TORONTO, Dec. 1, 2014 /CNW/ - Pacific Coal Resources Ltd.
(TSXV: PAK) has filed its unaudited consolidated financial
statements for the three months ended September 30, 2014, together with its
management's discussion and analysis ("MD&A") for the
corresponding period. All financial figures contained herein are
expressed in U.S. dollars unless otherwise noted. These documents
will be posted on the Company's website at www.pacificcoal.ca and
under the Company's profile at www.sedar.com.
Hernan Martinez, Executive
Chairman, commented: "In the third quarter of 2014, we were able to
maintain year to date general and administrative expenses below
forecasted amounts. I am happy to report that management's efforts
at the La Caypa mine, to improve cash flow after experiencing some
challenges in the second quarter, have shown positive results with
an increase in production in the third quarter of 2014. We aim to
further develop the south pit at La Caypa to maximize its coal
production and strengthen our focus on core assets by disposing of
the remaining interest in the Barranquilla port. As we announced in
October 2014, we have signed a joint
operating agreement at Cerro Largo with Sloane Mining Services
Sucursal Colombia, and expect production to resume at Cerro Largo
by December of this year. This new agreement will provide the
Company with a steady cash flow to address the liquidity concerns
of the Company."
Third Quarter 2014 Highlights
- Coal
production: The Company produced 285,167 tonnes of coal in
the third quarter of 2014 (93% coming from the La Caypa open-pit
operations) bringing the total for the first nine months of 2014 to
837,827 tonnes. With production of 92,000 tonnes in October 2014, the Company now expects that 2014's
total annual production will be approximately 1.1 million tonnes.
La Caypa's production in the third quarter of 2014 showed
improvement over the second quarter of 2014 as management changed
the mine plan, including delaying some development to the first
half of 2015, to improve cash flow after experiencing some
challenges in the second quarter associated with adverse geological
conditions. In addition, production at the Cerro Largo mine was
minimal in the third quarter of 2014 as the operating contract with
the operator of the mine was terminated in July 2014 and production ceased. In October 2014, the Company signed a multi-year
joint operation agreement involving the takeover of operations by
Sloane Mining Services Sucursal Colombia ("Sloane") for the Cerro
Largo mine with production expected to start in December. The new
operator will be responsible for the mine's thermal coal production
and the associated costs going forward. This new contract will
improve the Company's operating cash flow and addresses the
liquidity concerns of the Company (see the 'Outlook' section on
page 2 of the Company's MD&A).
- Revenues:
Coal revenues of $33.1 million for
the third quarter of 2014 were approximately 50% above the second
quarter of 2014, mainly attributable to the 48% higher volume of
coal sold. Despite the Company's effort, coal revenues in the third
quarter of 2014 were 9% below the third quarter a year ago due to
the $4.95 per tonne decrease in the
average realized coal price and 5% lower coal sales volume
attributable to the impact of the second quarter 2014 production
issues at La Caypa on coal sales early in the third quarter of
2014.
- Operating Margin and
Adjusted Earnings Before Interest, Taxes, Depreciation and
Amortization ("EBITDA"): The Company's focus on mitigating
the effects of the adverse geological conditions that occurred at
the La Caypa mine in the second quarter of 2014 (see page 4 of the
Company's MD&A for more details) resulted in a reduced
operating loss in the third quarter of 2014 ($0.6 million) when compared to the second quarter
of 2014 operating loss of $3.5
million. The operating stripping ratio was reduced to
11.91:1 in the third quarter of 2014 from the previous quarter high
of 14.09:1. Correspondingly, Adjusted EBITDA for the third quarter
of 2014 improved over the second quarter of 2014 loss of
$4.9 million to a loss of
$1.9 million. See 'Non-GAAP and
Additional GAAP Financial Measures' for a definition and
reconciliation of operating margin and Adjusted EBITDA.
- Liquidity: In
July 2014, the Company completed a
private debt offering of notes for aggregate gross proceeds of
$6.5 million. The notes expire in
July 2015 and are guaranteed by a
receivable relating to the 2013 Barranquilla port concession sale
agreements due at that time.
- General and
administrative ("G&A") expenses: The Company recorded
$1.3 million in G&A expenses,
excluding depreciation, depletion and amortization ("DD&A"), in
the third quarter of 2014 compared to $1.4
million in the same period of 2013, a reduction of 10%. The
Company anticipates holding G&A expenses to $1.4 million for the fourth quarter of 2014.
Outlook
The Company has concentrated its efforts on the production of
thermal coal after re-focusing its strategic goals in 2013, which
included the sale of a majority of the Barranquilla port concession
in the fourth quarter of 2013. Management is also focusing on
eliminating the funds owed to Chipalo Resources (formerly owed to
Masering S.A.S "Masering") for past operation of the Cerro Largo
mine, with a balance of $13.6 million
owed at September 30, 2014, compared
to a high of $27.6 million owed at
December 31, 2012. The funds
generated from the sale of the Barranquilla port concession will go
towards the amount owed to Chipalo Resources, helping the Company
focus efforts on improving operations. The Company continues to
explore options to sell its remaining 15% interest of the
Barranquilla port concession.
