CanAm Coal Corp. (TSX VENTURE:COE) (OTCQX:COECF) ("CanAm" or the "Company") has
filed its unaudited consolidated financial statements and related management
discussion and analysis for the period ended September 30, 2012.
Record financial results were achieved during the third quarter as a result of
the Company's increased ownership in Birmingham Coal & Coke ("BCC"), integration
of mine operations and, last but not least, the Company's focus on operational
execution. These actions and the Company's increased ownership in BCC have
resulted in a steady improvement of our financial results over the last three
quarters.
2012 Coal Sales Revenue EBITDA Cash Flow
Tons $'000 $'000 $'000
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Q1 67,153 7,672 973 248
Q2 76,577 14% 8,153 6% 1,080 11% 580 134%
Q3 157,900 106% 14,741 81% 3,281 204% 2,856 392%
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Q3 YTD 2012 301,630 30,566 5,334 3,684
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46% 57% 35% 25%
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Q3 YTD 2011 206,369 19,437 3,951 2,943
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Note: Please refer to the definition of EBITDA and Cash Flow at the end of
this press release
Highlights for the quarter include:
-- Coal sales at the Powhatan mine of 33,332 tons, an all-time high;
-- Coal sales at the BCC mines of 124,568 tons, the highest since Q1 of
2008;
-- EBITDA of $3.3 million, up 90% over last year and triple Q2;
-- Cash flow from operations of $2.9 million, up 244% over last year and
five-times Q2;
-- Acquired an additional 30% interest in BCC for $11.5 million, financed
by debentures;
-- Raised $13.1 million through a 4 year, unsecured debenture through a
private placement;
-- Obtained the Old Union 2 mine permit covering 1,108 minable acres with
an estimated 1.3 million tons of recoverable coal per the NI 43-101
report dated May 2011. Production commenced in Q4;
-- Acquired 133 acres of surface mining rights, on top of the 574 acres
acquired in the period April to June 2012;
-- Added Steve Somerville, former President of BMO Capital, to the Board of
Directors.
Commenting on the quarter, Company President Jos De Smedt noted "This was a
breakthrough quarter for CanAm Coal. Not only did we close an additional 30%
acquisition of BCC, we made significant progress in improving operating
efficiency at our mines resulting in record production, EBITDA and operating
cash flow. The hard work of our team paid off and the operational improvements
achieved at our mines in the quarter, coupled with improved mining conditions,
resulted in higher production levels and a significantly lower cost structure.
We also received our Old Union 2 permit in August and our Knight Mine permit
subsequent to quarter end. While there is more work ahead, we are pleased with
our performance and look forward to further improvement in the fourth quarter
and into 2013".
Financial Results Analysis
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Three Month Period Ended Nine Month Period Ended
Sept 30, 2012 Oct 31, 2011 Sept 30, 2012 Oct 31, 2011
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Tons sold
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Metallurgical coal
sales 15,443 13,175 47,014 43,203
Thermal coal sales 142,457 81,086 254,615 163,166
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Total 157,900 94,261 301,629 206,369
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Coal sales revenue $ 14,741,010 $ 8,729,604 $ 30,565,828 $19,437,232
Income from mining
operations 1,583,612 706,382 1,680,653 2,286,384
Other expenses (2,366,331) (1,228,169) (5,357,325) (3,798,670)
Loss for the period (880,393) (497,764) (3,065,516) (1,544,379)
EBITDA 3,281,155 1,745,062 5,334,294 3,951,803
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Per ton metrics
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Average metallurgical
coal price $ 141 141 $ 149 136
Average thermal coal
price 89 84 92 83
Average overall coal
price 94 93 101 94
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Average production
cost 47 51 57 51
Average RTO cost 20 18 21 18
Income from mining 10 7 6 11
EBITDA $ 21 $ 19 $ 18 $ 19
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Note: Please refer to the definition of EBITDA and Cash Flow at the end of
this press release.
