so we’ve had a quite a lot of activity. We think there might be a 10% to 15% increase on the Black Lung side of things. The healthcare bill until we see the regs, we’re not going to know but certainly, we’re working not only with the union but we’re working legislatively to try to determine if some of these people can be handled through that bill, but there’s nothing we’ve seen yet to believe that in the bill as it’s currently written that we’ve got that, but we think there’s some progress that could still be made.

Greg Venit — Morgan Stanley Smith Barney

Okay. Thanks a lot, Keith.

Keith E. Alessi — Westmoreland Coal Company — President and Chief Executive Officer

I should point out that our experience there is running right at or better than where we thought. It will probably be another couple of quarters before our actuaries can really take another look back and see if we’ve got that trued up. But we feel pretty optimistic that we’re at least at the numbers we’ve got actuarially. With any luck, maybe we could get a little bit more juice there but we’ll see.

Operator

Mr. Alessi, there are no further questions at this time. I will turn the conference back over to you for closing remarks.

Keith E. Alessi — Westmoreland Coal Company — President and Chief Executive Officer

Well, I think we said everything we needed to say and as always feel free to give us a shout if there’s something we haven’t covered. We’ll be doing a year end call. We’ve committed to doing these quarterly going forward. Of course, the year end call will be a little longer after the quarter because of the year end work that has to get done and the audits and whatnot. So we look forward to talking to you at end of the year. Thanks.

Operator

Thank you. This concludes today’s conference. All parties may disconnect now. Thank you.