CanAm Coal Corp. (TSX VENTURE: COE) (OTCQX: COECF) ("CanAm" or the "Company") has filed its unaudited condensed interim consolidated financial statements and related management's discussion and analysis for the three and nine month period ended October 31, 2011. Copies of these documents may be obtained via the SEDAR website.
With the primary focus of the Company on growing coal production and resources, the main activities of the CanAm team in the third quarter were devoted to successfully completing and integrating the 50% acquisition of Birmingham Coal & Coke ("BCC"), permitting of various tracts of land and identification of additional expansion opportunities. With 4 mines in operation; Bear Creek, Old Union, Gooden Creek and Powhatan, average coal sales are now in excess of 30,000 tons per month and the Company, once again, delivered record production, revenue, income and EBITDA (Earnings Before Interest Taxes Depreciation Amortization). A summary of key metrics for fiscal 2012 are as follows:
Period Production Revenues EBITDA
(in tons) (in $) (in $)
----------------------------------------------------------------------------
Q3 2012 94,261 8,729,604 1,744,787
Q2 2012 81,453 7,474,506 1,339,144
Q1 2012 30,655 3,233,121 867,870
"We continued to build our production levels in the third quarter and have seen coal sales grow from 30,655 tons in Q1 to 81,453 tons in Q2 and 94,261 tons in Q3. Year-to-date we have now surpassed coal sales of 200,000 tons as compared to 33,000 tons last year", said Tim Bergen, CEO of CanAm. "All of our key metrics continued their upward momentum and we delivered $8.7 million of revenue, $1.7 million of EBITDA and generated $1.5 million of cash flow from operations, before changes in non-cash working capital, during the quarter. Our cash position continues to be healthy with cash on hand of $5.0 million, including $1.8 million of restricted cash associated with reclamation deposits, at October 31, 2011".
Highlights and events for the third quarter include:
-- Achieved coal sales of 94,261 tons in Q3 or an increase of 82,853 tons
from last year's third quarter and an increase of 12,808 tons from the
previous quarter.
-- Achieved coal sales of 206,369 tons for the nine months of fiscal 2012
or a six-fold increase from last year;
-- Generated revenue of $8.7 million in Q3 as compared to $1.2 million in
Q3 of last year; Topped $19 million in revenue for nine months of fiscal
2012 as compared to $3.8 million last year;
-- Generated EBITDA of $1.7 million for Q3 as compared to $(0.1) million
last year and $4 million for nine months of fiscal 2012 as compared to
$0.2 million last year;
-- Delivered average EBITDA of $19/ton for the quarter and for the nine
months of fiscal 2012; Generated cash from operations of $0.9 million in
Q3 as compared to a use of cash from operations of $0.3 million last
year;
-- Converted approximately $0.75 million of the 12% convertible debenture
debt into common shares and raised additional funds as a result of the
exercise of warrants and options for proceeds of approximately $200,000.
Highlights and events subsequent to the quarter ended October 31, 2011
include:
-- Ordered additional new mining equipment; 2 excavators, 1 dozer and 3
trucks, in order to pursue organic growth opportunities for 2012 at both
the BCC mines and the Powhatan mine;
-- Completed the transfer of ASMC permit 3868 on the Powhatan mine;
-- Hired a major independent engineering firm to pursue alternative
development opportunities for the Buick Coal Property in Colorado;
-- Changed the Company's year-end from January 31 to December 31 and
therefore this fiscal year will be comprised of only 11 months ending
December 31, 2011. As such our fourth quarter will be comprised of 2
months.
Financial results for the three and nine month period ended October 31 were
as follows:
Three Month Period Nine Month Period
Ended October 31 Ended October 31
-----------------------------------------
2011 2010 2011 2010
Revenue 8,729,604 1,216,885 19,437,232 3,775,686
Income from mining operations 706,657 109,780 2,286,384 504,172
Profit (loss) before tax (i) -521,787 -331,992 -1,512,286 -309,636
Net profit (loss) -497,764 -342,647 -1,544,379 -361,311
EBITDA 1,744,787 -59,537 3,951,803 154,428
(i) YTD includes $0.8 M of one-time expenses relating to the BCC acquisition
& debenture financing
Mine operating results for the three and nine month period ended October 31
were as follows:
Three Month Period Nine Month Period
Ended October 31 Ended October 31
-----------------------------------------
2011 2010 2011 2010
Mettalurgical coal 13,175 7,562 43,203 25,928
Thermal coal 81,086 3,846 163,166 7,744
-----------------------------------------
Total 94,261 11,408 206,369 33,672
-----------------------------------------
-----------------------------------------
Coal sales revenue 8,729,604 1,180,199 19,437,232 3,644,084
Income from mining operations 706,657 109,780 2,286,384 504,172
EBITDA 1,744,787 -59,537 3,951,803 154,428
Coal sales (in tons) 94,261 11,408 206,369 33,672
Average coal price 93 103 94 108
Average cost of product sold 51 68 51 67
Average cost of royalties
transportation and other 18 24 18 25
Average income from mining 7 10 11 15
Average EBITDA 19 -5 19 5
Notes:
-- Averages are all presented on a per ton basis.