CanAm holds 80% ownership in Birmingham Coal & Coke (BCC) following its
acquisition of an additional 30% interest, effective July 1, 2012. As at
that date, CanAm began consolidating the financial results of BCC in
accordance with generally accepted accounting principles and, accordingly
the above information is presented on a consolidated basis, including 100%
of BCC's production and sales volumes.
Sales volume and pricing
Consolidated third quarter sales volumes were 157,900 tons, a 68% increase over
the previous year and double the second quarter. Thermal sales volumes were
142,457 tons, a 76% increase over the prior year and a 136% increase over the
second quarter. The Company's acquisition of an additional 30% interest in BCC
(effective July 1, 2012) as well operational improvements at its Powhatan, Old
Union and Bear Creek mines were the key factors contributing to this significant
increase. Metallurgical sales volumes were 15,443 tons, a 17% increase over the
previous year but a 5% decrease over the previous quarter. During the quarter,
the Company experienced inconsistencies in coal quality, which resulted in
decreased shipments to a key metallurgical customer compared to the second
quarter. Overall in Q3, sales and production at Powhatan set an all-time high
and, likewise at BCC, sales and production numbers were the highest since Q1
2008.
Revenue for the quarter was $14.7 million compared to $8.7 million in the prior
year, an increase of 81%. Third quarter average sales prices were slightly
higher than in the prior year.
-- Third quarter average thermal pricing was $89/ton compared to $84/ton in
the prior year and $92/ton achieved in the previous quarter. Thermal
pricing was lower than the previous quarter as the Company's sales mix
was weighted more heavily to lower priced coals. Average quarterly
pricing will fluctuate above or below $90/ton depending on the
particular sales mix achieved in the quarter.
-- Third quarter average metallurgical pricing was $141 per ton compared to
$141/ton in the prior year and $155/ton in the previous quarter. During
the quarter, the Company sold metallurgical coal, which did not meet
specifications for a key customer to other industrial customers at a
lower price.
-- There were no changes in the quarter in any of the Company's contracted
sales terms.
Coal Production
Third quarter coal production was 167,400, the best production quarter in the
Company's history. The aforementioned acquisition of an additional 30% interest
in BCC and operational improvements explain these strong operational results.
The Company's coal production exceeded sales levels for the quarter resulting in
a modest increase in inventory.
Cost of Product Sold, Cost of Royalties, Transportation & Other (RTO)
Third quarter cost of product sold was $47 per ton sold, compared to $51 per ton
in the previous year, $65 per ton in the second quarter and $71 per ton in the
first quarter. The substantial reduction can be attributed to the significant
operational improvements achieved at all of our mines in the quarter, which
resulted in higher production levels and a lower cost structure. The Company's
investment in new equipment and capital repairs to existing equipment
(particularly at Powhatan) began to pay off and overall repair and maintenance
expenditures were significantly lower. Additionally, improved mine operating
efficiency, particularly at Bear Creek, Old Union and Powhatan, significantly
lowered per ton expenditures in virtually all key cost categories.
RTO costs were $20 per ton sold as compared to $18 per ton in the prior year and
$21 per ton achieved in first and second quarter.
EBITDA
Third quarter EBITDA was $3.3 million compared to $1.7 million in the previous
year, $1.1 million in the second quarter and $1.0 million in the first quarter.
Nine month EBTIDA was $5.3 million compared to $4.0 million in the prior year.
The significant increase can be attributed to increased production and sales
levels and substantially lower cost of production achieved in the third quarter.
EBITDA per ton was $21 in the third quarter as compared to $14 in both the first
and second quarters of this year.
Net Income
For the three and nine month periods ended September 30, 2012, the Company
reported a net loss of $0.9 million and $3.1 million respectively. This compares
to a three and nine month loss of $0.5 million and $1.5 million in the previous
year. Notwithstanding significantly higher EBTIDA, the third quarter loss was
higher than last year primarily due to higher financing expenses and higher
non-cash expenses including depreciation, depletion and other amortization,
debenture issue costs and accretion expense, stock based compensation and a loss
on the sale of equipment. As well, third quarter results included a foreign
exchange loss resulting from the strengthening of the Canadian dollar. The three
month loss was significantly reduced from the first and second quarters due to
improved operating results.
