Pacific Coal Resources Ltd. announces 2014 first quarter financial results and operational update

TORONTO, June 2, 2014 /PRNewswire/ - Pacific Coal Resources Ltd. (TSXV: PAK) has filed its unaudited consolidated financial statements for the three months ended March 31, 2014, together with its management's discussion and analysis ("MD&A") for the corresponding period. All financial figures contained herein are expressed in U.S. dollars unless otherwise noted. These documents will be posted on the Company's website at www.pacificcoal.ca and under the Company's profile at www.sedar.com.

Hernan Martinez, Executive Chairman, commented: "In the first quarter of 2014, we were able to reduce general and administrative expenses below forecasted amounts, further ramp up south pit production at La Caypa, hire a third party operator at Cerro Largo, and enter into an Memorandum of Understanding at Jam for a collaborative project. We aim to further strengthen our focus on the core assets by disposing off the remaining interest in the Barranquilla port and continue to increase cost and operational efficiencies to maximize production."

Financial and Operating Summary

A summary of the financial and operating results for the first quarter of 2014 is as follows:

         
(000's except per share and operating data) First Quarter
2014 2013
Operational        
Tonnes of coal produced(1)   274,421   223,346
Average stripping ratio - operations   9.09:1   10.28:1
Tonnes of coal sold   371,716   220,751
Average realized thermal coal price per tonne sold (2) $ 95.67 $ 99.10
Operating margin per tonne sold (2) $ 11.51 $ (4.06)
         
Financial        
Revenues $ 35,671 $ 21,901
Adjusted Earnings Before Interest, Taxes, Depreciation
and Amortization ("EBITDA") (2)
  3,087   (2,503)
Earnings (loss) from operations   1,161   (4,887)
Net loss attributed to shareholders   (113)   (3,150)
Basic and fully diluted loss per share $ (0.00)  $ (0.07)
         
Cash   430   4,785
Mineral properties additions - La Caypa south pit   4,368   2,309
Total assets   254,164   238,635
Total debt (3) $ 48,477 $ 66,161
(1)      Excludes 2,323 tonnes of coal produced from underground mine.
See 'Outlook' for details of pilot project.
(2)      Adjusted EBITDA, average realized thermal coal price per tonne sold and
operating margin per tonne sold are non-GAAP finance performance
measures, none of which have standardized definitions under IFRS.
See pages 17-18 of the Company's Q1 2014 MD&A for further details.
(3)      Total debt includes short-term debt, long-term debt, finance leases and
amounts owed to Masering S.A.S. by Norcarbon S.A.S. ("Norcarbon")
(March 31, 2014 - $14.7 million, March 31, 2013 - $33.4 million).

Q1 2014 Highlights

  • Coal production: The Company produced 274,421 tonnes of coal in the first quarter of 2014 from open-pit mining, representing an increase of 24% from the first quarter of 2013 (223,346 tonnes). The Company's operational stripping ratio of 9.09:1 in the first quarter of 2014 represented a decrease of 18% and 12% from the fourth quarter of 2013 (11.06:1) and first quarter of 2013 (10.28:1), respectively.
  • Revenues: Coal revenues for the first quarter of 2014 were $35.6 million - 371,716 tonnes of coal sold at an average realized price of $95.67 per tonne, an increase from $94.52 per tonne in the fourth quarter of 2013. Coal revenues represented an increase of 54% from the fourth quarter of 2013 and an increase of 62% from the first quarter of 2013.
  • Earnings from operations: Earnings from operations for the first quarter of 2014 were $1.2 million, a significant improvement when compared to the loss of $5.4 million in the fourth quarter of 2013 and a loss of $4.9 million in the first quarter of 2013.  This can be attributed to continued Company-wide cost and expense reductions.
  • Adjusted EBITDA and operating margin: Adjusted EBITDA for the first quarter of 2014 was $3.1 million, an increase of $6.5 million and $5.6 million and when compared to the fourth and first quarters of 2013 losses of $3.4 million and $2.5 million, respectively. The total operating margin for the three months ended March 31, 2014 on a per tonne sold basis was $11.51.
  • Operation of Cerro Largo and La Caypa mines:  In January 2014, the Company entered into an agreement with a third party for the operation of the Cerro Largo mine. The third party has substantial experience with the Cerro Largo mine, being previously involved with its operations prior to the Company's acquisition of the mine.  After commencing in November 2013, operations in the La Caypa south pit continued in the first quarter of 2014 as the Company produced 22,503 tonnes from the pit in the quarter.
  • General and administrative ("G&A") expenses: The Company recorded $1.2 million in G&A expenses, excluding DD&A, in the three months ended March 31, 2014, compared to $1.6 million in the same period of 2013, a reduction of 26%. G&A expenses in the first quarter of 2014 were also 13% lower than the $1.4 million forecasted.  The Company anticipates a quarterly G&A run rate of $1.4 million for the remainder of 2014.

Operational Update

La Caypa mine

  Production of Coal
(metric tonnes)
Waste
(bcm)(1)
Stripping Ratio
       
Operations(2) 238,828 2,100,572 8.80:1
South pit development - 1,487,944 N/A
Total 238,828 3,588,516 15.03:1
(1) Bank cubic meters
(2) 216,325 tonnes from La Caypa's north pit and 22,503 tonnes from the
south pit.

Production from the La Caypa mine was 238,828 tonnes in the first quarter of 2014, achieving 89% of its planned production and over two times the tonnes produced in the first quarter of 2013 (118,980 tonnes), but 8% less than the 258,754 tonnes in the fourth quarter of 2013.

