VANCOUVER, Aug. 14 /CNW/ - Western Canadian Coal Corp. (TSX: WTN, WTN.DB
& WTN.WT and AIM: WTN) ("Western" or the "Company") announces its operating
results for the three month period ended June 30, 2009. Despite the backdrop
of the global economic recession where demand for metallurgical coal has
fallen, the Company generated over $17 million of cash from operations during
the first fiscal quarter 2010 through improved productivity and lower cash
costs. The Company earned net income of $3.4 million or earnings per share of
$0.02, on a basic and diluted basis during the quarter from sales of $75.7
Highlights for the quarter:
- Income from mining operations of $19.6 million
- Total cost of goods sold on a per unit basis fell by 3%. Wolverine
actual cash costs decreased 27% to $106 per tonne. Brule actual cash
costs temporarily increased 88% to $165 per tonne because the Company
elected to remove waste materials, thereby exposing 90,000 tonnes of
coal which was left in situ. The benefit of this exposed coal will be
realized in subsequent periods. The impact of the waste mining on a
cash basis was approximately $76 per tonne at the Brule mine.
- On-going cash costs will continue to fall as Brule ramps up coal
production to 550,000 tonnes for the remainder of fiscal 2010
- Market conditions improve with spot prices for hard-coking coal
currently at US$150 to $160 per tonne, which is above contract prices
of US$126 per tonne. As a result, fiscal 2010 coal shipments have
been revised upward and are now expected to be 2.4 million to
2.6 million tonnes
- Reviewing fiscal 2010 capital plans to increase production to meet
- Strong financial position with net working capital of $155 million
- Subsequent $52 million equity raising increases cash on hand to over
- At June 30, 2009, the Company had full access to its $30 million
- Q1-2010 results are for Western only with Q2-2010 to include
consolidated results of the former Cambrian operations
John Hogg, President & CEO states,
"Despite the global economic recession and uncertainty by our customers
to their production levels during the first quarter, the Company has done well
in generating strong cash flows from operations. We have adapted to the market
uncertainty by further reducing costs and increasing productivity, and as
such, Wolverine and Brule are exceeding our expectations across all areas."
"Our focus is to continue this process to ensure we meet the increase in
demand we are currently experiencing from our customers. We are also reviewing
immediate opportunities to expand production to maximize our full potential."
This news release is prepared as at August 14, 2009 and should be read in
conjunction with the Company's audited financial statements for the year ended
March 31, 2009 and notes contained therein, and Management's Discussion and
Analysis (MD&A) for the same period. This news release does not constitute a
MD&A as contemplated by relevant securities rules. Western Canadian Coal
Corp.'s First Quarter Report and MD&A for the three months ending June 30,
2009 are available on SEDAR at www.sedar.com under the Company's profile.
Financial Summary - unaudited:
(In thousands of Canadian dollars, June 30, March 31,
except tonnes and per share data) 2009 2009
Cash & cash equivalents $ 81,920 $ 74,853
Accounts receivable 23,396 39,270
Inventory 58,929 62,376
Total current assets 209,637 217,943
Total Assets 651,962 662,337
Current liabilities $ 53,951 $ 72,304
Long-term liabilities 126,627 124,625
Shareholders' equity 471,384 465,944
Total liabilities and shareholders' equity 651,962 662,337
Current ratio (current assets/current liabilities) 3.89 3.01
Debt to equity ratio (total debt/shareholders'
equity) 0.38 0.42
Three months ending June 30,
Tonnes sold 435,000 583,000
Tonnes produced (clean coal tonnes) 406,000 614,000
Revenue $ 75,698 $ 130,393
Cost of goods sold 56,049 77,417
Income from mining operations 19,649 52,976
Other expenses 10,001 16,055
Income tax expense (recovery) 6,260 (22,784)
Net income $ 3,388 $ 59,705
Earnings (loss) per share, basic $ 0.02 $ 0.42
Earnings (loss) per share, diluted $ 0.02 $ 0.27
For the three month period ended June 30, 2009, revenues were $75,698,000
from the sale of 435,000 tonnes of coal of which 74,000 tonnes were carryover
tonnage from the previous year at the 2008 coal year prices. The average price
per tonne realized during the period was $174 or US$147.