Capital Expenditures
Third quarter capital expenditures on new equipment, capital repairs and mineral
property development were $5.2 million. During the quarter the Company made
significant investments in new equipment (including haul trucks, dozer rebuilds
and a new excavator), new mine development (including engineering, permitting,
bridge construction and site preparation) and major repairs to existing
equipment. The Company made these investments in anticipation of the expected
opening of 3 new mines in Q4 and early 2013 (refer to subsequent events). The
Company financed $3.1 million of this investment and funded the remainder from
cash flow.
Liquidity
At the end of the third quarter, the Company had cash on hand of $4.1 million,
compared to $2.6 million at December 31, 2011. The Company's overall financial
position remains stable as a result of cash flow generated from mining
operations, cash received from the exercise of warrants, options, private
placements, the debenture financing and a reduction of restricted cash
requirements required as security for reclamation bonding purposes.
At September 30, 2012, the Company had a working capital deficiency of $2.6
million ($1.5 million excluding the repayment of a $1.1 million, 12% convertible
debenture in August 2013) compared to a deficiency of $1.7 as at June 30, 2012
and a deficiency of $1.0 million at December 31, 2011. We expect improvement in
the fourth quarter as a result of cash flow generated from operations and
reduced internally funded capital spending requirements.
Subsequent Events
Subsequent to the end of Q3, the Company achieved a number of significant
milestones including:
-- Commenced mining at Old Union 2 in mid-October. Production results to
date have been at or above planned levels.
-- In October, the Company moved forward the start date for two Old Union 2
pits to December from the middle of 2013. In order to facilitate this
adjustment, the Company temporarily suspended production at its Gooden
Creek mine. The Company believes the revised mine plan is more
efficient.
-- In November, the Company received a final permit from the Alabama
Surface Mining Commission for the Knight mine. First production will
commence at the beginning of December. The Company anticipates receiving
a mining permit for the Posey Mill 2 mine in the near future.
-- Realigned the corporate executive roles as Tim Bergen stepped down as
the Company's CEO and assumed the title of Vice Chairman of the board
responsible for business development. Jos De Smedt, CanAm's President
and Chief Operating Officer, has assumed Tim's day to day management
responsibilities.
Outlook
The Company expects to continue to build on its momentum in the last quarter of
the fiscal year and going into 2013. With 3 new mines in production by early
2013 (Old Union 2 in October 2012, Knight in December 2012 and Posey Mill 2 in
early 2013), the Company should be in a position to steadily grow production
into 2013. Fourth quarter 2012 sales are forecasted to be in the range of
155,000 to 175,000 tons with all of the production going into existing
contracts. Improvements in mine operating costs realized in the third quarter
are expected to continue into the fourth quarter. As well, fourth quarter
capital expenditures will be substantially lower compared to the previous
quarter and this trend is expected to continue into 2013. On this basis, the
Company expects to generate free cash flow in the fourth quarter.
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 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 Ligni te 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.
EBITDA and Cash Flow
EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization): defined
as income from mining operations plus depreciation, depletion, amortization and
accretion minus general and administrative expenses. Transaction costs, project
development related expenditures and financing related expenditures are excluded
from EBTIDA. 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.
Cash Flow: defined as cash provided by operating activities as disclosed in the
Consolidated Statements of Cash Flow contained in the Consolidated Financial
Statements.
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 securi ties 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 November 29, 2012. 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.
FOR FURTHER INFORMATION PLEASE CONTACT:
CanAm Corporate Office
Jos De Smedt
President & COO
403.262.3797 or Toll Free: 1.877.262.5888
jdesmedt@canamcoal.com
Brisco Capital Partners
Scott Koyich
Partner
403.262.9888
scott@briscocapital.com
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