Coalcorp Undertakes Operational Restructuring Plan

    BOGOTA, Colombia, April 24 /CNW/ - Coalcorp Mining Inc. (TSX-CCJ:
"Coalcorp") announced today that it is undertaking a plan to restructure its
operations with the objective to stabilize its current mining operations,
preserve liquidity, reduce costs and establish a foundation for a sustainable
business. The following is a description of this Operational Restructuring
Plan. All dollar references set out herein are in U.S.$ dollars.


    In December 2008, Coalcorp appointed a new executive management team
which immediately began a comprehensive review of the Strategic Plan
previously announced by Coalcorp on May 14, 2008 (the "May 2008 Strategic
Plan"). During this review, management identified a number of issues with the
business and operations of Coalcorp as well as concerns over the economic and
operational feasibility of the May 2008 Strategic Plan, including:

    -   Insufficient port and rail capacity to accommodate the previously
        anticipated 6.0 million tonnes of annual production (mtpa) projected
        under the May 2008 Strategic Plan.

    -   Fundamental operational issues with increasing the production rate
        from the La Francia mine to 6.0 mtpa.

    -   Significant environmental permitting, river diversion and town
        relocation issues to be resolved before development of Blocks C and D
        of the La Francia property to increase the production rate to
        6.0 mtpa.

    -   Significant capital expenditures and logistical issues for securing
        additional mining equipment to increase the production rate to
        6.0 mtpa had not been properly addressed or resolved and would have
        significantly reduced Coalcorp's short-term liquidity.

    As a result of the concerns with the May 2008 Strategic Plan, the current
management team has initiated an Operational Restructuring Plan designed to
stabilize the current mining operations, preserve liquidity, reduce costs and
establish a foundation for a sustainable business. Management will be working
to implement the various items of the Operational Restructuring Plan
throughout 2009.

    The Operational Restructuring Plan

    The Operational Restructuring Plan is a 5-part plan which has been
developed to immediately address a number of structural issues at Coalcorp.
The 5 parts of the Operational Restructuring Plan involve a revised strategic
approach in each of the following areas of the organization:

    -   Coal Contracts and Sales
    -   Mining Operations
    -   Port and Rail Access
    -   Overhead Cost Reductions
    -   Controls, Compliance and Risk Management

    A. Coal Contracts and Sales

    Current Coal Contract Update

    On January 26, 2009 Coalcorp announced the commencement of arbitration
proceedings by Coalcorp against Glencore International AG ("Glencore"), with
the London Court of International Arbitration with respect to a coal sales
agreement entered into between Glencore and Coalcorp's sales agent GC Coal in
February, 2007 (the "February 2007 Agreement"). Coalcorp has since received
notice from Glencore that it is terminating the February 2007 Agreement as
well as its coal sales agreement entered into on August 18, 2008 (the "August
2008 Agreement"). It is Coalcorp's position that the terminations by Glencore
are unlawful and Coalcorp reserves any and all of its rights and remedies
under the contracts.
    As a result of Glencore's decision to terminate both long-term sales
contracts, Coalcorp presently only has one long-term sales contract with
another customer for 600,000 tonnes (plus or minus 10% at the buyer's option)
per year for the next 4 years (plus a 1 year extension option by the buyer).

    The Plan

    Management intends to implement the following strategies to address the
sales of coal production from the La Francia mine:

    -   Increase variable or short-term indexed pricing versus long-term
        fixed pricing
    -   Use the current low spot coal price to renegotiate lower priced long-
        term contracts or employ trading strategies to satisfy contract
        delivery obligations under current contracts
    -   Include flexible delivery options in contracts due to port
        constraints in Colombia
    -   Reduce the quality specifications in contracts in order to reduce the
        risk of payment penalties or shipment rejections while positioning
        Coalcorp to capture premiums once coal quality performance improves
    -   Diversify Coalcorp's customer base

    Management is seeking to structure contracts to include more spot or
short-term indexed pricing in order to provide Coalcorp shareholders with
greater participation in any future increase in coal prices and will be moving
away from long-term fixed priced contracts. Despite the global financial
crisis and recent weakness in spot thermal coal prices, management believes
that the fundamentals for seaborne export thermal coal remain strong. In
recent weeks, spot coal prices (Puerto Bolivar FOB 11,340BTU) have
strengthened and are currently trading in a range of approximately $55/tonne
with one year forward prices trading above $80/tonne.
    Coalcorp is also in discussions with other customers to renegotiate
existing contract terms to ensure that coal delivery obligations can be
fulfilled by Coalcorp. Possible options include contract buy-outs, partial
buy-outs, deferral of deliveries, revised delivery schedules or a combination
of these options.
    Coalcorp is currently subject to pricing penalties or shipment rejections
if the quality requirements under current coal contracts are not met. Over the
past year, the average run-of-mine coal quality from La Francia has averaged
below the quality specifications under many contracts. As described below,
management believes the issues with coal quality can be resolved through
operational improvements or, if necessary, purchasing coal to satisfy contract
obligations. Management will also try to negotiate agreements with a reduction
in quality specifications in order to reduce the risk of pricing penalties or
shipment rejections while positioning Coalcorp to capture premiums once coal
quality performance improves.
    Coalcorp is also seeking to expand its coal marketing channels and is in
the process of establishing new customer relationships to diversify its
customer base.