For the three month period ended June 30, 2008, total sales revenues were
$130,393,000 from the sale of 583,000 tonnes of coal of which 159,000 tonnes
were carryover tonnage from the previous coal year at the 2007 coal year
prices. The average price per tonne realized during the period was $224 or
The global economic recession has resulted in a 41% decrease in revenues
over the prior comparable period which is reflected in both the decrease in
sales price realized and the lower sales volume. The decrease in sales price
is a result of lower coal contract prices for fiscal 2010, which are US$126
per tonne for hard coking coal and US$90 per tonne for ultra-low volatile PCI
compared to US$300 per tonne and US$248 per tonne respectively for fiscal
2009. The decrease in sales price was partially offset by the strengthening of
the US dollar against the Canadian dollar. The average US dollar/Canadian
dollar exchange rate for the three month period ended June 30, 2009 was $1.18
compared to $1.01 in the comparable period in the prior year.
Sales volumes for the three month period ended June 30, 2009 were 148,000
tonnes lower than in the comparable period in the prior fiscal year due to
significant cutbacks in steel production by most of the Company's customers in
response to the global economic recession.
Cost of goods sold
Cost of goods sold for the three month period ended June 30, 2009,
including costs of product, transportation, and depletion, amortization and
accretion charges totaled $56,049,000 or approximately $129 per tonne, which
is 3% lower when compared to the first quarter of fiscal 2009 of $77,417,000
or approximately $133 per tonne.
(In thousands of June 30, June 30,
Canadian dollars) 2009 $/tonne 2008 $/tonne
Cost of product sold $ 38,010 $ 88 $ 53,065 $ 91
Transportation and other 11,844 27 16,711 29
and accretion 6,195 14 7,641 13
Total cost of goods sold $ 56,049 $ 129 $ 77,417 $ 133
Production at Wolverine increased 19,000 tonnes when comparing the three
month period ended June 30, 2009 to the three month period ended June 30,
2008. Despite a smaller workforce, the increase is attributable to an
improvement in equipment availabilities, increased overall productivity within
the mine and a lower strip ratio.
Production at the Brule mine decreased 227,000 tonnes when comparing the
three month period ended June 30, 2009 to the three month period ended June
30, 2008. The Company ceased its coal mining and hauling activities at the
Brule mine in mid-March 2009 due to a build-up of inventory, resulting from
the downturn in the markets for PCI. In order to retain a core of qualified
and experienced workers, the Company continued its waste stripping to expose
coal. Having invested in the waste stripping in the first quarter, the Company
is in a good position to respond to the recent upturn in the economy and
mining and coal hauling recommenced in mid-June 2009.
The 3% decrease in the per unit cost of product sold is mainly
attributable to the Wolverine mine which benefited from an improvement in
equipment availabilities, an increased overall productivity, a 11% decline in
the stripping ratio to 13.6 and the replacement of the mining contractor on
May 18, 2009 with the direct hire of the work force to operate and manage the
The transportation and other cost per unit have decreased due to a
decrease in fuel costs and the rail fuel surcharge. These costs are also
affected by the blend of coals produced.
Cost of goods sold, excluding depletion, amortization and accretion, for
Wolverine for the three month period ended June 30, 2009 decreased $17 per
tonne or 12% to $122 per tonne from $139 per tonne in the comparable period.
Cost of goods sold reflects changes in inventory balances and actual cash
costs during the three month period.
Actual cash costs for Wolverine for the three months ended June 30, 2009
were $37,905,000 or $106 on a clean coal tonne produced basis compared to
$49,808,000 or $146 per tonne for the comparable period, a 27% improvement
which is discussed above.
Cost of goods sold, excluding depletion, amortization and accretion, for
Brule for the three month period ended June 30, 2009 increased $11 per tonne
or 13% to $99 per tonne from $88 per tonne in the comparable period.
Actual cash costs for Brule for the three months ended June 30, 2009 were
$7,738,000 or $165 on a clean coal tonne produced basis compared to
$24,067,000 or $88 per tonne for the comparable period. The increase is due to
Brule concentrating on stripping waste in the first quarter 2010, which
accounts for approximately $3,554,000 or $76 per tonne of the above cost.
