Pacific Coal provides fourth quarter and full year 2011 operational and corporate update

TORONTO, Jan. 24, 2012 /CNW/ - Pacific Coal Resources Ltd. (TSXV: PAK) today provided an operational update on its fourth quarter and full year 2011 production at its La Caypa, Cerro Largo, and CI Jam mines.

Luis Carvajales, Chief Executive Officer of Pacific Coal, commented: "We are very pleased by the Company's production progression during the fourth quarter of 2011. The Company produced 356,542 tonnes of thermal coal this quarter from its La Caypa and Cerro Largo mines, while reducing stripping ratios at both properties. For the full 2011 year, our combined production at both mines was 1,537,624 tonnes of thermal coal, just slightly below our expectations of 1.6 million to 1.7 million tonnes. We are particularly proud of reaching these production levels, as we achieved a new historical annual record production at La Caypa by completing 101% of our target production and over 96% of our expected combined total despite weather-related delays. Going forward, we expect stabilized growth in our production. We have a strong portfolio of cash generating assets in Colombia, with exposure to thermal coal, coke and the commercialization of asphaltite. In terms of margin expansion we are working towards reducing costs on a per tonne basis. As royalty payments from La Caypa increased last quarter based on international coal prices, these increased costs significantly. It is important to clarify that these costs are prepaid a quarter in advance, and they are expected to decrease in coming quarters based on recent trends in international coal prices. Increasing efficiencies and improving costs wherever possible are still initiatives that are key areas of focus for the Company, and in conjunction with a fully committed trucking fleet in place, these costs are expected to decline as well this quarter and throughout 2012."

Current production at La Caypa

Period Production
 (metric tonnes) 
Waste
(bcm)
 Strip Ratio 
Q4/2011  269,245  1,559,068 5.79:1
2011 1,239,583   8,174,689 6.59:1

During the fourth quarter, La Caypa produced 269,245 tonnes and improved stripping ratios. For the full year 2011, production at La Caypa exceeded management's expectations, reaching 1,239,583 tonnes, 101.1% of the Company's planned production.

Due to increased efficiencies at the mine, the fourth quarter strip ratio at La Caypa continued to fall, reaching 5.79:1, versus 6.16:1 in the previous quarter, representing an approximate improvement of 6%.

As a consequence of extreme weather conditions in the month of September, a bridge located between La Caypa and Cuestecitas was washed out for 45 days. The Company utilized its own resources to repair and rebuild this bridge in order to quickly restore transportation capabilities for its coal and limit production delays. The alternative would have been for the Company to use a longer and more expensive route, thereby impacting production and deliveries while awaiting government authorities to order repairs for this bridge. The bridge reconstruction was completed on November 12, 2011 at a cost of US$347,000 to the Company and will be included in the Company's General & Administrative ("G&A") expenses for the fourth quarter of 2011 as a one-time expenditure. The Company expects that this expenditure saved the Company approximately US$1.56 million in the fourth quarter of 2011 and saves a further US$3.26 million in each of the first and second quarters of 2012, totalling expected savings of approximately US$8.08 million if the alternate route needed to be utilised while the situation continued to be unresolved.

Current production at Cerro Largo - La Divisa

Period Production
 (metric tonnes) 
Waste
(bcm)
 Strip Ratio 
Q4/2011   87,297   1,546,583 17.72:1
2011* 298,041 6,151,724 20.64:1

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

In the fourth quarter of 2011, the Company made further progress at Cerro Largo, resulting in improvements in both production and strip ratio. Production was up quarter over quarter, improving to 87,297 tonnes versus 85,014 tonnes in the third quarter, while the strip ratio was reduced to 17.72:1, versus 19.06:1 in the third quarter. For the year 2011, the Company produced 6,151,724 tonnes, 56.5% of planned production. The Company did not meet this target due to necessary modifications implemented on the mine plan in connection with the heavy rains of October and November to ensure safety associated with high wall instability. The project is still in a ramp-up phase and management estimates that Cerro Largo will increase production by 200% (to approximately 180,000 tonnes) and improve its strip ratio by approximately 15% during the first quarter of 2012.

Fourth quarter 2011 exports from both La Caypa and Cerro Largo totaled 458,277.05 tonnes.

CI Jam operational balance 2011

Metallurgical Coal Tonnes
Third Party Coal Purchases 23,400.50
Cerrejoncito Mine 1,556.05
La Mona Mine 61.69
Total Coal Handled   25,018.24
Coal Converted to Coke (as of December 31, 2011) 13,543.26
Coal Ending Inventory (as of December 31, 2011) 11,474.98
Coal at Inventory Converted to Coke 7,127.32
 
Coke Operation Tonnes
Coke Converted at Jam Ovens with the 13,543.26 consumed   7,265.71
Third Party Purchase as Trial 453.83
Coke Processed on Third Party Ovens 489.55
Sales 2,361.31
Coke Ending Inventory 5,847.78

Corporate update

Exploration continues at all of the Company's properties with the objective of updating its resources and reserves through the completion of National Instrument 43-101 compliant technical reports. Drilling programs at La Caypa, La Divisa and CI Jam were at 60% completion as of December 31, 2011. The technical reports are expected to be completed during the first quarter of 2012.

The Company continues to advance its asphaltite trials and is on schedule to release results in early 2012. CAW combustion trials were conducted during the second week of December, producing positive results. A visitor day at the Babcock & Wilcox facilities to receive a full briefing on trial results will be scheduled for Q1 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

SRK has been retained as a consultant in the document elaboration, conceptual design, tender issuance and bid evaluation for the underground mine project at La Caypa. This process is expected to be concluded by the end of Q2 2012 and operations to commence in 2013.

La Tigra exploration

Geophysical, metallurgic and gravimetric studies are in progress and results are expected for the second half of February. Subsequently, a full exploration program involving the Company's rigs, 5 in total, is expected to be undertaken in the period of March through July 2012.

Baranquilla port

Land movement for the coal/coke yard is set to commence in the last week of January. Engineering and design work is ongoing with Nathan and Associates. Development work continues with the goal of having an early operation by Q3 2012.

NCIB Update

As at December 31, 2011 8.4 million shares have been purchased for cancellation under the normal course issuer bid, previously announced on July 4, 2011. The Company currently has 324.8 million shares outstanding.

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.

For further information:

Greg DiTomaso
Investor Relations
(647) 427-0208

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Pacific Coal Resources Ltd.

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