    B. Mining Operations

    Mining Operations Update

    Between January and March 2009, La Francia's production has been
consistent with an average monthly production rate of approximately 200 kilo
tonnes (kt). Assuming no interruptions or other operating issues, Coalcorp
expects coal production to reach approximately 2.5mt in calendar year 2009.
The initial higher 2009 year-to-date strip ratio is a carryover from 2008 due
to late equipment arrivals and the five week labour strike during November and
December 2008. At this time, management expects that the Total Strip Ratio
will continually improve during the course of 2009 approaching 8:1 by year

    January to March 2009 Summary Operating Results (Unaudited)

                                       January  February     March        Q3
    Production             tonnes '000     205       198       204       607
    Coal Stockpile         tonnes '000     251       267       297       297
    Cash Production Cost
     before Royalties      $/tonne       28.16     28.09     24.25     26.82
    Royalties(1)           $/tonne        5.64      5.18      4.70      5.17
    Cash Production Cost   $/tonne       33.80     33.27     28.95     32.00
    Production Strip
     Ratio(2)                    :1        8.2       8.1       6.5       7.6
    Total Strip Ratio(3)         :1        9.1       9.0       9.5       9.2

    (1) On March 10th 2009, Colombian mine authorities decreased the coal
        royalty base by 13%.
    (2) Excluding development stripping.
    (3) Including development stripping.

    On March 24, 2009 the rail line labourers for Fenoco went on strike
demanding higher wages and new representation by the Industrial Workers Union.
As a result, coal inventory at La Francia increased to over 300,000 tonnes due
to the inability to ship coal during this period compared to approximately
145,000 tonnes at December 31, 2008. On April 1st, 2009, Coalcorp and
Consorcio Minero del Cesar ("CMC"), the consortium including Masering,
providing mining contractor services at La Francia, agreed to suspend coal
production and reduce waste production to approximately 65% of operating
capacity. Trains resumed operation on the Fenoco rail on April 19, 2009.
During this period of the strike, development work was undertaken at La
Francia in order to develop new production areas and position the mine for a
lower strip ratio for the remainder of 2009.

    The Plan

    Management intends to address the following operational matters at the La
Francia mine in order to stabilize current operations and establish the
foundation for future development and increased production:

    -   Replace the Memorandum of Understanding with CMC signed in 2008 (the
        "MOU") and the original coal mining services contract with CMC (the
        "Mining Services Contract"), with a new operating arrangement
        designed to provide Coalcorp with more control over operating
        procedures and practices and lower operating costs
    -   Develop a plan to improve coal quality
    -   Finalize the report under National Instrument 43-101 - Standards of
        Disclosure for Mineral Projects ("NI 43-101") and update life-of-mine
        plan for La Francia
    -   Focus on an optimized but smaller mining operation to align with
        Coalcorp's current transportation capacity

    In December 2008, the term of the MOU with CMC was extended to April 30,
2009. Coalcorp is currently in discussions with CMC regarding an alternative
arrangement to the current MOU and the Mining Services Contract. In the event
that Coalcorp and CMC fail to reach a definitive agreement, under the terms of
the MOU, CMC will have the option of electing to either, (i) continue
operating with all or some of the new equipment, (ii) require Coalcorp to
assume its lease payment obligations for the new equipment, or (iii) require
Coalcorp to pay the cost of relocating its equipment off-site.
    In calendar year 2008, Coalcorp's average coal quality, as measured at
the mine gate, was 10,671BTU which is below the required specifications of its
current contracts. More importantly, the level of quality delivered in
calendar year 2008 is below the minimum specification of certain of the
long-term contracts which allow customers to reject shipments and claim
damages or penalties unless higher quality coal is purchased to upgrade the
quality. Based on a review with SRK Consulting ("SRK") of the operations at La
Francia, management believes the coal quality performance is largely the
result of poor operating practices by the contract coal miner. Coalcorp is
developing a plan to address the quality issue and work with the contract coal
miner to implement procedures aimed at improving coal quality. Given the
recent weakness in coal prices, it will be increasingly important for Coalcorp
to improve coal quality in order to improve the marketability of the La
Francia coal to international customers. Coalcorp lost $2.6 million in revenue
due to the failure to meet quality specifications in customer contracts in
calendar year 2008.
    Coalcorp is currently working with SRK to finalize an updated
life-of-mine plan for La Francia Blocks AB as well as C and D in order to
establish an integrated mine plan incorporating all of Coalcorp's current
reserves and resources. Management is working closely with SRK to develop an
optimized mine plan taking into account transportation issues such as rail and
port capacity and port constraints.
    Management believes that an integrated 6.0 mtpa near-term is not feasible
and is examining a smaller mining operation that will be in line with the
current transportation infrastructure capacity available to Coalcorp.
Management expects that the NI 43-101 report along with an updated
life-of-mine plan will be completed by June 30, 2009.

