Toronto Stock Exchange: XRG
(All Amounts in $US unless otherwise stated)
KNOXVILLE, TN, Feb. 23 /PRNewswire-FirstCall/ - Xinergy Ltd., (TSX:XRG) ("Xinergy" or "the Company") a US Central Appalachian producer of high quality coal, today announced the release of its Audited Consolidated Financial Statements for the year ended December 31, 2010, together with its Management's Discussion and Analysis ("MD&A") for the corresponding period. These documents will be posted on SEDAR at www.sedar.com and on the Company's website at www.xinergycorp.com.
During the three month period ended December 31, 2010, the company generated EBITDA of approximately $13.2 million on revenues of $38.1 million versus a negative EBITDA of ($2.5) million on revenues of $8.8 million for the same period in 2009. Revenues for the year totalled $108.8 million up 83% from $59.4 million in 2009; EBITDA for 2010 was $32.8 million; Adjusted EBITDA for 2010 was $27 million; gross margins from operations were $34 million in 2010 compared to $13.1 million in 2009; per ton cost of sales decreased to $58.57/ton in 2010 down from $69.58 in 2009.
In addition to the solid operating results, the Company continued to maintain strong working capital including cash, trade receivables and inventories of $33.5 million at December 31, 2010. The Company also carries its investment in The Elk Horn Coal Company, LLC at $7.8 million which it acquired with cash in November.
Commenting on the Company's fourth quarter results, Xinergy's Chief Financial Officer Michael R. Castle said, "We are extremely pleased with our fourth quarter 2010 results and based on the trends we're seeing of sustaining our cash production costs, increased margins and favorable forward pricing, we see sequential 2011 quarters as excellent opportunities to maximize shareholder value."
Highlights for the Quarter Ended December 31, 2010
- In November 2010, the Company signed a Letter of Intent to acquire a high quality, mid-volatility metallurgical coal reserve located in Greenbrier County, West Virginia. On January 31, 2011, the Company, through its wholly owned subsidiary, South Fork Coal Company, LLC, consummated the acquisition pursuant to an asset purchase agreement. The Company has completed an exploration program and has already begun the process of producing a reserve estimate compliant with NI 43-101 standards. The Company expects permits to be issued by late in the third quarter of 2011 and estimates initial production to begin in the early part of the fourth quarter of 2011 initially at a rate of 10,000-20,000 tons per month, with production increasing to a run rate of 600,000 metallurgical tons annually in 2012.
- On November 30, 2010, the Company acquired 1,852,367 membership units representing approximately 17.5% of the outstanding equity, of Elk Horn Coal Company, LLC. Elk Horn is a private company located in eastern Kentucky engaged in the leasing of coal reserves to other parties. Its properties consist of mineral rights to approximately 153,600 acres of coal bearing land.
- The Company announced that with the consent of its senior lenders, it would redeem $10.0 million in principal amount of its $75 million senior secured notes at a redemption price of 110% of the face amount of the notes, which redemption would occur in four monthly installments of $2.5 million in principal amount from November 2010 through February 2011.
- The Company spent approximately $11.5 million on capital expenditures in the quarter on surface and underground equipment including one continuous miner and related support equipment for the underground operation at the Kentucky operations known as Straight Creek and several haul trucks, loaders, dozers, drills and support equipment primarily for the KY 6 (Salt Trace) surface mine also at Straight Creek that resumed production in November 2010.
Thermal Coal Production and Sales
Xinergy announced plans to increase production and sales in 2011 from currently controlled thermal producing properties to 2.8 to 3.0 million tons with contracted sales of 1,348,000 tons, or 44-48% of forecasted production, at an average sales price of $98.16 per ton. As market conditions continue to improve we expect 2012 production and sales to increase to 3.5 to 4.0 million tons on our existing properties. We currently have 146,000 tons contracted for sale in 2012 at $115.10 per ton.
We expect to produce and ship our 2011 contracted tons as follows:
- 660,000 tons from our West Virginia mines; and
- 688,000 tons from our Kentucky mines.
We expect to produce and ship our 2012 contracted tons from our Kentucky mines.
Negotiations are currently ongoing with several customers for third and fourth quarter 2011 sales commitments as well as for 2012, 2013 and 2014. Based on recent upward pricing for 2012 through 2014, as reported by NYMEX and other commodity future pricing sources, the Company expects to be able to secure coal supply agreements in the second or third quarter of 2011 for a significant portion of its expected thermal production from its Kentucky and West Virginia mines for 2012 and possibly through 2014 at prices at or above the current 2011 NYMEX Central Appalachia market prices. We anticipate securing commitments for a substantial portion of our expected production for these periods.