The increase from the first quarter of 2013 can be attributed to the fact that the current operator of La Caypa commenced operations in February 2013, therefore production in the first quarter of 2013 was limited. The decrease from the fourth quarter of 2013 can be attributed to the ramp up of the south pit operations in the first quarter of 2014, which began in November 2013.

The Company is forecasting thermal coal from La Caypa in 2014 of approximately 960,000 tonnes (open pit production of 920,000 tonnes and underground production of 40,000 tonnes), representing a 5% production decrease from 2013. The Company had initially forecasted production of an additional 130,000 tonnes from open pit production in 2014, but production results in the second and third quarter of 2014 are expected to be lower than originally estimated as a result of adverse geological conditions in the section from which the Company plans to produce.  The issue in the section is primarily a result of naturally occurring burning of the coal mantles in addition to the mantles being affected by the presence of a geological fault.

Cerro Largo mine

  Production of Coal
(metric tonnes)
Waste
(bcm)
Stripping Ratio
Q1 2014 35,593 393,644 11.06:1

In the first quarter of 2014, the Company produced 35,593 tonnes from the Cerro Largo mine, compared to 104,366 tonnes in the first quarter of 2013, a decrease of 66%. This was consistent with the 40,624 tonnes produced in the fourth quarter of 2013.

The Company dealt with a production slowdown in the first quarter of 2014 as the Company finalized an agreement with a third party for operation of the Cerro Largo mine.  On January 31, 2014, the Company signed a contract with Servicios Integrales del Ranchería S.A.S. ("SIRA S.A.S.") for operations of the Cerro Largo mine. This operator is controlled by a company with vast experience in engineering, strip mining services and the Cerro Largo mine specifically, as they are a former operator of the mine (prior to the Company's acquisition of it) and therefore familiar with the region and mine conditions. The Company produced well below planned production for the first quarter of 2014 because the forecast was made under the assumption that the transition to third party operation would be finalized before the end of 2013.

Production targets for 2014 at Cerro Largo are 0.4 million tonnes, an approximately 32% increase over the tonnes produced in 2013.  The Company had originally estimated production in 2014 to be 0.5 million tonnes, but the results of the first quarter of 2014 mitigated the annual plan.

Outlook

The Company has concentrated its efforts on the production of thermal coal after re-focusing its strategic goals in 2013, which included the sale of a majority of the Barranquilla port concession in the fourth quarter of 2013. Management is also focusing on eliminating the funds owed to Masering for past operation of the Cerro Largo mine, with a balance of $14.7 million owed at March 31, 2014, compared to a high of $27.6 million owed to Masering at December 31, 2012.  The funds generated from the sale of the Barranquilla port concession will be used to pay the remaining amount owed to Masering, helping the Company focus efforts on improving operations. The Company continues to explore options to sell its remaining 15% interest of the Barranquilla port concession.

Operationally, the margin of $5.4 million at the La Caypa mine was the fourth straight quarter with positive results, although the Company is still in need of additional cash to continue to fund the ramp-up of south pit operations. The Company is determined to continue in improving operations of the Cerro Largo mine, evidenced by the hiring of an experienced mine operator and a reduction of the cost of operations per tonne by approximately 6% (when compared to the 2013 per tonne average).

The Company is forecasting open pit production of 920,000 tonnes and underground production of 40,000 tonnes of thermal coal from La Caypa in 2014, reduced by 130,000 tonnes from the original forecast based on geological issues discovered in the area the Company will be producing from in the second and third quarter of 2014. After beginning late in the fourth quarter of 2013, production at the south pit continued to ramp-up with approximately 23,000 tonnes produced in the first quarter of 2014.  The Company is anticipating the south pit to be at full operation by the second quarter of 2014.  The underground mine pilot project began in February 2014, with approximately 2,500 tonnes of coal produced from the mine in the first quarter. The underground miner will complete a pilot project of approximately 40,000 tonnes of coal with the goal of contracting all of the underground mining if the pilot project is successful.  If successful, full production of the underground mine would commence in 2015.  Production from the south pit and underground mine is critical for the La Caypa mine going forward as the main pit nears the end of its life in the second half of 2014.  At Cerro Largo, with the new operator beginning production in March 2014, production targets for 2014 at Cerro Largo are 0.4 million tonnes.

In February 2014, the Company signed a letter of intent with a third party to perform analysis of the results of asphaltite exploration at the La Tigra property and additional exploration if desired, at the third party's cost, to determine the site's prospects. The third party's exploration period will conclude at the end of October 2014, although they can elect to extend the period by six months.

In terms of G&A expenses, after exceeding the Company's 2013 cost cutting objective,   management was able to surpass the Company's reduction goal for the first quarter of 2014.  Actual G&A expenses were $1.2 million for the first quarter of 2014, compared to the Company's forecast of $1.4 million.  The Company anticipates a quarterly G&A run rate of $1.4 million for the remainder of 2014, but further cost reduction continues to be a priority.

About Pacific Coal Resources Ltd.

Pacific Coal Resources Ltd. is a Canadian-based mining company engaged in the acquisition, exploration and production of coal and coal-related assets from properties located in Colombia. The Company's common shares are listed on the TSX Venture Exchange and trade under the symbol "PAK".

Forward Looking Information:

This news release contains "forward-looking information", which may include, but is not limited to, statements with respect to the future financial or operating performance of the Company and its projects. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or believes" or variations (including negative variations) of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Pacific Coal to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements contained herein are made as of the date of this press release and Pacific Coal disclaim, other than as required by law, any obligation to update any forward-looking statements whether as a result of new information, results, future events, circumstances, or if management's estimates or opinions should change, or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, the reader is cautioned not to place undue reliance on forward-looking statements.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.

 

SOURCE Pacific Coal Resources Ltd.



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