Western Canadian Coal Announces Record Earnings In First Quarter 2009 Results

    VANCOUVER, Aug. 13 /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 ending June 30, 2008. During the first
quarter of fiscal 2009, higher coal prices moved the Company firmly into a
record net income position. The balance sheet was also strengthened
considerably as a result of strong cash flow generation, conversion of
convertible debentures, the securing of long-term bank financing and the
subsequent repayment of short-term bridge financing.
    The Company earned income from mining operations of $53 million in the
first quarter of 2009, an increase from a loss in mining operations of
$4 million in a similar period of the previous year. The increase was achieved
because of higher coal prices realized from the current coal year contracts,
which resulted in coal sales of $130 million. These sales were 140% higher
than in the same quarter a year ago.
    Coal volumes sold for the first quarter fiscal 2009 were 583,000 tonnes
or 7% lower than the first quarter fiscal 2008. The average realized price of
$224 per tonne in the current quarter was 166% higher than the same quarter of
2008. Approximately 159,000 tonnes of coal sold in the quarter, representing
27% of sales, was at last year's coal prices, which averaged $83 per tonne,
with the balance sold at current year prices of US $300 per tonne for hard
coking coal and US $248 for the low-vol PCI coal. All sales going forward in
this fiscal year are at the new prices.
    Net income for the first quarter 2009 was almost $60 million or earning
per share of $0.42 and $0.27, on a basic and diluted basis respectively. As a
result of the return to profitability and the visibility of earnings going
forward, a $24 million of a possible $33 million future income tax asset which
was previously written down was recovered during the quarter.
    During the quarter, coal production was 614,000 tonnes or 23% lower than
in the first quarter of 2008. As a result of the lower coal production
volumes, higher mining contractor cost and increased fuel costs during the
quarter, the Company suffered higher cash costs for production. Cash costs for
the first quarter 2009 were $120 per tonne versus $81 per tonne in the first
quarter 2008; however cash costs going forward are expected to decrease as the
strip ratio improves over the coming months. The quarter's lower coal
production was consistent with the Company's plans to use a higher coal price
environment to focus on waste rock removal. Due to lower coal prices and
productivity issues in the previous year, the Company did not remove the
required amount of waste rock.
    In the quarter ending June 30 2008, the Company increased its removal of
waste material by 47% over the same quarter a year ago. Once past this phase
of rock removal, the Company expects to achieve monthly production targets by
the end of the second quarter 2009. The Company expects to produce 1.7 million
tonnes of hard coking coal, 0.2 million tonnes of mid-vol PCI coal and
1.6 million tonnes of low-vol PCI coal in fiscal 2009.
    "While it may not show up in the amount of coal produced this quarter, I
am pleased with the improved productivity levels being achieved at the mines,"
said Mr. John Hogg, President and CEO of Western Canadian Coal Corp. "We have
increased productivity at the Wolverine operation, while Brule continues to
meet all expectations at its higher operating rates. Once past this phase of
waste rock removal at Wolverine, we'll see coal production increase and we are
confident that we will meet our production and cost goals for the year."
    Mr. Hogg continues, "The second quarter is expected to be stronger as we
achieve the full benefit of the current high coal price for all of our
production, expect an improvement in the ratio of clean coal produced to waste
removed and lower our mining costs."

    News Release

    This news release is prepared as at August 13, 2008 and should be read in
conjunction with the Company's audited financial statements for the year ended
March 31, 2008 and notes contained therein, and Management's Discussion and
Analysis (MD&A) for the same period. This news release does not constitute
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,
2008 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)                      2008        2008
    Cash & cash equivalents                            $  16,483   $  14,137
    Inventory                                             28,855      24,173
    Other current                                         62,042      16,242
    Total Assets                                         532,017     453,324

    Current liabilities                                $ 105,239   $ 126,891
    Long-term liabilities                                156,690     207,443
    Shareholders' equity                                 270,088     118,990

                                                Three months ending June 30,
                                                            2008        2007
    Tonnes sold                                          583,000     629,000

    Revenue                                            $ 130,393   $  54,214
    Cost of goods sold                                    77,417      58,187
    Income (loss) from mining operations                  52,976      (3,973)
    Other expenses                                        16,055         282
    Income tax recovery (expense)                         22,784       1,198
    Net income (loss)                                  $  59,705   $  (3,057)

    Earnings (loss) per share, basic                   $    0.42   $   (0.03)
    Earnings (loss) per share, diluted                 $    0.27   $   (0.03)

    Included in the above balances and results are the Company's
proportionate share of its interest in the results from the Belcourt Saxon
joint venture.


    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 $223.66 or
    For the three month ended June 30, 2007, total sales revenues were
$54,214,000 from the sale of 629,000 tonnes of coal. The average price per
tonne realized during the period was $86.19 or US$78.36.
    The primary reason for the increase in the Company's total revenues over
the comparable period in the prior year is the increase in sales price
realized. The increase in sales price is a result of higher coal contract
prices, which was offset by lower sales volume and a weaker US dollar.

