Pacific Coal Resources Ltd. announces second quarter 2012 financial results
TORONTO, Aug. 30, 2012 /PRNewswire/ - Pacific Coal Resources Ltd. (TSXV: PAK) has filed its unaudited interim condensed consolidated financial statements for the three and six months ended June 30, 2012, 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.
Luis Carvajales, Chief Executive Officer, commented: '"We continued to make progress with regard to the Company's production during the second quarter of 2012, producing 335,008 tonnes of thermal coal at our La Caypa and Cerro Largo mines. Important progress continues with the development work at La Caypa's south pit, Cerro Largo's integrated mine plan and the CI Jam project. We have also implemented a comprehensive cost reduction plan, given actual thermal coal and metcoke market trends, that will reduce our G&A expenses by 35% or approximately $6 million annually. We realized savings in the second quarter of 2012 with G&A expenses down 9% from the first quarter of 2012, in addition to the 12% decrease previously realized in the first quarter of 2012, with further reductions in G&A planned for the third quarter of 2012 and the remainder of the year."
Financial and Operating Summary
A summary of the financial and operating results for the three and six months ended June 30, 2012 and 2011 is as follows:
| Second Quarter | First Half | |||||||
| (000's except per share and operating data) | 2012 | 2011 | 2012 | 2011 | ||||
| Operational | ||||||||
| Tonnes of coal produced | 335,008 | 307,528 | 652,078 | 669,300 | ||||
| Average stripping ratio - operations | 9.60 | 7.40 | 10.20 | 7.24 | ||||
| Tonnes of coal sold(1) | 338,775 | 376,332 | 599,270 | 757,200 | ||||
| Average realized price per tonne sold | $ | 98.93 | $ | 94.27 | $ | 100.82 | $ | 95.60 |
| Operating margin per tonne sold(2) | (12.00) | 5.89 | (18.45) | 11.46 | ||||
| Financial | ||||||||
| Revenues | $ | 35,197 | $ | 35,477 | $ | 63,621 | $ | 72,392 |
| Gross margin(3) | (7,271) | 1,464 | (16,327) | 7,308 | ||||
| Net (loss) earnings attributed to shareholders(4) | (49,520) | (8,789) | (70,626) | (45,253) | ||||
| Basic and fully diluted (loss) earnings per share | (0.15) | (0.03) | (0.22) | (0.16) | ||||
| Total cash | 2,858 | 34,196 | 2,858 | 34,196 | ||||
| Total assets | 332,067 | 383,109 | 332,067 | 383,109 | ||||
| Total debt (5) | 42,013 | 32,250 | 42,013 | 32,250 | ||||
| (1) | Includes coal purchased from third parties for sale. |
| (2) | "Operating margin per tonne sold" - see additional financial measures in MD&A. |
| (3) | "Gross margin" represents total revenues, net of operating costs, transportation and port services costs, selling costs, mine disruption costs, depreciation, depletion and amortization, and impairment charges related to inventory. |
| (4) | 2012 includes a non-cash impairment writedown of $37.5 million; see "Q2 2012 - Cerro Largo" section for discussion. |
| (5) | Includes bank indebtedness, long-term debt (including current portion), and obligations under finance leases (including current portion). |
Second Quarter Highlights
- The Company produced 335,008 tonnes of coal during the second quarter of 2012, representing a 6% increase over 317,070 tonnes produced in the prior quarter. In addition, the Company's stripping ratio from operations improved 11% from 10.83:1 in the first quarter of 2012 to 9.60:1 during the second quarter of 2012.
- Production at La Caypa was 267,321 tonnes representing an increase of approximately 45% from the first quarter of 2012 and 96% of its planned production for the quarter. Production at the Cerro Largo mine was 67,687 tonnes, representing a decrease of approximately 50% from the record highs reached during the first quarter of 2012, negatively impacted by additional work undertaken to address difficulties encountered with mud concentrations at the bottom of the open pit and to maintain high wall and foot wall stability.
- Total revenues for the second quarter of 2012 were $35.2 million, up 24% from $28.4 million in the first quarter of 2012, on the strength of coal sales of 338,775 tonnes, 89% of which were sold on an FOB basis at an average realized price of $102.95 per tonne.
- Exploration at both the La Caypa and Cerro Largo mines was completed during the second quarter in coordination with SRK Consulting (UK) Ltd. (SRK) pursuant to updating the NI 43-101 technical reports in connection with the open pit and underground resources at both mines. The updated technical reports are expected to be released during the third quarter of 2012.
- The net loss of $49.5 million, or $0.15 per share, in the second quarter of 2012 includes a $37.5 million, or $0.12 per share, non-cash impairment writedown of Cerro Largo and other non-current assets triggered by the recent trend in coal market prices. A change in this trend could result in a reversal of this writedown in a future period.