Production costs will decrease as Brule mines the exposed coal. The costs of
exposing this coal have been reflected in the inventory balance per the
Company's accounting policy. However, the benefits of mining the 90,000 tonnes
of exposed coal will not be recognized until the coal is mined in subsequent
periods. The exposed coal tonnes have not been reflected in the unit costs.
Income from mining operations
Income from mining operations for the three month period ended June 30,
2009 was $19,649,000 or $45 per tonne. The operating margin was 26% compared
to 41% in the comparable quarter. The lower margin is as a result of lower
sales prices achieved, partially offset by lower production costs and a more
favourable US dollar/Canadian dollar exchange rate as discussed above.
Other expenses, for the quarter ending June 30, 2009, were $10,001,000
and include the following:
Three months ending June 30,
(In thousands of Canadian dollars) 2009 2008
General, administration and selling $ 5,547 $ 6,235
Coal exploration and other mine maintenance costs 1,303 563
Interest and financing fees on liabilities 2,642 9,759
Other income 509 (502)
Total other expenses $ 10,001 $ 16,055
General, administration and selling costs for the three month period ended
June 30, 2009 decreased by $688,000 or 11% over the same period in the prior
fiscal year. This decrease is primarily due to:
- A downward adjustment to the estimate for the annual incentive plan,
offset by an increase in stock based compensation due to stock
options that were issued during the three months ended June 30, 2009;
- Lower sales and marketing costs as a result of decreased revenues,
offset by an accrual for a potential liability for the Wolverine
Royalty Sharing agreement (See "Contingencies"); and
- Lower general, administration and selling expenses reflecting the
Company's reduced operating levels.
The Company also incurred certain expenses relating to its strategic
review process during the June 30, 2008 quarter, which were not applicable
during the current quarter.
Coal exploration and other mine maintenance costs for the three month
period ended June 30, 2009, increased to $1,303,000 from $563,000 in the
comparable period. Coal exploration expenditures for the three month period
ended June 30, 2009 were $120,000 compared to $563,000 in the comparable
period of the prior year and care and maintenance expenditures relating to the
Willow Creek mine were $1,183,000 compared to nil for the three month period
ended June 30, 2008. Care and maintenance expenditures for the Willow Creek
mine are expected to continue until the Company recommences production.
For the three month period ended June 30, 2009, interest, accretion and
financing fees on liabilities were $2,642,000 compared to $9,759,000 for the
three months ended June 30, 2008. This decrease is due to the conversion into
equity of some of the Company's convertible debentures and the repayment of
certain liabilities during the prior fiscal year, resulting in lower debt
Other expenses amounted to $509,000 for the three month period ended June
30, 2009 compared to other income of $502,000 in the comparable period in the
prior year. Other expenses for the three month period ended June 30, 2009
consisted of $5,214,000 in foreign exchange losses (net of $3,519,000 of
foreign exchange gains realized on foreign currency contracts), $3,180,000
unrealized gains on forward currency contracts, $1,493,000 of interest income
and $32,000 of other income. Other income for the three month period ended
June 30, 2008 consisted of $19,000 of realized foreign exchange losses,
$237,000 of interest income and $284,000 of miscellaneous income. Realized
foreign exchange losses increased due to the strengthening of the Canadian
dollar compared to the US dollar. Interest income has increased due to the
Company carrying higher cash balances during the three month period ended June
30, 2009 and the accrual of interest on related party loans.
Net income for the three month period ended June 30, 2009 was $3,388,000
compared to $59,705,000 for the same period in the prior fiscal year. The net
income reflects: an income from mining operations of $19,649,000; other
expenses totaling $10,001,000; and an income tax expense of $6,260,000 which
includes $3,428,000 of provincial mineral taxes which are currently payable.
Acquisition - Cambrian Mining Plc
On July 13, 2009, the Company completed the acquisition of Cambrian
Mining plc ("Cambrian"). A total of 88,625,764 common shares of the Company
were issued to Cambrian shareholders on the basis of 0.75 Company shares for
every Cambrian share. The total number of common shares issued and outstanding
following this issue is 299,958,733. Pursuant to section 177 of the Business
Corporations Act (British Columbia), the 72,122,826 common shares of the
Company held directly or indirectly by Cambrian, now a wholly owned subsidiary
of the Company, are not entitled to be voted at a meeting of shareholders of
the Company. $29,000,000 of the Company's convertible debentures owned by
Cambrian will be cancelled upon consolidation for the quarter ended September
30, 2009. On July 15, 2009, the Company redeemed in full the US$27,000,000
convertible notes of Cambrian.