    Cost of goods sold

    Cost of goods sold for the quarter ended June 30, 2008, including costs
of product, transportation, and depletion, amortization and accretion charges
totaled $77,417,000 or approximately $132.79 per tonne compared to $58,187,000
or approximately $92.51 per tonne in the first quarter of fiscal 2007. Cost of
goods sold includes cost of production, transportation, and depletion,
amortization and accretion charges as presented in the table below:

    (In thousands of                June 30,              June 30,
     Canadian dollars)                 2008    $/tonne       2007    $/tonne
    Cost of production             $ 53,065   $  91.02   $ 35,153   $  55.89
    Transportation and other         16,711      28.66     16,087      25.58
    Depletion, amortization and
     accretion                        7,641      13.11      6,947      11.05

    Total cost of goods sold       $ 77,417   $ 132.79   $ 58,187   $  92.52

    The increase in the current period's per unit cost of product sold over
the comparable prior period is due to lower production volumes from the
Company's Perry Creek Mine and inflation in mining input costs, specifically
fuel costs and mining contractor costs.
    Transportation and other costs have increased due to an increase in
contracted transportation costs.
    Depletion, amortization and accretion has increased due to the additional
depletion, amortization and accretion charges related to the Perry Creek mine
assets that have been acquired during the last nine months of fiscal 2008.
    For the current quarter, cash costs, a key performance indicator for the
industry, were $119.68 per tonne compared to $81.47 per tonne for the quarter
ended June 30, 2007. This is expected to decrease as the stripping ratio
improves over the coming months.

    Income from mining operations

    Income from mining operations for the three months ended June 30, 2008
was $52,976,000. This was the result of revenues from 583,000 tonnes of coal
at an average price of $223.66/tonne for total revenues of $130,393,000, net
of cost of goods sold of $77,417,000 at an average cost of $132.79/tonne.

    Other expenses

    Other expenses, for the quarter ending June 30, 2008, were $16,055,000
and include the following:

                                                Three months ending June 30,
    (In thousands of Canadian dollars)                     2008         2007
    General, administration and selling                $  6,235     $  3,917
    Coal exploration                                        563          799
    Interest and financing fees on long-term debt         9,759        5,667
    Unrealized gain on forward currency contracts             -       (8,028)
    Other income                                           (502)      (2,073)
    Total other expenses                               $ 16,055     $    282

    General, administration and selling costs for the three month period
ended June 30, 2008 increased by $2,318,000 or 59% over the same period in the
prior fiscal year. The increase is primarily due to an increase in consulting,
sales and marketing and salaries, benefits and other remuneration. Consulting
expenses have increased as the Company hired various consultants in connection
with the strategic review and process improvement at the Perry Creek mine.
Sales and marketing expenses, which are a function of coal sales, has
increased due to the higher sales price received on the Company's coal in the
first three months of fiscal 2009 when compared to fiscal 2008. Changes in
salaries, benefits and other remuneration expenses are based on the Company's
compensation programs.
    Coal exploration expenditures for the three month period ended June 30,
2008, including the Company's proportionate share of expenses recorded by the
Partnership of $217,000, decreased to $563,000 from $799,000 in the same
period in the prior fiscal year. Coal exploration costs include property
development expenditures, field programs, consultants, coal license and lease
payments, engineering, environmental costs and other project administration
expenses. Exploration costs are charged to earnings in the quarter in which
they are incurred, except where these costs related to specific properties for
which economically recoverable reserves have been established, in which case
they are capitalized.
    For the three month period ended June 30, 2008, interest, accretion and
financing fees on long-term debt were $9,759,000 compared to $5,667,000 in the
same period in the prior fiscal year. This increase was a result of interest
and accretion charges relating to the US$40,372,000 convertible debenture
which was issued in November 2007 and the bridge financing of US$30,000,000
with related finance fee costs issued in April 2008. The non-cash accretion of
liabilities, including accretion of financing fees, was $5,036,000 for the
three months ended June 30, 2008 (2007 - $1,054,000).
    For the three month period ended June 30, 2008, the Company did not
record any unrealized gains on forward currency contracts compared to a gain
of $8,028,000 in the same period in the prior fiscal year. At June 30, 2008,
the Company did not have any outstanding forward contracts.
    Other income amounted to $502,000 for the three month period ended
June 30, 2008 as compared to other income of $2,073,000 in the prior year.
Other income for the three month period ended June 30, 2008 consisted of
$237,000 of interest income, $284,000 of unrealized fair value adjustment gain
on embedded derivatives and $19,000 of foreign exchange losses. Other income
for the three month period ended June 30, 2007 consisted of $1,521,000 of
realized forward exchange gains on both forward currency contracts and
transactions, $649,000 in interest on short term investments and $97,000 in
miscellaneous expenses.

    Net Income

    Net income for the three month period ended June 30, 2008 was $59,705,000
compared to a net loss of $3,057,000 for the same period in the prior fiscal
year. The net income reflects: an income from mining operations of
$52,976,000; other expenses totaling $16,055,000 including general,
administration and selling expenses; coal exploration; interest, accretion and
financing fees on long-term debt; other income; and an income tax recovery of
$22,784,000 reflecting a current income tax expense of $1,076,000 and a future
income tax recovery of $23,860,000. The income tax recovery represents the
unrecognized future income tax asset to be realized as a result of it being
more likely than not that sufficient future taxable income will be available
to utilize such tax assets, in accordance with CICA Handbook Section 3465
"Income Taxes."