-- Through November 8, 2010, the Company only owned 49% of the mining
operations and therefore for the third quarter ended October 31, 2010,
all numbers represent CanAm's proportionate 49% share.
-- EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization
equals income from mining operations plus depreciation, depletion and
amortization minus general and administrative expenses. EBITDA is a
supplemental measure that is not presented in accordance with
International Financial Reporting Standards (IFRS). This non-IFRS
measure may not be comparable to the calculation of similarly titled
measures reported by other companies and should not be considered in
isolation, as an alternative to, or more meaningful than financial
measures calculated and reported in accordance with IFRS.
-- The Company previously reported EBITDA from mining but has substituted
this measure with simple EBITDA in order to be in line with reporting
measures used by other coal companies.
Coal Sales
Coal sales were 94,261 tons in the third quarter of fiscal 2012 as compared to 11,408 tons in Q3 of fiscal 2011 or an increase of 82,853 tons. The significant increase is mainly the result of the contribution of 59,027 tons of coal sales from BCC's three operating mines; Bear Creek, Old Union and Gooden Creek.
Coal sales at the Powhatan mine were up 17,869 tons or 256% from the comparable period in the previous year and up 10,098 tons or 53% from the second quarter. The ratio of metallurgical/thermal coal at the Powhatan mine was 45/55%, which is below the average coal mix of 60/40% as a result of geological inconsistencies encountered in the coal seams within the increment that is currently being mined.
For the nine month period ended October 31, 2011, coal sales were 206,369 tons as compared to 33,672 tons in fiscal 2011 or a six-fold increase. The ratio of metallurgical/thermal coal for the nine month period ended October 31, 2011 at the Powhatan mine was 55/45% as compared to 77/23% in fiscal 2011.
Revenue, Income and EBITDA
Revenue, income and EBITDA for the quarter were all up significantly as compared to the prior period as a result of the increased production following the acquisition of a 50% ownership stake in BCC and improved pricing on both metallurgical and thermal coal. Although prices for both coals increased, the average coal price was lower due to the Company's coal mix of 14/86% metallurgical/thermal coal as compared to 66/34% in the comparable prior period. The major shift in the coal mix is primarily due to the BCC acquisition which only mines high quality thermal coal. For the quarter, the Company realized an average sales price of $93/ton as compared to $103/ton in fiscal 2011. Production costs for the quarter were on average $51/ton as compared to $68/ton in fiscal 2011 with the decrease mainly coming from the lower production costs at the BCC mines. EBITDA was $1,744,787 as compared to $(59,537) in the third quarter of fiscal 2011.
For the nine month period ended October 31, 2011, the Company exceeded $19 million in revenue and generated approximately $4 million in EBITDA and changes from the prior year are mainly the result of the BCC acquisition and increased production at the Powhatan mine.
Revenue, income and EBITDA were negatively impacted from the strengthening of the Canadian dollar. Average exchange rate for the nine month period ended October 31, 2011 was US$1=CDN$0.9808 as compared to US$1=CDN$1.0373 in the comparable prior period.
Other Income (Expenses)
Other expenses for the three and nine month period ended October 31, 2011 were $1,228,444 (2011 - $441,772) and $3,798,670 (2011 - $813,808), respectively. The increase for the quarter was mainly the result of: higher general and administrative expenses as a result of the increased activity in the Company's operations and additional overhead following the acquisitions of BCC and RAC (+$271,000), interest and costs associated with the Company's 9.5% and 12% debenture (+$489,000), higher stock based compensation expenses (+$80,000) and higher equipment interest expense mainly as a result of the BCC acquisition (+$70,000). The increase was somewhat offset by a favourable impact of fluctuations in the US$/CDN$ foreign exchange (-90,000).
The Company's overall financial remained healthy as a result of the cash flow generated from mining operations and conversion of a portion of the 12% convertible debenture. Cash on hand at October 31, 2011 was $3.2 million as compared to $1.5 million at January 31, 2011. In addition, the Company provided $1.8 million in reclamation deposits as security for reclamation bonds. The Company continued its investment in its mining operations in Alabama and capital investment in equipment and mine development, excluding the BCC acquisition, for the nine months of fiscal 2012 was approximately $2.7 million. Additional reclamation deposits of approximately $0.3 million were also provided in the same period.
Outlook
Since November 2009, the Company has embarked on a strategy to become an emerging coal producer and in the last year the Company has successfully completed two acquisitions: gaining control of RAC Mining LLC, a predominantly metallurgical coal producer, and acquiring a 50% ownership stake in Birmingham Coal & Coke Inc., a predominantly thermal coal producer. As a result, CanAm's assets now comprise an ownership stake in:
-- 4 producing surface coal mines
-- 1 development mine
-- Permits and leases covering approximately 5,000 acres of land
-- Workforce of 110+ employees
With the acquisition of BCC completed, the Company is estimating coal sales of between 260,000 to 270,000 tons for this shortened fiscal year (11 months) ending December 31, 2011. This is in line with a previously provided target of coal sales, for the 12 month period ended January 31, 2012, of 300,000 to 325,000 tons. The Company also believes that it will continue to benefit from a strong pricing environment as a result of the high quality of both its metallurgical and thermal coal and existing off-take contracts for some of its metallurgical coal and the majority of its thermal coal. In addition, the Company is looking to organically grow its production in Alabama by increasing its existing capacity and adding adjacent land positions to its portfolio. The Company also has an option to purchase an additional 30% ownership in BCC within the next 2 years and the remaining 20% within 5 years.