Operationally, production at the La Caypa mine in the third
quarter of 2014 was 265,323 tonnes, bringing the total production
to 696,126 tonnes for the first nine months of 2014. This puts the
Company on track to meet its 2014 annual forecast of thermal coal
open pit production from La Caypa mine of one million tonnes. The
Company adjusted its mining plan for the second half of 2014,
shifting some mine development to the first half of 2015 in order
to conserve funds after the impact on operations of the geological
issues experienced in the second quarter of 2014 (see page 4 in
MD&A for more details). This shift in development spending will
cause higher stripping ratios in the first half of 2015; therefore,
management is undergoing negotiations with the mine operator to
stabilize payments during 2015, using the average stripping ratio
throughout the year, to relieve the impact the higher ratios will
have on cash flow. The Company is forecasting production of 1.1
million tonnes in 2015 from the La Caypa mine. In addition, the
approximately 8,000 tonnes underground mine pilot project at La
Caypa that began in February 2014 was
completed in the third quarter of 2014, with 1,354 tonnes of coal
produced in the third quarter (8,345 in the first nine months of
2014). The completion of the pilot project did not bring the
expected results; therefore, the Company is exploring other
opportunities with the goal of contracting all of the underground
mining to commence in the third quarter of 2015.
In an effort to maximize efficiencies of the Cerro Largo mine
and increase cash flow from operations, subsequent to September 30, 2014, the Company signed a
multi-year joint mine operation agreement with Sloane who will be
responsible for the mine's thermal coal production and the
associated costs going forward. The Company will be entitled to a
percentage of the tonnes produced, which it will in turn sell back
to Sloane at a set price. The agreement further contemplates that
Sloane will provide the Company with a $6.5
million advance payment for the purchase of the future coal
production which it is entitled to. The agreement is expected to
provide the Company with a steady cash inflow that will be used to
fund the continued ramp up of La Caypa south pit operations and
improve the Company's working capital deficit position. The
Company expects to receive over $3
million under this agreement in 2015, of which 50% will be
applied towards the repayment of the advance.
In July 2014, the Company
completed a private debt offering for aggregate gross proceeds of
$6.5 million at an annual interest
rate of 12%, payable monthly. The notes expire in July 2015 and are guaranteed by a $6.5 million receivable from the 2013
Barranquilla port concession sale agreements, which is also due in
July 2015. The Company used a
majority of the net proceeds of $6.3
million (after excluding fees associated with the offering)
to pay amounts owed to Chipalo Resources and towards La Caypa
royalties owed to the community of El Cerrejón.
In terms of G&A expenses, after exceeding the Company's 2013
cost cutting objective, management was able to surpass the
Company's reduction goal for the first nine months of 2014.
Actual G&A expenses were $3.9
million for the nine months ended September 30, 2014, compared to the Company's
forecast of $4.2 million. The Company
anticipates G&A expenses in the fourth quarter of 2014 will be
approximately $1.4 million.
Financial and Operating Summary
A summary of the financial and operating results for the third
quarter and nine months of 2014 and 2013 is as follows:
|
Third
Quarter
|
Nine Months
|
|
2014
|
2013
|
2014
|
2013
|
Operating
data:
|
|
|
|
|
|
Tonnes of coal
produced(1)
|
283,813
|
395,499
|
837,827
|
1,017,710
|
|
Average stripping
ratio – operations
|
11.48:1
|
8.48:1
|
11.57:1
|
8.80:1
|
|
Tonnes of coal
sold
|
338,881
|
356,299
|
939,873
|
926,868
|
|
Average realized
thermal coal price ($/tonne sold)(2)
|
$ 97.76
|
$ 102.71
|
$ 96.35
|
$ 103.11
|
|
Operating margin per
tonne sold (2)
|
$ (1.63)
|
$ 18.77
|
$ 0.25
|
$ 11.39
|
|
|
|
|
|
Financial data
($000's, except per share amounts):
|
|
|
|
|
|
Revenue
|
$ 33,229
|
$ 37,189
|
$ 91,189
|
$ 96,190
|
|
Adjusted EBITDA
(2)
|
(1,850)
|
5,252
|
(3,680)
|
5,861
|
|
Earnings (loss) from
operations
|
(4,104)
|
11,376
|
(9,521)
|
6,902
|
|
Net loss attributable
to shareholders
|
(1,360)
|
9,021
|
(14,245)
|
7,921
|
|
Basic and diluted
loss per share
|
(0.03)
|
0.18
|
(0.29)
|
0.17
|
|
Mineral properties
additions – La Caypa south pit
|
165
|
2,719
|
6,377
|
9,436
|
|
|
|
|
|
|
|
|
September
30,
2014
|
December
31,
2013
|
Balance sheet
($000's):
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
$ 814
|
$ 235
|
|
Total
assets
|
|
|
241,249
|
265,138
|
|
Total debt
(3)
|
|
|
49,249
|
53,317
|
|
|
(1)
|
Excludes 1,354 and
8,345 tonnes of coal produced from underground mine for the three
and nine months ended September 30, 2014. See 'Outlook'
section of the Company's MD&A for details of the pilot
project.
