Phoenix Coal Inc. reports fiscal 2009 first quarter results

    LOUISVILLE, KY, May 4 /CNW/ - Phoenix Coal Inc. (TSX: PHC) ("Phoenix" or
"the Company"), a leading producer and consolidator of thermal coal reserves
in the Illinois Basin, announced today its financial results for the three
months ended March 31, 2009. Unless otherwise noted, all mineral reserves and
mineral resources are expressed in imperial tons, and all financial
information is expressed in U.S. dollars.

    First Quarter 2009 Summary
                                  Three months ended      Three months ended
                                      March 31, 2009          March 31, 2008
    Saleable tons produced                   493,000                 502,000
    Purchased coal                            53,000                  27,000
    Tons sold                                538,000                 560,000
    Revenue                            $18.0 million           $18.5 million
    Revenue per ton                           $33.40                  $33.03
    Total cash costs                   $18.6 million           $21.0 million
    Total cash costs per ton                  $34.51                  $37.45
    EBITDAR                                ($595,000)          ($2.5 million)
    EBITDAR per ton sold                      ($1.11)                 ($4.42)
    EBITDAR before G&A                  $1.2 million           ($1.0 million)
    EBITDAR before G&A
     per ton sold                              $2.17                  ($1.78)

    Highlights for Q1 2009:

    -   EBITDAR for the quarter was negative $595,499, before a one-time
        payment related to the termination of a coal sales contract. In
        March, the Company generated positive EBITDAR of $25,238. Before
        general and administrative costs, the Company generated $1.2 million
        in EBITDAR for the first quarter 2009;

    -   Received the required permits from the Kentucky Department of Natural
        Resources and the U.S. Army Corps of Engineers for its Winn North and
        Radio Hill reserves; commenced mining at the properties following the
        permit issuances;

    -   Opened 1 million tons of production to market pricing or for sale on
        existing sales contracts by entering into a mutual release and
        settlement agreement to terminate a coal supply agreement with one of
        its customers;

    -   Continued to improve its existing coal sales contract portfolio by
        lowering quality specifications and deferring tonnage;

    -   Acquired coal reserves from Petersburg Coal, LLC ("Petersburg"),
        increasing the reserve base at the Gryphon Mining Complex to 43
        million tons and enhancing the strategic value of the combined

    -   At March 31, 2009, the Company had approximately $27.7 million in
        cash, cash equivalents and short-term investments, which equated to
        $0.18 per share, or Cdn$0.23 per share based on the March 31, 2009
        exchange rate of $1 = Cdn$1.254.

    "During the quarter we made significant progress toward improving our
cost structure and generating positive EBITDAR. The commodity markets,
specifically diesel fuel, played an important role in bringing costs down. By
purchasing approximately 56% of our expected diesel fuel consumption for the
remainder of 2009, we have mitigated our exposure to the volatile crude oil
markets and expect to keep this important component of our cost structure in
check," said Dustin Angelo, Chief Financial Officer of Phoenix Coal.
"Additionally, our revised coal sales contracts will enable improved margins
by reducing preparation related costs and by opening previously committed tons
to market pricing. In the upcoming months, we will continue to drive operating
efficiencies and pursue sales contracts for our uncommitted production."
    "We also continued to execute on our growth strategy of consolidating the
Illinois basin, with the acquisition of the Petersburg reserve. This
acquisition is an important milestone in the development of the Gryphon Mining
Complex as it both increases the reserve base and provides strategic access to
a portal location along the CSX railroad. In the next quarter, we expect to
complete a National Instrument 43-101 technical report that will substantiate
our mineral reserve base and refine engineering and financing plans to advance
the development of Gryphon Mining Complex," said David A. Wiley, President and
CEO of Phoenix Coal.

