Calgary, AB / ACCESSWIRE / April 30,
2014 / CanAm Coal Corp. (TSXV: COE) ("CanAm" or the
"Company") has filed its audited consolidated financial statements
and related management discussion and analysis for the year ended
December 31, 2013. Definitions of commonly used non-IFRS financial
measures (EBITDA from operations and Free Cash Flow) are included
at the end of this press release.
The Company announced today
its full year 2013 and fourth quarter financial results for the
period ending December 31, 2013. Full year revenue, EBITDA from
Operations and net loss for the year were $62.2 million, $10.5 and
($8.5) million respectively as compared to $55.4 million, $9.8
million and ($6.1) million in the prior year. Fourth quarter
revenue, EBITDA from Operations and net loss were $14.9 million,
$2.6 million and ($4.2) million respectively as compared to $14.5
million, $2.8 million and ($2.3) million in the prior year.
Excluding one-time impairment and other charges recorded in 2013
and 2012, net loss for the year was ($6.1) million and ($3.9)
million respectively.
The Company continued on its growth
path and since CanAm embarked on its new strategic direction of
becoming a small to medium-sized coal producer, production and
sales have steadily grown both organically and through acquisition.
Over the last three years, sales have increased from 403,000 tons
in 2011 to 682,000 tons in 2013, an increase of 279,000 tons or
69%. Likewise, revenue and EBITDA from Operations have grown from
$38.9 million and $8.5 million, respectively in 2011 to $62.2
million and $10.5 million in 2013.
Note:
Refer to the definition of EBITDA
from operations and Free Cash Flow on the last page of this press
release.
Certain comparative figures have
been reclassified to conform with the current period's
presentation.
The year 2013 saw continued
growth with coal sales and revenue up 22% and 12% respectively as
compared to last year. Most importantly we have turned around free
cash flow and have seen a significant improvement from ($7.6)
million to generating free cash flow of $2.0 million in 2013.
Although 2013 was successful on many accounts, the year was not
without its challenges. In the first half of 2013, following the
award of three new permits in late 2012 and early 2013, we migrated
the majority of our operations into a new mine complement: Knight,
Posey Mill 2 and Old Union 2. Together with our existing Powhatan
mine, the productive capacity of this new mine complement is
expected to consistently be in the range of 60,000 to 80,000 tons
per month. We completed this mine transition by the end of Q2. In
the second half of 2013, we turned our attention to optimizing our
cost structure and driving operational efficiencies across all of
our mines. In this context, we also targeted to closely match our
production to our projected monthly and quarterly sales in order to
minimize coal inventories. We have seen good improvement in this
area and our production costs have come down from $56/ton in Q1 to
$50/ton in Q4 of 2013. We are targeting an average production cost
per ton of $50 or lower on a forward going basis.
Fourth Quarter and Full Year 2013 Financial
Results
(1) 2012 EBITDA (as reported
in the 2012 MD&A) excluded allowance for doubtful accounts and
financing charges. For 2013 (and 2012 comparative), these
categories are classified as part of general and administrative
costs and included in the calculation of EBITDA. Please refer to
the definition of EBITDA from operations on the last page of this
MD&A.
Key quarterly statistics for
2013 are as follows:
Note: Operating cash flow is before changes in non-cash
working capital
-
-.Sales for the
fourth quarter were 168,113 tons as compared to 153,841 tons, an
increase of 14,272 tons or 9%. Sales in the quarter were impacted
by shipping curtailments of a number of our key customers as a
result of extended plant maintenance issues and annual inventory
management practices. Full year 2013 sales were up 122,354 tons or
22%.
-
-.Long term
off-take contracts continue to enable the Company to achieve better
than market pricing for our high quality coals. Excluding the sales
of purchased coal fines and some low grade coal totaling about
8,000 tons, average sales price per ton for Q4 was $91/ton,
consistent with prior 2013 quarters. The lower average price as
compared to last year is a result of our changing coal mix (i.e. a
higher ratio of thermal coal versus metallurgical coal) and the
termination of a met coal contract in early 2013.
