CanAm Coal Corp. (TSX VENTURE:COE) (OTCQX:COECF) ("CanAm" or the "Company") has
filed its unaudited condensed interim consolidated financial statements and
related management's discussion and analysis for the three month period ended
April 30, 2011. Copies of these documents may be obtained via the SEDAR website.
With the primary focus of the Company on growing coal production and resources,
the main activities of the CanAm team in the first quarter were devoted to
transitioning and optimizing the Powhatan mine operations and on successfully
completing the Birmingham Coal & Coke ("BCC") acquisition. The Company was
successful on both accounts and delivered record production and profit in the
first quarter of fiscal 2012 and on May 9th, shortly after quarter end,
completed the acquisition of 50% of the BCC group of companies.
"We made significant progress on all fronts in this quarter", said Tim Bergen,
CEO of CanAm. "Compared to prior year's first quarter, we tripled coal
production and coal revenue and increased income from mining operations
five-fold. We also generated approximately $0.8 million of cash flow from
operations and delivered $0.2 million of net income in the first quarter. At the
same time, we completed the BCC acquisition which adds a 50% interest in 3
operating mines and a coal brokerage business".
Highlights and events for the first quarter include:
-- Mined 30,655 tons of coal in the first quarter as compared to 9,950 tons
in Q1 of fiscal 2011 or an increase of 20,705 tons. Coal sales were up
16,022 tons from the previous quarter (Q4 2011) or more than doubled;
-- Generated revenue, income and EBITDA from mining operations of
$3,233,121 (2011 - $1,124,738), $892,824 (2011 - $177,986) and
$1,180,461 (2011 - $206,952), respectively;
-- Generated cash from operations of $788,175 as compared to a use of cash
for operations of $115,903 in the comparable prior period;
-- Improved the overall financial position of the Company and cash and cash
equivalents and working capital at April 30, 2011 amounted to $2.4
million and $0.9 million as compared to $1.5 million and $5,497 at
January 31, 2011;
-- Converted approximately $0.5 million of the 12% convertible debenture
debt into common shares and raised additional funds as a result of the
exercise of warrants for proceeds of approximately $65,000.
Highlights and events subsequent to the first quarter ended April 30, 2011 include:
-- Completed the purchase of a 50% ownership stake in Birmingham Coal &
Coke which operates 3 operating mines and a brokerage business in
Alabama that will add coal sales of approximately 20,000 to 25,000 tons
per month starting in May of 2011. The Company has an option to purchase
an additional 30% ownership within the next 2 years and the remaining
20% within 5 years;
-- Raised $11.5 million through a 9.5% convertible debenture offering which
will be used to fund the Company's acquisition, its 2011 capital
expenditure program and for working capital purposes;
-- Completed a NI 43-101 independent reserve report for BCC which
determined the coal resource at 6 million tons of proven reserves. On
this basis, and considering current production levels, average mine life
for the BCC mines is 10 years;
-- Started trading on the US OTC market, OTCQX International, under the
symbol COECF.
Financial results for the quarter ended April 30, were as follows:
2011 2010
--------------------------
Revenue $ 3,233,121 $ 1,124,738
Income from mining operations $ 892,824 $ 177,986
Other income (expenses) $ (539,845) $ (184,987)
Net income (loss) $ 227,604 $ (25,053)
EBITDA from mining operations $ 1,180,461 $ 206,952
Mine operating results for the quarter ended April 30, were as follows:
Three Month Period
Ended April 30
-------------------------
2011 2010
Coal sales revenue 3,233,121 1,095,096
Income from mining operations 892,824 177,986
EBITDA from mining operations 1,180,461 206,952
Coal sales (in tons) 30,655 9,950
Average coal price 105 110
Average cost of product sold 43 67
Average cost of royalties
transportation and other 24 25
Average income from mining 29 18
Average EBITDA from mining 39 21
Notes:
-- Averages are all presented on a per ton basis.
-- Through November 8, 2010, the Company only owned 49% of the mining
operations and therefore for the first quarter ended April 30, 2010, all
numbers represent CanAm's proportionate 49% share.
-- EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization
is a supplemental measure that is not presented in accordance with
generally accepted accounting principles (GAAP). This non-GAAP measure
may not be comparable to the calculation of similarly titled measures
reported by other companies and should not be considered in isolation,
as an alternative to, or more meaningful than financial measures
calculated and reported in accordance with GAAP.
Coal Sales
Coal sales tripled over the comparable period in the prior fiscal year and were
30,655 tons in the quarter as compared to 9,950 tons or an increase of 20,705
tons. Coal sales were up 16,022 tons from the previous quarter or more than
doubled. Higher thermal coal recovery rates from the Mary Lea coal seam resulted
in a 63/37% metallurgical/thermal coal mix.