    C. Port and Rail Access

    Transportation Update

    Coalcorp currently has guaranteed rail capacity with Fenoco of 3.5 mtpa
but does not have its own port from which to ship coal and must rely on third
party port access. Presently, Coalcorp's rail cars can only be accommodated at
the Puerto Zuniga (Prodeco) port. No assurance can be given as to how much, if
any, port space can be secured at this port.
    In 2008, Coalcorp ordered in excess of 5.0 mt of annual capacity of
rolling stock without firm commitments for additional rail capacity above
Coalcorp's allocated capacity of 3.5 mtpa with Fenoco. In addition, Prodeco
indicated to Coalcorp in December 2008 that it was unable to accept coal
shipments from Coalcorp via rail to its port at Puerto Zuniga in Santa Marta
in the first half of calendar year 2009 (H1) and possibly the full year 2009.

    The Plan

    Management is pursuing a number of initiatives in the area of
transportation to improve Coalcorp's options and position Coalcorp for future
infrastructure developments in Colombia. These initiatives include:

    -   Participation in the development of Puerto Nuevo
    -   Securing alternative port access for short-term capacity
    -   Cancelling order for 108 rail cars
    -   Hiring senior executive to manage railroad and logistics operations

    The Colombian government has issued a Decree that all coal ports in
Colombia must become direct-loading ports by July 2010. Coalcorp is a member
of the Puerto Nuevo consortium which also includes Prodeco (Xstrata), Carbones
del Caribe (Vale) and other smaller Colombian coal producers and developers.
Puerto Nuevo is located in the Santa Marta region adjacent to Drummond's port.
It is currently contemplated that the project will be developed in 3 phases
with an initial phase of 32 mtpa, a second phase increasing to 37 mtpa and a
third phase reaching a capacity of 60 mtpa, however, the development of Phase
3 is less certain at this time. The preliminary capital cost estimate for
Phase 1 and 2 of Puerto Nuevo is approximately $700 million. Coalcorp has
indicated a commitment to participate in Puerto Nuevo with 4.25 mtpa of
guaranteed capacity and a take-or-pay (TOP) commitment of 3.0 mt. During the
following year, the focus of developing Puerto Nuevo will be on making
required land purchases, receiving necessary permits and approvals, conducting
feasibility studies and negotiation and settlement of the relevant governing
agreements amongst the participating parties. The current estimate for timing
of completion for Puerto Nuevo is uncertain however the present target date
for completion is 2013. Given the developments with Puerto Nuevo and the
Colombian government's Decree for direct-loading, management has decided not
to pursue the Barranquilla port project and to pursue a sale of the Capulco
river port.
    To provide Coalcorp with more port options in the short-term, Coalcorp is
currently in discussions to secure alternative port access for coal shipments.
These ports would provide Coalcorp with the ability to ship coal directly to
customers, however, a number of these ports can only receive coal by truck
which will result in higher transportation costs for Coalcorp.
    A decision was made to cancel an order of 108 rail cars from Freight Car
America since the additional cars would have provided Coalcorp with rolling
stock well in excess of its railroad capacity and ultimate utilization. As a
result of this decision, Coalcorp has been able to preserve approximately $11
million of cash in order to maintain liquidity.
    Barring any unforeseen issues, management believes that rail operations
with Fenoco will commence in the first quarter of fiscal year 2010. All
construction work has been completed on the rail spur and empty train testing
of Coalcorp rolling stock began in late March but was suspended due to the
Fenoco rail strike and start-up locomotive mechanical problems. The current
operating plan for the railroad for the initial start-up phase, subject to
securing port availability, calls for 1 train with 105 cars providing an
annualized rate of capacity of approximately 2 mt which is below Coalcorp's
guaranteed capacity but closer aligned with near-term production projections
and Coalcorp's take-or-pay volume with Fenoco.
    With the development of the La Francia asset, Coalcorp must develop an
organization with the necessary skills to manage transportation and logistics.
A search is underway to find a new senior executive to manage Coalcorp's
railroad and logistics operations.