-
-.All of our 2014
production is currently committed into our off-take contracts with
our customers and we are fully contracted for 2014.
-
-.Average
production cost per ton continues to trend down and was $50/ton as
compared to $56/ton in Q1 of 2013 or a decrease of 11%. With all
mines at steady state production now and with an ongoing focus on
operational efficiencies, we are targeting to achieve an average
cost per ton of at or below $50/ton. Q4 production costs were
somewhat impacted by shipment curtailments which necessitated the
Company to slow down production which in turn impacted operational
efficiency.
-
-.Investment in
equipment and mine development in Q4 was $1.9 million as compared
to $1.6 million in the comparable period last year. For 2013,
capital expenditures were $8.5 million or less than half of the
$17.4 million in expenditures in 2012. Major investments in
equipment, capital repairs and mine development were made in 2012
in order to position to Company for growth.
-
-.Free cash flow
for the quarter was $0.7 million as compared to $1.2 million in Q4
2012. This is the third consecutive quarter of positive free cash
flow with full 2013 free cash flow of $2.0 million as compared to
($7.6) in 2012. Increased EBITDA performance and significantly
reduced capital expenditures have both contributed to this
turnaround.
-
-.Repayment of
equipment financing obligations continues at a healthy pace and in
2013, the Company repaid $7.6 million of these obligations as
compared to $6.4 million in 2012.
-
-.Loss for 2013 was
$8.5 million as compared to $6.1 million in 2012 with the increase
mainly the result of a number of factors: $2.4 million impairment
charge on the Buick project, increased depreciation, amortization
and depletion arising from a larger asset base, increased financing
charges related to additional equipment and debenture financing and
increased debenture issue amortization and accretion expenses. The
majority of these increases are non-cash related and therefore do
not impact the Company's EBITDA from Operations and Free Cash
Flow.
Liquidity and Financial Position
As at
December 31, 2013 the Company had
a working capital deficit of $22.8 million. The majority of the
deficit relates to repayment of approximately $12 million in
debentures due in May 2014.
Subsequent to year-end
the Company has taken the following steps to address this
deficit.
Additional US $3 million financing by major US Financial
Institution
Effective April 18, 2014, the
Company amended its equipment financing agreement with its main
banking and equipment lender. The main changes were to increase the
principal amount of the loan by US $3 million (54 month term) and
to reset the amortization period for the outstanding amount of the
original loan (US $13.2 million outstanding at April 2014) to 48
months. The blended interest rate on the facility is
4.04%.
Included in the revised
agreement is a new covenant requiring the Company to convert at
least $6,500,000 of its 2012, 9.5% debenture to equity prior to
July 31, 2014. This represents approximately 50% of the face value
of the debenture. The debenture matures in August 2016.
Private placement financing of up to $14 million
The Company has signed an
agreement with Richardson GMP Limited to sell by private placement
on a commercially reasonable efforts basis up to 14 million units
for proceeds of up to $14 million. Each unit will consist of $1,000
principal amount of non-convertible secured debentures and 670
common share purchase warrants. The debentures mature
48 months from the date of issuance and will bear interest at a
rate of 12% per annum, payable semi-annually. The Debentures have a
principal repayment feature starting in month 25 and early
redemption provisions starting in month 13. Further details on this
proposed financing are included in a separate press release dated
May 1, 2014.
CanAm intends to use the net
proceeds from the private placement for the repayment of its 10%
and 9.5% debentures that mature on May 8 and May 9, 2014,
respectively, and for general working capital purposes.
Summary impact
The impact of the additional
equipment financing, the extension of the equipment financing loan
term, a successful refinancing of the May debentures and other
measures taken by the Company will reduce the working capital
deficit by approximately $17 million. In addition, long-term debt
will be reduced by a minimum of $6.5 million resulting from the
debt to equity conversion.