    Financial and Operational Review

    During the quarter, the Company produced 492,530 tons from five mines.
Briar Hill remained the largest operation, producing 241,081 tons. Back in
Black, which resumed production in February 2009 after being idled for eight
months due to permit delays, produced 30,007 tons. Radio Hill, a new mining
area at the Briar Hill Mine, began production in January 2009 and contributed
50,025 tons. The remaining production was sourced from the Beech Creek and
Jessup mines, which contributed 109,701 and 61,716 tons, respectively.
Production during the quarter was impacted by a severe ice storm that crippled
Western Kentucky in January and cost the company an estimated 50,000 to 60,000
tons of production.
    For Q1 2009, revenue was $18.0 million, a decrease of 2.8%, compared to
Q1 2008. The decrease was attributable to a 3.9% decrease in sales volume from
559,875 tons to 538,027 tons. The reduced revenue that resulted from lower
sales volume was partially offset by a 1.1% increase in revenue per ton sold
to $33.40, compared with $33.03 in Q1 2008. The increase in revenue per ton
sold was related to two factors: First, the Company's existing sales contracts
generally include annual price increments. Second, due to renegotiating a
change in quantity specifications with a customer, the Company was able to
ship a higher percentage of its production on a contract that currently
provides the highest base price realization of all its sales contracts.
    The Company's cost of sales decreased by 15.7% to $14.7 million in Q1
2009 from $17.5 million in Q1 2008. Comparing the same periods on a cost per
ton sold basis, cost of sales decreased by 12.3% to $27.40 from $31.23.
    Diesel fuel and explosives had the largest impact on the reduction of per
ton operating costs during Q1 2009 when compared to Q1 2008. Diesel fuel cost
was $4.39 per ton produced in Q1 2009 versus $7.86 per ton in Q1 2008, a
decrease of $3.47. Explosives costs decreased by $0.50 per ton produced to
$2.28 per ton in Q1 2009 from $2.78 per ton produced in Q1 2008.
    General and administrative expenses for Q1 2009 were $3.6 million,
compared to $1.6 million for Q1 2008. The majority is due to a non-cash charge
to employee share-based compensation of $1.9 million in Q1 2009 versus $0.1
million in Q1 2008. On a cash basis, Q1 2009 and Q1 2008, G&A costs were $1.7
million and $1.5 million, respectively. This cost increase is primarily
attributable to the addition of corporate staff to support field operations
and administrative costs of operating a publicly traded company.
    Decreased operating costs resulted in significant progress toward
generating positive EBITDAR, which equals operating income (loss) and adds
back depreciation, depletion, amortization, accrued reclamation, non-cash
stock based compensation, and, for Q1 2009, a one-time payment related to the
termination of a coal sales contract. For Q1 2009, EBITDAR was negative
$595,000, compared to negative $877,000 for Q4 2008 and negative $2.5 million
for Q1 2008. For the month of March, the Company produced positive EBITDAR of
approximately $25,000.
    Net loss was $7.6 million for Q1 2009, compared to $6.0 million for Q1
2008. Basic net loss per share for Q1 2009 was $0.05, compared to $0.16 in Q1
2008. The net loss in Q1 2009 was primarily attributable to one time charges
and non-cash expenses. The sales contract termination cost $3 million and
depreciation, amortization and share-based compensation totaled approximately
$3.7 million.
    At March 31, 2009, the Company had $27.7 million, or $0.18 per share in
cash, cash equivalents and short-term investments. In addition, it had $12.9
million in restricted cash, cash equivalents and certificates of deposit as
collateral for letters of credit for reclamation bonding. As at March 31,
2009, the Company had net working capital of $12.8 million.
    At May 4, 2009, the Company had 150,045,552 common shares issued and

    Notice of Conference Call

    Phoenix Coal will host a conference call on May 5, 2009 at 8:30 a.m. ET
to discuss the Company's fiscal Q1 2009 financial results David Wiley,
President and Chief Executive Officer, and Dustin Angelo, Chief Financial
Officer will co-chair the call. All interested parties can join the call by
dialing 416-644-3414 or 1-800-733-7560. Please dial in 15 minutes prior to the
call to secure a line. The conference call will be archived for replay until
Tuesday, May 12, 2009 at 11:59 p.m. ET. To access the archived conference
call, please dial 416-640-1917 or 1-877-289-8525 and enter the reservation
code 21304409 followed by the number sign.
    A live audio webcast of the conference call will be available at and Please connect at least 15 minutes prior
to the conference call to ensure adequate time for any software download that
may be required to join the webcast. An archived replay of the webcast will be
available for 365 days.

    About Phoenix Coal Inc.

    Phoenix Coal Inc. is an integrated mining company producing high sulphur,
low chlorine, bituminous coal from the Illinois Basin. To address the
increasing demand for energy in the Eastern United States as well as in the
export market, Phoenix Coal is pursuing production growth through the focused
acquisition, consolidation, and extraction of coal assets. Phoenix Coal
currently operates surface coal mines in Muhlenberg County, Kentucky and a
barge loading facility on the Green River. Development plans for additional
surface operations, as well as an underground mine, are underway. The
Company's executive offices are located in Louisville, KY and its operational
headquarters are stationed in Madisonville, KY. For additional information,


    Certain information set forth in this press release contains
"forward-looking statements", and "forward-looking information" under
applicable securities laws. Except for statements of historical fact, certain
information contained herein constitutes forward-looking statements which
include management's assessment of Phoenix's future plans and operations and
are based on Phoenix's current internal expectations, estimates, projections,
assumptions and beliefs, which may prove to be incorrect. Some of the
forward-looking statements may be identified by words such as "expects"
"anticipates", "believes", "projects", "plans", and similar expressions. These
statements are not guarantees of future performance and undue reliance should
not be placed on them. Such forward-looking statements necessarily involve
known and unknown risks and uncertainties, which may cause Phoenix's actual
performance and financial results in future periods to differ materially from
any projections of future performance or results expressed or implied by such
forward-looking statements. These risks and uncertainties include, but are not
limited to: liabilities inherent in coal mine development and production;
geological, mining and processing technical problems; Phoenix's inability to
obtain required mine licenses, mine permits and regulatory approvals required
in connection with mining and coal processing operations; dependence on third
party coal transportation systems; competition for, among other things,
capital, acquisitions of reserves, undeveloped lands and skilled personnel;
incorrect assessments of the value of acquisitions; changes in commodity
prices and exchange rates; changes in the regulations in respect to the use of
coal; the effects of competition and pricing pressures in the coal market; the
oversupply of, or lack of demand for, coal; currency and interest rate
fluctuations; various events which could disrupt operations and/or the
transportation of coal products, including labor stoppages and severe weather
conditions; the demand for and availability of rail, port and other
transportation services; and management's ability to anticipate and manage the
foregoing factors and risks. 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. Phoenix
undertakes no obligation to update forward-looking statements if circumstances
or management's estimates or opinions should change except as required by
applicable securities laws. The reader is cautioned not to place undue
reliance on forward-looking statements.

    The TSX has neither approved nor disapproved of the contents of this
    press release.

For further information:

For further information: Joanna Longo, The Equicom Group, Investor
Relations, (416) 815-0700 ext. 233,

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