The major operations acquired were:
- 2 mines in West Virginia (USA) called Maple Coal and Gauley Eagle.
Both mines produce both metallurgical and thermal coal, have
processing plants nearby and operate both surface and underground
- 50.6% interest in Energybuild Group Plc, which is listed on AIM as
"EBG". Energybuild is a producer of anthracite and open cast coals in
- 45% interest of Xtract Energy Plc, which is listed on AIM as "XTR".
Xtract invests in a diversified portfolio of energy companies.
- 20% interesting NEMI Northern Energy & Mining Inc, which is listed on
the TSX as "NNE.A". NEMI owns a 12% interest in the Peace River Coal
- 100% of AGD Mining Pty Ltd, which operates a small gold and antimony
operation in Costerfield (Australia).
The Company will consolidate the results of the operations from the
Cambrian acquisition in its second fiscal quarter 2010 (period ending
September 30, 2009) results.
As previously announced, in the short term, the current economic downturn
has resulted in significant cutbacks in steel production on the part of the
Company's customers, in some cases as much as a 50% decrease from 2008 levels.
This has affected the short term demand for metallurgical coal, leading to
production cutbacks at the Company's operations. Despite the significant
curtailments by the Company's customers, the Company has achieved coal sale
prices that are the second highest on record, which speaks well to the quality
of the Company's coal and the service provided to customers.
The Company further expects that the economic stimulus packages
introduced by governments including the US, Japan and China will lead to
increased steel production during this calendar year, accompanied by increased
demand for metallurgical coal. Already in China, there is higher construction
activity in the first calendar quarter of 2009, together with increased
consumer spending in steel-based goods such as appliances and autos. This has
led to a sharp increase in imports of coking coal and PCI by Chinese steel
producers, which has offset the reduction in imports into other markets.
Improvements in market conditions are also being experienced by steelmakers in
other regions in Asia, namely Korea and Japan. The Company's Canadian assets
are strategically located to meet the rising demand conditions in Asia and we
are experiencing increased demand for our product.
In the longer term, the market fundamentals for seaborne metallurgical
coal are expected to continue to improve which will provide continued
opportunity for the Company to increase market diversity and market share. The
Company's Wolverine hard coking coal forms a key blend component with many of
the world's leading steel mills, while the Brule mine ULV-PCI coal is
consistently ranked among the top PCI coals worldwide. These high quality and
high demand coals, in conjunction with the region's highly efficient rail and
port infrastructure with excess capacity, continue to provide the Company a
competitive advantage to continue to grow and diversify.
The Company also has seen increased market demand for its metallurgical
and thermal coals from the US operations. A major metallurgical coal customer
has resumed taking coal from the Maple Mine and as such, the mine has recently
reactivated equipment and increased its workforce by over 45%.
For fiscal 2010, the Company has revised upwards its production
expectations and now expects to produce between 2,000,000 and 2,200,000 tonnes
of metallurgical coal from its two operating mines in Canada based on the
current increase in demand:
- Wolverine operations producing 1,400,000 to 1,500,000 tonnes of hard
- Brule mine producing approximately 600,000 to 700,000 tonnes of
As a result of the increased demand for its products, the Company now
expects to ship between 2,400,000 and 2,600,000 tonnes of metallurgical coal
which will consist of 1,400,000 to 1,600,000 tonnes of hard coking coal and
1,000,000 tonnes of ULV-PCI. These expected sales reflect a drawdown of
All of the Company's current fiscal 2010 production from its mines in
Canada are under contract for sale to international steel producers. Coal
prices for fiscal 2010 are approximately US$126 per tonne for hard coking coal
and US$90 per tonne for its ULV-PCI coal. Since coal deliveries during fiscal
2010 will include certain quantities of fiscal 2009 carryover tonnages, the
average selling prices for coal to be delivered in fiscal 2010 are expected to
be in the range US$118 to US$122 per tonne, which reflects pricing for both
hard coking coal and ULV-PCI coal, as well as carryover tonnages at fiscal
2009 prices. The Company has entered into foreign currency contracts totaling
US$160.7 million at June 30, 2009 to help manage the uncertainty of foreign
exchange fluctuations in the market. The contracts were for approximately 60%
of the Company's remaining coal sales in fiscal 2010. The contracts mature
each month through to April 2010. They are at an average rate of C$1.1828 per
With the stripping ratios in fiscal 2010 expected to be lower than in
fiscal 2009, total cash costs in fiscal 2010 on a combined operational basis
are expected to be approximately $110 to $115 per tonne (FOBT).