In addition, the Company continues to pursue the development of the Buick Coal Property which holds significant coal resources, 188 million tons of indicated and 103 million tons of inferred coal resources, in Colorado, USA (see the technical report entitled "Limon Lignite Project, Elbert County, Colorado, USA," dated October 26, 2007 and filed on SEDAR on November 2, 2007). In this context, an independent major engineering firm has been retained to identify alternative development opportunities for this significant resource.
About CanAm Coal Corp.
CanAm is a coal producer and development company focused on growth through the acquisition, exploration and development of coal resources and resource-related technologies. CanAm's main activities and assets include its four operating coal mines in Alabama, the exclusive rights to a proprietary Coal to Liquids technology which converts coal into liquid fuels (such as oil, jet fuel) at an economical cost with zero airborne emissions and the Buick Coal Project which holds significant coal resources, 188 million indicated and 103 million inferred resources, in Colorado, USA (see the technical report entitled "Limon Lignite Project, Elbert County, Colorado, USA," dated October 26, 2007 and filed on SEDAR on November 2, 2007). Other coal and related opportunities continue to be evaluated on an ongoing basis.
Forward-Looking Information and Statements
This press release contains certain forward-looking statements and forward-looking information (collectively referred to herein as "forward-looking statements") within the meaning of applicable Canadian securities laws.
All statements other than statements of present or historical fact are forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "could", "should", "can", "anticipate", "estimate", "expect", "believe", "will", "may", "project", "budget", "plan", "sustain", "continues", "strategy", "forecast", "potential", "projects", "grow", "take advantage", "well positioned" or similar words suggesting future outcomes. In particular, this press release contains forward-looking statements relating to: the future production of the Powhatan mine; the permitting of the Davis mine; and the potential production at the Davis mine. This forward looking information is based on management's estimates considering typical strip mining operations, equipment requirements and availability and typical permitting timelines.
In addition, forward-looking statements regarding the Company are based on certain key expectations and assumptions of the Company concerning anticipated financial performance, business prospects, strategies, the sufficiency of budgeted capital expenditures in carrying out planned activities, the availability and cost of services, the ability to obtain financing on acceptable terms, the actual results of exploration projects being equivalent to or better than estimated results in technical reports or prior exploration results, and future costs and expenses being based on historical costs and expenses, adjusted for inflation, all of which are subject to change based on market conditions and potential timing delays. Although management of the Company consider these assumptions to be reasonable based on information currently available to them, these assumptions may prove to be incorrect.
By their very nature, forward-looking statements involve inherent risks and uncertainties (both general and specific) and risks that forward-looking statements will not be achieved. Undue reliance should not be placed on forward-looking statements, as a number of important factors could cause the actual results to differ materially from the Company's beliefs, plans, objectives and expectations, including, among other things: general economic and market factors, including business competition, changes in government regulations or in tax laws; the early stage development of the Company and its projects; general political and social uncertainties; commodity prices; the actual results of current exploration and development or operational activities; changes in project parameters as plans continue to be refined; accidents and other risks inherent in the mining industry; lack of insurance; delay or failure to receive board or regulatory approvals; changes in legislation, including environmental legislation, affecting the Company; timing and availability of external financing on acceptable terms; conclusions of economic evaluations; and lack of qualified, skilled labour or loss of key individuals. These factors should not be considered exhaustive. Many of these risk factors are beyond the Company's control and each contributes to the possibility that the forward-looking statements will not occur or that actual results, performance or achievements may differ materially from those expressed or implied by such statements. The impact of any one risk, uncertainty or factor on a particular forward-looking statement is not determinable with certainty as these risks, uncertainties and factors are interdependent and management's future course of action depends upon the Company's assessment of all information available at that time.
Forward -looking statements in respect of the future production of the Powhatan and BCC mines may be considered a financial outlook. These forward-looking statements were approved by management of the Company on December 22, 2011. The purpose of this information is to provide an operational update on the company's activities and strategies and this information may not be appropriate for other purposes.
The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement. The forward-looking statements included in this press release are made as of the date of this press release and the Company does not undertake and is not obligated to publicly update such forward -looking statements to reflect new information, subsequent events or otherwise unless so required by applicable securities laws.
Neither the 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 release.
Contacts:
CanAm Corporate Office:
Tim Bergen
Chief Executive Officer
403.262.3797 or Toll Free: 1.877.262.5888
tbergen@canamcoal.com
Brisco Capital Partners:
Scott Koyich
Partner
403.262.9888
scott@briscocapital.com
SOURCE: CanAm Coal Corp.