The Company believes that
these transactions, taken together sufficiently improve the
financial position of the Company to allow it to achieve its future
business plans. That said, the refinancing of the May debenture,
which is a critical component of the Company's plan has not been
finalized. While the Company believes that this financing will
close on or about May 9, 2014, there is no certainty that this will
occur. Accordingly, the Company has included a reference in the
consolidated financial statements respecting the Company's ability
to continue as a going concern (see Note 2 of the financial
statements).
Company President and CEO, Jos
De Smedt commented: "Our 2013 performance showed continued growth
and improvement of our performance at all levels and, most
importantly, we are now generating free cash flow on a consistent
basis with a major turnaround in this metric as compared to 2012.
The year 2013 saw us transition to a new mine complement in the
first half and since then we have and continue to focus on
operational efficiencies and lowering our cost of production. Our
production cost per ton has come down by some 11% since the start
of the 2013 and our target for 2014 and beyond is below $50/ton. As
to our financial position, we continue to pay down our equipment
debt at a healthy pace but our overall debt levels remain high and
the Company requires additional financial flexibility to continue
to execute on its business plan. In this regard, we are extremely
pleased with the additional funding of our US banking partner, our
proposed private placement financing spearheaded by Richardson GMP
Limited and our debt to equity conversion amounting to $6.5 million
which is anticipated to take place prior to July 31,
2014."
Outlook for 2014
The
Company is optimistic about 2014 as the overall coal market has
improved following the colder-than-normal winter in most of
North America including Alabama. As a
result thereof, gas prices have increased, coal demand has been
high and coal inventories are at record lows which will bode well
for coal demand in 2014.
For 2014,
the Company expects to continue on its path of steady growth and is
targeting an increase of coal sales of approximately 10%. With 95%
of 2014 production under contract, the Company is well positioned
to deliver on the anticipated sales and revenue growth. With an
increase in sales and the Company's continued focus on operating
efficiency, it is expected that EBITDA from Operations will grow in
2014. The Company believes that its existing equipment fleet is
sufficient for the foreseeable future to support the existing mine
plan and has therefore positioned the Company well
from a capital expenditures perspective.
On this basis, no significant new equipment purchases are planned
for 2014.
On the
basis of the forgoing and the fact
that the majority of 2014 production has been sold into off-take
contracts, the Company expects to consistently generate free cash
flow in 2014.
For Further
Information:
CanAm
Corporate Office:
Jos De Smedt, President &
CEO
Tel: 403.262.3797
Toll Free: 1.877.262.5888
Email: jdesmedt@canamcoal.com
EBITDA from operations and Free Cash
Flow
Statements throughout this MD&A
make reference to EBITDA from operations and Free Cash Flow which
are non-IFRS financial measures commonly used by financial analysts
in evaluating financial performance of companies, including
companies in the mining industry. Accordingly, management believes
EBITDA from operations and Free Cash Flow may be a useful metric
for evaluating the Company's performance as it is a measure
management uses internally to assess performance, in addition to
IFRS measures. As there is no generally accepted method of
calculating EBITDA from operations and Free Cash Flow, the terms
used herein are not necessarily comparable to similarly titled
measures of other companies. The items excluded from EBITDA from
operations and Free Cash Flow are significant in assessing the
Company's operating results and liquidity. EBITDA from operations
and Free Cash Flow have limitations as an analytical tool and
should not be considered in isolation from, or as an alternative
to, net income or other data prepared in accordance with IFRS.
EBITDA from operations is calculated as income from mining
operations plus depreciation, depletion, accretion and amortization
less general and administrative costs. Free Cash Flow is calculated
as EBITDA from operations less financed and non-financed capital
expenditures. Other financial data has been prepared in accordance
with IFRS.