Q2 2012 - La Caypa
| Production of Coal (metric tonnes) |
Waste (bcm (1)) |
Strip Ratio | |
| Actual Pit | 267,321 | 1,488,154 | 5.57:1 |
| South Pit | - | 865,176 | - |
| Total | 267,321 | 2,353,330 | 8.80:1 |
| (1) | "BCM" is Bank Cubic Metres |
During the second quarter of 2012, the Company produced 267,321 tonnes at La Caypa completing 96% of its planned production for the quarter. Operational stripping ratios at La Caypa improved 22% over the second quarter of 2011 and were only 3% behind the historic lows reached in the fourth quarter of 2011. Total stripping ratios at La Caypa include waste volumes moved from the south pit.
The Company expects total coal production from La Caypa, including the south pit, to reach 1,150,000 tonnes for 2012.
Q2 2012 - Cerro Largo
| Production of Coal (metric tonnes) |
Waste (bcm (1)) |
Strip Ratio | |
| Total | 67,687 | 1,727,779 | 25.53:1 |
| (1) | "BCM" is Bank Cubic Metres |
The Company's production at Cerro Largo of 67,687 tonnes in the second quarter of 2012 was approximately 50% lower than the record highs in the previous quarter. Production at Cerro Largo during the quarter was negatively impacted due to significant work required to address mud concentrations at the bottom of the open pit and work necessary for maintaining high wall and foot wall stability. The Company expects these improvements to result in greater production from the mine in the second half of the year.
During the second quarter of 2012, there was a fundamental decrease in current and forward looking Atlantic basin seaborne coal prices. Consequently, the fair value of the Cerro Largo property, based on estimated cash flows using these current and forward looking prices, declined below its carrying value at June 30, 2012, and the Company recorded a $35.6 million non-cash impairment charge on its Cerro Largo non-current assets in the second quarter. Under IFRS, future improvements in such coal prices that result in an increase in the fair value of the property could result in a reversal of the impairment writedown in future periods.
Q2 2012 - CI Jam
| Q2 2012 | Q1 2012 | |
| Tonnes produced | 7,397 | 10,547 |
Given current metcoke market trends the Company has decided to maintain coke production at minimum levels. The Company's metcoke production has been suspended and coke production activity has been focused on processing third party purchased metcoke.
Revised production guidance
As a result of production for the first half of 2012, the Company's 2012 production target at La Caypa has been reduced from 1,200,000 tonnes to 1,150,000 tonnes, including expected coal production from the south pit expansion.
At Cerro Largo, in light of the second quarter results and the ongoing work required to clear the mud concentration in the pit, the Company has revised its 2012 production target for Cerro Largo from 800,000 tonnes to 700,000 tonnes.
The Company's total 2012 forecasted production is 1,850,000 tonnes, a projected 30% increase from 2011 production.
Corporate update
Exploration at both the La Caypa and Cerro Largo mines was completed during the second quarter of 2012 in coordination with SRK pursuant to updating the National Instrument 43-101 compliant technical reports in connection with the open pit and underground resources at both mines. The updated technical reports are expected to be released during the third quarter of 2012.
The Company continues to advance its Colloidal Asphaltite in Water project ("CAW"). In addition, the Colloidal Coal in Water ("CCW") project continues to advance with trial burns at the Babcock & Wilcox facilities conducted in July and August 2012. A new visitor day for detailed discussions of the progress of "CCW" trials has been scheduled for Q3 2012. A fact sheet on the properties, uses and commercialization opportunities for asphaltite is available on the Company's website at www.pacificcoal.ca.
Underground mine
Conceptual design for the underground mine project at La Caypa continues to progress according to plan with in-house staff working in coordination and with the support of external local consultants.
La Tigra exploration
Geophysical, metalotelluric, and gravimetric studies are in progress and results were received and are in the process of being analyzed to determine future exploration plans.
Barranquilla port
Work at the Barranquilla port has been suspended as a result of the recent metcoke market trends and mid term demand/supply balance expectations. The Company is exploring different options to attract third party interest in the port which may include a potential joint venture, sale or partial sale of the asset.
Cost reduction program
The Company has undertaken a comprehensive cost cutting program including payroll and G&A reductions. During the second quarter, actions taken contributed to a decrease of 9% in G&A expenses to $4.4 million as compared to $4.8 million in the first quarter of 2012, in addition to the 12% decrease already realized in the first quarter of 2012. G&A costs are expected to decrease a further 35% during the remainder of 2012 to an expected quarterly run rate of approximately $3 million by the fourth quarter of 2012.
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 producing, development-stage and exploration-stage properties in Colombia. The Company's common shares and warrants are listed on the TSX Venture Exchange and trade under the symbol "PAK" and "PAK.WT" respectively.
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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