|
(2)
|
Adjusted EBITDA,
average realized thermal coal price per tonne sold and operating
margin per tonne sold are non-GAAP finance performance measures,
none of which have standardized definitions under IFRS. See
the Company's MD&A for further details.
|
(3)
|
Total debt includes
short-term debt, long-term debt, finance leases and amounts owed to
Chipalo Resources by Norcarbon S.A.S. ("Norcarbon") (September 30,
2014 - $13.6 million, September 30, 2013 - $23.7
million).
|
Operational Update
La Caypa mine
|
Production of
Coal
(metric tonnes)
|
Waste
(bcm)(1)
|
Stripping
Ratio
|
Open-pit
operations(2)
|
265,323
|
3,159,231
|
11.91:1
|
South pit
development
|
-
|
55,494
|
N/A
|
Total
|
265,323
|
3,214,725
|
12:12:1
|
(1)
|
Bank cubic
meters
|
(2)
|
100% from La Caypa's
south pit
|
Production from the La Caypa mine was 266,677 tonnes in the
third quarter of 2014 (open-pit operations of 265,323 tonnes and
underground operations of 1,354 tonnes), achieving 99% of its
planned production, a decrease of 16% from the tonnes produced in
the third quarter of 2013 (315,933 tonnes) and 36% increase over
the tonnes produced in the second quarter of 2014 (196,644
tonnes).
Meeting the production forecast and the increase from the prior
period can be attributed to management making adjustments to
mitigate the effects of the adverse geological conditions in the
section produced from in the second quarter of 2014. The issue in
the second quarter of 2014 was outside of the Company's control and
primarily a result of naturally occurring burning of the coal
mantles in addition to the mantles being affected by the presence
of a geological fault.
The Company is forecasting thermal coal from La Caypa in 2014 of
approximately one million tonnes, approximately equal to the
production in 2013.
Cerro Largo mine
|
Production of
Coal
(metric tonnes)
|
Waste
(bcm)
|
Stripping
Ratio
|
Total
|
18,490
|
99,922
|
5.40:1
|
In the third quarter of 2014, the Company produced 18,490 tonnes
from the Cerro Largo mine, a significant decrease from the 87,618
tonnes produced in the second quarter of 2014 and the 79,577 tonnes
produced in the third quarter last year. In July 2014, the Company terminated the operating
contract with the mine operator, Servicios Integrales del Ranchería
S.A.S. ("SIRA S.A.S."). Consequently, production in the third
quarter of 2014 was minimal and is expected to remain so for most
of the fourth quarter 2014. In October
2014, the Company signed a multi-year joint mine operation
agreement with Sloane for the Cerro Largo mine which includes other
agreements such as sale and purchase of coal and rent of equipment
and land. It is expected that production activities will recommence
in December 2014.
About Pacific Coal Resources Ltd.
Pacific Coal Resources Ltd. is a Canadian-based mining
company engaged in the acquisition, exploration and production of
coal and coal-related assets from properties located in
Colombia. The Company's common
shares are listed on the TSX Venture Exchange and trade under the
symbol "PAK".
Forward Looking Information:
This news release contains "forward-looking information",
which may include, but is not limited to, statements with respect
to the future financial or operating performance of the Company and
its projects. Often, but not always, forward-looking statements can
be identified by the use of words such as "plans", "expects", "is
expected", "budget", "scheduled", "estimates", "forecasts",
"intends", "anticipates", or believes" or variations (including
negative variations) of such words and phrases, or state that
certain actions, events or results "may", "could", "would", "might"
or "will" be taken, occur or be achieved. Forward-looking
statements involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or
achievements of Pacific Coal to be materially different from any
future results, performance or achievements expressed or implied by
the forward-looking statements. Forward-looking statements
contained herein are made as of the date of this press release and
Pacific Coal disclaim, other than as required by law, any
obligation to update any forward-looking statements whether as a
result of new information, results, future events, circumstances,
or if management's estimates or opinions should change, or
otherwise. 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. Accordingly, the reader is cautioned not to place undue
reliance on forward-looking statements.
Neither 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 news release.
SOURCE Pacific Coal Resources Ltd.