Revenue, Income and EBITDA from Mining Operations
Revenue, income and EBITDA from mining operations were all up significantly as
compared to the prior period as a result of the increased production and
improved pricing on both the metallurgical and thermal coal. Although prices for
both coals increased quarter over quarter, the average coal price was lower due
to the Company's coal mix of 63/37% metallurgical/thermal coal as compared to
84/16% in the comparable prior period. For the quarter, the Company realized an
average sales price of $105/ton as compared to $110/ton in fiscal 2011.
Production costs were significantly lower in the quarter due to the increased
production volumes, better strip ratios and efficiencies realized following the
transition of mine operations from the previous contract miner to the Company.
For the quarter, average production cost per ton was $43 as compared to $67 in
fiscal 2011 or a decrease of 35%. EBITDA from mining operations was $1,180,461
million or $39/ton as compared to $206,952 or $21/ton in the first quarter of
fiscal 2011.
Revenue, income and EBITDA from mining operations were negatively impacted from
the strengthening of the Canadian dollar. Average exchange rate for the first
quarter was US$1=CDN$0.9624 as compared to US$1=CDN$1.0280 in the comparable
prior period.
Other Income (Expenses)
Other expenses for the three month period ended April 30, 2011 were $539,845 as
compared to $184,987 in fiscal 2010 or an increase of $354,858. The increase was
mainly the result of: higher general and administrative expenses as a result of
the increased activity in the Company's operations (+$178,000), interest and
costs associated with the Company's 12% debenture which was not in place in
fiscal 2011 (+$90,000), higher foreign exchange losses as a result of the
strengthening of the Canadian dollar (+$16,000), higher stock based compensation
expenses (+$37,000) and higher equipment interest expense (+$30,000).
The Company's overall financial position improved as a result of the cash flow
generated from mining operations and monies received in the amount of $1 million
through the issue of subscription receipts in the context of the 9.5%
convertible debenture financing. These funds were held in escrow by the Company
until the closing of the BCC acquisition (which occurred on May 9, 2011). The
Company continued its investment in its mining operations in Alabama and capital
expenditures for the quarter ended April 30, 2011, were approximately $0.6
million including $0.2 million for a deposit on mine reclamation bonds.
Outlook
Since November 2009, the Company has embarked on a strategy to become an
emerging coal producer and in the last year the Company has successfully
completed two acquisitions: gaining control of RAC Mining LLC, a predominantly
metallurgical coal producer, and acquiring a 50% ownership stake in Birmingham
Coal & Coke Inc., a predominantly thermal coal producer. As a result, CanAm's
assets now comprise an ownership stake in:
-- 4 producing coal mines
-- 1 development mine
-- Permits and leases covering approximately 5,000 acres of land
-- Workforce of 110+ employees
With transition of mining operations to RAC completed and the acquisition of 50%
of BCC, which will contribute to CanAm's results starting May 1, 2011, the
Company is estimating coal sales of between 300,000 to 350,000 for fiscal 2012
(ending January 31, 2012). The Company will also continue to evaluate other
mining opportunities in North America and it is the Company's intention to
exercise its option on the remaining 50% ownership stake in Birmingham Coal &
Coke, Inc.
In addition, the Company continues to pursue the development of the Buick Coal
Property which holds significant coal resources, 188 million tons of indicated
and 103 million tons of inferred coal resources, in Colorado, USA (see the
technical report entitled "Limon Lignite Project, Elbert County, Colorado, USA,"
dated October 26, 2007 and filed on SEDAR on November 2, 2007).
About CanAm Coal Corp.
CanAm is a coal producer and development company focused on growth through the
acquisition, exploration and development of coal resources and resource-related
technologies. CanAm's main activities and assets include its four operating coal
mines in Alabama, the exclusive rights to a proprietary Coal to Liquids
technology which converts coal into liquid fuels (such as oil, jet fuel) at an
economical cost with zero airborne emissions and the Buick Coal Project which
holds significant coal resources, 188 million indicated and 103 million inferred
resources, in Colorado, USA (see the technical report entitled "Limon Lignite
Project, Elbert County, Colorado, USA," dated October 26, 2007 and filed on
SEDAR on November 2, 2007). Other coal and related opportunities continue to be
evaluated on an ongoing basis.
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 Powhatan
mine; the permitting of the Davis mine; and the potential production at the
Davis mine. 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, changes in government
regulations or in tax laws; 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 Powhatan
and BCC mines may be considered a financial outlook. These forward-looking
statements were approved by management of the Company on July 29, 2011. 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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