    Market Outlook

    The financial performance of the Company is strongly influenced by the
price of metallurgical coal, which is set in a highly competitive marketplace
and impacted by numerous factors outside the control of the Company. These
include the demand for steel, developments in mining technology,
infrastructure and transportation capacity constraints, fluctuations in
currency, interest rates, political stability and overall economic growth.
    With continued strong economic growth, the demand for hard coking coal
continues to rise; however, the continued shortage of transportation
infrastructure in the major coal producing countries, coupled with scarcity of
key mining inputs such as skilled labour, mining equipment and in some areas
basic inputs like water, has skewed the supply-demand balance in favour of the
producers. This trend was evident in 2007, with spot prices moving upwards as
the year progressed, enabling Australian and Canadian producers to achieve
2007 spot fixtures in the range US$120-200/tonne FOB by early December 2007.
In January and February 2008, the market experienced major disruptions in the
supply of Australian metallurgical coal, following two severe flooding events
in Queensland. This was followed by an unusual snow storm in China, which
suspended coal exports and further tightened metallurgical coal supply. As a
result, spot prices rose to unprecedented levels and have now exceeded 
US$400/tonne FOB for hard coking coal. In this environment, the majority of
coal suppliers have settled their 2008 contract prices at an average of
US$300/tonne. On May 7, 2008, the Company advised that it had settled a
majority of its coal year 2008 (fiscal 2009) contracts for hard coking coal at
an average of US$300 per tonne, which is approximately 253% higher than 2007
contract prices.
    A similar situation exists in the supply-demand balance for ultra-low
volatile PCI ("ULV-PCI") coals. Constraints on mine production in key supply
areas in 2007 and into 2008 have coincided with continued demand increases. On
May 7, 2008, the Company announced that a majority of its coal year 2008
(fiscal 2009) contracts for its ULV-PCI coal had been settled at approximately
US$248 per tonne FOB, which is 267% higher than 2007 pricing.
    According to press reports, the last of the 2008 coking coal contracts
were recently settled by a major Australian supplier, in the range US$365-375
per tonne. This supports the Company's belief that current metallurgical coal
pricing is not merely a short term phenomenon. This view is shared by numerous
market analysts, who are forecasting a further price increase for the 2009
Coal Year (the Company's 2010 fiscal year).
    In the longer term, the Company believes that the market fundamentals for
metallurgical coal will provide substantial opportunity to further increase
market diversity and market share. The Company's Wolverine hard coking coal is
now firmly established as a blend component with the world's leading steel
mills. The Company's Burnt River ULV-PCI coal is consistently ranked in the
top three PCI coals worldwide and has experienced unparalleled demand. These
coals, in conjunction with highly efficient rail and port infrastructure with
excess capacity, provide to the Company a strategic advantage to grow and


    The Company's Wolverine hard coking coal and Burnt River ULV-PCI coals
have been sold to major steel mills throughout Asia, Europe and South America.
Long term supply agreements have been concluded with top tier steel mills for
100% of the 2008 planned output of the Brule mine and the Wolverine mine.
    With resources now fully deployed for coal year 2008 (the Company's
fiscal 2009), the Company anticipates approximately 1.9 million tonnes of
production from the Perry Creek Mine, of which approximately 1.7 million
tonnes will be marketed as Wolverine hard coking coal while the balance will
be marketed as Wolverine Mid-Vol PCI. The Company anticipates 1.3 million
tonnes of Burnt River ULV-PCI production from the Brule mine.
    In addition, recommencement of mining at the Willow Creek metallurgical
coal mine is scheduled for the start of the fourth calendar quarter of 2008,
building up to a rate of approximately 60,000 tonnes per month of ULV-PCI for
a total of 285,000 tonnes in fiscal 2009. The majority of this forecast
ULV-PCI production has been contracted to major international steel mills.
    All of the Company's expected hard coking coal production and ultra
low-vol PCI production for fiscal year 2009 is already under contract and will
be sold at the prices described above.

    Conference Call

    The Company will be hosting a conference call to discuss the first
quarter 2009 operating results at 7:00am (PST) on August 14, 2008. To
participate on the call, dial either 1-800-732-9303 or 416-644-3426. The call
will also be webcast live on the Company's website at

    About Western Canadian Coal

    Western Canadian Coal Corp. produces 3.5 million tonnes of high quality
metallurgical coal from three mines located in the northeast of British
Columbia. The company also has interests in various coal properties in
northern and southern British Columbia and a 50% interest in the Belcourt
Saxon Limited Partnership, which was formed to explore and develop the
Belcourt and Saxon group of properties in northern BC. Currently, these
properties provide the company with an estimated 15 years of coal reserves at
current production levels.

    Forward-Looking Information

    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.

    "John Hogg"
    President and Chief Executive Officer

For further information:

For further information: David Jan, Manager, Investor Relations &
Corporate Development, Phone: (604) 608-2692, Email: djan@westerncoal.com

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