Pacific Coal announces third quarter operational update

TORONTO, Oct. 6, 2011 /PRNewswire/ - Pacific Coal Resources Ltd. (TSX-V: PAK) announced today an operational update on its producing mines, La Caypa and Cerro Largo - La Divisa.

Luis Carvajales, Chief Executive Officer of Pacific Coal, commented: "We are very pleased with the third quarter performance of both La Caypa and Cerro Largo. La Caypa's production and strip ratio results are still ahead of management's projections, while the progress at Cerro Largo that we have achieved in such a short amount of time will continue into the next quarter, keeping us on track to reach production of 1.6 million to 1.8 million tonnes by year-end. We are also satisfied with the advancement of our other projects, including the exploration program at La Tigra and the increased installed capacity for coke production at CI Jam."

Current production at La Caypa  

The third quarter production at La Caypa represents an annualized rate of 1.26 million tonnes vs. management's projection of 1.20 million tonnes. Due to increased efficiencies at the mine, the third quarter strip ratio at La Caypa was 6.16:1, representing an approximate improvement of 14% in comparison to the previous quarter.

Current production at Cerro Largo - La Divisa  

*Q1/2011 production of Cerro Largo was prior to Pacific Coal acquisition

The integrated mine plan at Cerro Largo was implemented towards the end of the second quarter, which allowed for less waste rock removal during the third quarter. The Company aims to make further progress at Cerro Largo, which will result in significant improvements in both production and strip ratio over the next few quarters. Management estimates that Cerro Largo will increase production by over 400% and improve its strip ratio by approximately 35% during the fourth quarter of 2011.

From production at both La Caypa and Cerro Largo, exports totaled 448,691 tonnes and the average achieved sale price was US$102.51/tonne FOB, representing revenues of approximately US$46 million for the third quarter of 2011. The increase in export volumes compared to the previous quarter was due to incremental production coming from both La Caypa and Cerro Largo assets, as well as efficiencies achieved in the logistics chain by the incorporation of the new truck fleet.

Freight on truck ("FOT") sales from Cerro Largo under contracts that were inherited from Norcarbon totaled 5,472.40 tonnes at a price of US$38.84 per tonne.

Exploration at La Caypa and Cerro Largo

Additional exploration at both La Caypa and Cerro Largo mines has been undertaken in coordination with SRK pursuant to updating the National Instrument 43-101 ("NI 43-101") technical reports in connection with open pit and underground resources at both mines. Additionally, drilling at both mines will include methane emission readings and a geotechnical study to ascertain floor and roof stability in connection with the underground projects to be undertaken at both mines. Exploration at both mines is scheduled to be completed by late-November.

New sales purchase agreement

Pacific Coal has entered into a sales purchase agreement (the "Contract") with LCC Group ("LCC"), an established energy services company based in Ireland, for the supply of 700,000 tonnes per annum, commencing upon the completion of deliveries under their existing long-term contract and extending the relationship between the two companies to 2019. Pricing for deliveries under the Contract is to be agreed upon on an annual basis and shall be based on the forward price curves. The estimated value of the Contract is approximately US$350 million dollars based on management's conservative reference projected forward price of US$100 per metric tonne, which will provide stable cash flows for both La Caypa and Cerro Largo.  LCC and Pacific Coal have just completed a new screening installation at both the La Caypa and Cerro Largo mines. Coal sold to LCC is shipped to washing and processing facilities at Gijon, Spain; Londonderry and Belfast in Northern Ireland; and Oxelosund in Sweden.

CI Jam

One hundred and sixty ovens are currently operational at CI Jam and coke production is expected to ramp up during the fourth quarter of 2011. The 160 ovens represent an installed capacity of 72,000 tons per annum. A third installation of 100 ovens has been authorized at the property, maximizing the use of actual installed infrastructure and taking total actual capacity to 120,000 tonnes per annum, which will enable Pacific Coal to meet the coke production volumes forecasted for 2014. The new 100 oven battery is expected to be commissioned by the first quarter of 2012.

Metallurgical coal production out of the Cerrejoncito and La Mona underground mines, located in the CI Jam property, has started at levels of 500 tonnes per month, ramping up to 6,500 tonnes per month in 18 months.

La Tigra Asphaltite Deposit Exploration

Exploration at La Tigra progresses according to schedule. Magnetometry, Gravimetry, Magnetoteluric and Hiperespectral studies have been contracted and 5 drills (3 Longyear LF 70 and 2 Longyear LF 90) were acquired to increase exploration and interpretation efforts of the deposit. Exploration is expected to continue throughout the fourth quarter of 2011 with the objective of the completion of a NI-43-101 resource statement in the first quarter of 2012.

CAW Trials

Industrial sized samples of Colloidal Asphaltite in Water ("CAW") are being prepared at the Blue Advanced Colloidal Fuel facilities in Panama, using the recently acquired Filmix equipment. Trial burns at the Ohio-based Babcock & Wilcox facilities are now scheduled for late-October to early-November.

Pyrolysis

Economic and technical prefeasibility evaluation is being conducted on pyrolysis with asphaltite. Pyrolysis has been conducted in the past by other companies and is a proven process with existing technology (delayed coking) that is widely available in the market by different engineering companies, as well as other commercially proven technologies based on the processing of oil shales that could be modified to convert asphaltites.

Barranquilla Port

The Barranquilla Port project continues on schedule and the Company has agreed to a final design and layout provided by Nathan and Associates. Soil surveys have been completed and land movement is scheduled to commence during the fourth quarter of 2011. Pacific Coal has initiated social and work programs within the community of Barranquilla in order to provide improvement of living conditions and opportunities to the people that live in the area of influence of the port.

Tender for detailed engineering, equipment, supply and construction is expected to be issued in the first quarter of 2012.

Third Quarter Financial Results

The Company expects to announce its third quarter financial results on or about November 29, 2011.

About Pacific Coal Resources Ltd.

Pacific Coal Resources Ltd. is a Canadian-based mining company focused on coal, coking coal, asphalt and asphaltite exploration, development and production from prospective producing, development-stage and exploration-stage properties in Colombia. The Company has acquired or entered into agreements to acquire various interests in several operating coal mines and projects, representing a substantive coal and asphaltite exploration and production area throughout Colombia. Pacific Coal is committed to implementing its exploration and development strategy with a comprehensive environment, safety and community program, meeting international standards of best practice.

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.