Coalcorp Announces Transactions Implementing Focus on Core Assets



    TORONTO, July 2 /CNW/ - Coalcorp Mining Inc. (TSX-CCJ) announced today
that it has completed three transactions pursuant to which Coalcorp has
disposed of non-core assets, as well as acquired its third party coal sales
agency agreement. These transactions allow Coalcorp to focus its energies and
finances on the infrastructure and production assets that are key to
Coalcorp's success, as well as realize significant cost savings as the company
increases its coal production to the 6.0 mtpa level.

    Disposition of Caypa Mine

    Coalcorp does not anticipate that the Caypa mine will be cash flow
positive in the near or medium terms, and it represents an undesirable drain
on Coalcorp's cash reserves. As a result, Coalcorp has completed an agreement
with Xira Investment Inc., an arm's length private company incorporated in
Panama, to acquire shares of Carbones Colombianos del Cerrejon, S.A. (CCC) the
holder of the mining contract at Caypa. Consideration consists of up to
US$25.0 million, payable in tranches, as well as the payment of a US$1.00 per
tonne sales commission.
    Under the agreement, Coalcorp is transferring to Xira 40% of its
shareholding in CCC in consideration for the immediate payment of
US$1.0 million. Subsequent payments of US$7.0 million, US$6.0 million and
US$6.0 million will be made 13, 22 and 25 months from now. An additional
US$5.0 million payment can be received by Coalcorp upon the satisfaction of
certain conditions, to be satisfied no later than 28 months from completion.
The shares transferred to Xira will be held in escrow and be subject to a
pledge held by Coalcorp until all consideration is paid. Coalcorp will earn a
US$1.00 per tonne sales commission on all coal sold by CCC.

    Disposition of Cartagena Port and License

    As previously announced, Coalcorp has determined that the Cartagena port
and associated license is not critical to the company's success, given the
anticipated location of Coalcorp's main coal port at Barranquilla and the
restrictions on use imposed by the Colombian government on the Cartagena
location. Coalcorp has therefore completed an agreement with Lando Industrial
Park Inc., a Panamanian joint venture led by a group of Italian private equity
investors and Promotora de Energia Electrica de Cartagena & Cia, S.C.A. E.S.P.
(Proelectrica), to acquire the land associated with the port assets, as well
as all of the shares of Sociedad Portuaria del Carare S.A. (Carare), the
holder of the port license. Consideration consists of US$20.0 million, of
which US$5.0 million was paid at closing. Subsequent payments are to be made
of US$10.0 million within 120 days, and US$5.0 million within 485 days, of
closing.
    Proelectrica is a Cartagena, Colombia-based electrical utility, of which
21.7% is owned indirectly by Pacific Rubiales Energy Corp., a TSX-listed oil
and gas production company. Pacific Rubiales shares common directors with
Coalcorp (being Serafino Iacono, Miguel de la Campa, Jose Francisco Arata,
Neil Woodyer, Augusto Lopez and Miguel Rodriguez), and therefore all directors
in common abstained from voting on, and approving, this transaction. The board
received independent valuations of the port lands that were sold that valued
the lands at between US$8.8 million and US$10.6 million. Carare incurred
approximately US$1.8 million to obtain the existing port license.

    Acquisition of Coal Sales Agency Agreement

    Additionally, Coalcorp has acquired its existing coal sales agency
arrangement through the acquisition of its sales agent, GC Coal, from its
shareholders, who are arm's length to the company. Consideration for the
acquisition, which has also been completed, consists of the issuance of
6,649,342 common shares in the capital of Coalcorp, valued at US$10.0 million,
and the payment of US$10.0 million in cash. Coalcorp also paid the vendors
US$2.0 million in cash on account of sales commissions that were due to GC
Coal. As part of the acquisition, Coalcorp retained the services of the GC
Coal employee who has been primarily responsible for negotiating all of
Coalcorp's coal sales agreements to date.
    Coalcorp estimates that it will be able to realise substantial savings
from the acquisition of GC Coal.

    Coalcorp is a coal mining, exploration and development company with
interests in the La Francia coal mine and related infrastructure projects and
a number of coal exploration properties, all located in Colombia. Further
information can be obtained by visiting our website www.coalcorp.ca.

    %SEDAR: 00004043E




For further information:

For further information: Michael Davies, Chief Financial Officer, (416)
360-4653

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