    D. Overhead Cost Reductions

    Following a review by management, it was determined that Coalcorp's
overhead cost structure was too high when benchmarked against other comparable
companies. In addition, there was evidence of spending on non-essential items
such as private jet contracts and excessive entertainment and the absence of
proper cost controls generally. SG&A expense for fiscal year 2008 was $15.9
million which is not in line with the nature of Coalcorp's business.
Management has taken the following steps to reduce overhead expenses and to
establish better controls over costs:

    -   The Toronto head office was closed effective March 2, 2009. Functions
        historically served in Toronto will now be based in Bogota. This
        initiative is expected to save Coalcorp $3.0 million annually.
    -   The Exploration department in Colombia has been eliminated.
        Exploration activities and certain personnel have been moved to the
        mine and exploration activities will now be focused on supporting the
        work necessary to advance and develop La Francia.

    In addition, management has developed a cost reduction program which is
comprised of 2 phases:

    Phase 1 - Cost reduction associated with organizational restructuring
    (i.e. termination of exploration activities, Toronto office closure and
    administrative headcount reductions). Estimated annual savings of over
    $6.8 million are targeted to be realized in fiscal year 2009.

    Phase 2 - Further cost reductions from cost controls in each cost centre.
    Work has begun on Phase 2 of the plan. Specific cost reduction targets
    have not yet been quantified.

    E. Controls, Compliance and Risk Management

    Management has taken steps to improve its internal controls, compliance
and risk management with the following initiatives:

    -   Implementing an internal controls program
    -   Improving risk management processes and procedures
    -   Establishing a disclosure committee

    Management has taken steps to strengthen Coalcorp's internal controls.
These steps relate to improving financial reporting processes, legal review
and authorization guidelines as well as control of expenditures. Coalcorp is
pursuing an initiative to improve its internal controls by implementing an
internal controls program.
    Management will be working with KPMG to assist it in advancing this
initiative to implement an internal controls program and to assist Coalcorp in
generally developing a framework to further improve internal financial
reporting systems and internal controls. KPMG has also been retained to assist
Coalcorp in the preparation of its financial statements prior to their review
by Coalcorp's auditors, Deloitte & Touche LLP. Also as announced on March 30,
2009, Liliana Aleman has assumed the position of Senior Vice President,
Finance and Administration in which role, much of her focus will be on
developing stronger internal systems and controls.
    Management has also taken steps to improve Coalcorp's risk management
processes and procedures by developing greater coordination between functional
operating areas. Management is also working to improve Coalcorp's budgeting
and forecasting systems and implementing better risk management policies. In
2008, Coalcorp lost approximately $11.5 million in foreign exchange as a
result of maintaining Canadian dollars while obligations and significant
capital expenditures, which were known, were in U.S.$ dollars or Colombian
    Coalcorp has also recently established a Disclosure Committee comprised
of Joe Belan, Chief Executive Officer and Director, Richard Lister, Director
and Charles Entrekin, Director, to oversee, review and approve continuous
disclosure to ensure that full, accurate and complete information is provided
to the market on a timely basis.

    Liquidity Position Update

    As of March 31st, 2009, Coalcorp maintained a cash position of $47.2

    About Coalcorp Mining Inc.

    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. Coalcorp
also holds a 60% equity interest in Carbones Colombianos del Cerrejon which
owns the La Caypa coal mine in Colombia. Further information can be obtained
by visiting our website at or under Coalcorp's profile at

    Forward Looking Information

    This news release contains "forward-looking statements" within the
meaning of applicable securities laws relating to the operational
restructuring of Coalcorp, including statements regarding various matters and
operational issues management will be attempting to address in the future.
Readers are cautioned not to place undue reliance on any of these
forward-looking statements. Actual results and developments will likely differ
materially from those contemplated by these statements depending on, among
other things, the ability of management to execute on this restructuring plan,
the risks involved with the mining operations, the ability to negotiate or
renegotiate agreements with third parties, the ability to achieve the
operational cost reductions, the ability of Coalcorp to deliver its coal to
third party purchasers, the resolution of any labour strikes and other
operational matters typically involved with operating in a developing country.
The statements in this news release are made as of the date of this release
and, except as required by applicable law, we undertake no obligation to
publicly update or revise any forward-looking statement, whether as a result
of new information, future events or otherwise. Additionally, we undertake no
obligation to comment on analyses, expectations or statements made by third
parties in respect of Coalcorp, its financial or operating results or its
securities or any of the properties that we operate or in which we may have an

For further information:

For further information: Joseph Belan, Interim Chief Executive Officer,
+57 - 1 - 658 - 5050 Ext: 9990

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Coalcorp Mining Inc.

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