TORONTO, Sept. 4 /CNW/ - Coalcorp Mining Inc. (TSX-CCJ) announced today
it has agreed with an existing customer to restructure its forward coal sales.
The agreement provides for the sale of an additional 12.5 million tonnes of
coal from its La Francia mine at an average FOB port sales price averaging
$123 per tonne, with deliveries commencing in 2009. The net effect on all of
Coalcorp's forward sales commitments over the next six years is that a total
of 30.7 million tonnes of coal at a combined average FOB port price of $81 per
tonne has now been presold.
The completion of this restructuring provides surety of price to much of
the anticipated expanded capacity of La Francia, at a significantly higher
price than the company is realising on its current sales and results in an
overall restructuring of the company's forward sales contracts at a higher
combined average FOB price.
Commenting on this agreement, Luis Urdaneta, the newly appointed Chief
Executive Officer of the company stated, "this is a further important step in
the Coalcorp's implementation of its recently announced strategic plan. By
taking advantage of the strong thermal coal demand in the market, we have
increased our cash margins significantly with a higher blended coal price
between our existing sales commitments and this new agreement. Furthermore, it
enables management to focus on execution of the strategic plan to achieve the
expanded production levels at the La Francia mine and reduce operating costs
with the start up of the Fenoco rail access later this year."
Strategic Plan Update
In May 2008, the Coalcorp announced a new strategic plan to unlock value
of its assets and enhance value for shareholders. Since then, the company has
made progress on all of the key elements of the plan including:
- Completion in June 2008 of a Cdn$138 million financing led by GMP
Securities L.P. to provide the funding required over the next
18 months to implement the La Francia mine expansion and completion
of the rail spur connection to the Fenoco line.
- Construction of the Fenoco rail spur is in full swing with
commissioning expected to be completed by the end of October 2008 at
which point the company will be able to use its rail access rather
than trucks and cut the cost of transporting its coal to port by
- Mine development activities at the La Francia mine are underway in
Pit A/B with total coal production in fiscal 2009 expected to reach
3.4 million tonnes, up from 1.6 million tonnes in fiscal 2008.
- Through its agreement with Masering S.A., new equipment is being
introduced to the extraction process. So far, 15 of 29 expected
100t haul trucks have been delivered to site along with
two Rh70 excavators, over 40% of the total equipment Masering is
contractually responsible to bring this year. Equipment deliveries,
while somewhat dependent upon Caterpillar's schedules, remain on
track and it is expected the full complement, including the four
Rh120 excavators, will be on site and operational by November 2008 to
increase production capacity from 2.0 million tonnes per annum
("mtpa") to 4.0 mtpa as planned.
- Planning for the acquisition of the additional mining equipment to be
used at the La Francia property to assist in ramping up production
from 4.0 mtpa to the projected 6.0 mtpa is underway given that
ordering and delivery require considerable lead time, resulting in a
12-month program with commissioning on site by approximately
- SRK is continuing to assist the company in operating and expanding La
Francia I and II, monitoring implementation of the new mine plan and
analyzing opportunities for the company to expand its operations
beyond the current 175m depth of the pit to increase reserves and
lengthen mine life within the existing Pit A/B operation while
development activities are being initiated at pit C.
- The announcement on July 2, 2008 of the completion of the disposition
of non-core assets, comprising the Cartagena port lands and the Caypa
- Implementation of cost-cutting measures, focusing on general and
administrative expenses has already resulted in expected annualized
savings of $2.0 million through a 25% salary reduction for senior
management, a 30% headcount reduction in Colombian administrative
personnel and reductions in other costs and expenses; the company
also announced on July 2, 2008 that it has re-purchased its sales
agency arrangement with GC Coal.
- On June 1, 2008, the company appointed Mr. John Malysa, a seasoned
mining executive, as the Colombian-based Chief Operating Officer for
the Colombian operations.
2008 Year End Financial Results
Coalcorp also announced today its results for the year ended June 30,
2008 ("fiscal 2008"). Financial figures quoted herein are all in U.S. dollars.
As a result of the determination in the new strategic plan to dispose of the
company's interests in the Caypa mine and the Cartagena port land and
associated port license, these businesses are considered as discontinued
operations. Operating and financial results from the company's continuing
operations include its La Francia mine and the proposed ports at Barranquilla
La Francia's average monthly coal production rate increased by 5% in
fiscal 2008 compared with the previous fiscal year. During fiscal 2008, the La
Francia mine produced over 1.6 million tonnes of coal compared with almost
1.7 million tonnes during the thirteen month period ended June 30, 2007. La
Francia's mine stripping ratio of 7.6:1 in fiscal 2008 represented an
improvement from the 9.5:1 stripping ratio last year and was slightly higher
than the remaining life of mine ratio of 6.5:1. Mine operating costs averaged
$33 per tonne produced at La Francia during fiscal 2008 compared with $31 per
tonne last year, the increase primarily as a result of the devaluation of the
Colombian peso relative to the U.S. dollar in the current year.
Revenues from continuing operations in fiscal 2008 increased to
$75.2 million based on sales of 1.7 million tonnes from La Francia at an
average realized price of $43 per tonne compared with $56.5 million in the
prior period derived from sales of 1.6 million tonnes sold at an average price
of $35 per tonne. Revenue per tonne in the current year benefited from the
delivery of 190,000 tonnes on an FOB port basis at an average realized price
of $95 per tonne.
In fiscal 2008, the company reported a loss from continuing operations of
$32.0 million or $0.34 per share compared with a loss from continuing
operations of $54.5 million or $0.83 per share in the thirteen month period
ended June 30, 2007.
After the loss from discontinued operations of $62.5 million or $0.66 per
share, the company reported a net loss in fiscal 2008 of $94.5 million or
$1.00 per share compared with a net loss of $76.2 million or $1.16 per share
last year. The loss from discontinued operations during the current year
includes after-tax writedowns of the Caypa mine and the Cartagena port assets
totaling $47.6 million or $0.50 per share to reflect the proceeds to be
realized on the disposition of these assets.
At June 30, 2008, the company had cash and short-term investments
amounting to $115.0 million available to fund its capital expenditure program
in the strategic plan. Under the Cartagena asset sale agreement, the company
also expects to receive a further $10.0 million of the proceeds on or before
October 27, 2008.
Complete Financial Statements and Management's Discussion and Analysis
will be available from our website under "Investor Info" or on SEDAR at
A conference call to discuss the fiscal 2008 year end results will be
held on Friday, September 5, 2008, at 10:00 a.m. Eastern Standard Time.
Call-in details are as follows:
Toronto & International: (416) 644-3416
North America: (800) 732-9307
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.
This press release contains forward-looking statements based on
assumptions, uncertainties and management's best estimates of future events.
Actual results may differ materially from those currently anticipated.
Investors are cautioned that such forward-looking statements involve risks and
uncertainties. Important factors that could cause actual results to differ
materially from those expressed or implied by such forward looking statements
are detailed from time to time in the company's periodic reports filed with
the British Columbia Securities Commission and other regulatory authorities.
The company has no intention or obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
For further information:
For further information: Michael Davies, Chief Financial Officer, (416)