Based on our discussions with customers and our views of the global coal markets, we are cautiously optimistic that we will be in a position to achieve price realizations on term contracts that amply justify the production levels discussed above. We anticipate maintaining cash production costs of between $50.00 to $55.00 per ton, while continuing to focus on safety, productivity enhancements and cost controls across all of our operations.
Metallurgical Coal Production and Sales
On January 31, 2011, the Company, through its wholly owned subsidiary, South Fork Coal Company, LLC, acquired a high quality, mid-volatility metallurgical coal reserve in Greenbrier County, West Virginia pursuant to an asset purchase agreement. Based on information provided by the previous owner of the property, including a December 2008 report entitled "Project Summary and Preliminary Recoverable Coal Calculations, Prepared for MERAL Inc., Greenbrier Reserve Area" compiled by R. B. (Barry) Doss, PE, PS, MBA of Doss Engineering, Inc., management believes that the 14,300 acre property contains approximately 30.0 million mineral resource tons in the Sewell seams, of which a majority is high quality mid-volatility metallurgical coal, with the remaining portion being high quality thermal coal. The mineral resource is comprised of 11.95 million tons measured mineral resources, 6.85 million tons indicated mineral resources and 11.2 million inferred mineral resources. Total proven and probable mineral reserves are estimated to be 8.8 million tons of which 5.75 million tons are proven mineral reserve and 3.05 million tons are probable mineral reserve. The Company has completed an exploration program and already begun the process to produce a reserve estimate compliant with NI 43-101 standards, which will be filed within 45 days of the closing of the acquisition.
Additionally, the Company has prepared and will immediately submit the necessary permit application to commence production for a block of the property referred to as Blue Knob. The Company expects such permits to be issued by late in the third quarter of 2011 and expects initial production to begin in the early part of the fourth quarter of 2011 at a rate of 10,000-20,000 tons per month, with production ultimately increasing to a run rate of 600,000 metallurgical tons annually.
|As at||As at||As at|
|December 31||December 31||December 31|
|Cash||$ 17,029||$10,193||$ 164|
|Total current assets||47,442||13,264||7,896|
|Total current liabilities||23,790||5,734||8,900|
|Total long term liabilities||75,845||7,219||43,815|
|($ '000, except per share)||2010||2009||2008|
|Statement of Operations|
|Total coal revenues||$108,841||$ 59,448||$57,581|
|Cost of coal sales||74,884||46,354||49,160|
|Loss before taxes||(2,731)||(16,616)||(8,687)|
|Basic and diluted net|
|loss per share||(0.05)||(0.34)||(0.20)|
|Gross margin/ton sold||26.56||19.26||12.67|
|Cash costs/ton produced||54.16||69.77||103.36|
About Xinergy Ltd.
Headquartered in Knoxville, Tennessee, Xinergy Ltd., through its wholly owned subsidiaries, Xinergy Corp. and Xinergy of West Virginia, LLC., is engaged in coal mining in eastern Kentucky and West Virginia. Currently, Xinergy sells high quality coal to electric utilities and industrial companies throughout the south-eastern United States. For more information, please visit www.xinergycorp.com.
This release contains "forward-looking information" that includes information relating to future events and future financial and operating performance, including management's assessment of Xinergy's future outlook, potential lifting cost and sales prices. Specifically, this release contains forward-looking information related to tons under contract for 2011 & 2012, price per ton for 2011 and 2012 tons that are committed under contract, estimated cash costs of production for 2011 and 2012, increases in production capacity as the results of additional capital expenditures and permitted mines, additional reserves that have been leased or acquired, and future development of reserves or properties. Forward-looking information should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by which, that performance or those results will be achieved. Forward-looking information is based on information available at the time it is made and/or management's good faith belief as of that time with respect to future events, and such information is subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking information. Important factors that could cause these differences include but are not limited to: changes in contracted sales, the business of the Company may suffer as a result of uncertainty surrounding the coal market; the Company may be adversely affected by other economic, business, and/or competitive factors; the worldwide demand for coal; the price of coal; the price of alternative fuel sources; the supply of coal and other competitive factors; the costs to mine and transport coal; the ability to obtain new mining permits; the costs of reclamation of previously mined properties; the risks of expanding coal production; the ability to bring new mines on line on schedule; industry competition; the Company's ability to continue to execute its growth strategies; and general economic conditions. These and other risks are more fully described in the Company's filings with the Canadian Securities Administrators, including its Annual Information Form for the year ended December 31, 2009, available on SEDAR at www.sedar.com. You should not put undue reliance on any forward-looking information. We assume no obligation to update forward-looking information to reflect actual results, changes in assumptions or changes in other factors affecting forward looking information, except to the extent required by applicable securities laws. If we do update one or more forward-looking information, no inference should be drawn that we will make additional updates with respect to those or other forward-looking information.
SOURCE Xinergy Ltd.