For the remainder of fiscal 2010, the Company expects to produce and sell
approximately 1,000,000 tons (1 ton = 0.907 tonne) of coal from its two mines
in West Virginia as follows:
- 700,000 tons of thermal coal
- 300,000 tons of coking coal
Fiscal 2010 cash production costs at these mines are expected to be
approximately US$65 to US$70 per ton, with expected average coal sale price
realizations approximately US$80 to US$85 per ton.
In light of the improvements in the current economic climate, the
acquisition of Cambrian Mining and the $52 million financing (announced July
24, 2009), the Company has revised its planned capital expenditure program.
Based on a continuation of the recent improvement in market conditions,
proposed projects for capital expenditures include: expanding the current
operation at the Brule Mine in early calendar 2010; refurbishment of the
Willow Creek Mine plant for potential start-up late in calendar 2010 at
900,000 tonnes per year of low-vol PCI to potential capacity of 1.7 million
tonnes per year of both low-vol PCI and hard-coking coal; and acquiring
equipment to expand production at the Company's recently acquired mines in
The Company will be hosting a conference call to discuss the first
quarter 2010 operating results at 1:00 pm (Pacific) on August 17, 2009. To
participate on the call, dial either 1-800-594-3615 or 416-644-3425. A replay
of the call can be accessed at 416-640-1917 or 1-877-289-8525 (code 21311451
followed by the number sign). The call will also be webcast live on the
Company's website at www.westerncanadiancoal.com.
Western is a producer of high quality metallurgical and thermal coal from
mines located in northeast British Columbia (Canada) and West Virginia (USA).
The mines have the capacity to produce 7 million tonnes per year and have over
20 years of coal reserves. Western also owns a 50.6% interest Energybuild
(EBG: AIM) which produces high quality anthracite and thermal coal in South
Wales (UK). Other interests owned include a 45% interest in Xtract Energy
(XTR: AIM), 20% interesting in NEMI Northern Energy & Mining (NNE.A: TSX) and
100% of a small gold and antimony operation in Australia. The Company is
headquartered in Vancouver, BC, Canada, and trades on the AIM and TSX stock
exchanges under the symbol "WTN". More information can be found at
This release may contain forward-looking statements that may involve
risks and uncertainties. Such statements relate to the Company's expectations,
intentions, plans and beliefs. As a result, actual future events or results
could differ materially from those suggested by the forward-looking
statements. Readers are referred to the documents filed by the Company on
SEDAR. Such risk factors include, but are not limited to changes in commodity
prices; strengths of various economies; the effects of competition and pricing
pressures; the oversupply of, or lack of demand for, the Company's products;
currency and interest rate fluctuations; various events which could disrupt
the Company's construction schedule or operations; the Company's ability to
obtain additional funding on favourable terms, if at all; and the Company's
ability to anticipate and manage the foregoing factors and risks.
Additionally, statements related to the quantity or magnitude of coal deposits
are deemed to be forward-looking statements. The reliability of such
information is affected by, among other things, uncertainties involving
geology of coal deposits; uncertainties of estimates of their size or
composition; uncertainties of projections related to costs of production; the
possibilities in delays in mining activities; changes in plans with respect to
exploration, development projects or capital expenditures; and various other
risks including those related to health, safety and environmental matters.
WESTERN CANADIAN COAL CORP.
President and Chief Executive Officer
For further information:
For further information: David Jan, Director, Investor Relations, Phone:
(604) 694-2891, Email: firstname.lastname@example.org