Neither the TSX
Venture Exchange nor its Regulation Services Provider (as that term
is defined in the policies of the TSX Venture Exchange) accepts
responsibility for the adequacy or accuracy of this release.
Forward-Looking
Information and Statements
This press
release contains certain forward-looking statements and
forward-looking information (collectively referred to herein as
"forward-looking
statements") within the meaning of applicable Canadian
securities laws. All statements other than statements of present or
historical fact are forward-looking statements. Forward-looking
statements are often, but not always, identified by the use of
words such as "could", "should", "can", "anticipate", "estimate",
"expect", "believe", "will", "may", "project", "budget", "plan",
"sustain", "continues", "strategy", "forecast", "potential",
"projects", "grow", "take advantage", "well positioned" or similar
words suggesting future outcomes. In particular, this press release
contains forward-looking statements relating to the future
production of the RAC and BCC mines. This forward looking
information is based on management's estimates considering typical
strip mining operations, equipment requirements and availability
and typical permitting timelines.
In addition, forward-looking
statements regarding the Company are based on certain key
expectations and assumptions of the Company concerning anticipated
financial performance, business prospects, strategies, the
sufficiency of budgeted capital expenditures in carrying out
planned activities, the availability and cost of services, the
ability to obtain financing on acceptable terms, the actual results
of exploration projects being equivalent to or better than
estimated results in technical reports or prior exploration
results, and future costs and expenses being based on historical
costs and expenses, adjusted for inflation, all of which are
subject to change based on market conditions and potential timing
delays. Although management of the Company consider these
assumptions to be reasonable based on information currently
available to them, these assumptions may prove to be incorrect.
By their very nature,
forward-looking statements involve inherent risks and uncertainties
(both general and specific) and risks that forward-looking
statements will not be achieved. Undue reliance should not be
placed on forward-looking statements, as a number of important
factors could cause the actual results to differ materially from
the Company's beliefs, plans, objectives and expectations,
including, among other things: general economic and market factors,
including business competition, world and local coal markets,
changes in government regulations or in tax laws; changes in market
conditions, variations in coal recovery rates, risks relating to
international operations, fluctuating coal prices and currency
exchange rates, changes in project parameters, the possibility of
project cost overruns or unanticipated costs and expenses, labour
disputes and other risks of the mining industry, failure of plant,
equipment or processes to operate as anticipated, the business of
the companies not being integrated successfully or such integration
proving more difficult, time consuming or more costly than
expected, the early stage development of the Company and its
projects; general political and social uncertainties; commodity
prices; the actual results of current exploration and development
or operational activities; changes in project parameters as plans
continue to be refined; accidents and other risks inherent in the
mining industry; lack of insurance; delay or failure to receive
board or regulatory approvals; changes in legislation, including
environmental legislation, affecting the Company; timing and
availability of external financing on acceptable terms; conclusions
of economic evaluations; and lack of qualified, skilled labour or
loss of key individuals. These factors should not be considered
exhaustive. Many of these risk factors are beyond the Company's
control and each contributes to the possibility that the
forward-looking statements will not occur or that actual results,
performance or achievements may differ materially from those
expressed or implied by such statements. The impact of any one
risk, uncertainty or factor on a particular forward-looking
statement is not determinable with certainty as these risks,
uncertainties and factors are interdependent and management's
future course of action depends upon the Company's assessment of
all information available at that time.
Forward -looking statements in
respect of the future production of the RAC and BCC
mines may be considered a financial outlook. These forward-looking
statements were approved by management of the Company on April 29,
2014. The purpose of this information is to provide an
operational update on the company's activities and strategies and
this information may not be appropriate for other purposes.
The forward-looking statements
contained herein are expressly qualified in their entirety by this
cautionary statement. The forward-looking statements included in
this press release are made as of the date of this press release
and the Company does not undertake and is not obligated to publicly
update such forward-looking statements to reflect new information,
subsequent events or otherwise unless so required by applicable
securities laws.
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