Calgary, Alberta / ACCESSWIRE / December 2, 2014 / CanAm Coal Corp. (COE.V) ("CanAm" or the "Company") has filed its condensed interim consolidated
financial statements and related MD&A for the period ended September 30,
2014. 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 its third quarter 2014 financial results
for the period ending September 30, 2014. Revenue and EBITDA from operations for
the quarter were $16.7 million and $2.5 million respectively as compared to
$17.9 million and $3.4 million in the prior year. Loss for the quarter was $2.5
million as compared to $0.9 million in the prior year. Sales for the quarter
were 170,000 tons as compared to 196,000 tons in Q3 2013. Third quarter EBITDA
continues to be impacted from the delay of permit approval for Gooden Creek 2
and the fact that the Company had to purchase some 25,000 tons of coal from
third party producers in order to continue to meet its overall customer
commitments. The loss for the quarter was impacted by a one-time non-cash loss
of $0.9 million resulting from the conversion of the $7.6 million debenture debt
to equity.
For the nine month period ended September 30, 2014, revenue and
EBITDA from operations were $50.7 million and $7.8 million respectively as
compared to $47.3 million and $7.9 million in the prior year. Loss for the first
half of the year was $5.7 million as compared to $4.3 million in the prior year.
Sales for the nine month period were 524,000 tons as compared to 514,000 tons in
2013. During the first nine months of the year, the Company faced a number of
challenges: (1) in Q1, the Company was faced with some of the most difficult
operating conditions in the Company's history as a result of one of the coldest
winters in the State of Alabama, (2) production and sales were impacted to the
tune of 50,000 tons as a result of the delay in securing the Gooden Creek 2
permit and (3) operational challenges at some of its mines as a result of
geological inconsistencies in the coal seams. Despite these challenges, for the
nine month period, the Company achieved higher sales volumes and higher revenue
and delivered EBITDA from operations on par with 2013.
(in $ millions except sales)
|
Sept 30, 2014 |
Sept 30, 2013 |
% Change |
|
Q3 |
YTD |
Q3 |
YTD |
Q3 |
YTD |
Coal Sales (in tons) |
169,752 |
523,740 |
195,750 |
513,691 |
-13% |
2% |
Revenue |
$16.7 |
$50.7 |
$17.9 |
$47.3 |
-7% |
7% |
EBITDA from Operations |
$2.5 |
$7.8 |
$3.4 |
$7.9 |
-26% |
- |
Operating Cash Flow |
$1.7 |
$5.4 |
$1.1 |
$5.1 |
55% |
6% |
Free Cash Flow |
$2.4 |
$4.2 |
$1.7 |
$1.3 |
41% |
223% |
Note: Refer to the definition of EBITDA from operations and
Free Cash Flow on the last page of this press release.
Company CEO, Jos De Smedt commented: "The third quarter was a
challenging one for the Company as all aspects of the operations were impacted
by the fact that we were unable to secure the Gooden Creek 2 permit during the
quarter. This resulted in us being short on tonnage to meet some of our customer
commitments and required us to purchase some 25,000 tons of coal from third
party coal producers. Despite these challenges, sales volumes, revenue and
EBITDA continued at a healthy pace during the quarter and, on a year to date basis, we outperformed 2013 on
most accounts. Specifically, cash flow improved both on a quarterly basis and on
a year to date basis with free cash flow for the nine month period coming in at
$4.2 million as compared to $1.3 million in the previous year. As to our
financial position and capital structure, we completed our debt to equity
conversion in the third quarter which reduced our net debt by $7.6 million and,
as a result, significantly improved our debt to equity ratio to 8:1 at the end
of Q3 as compared to 76:1 at June 30, 2014. Subsequent to the quarter, we made
progress on a number of fronts: moved forward on our diversification strategy
and announced the acquisition of a frac sand property, obtained additional short
term financing and received the Gooden Creek 2 permit which started production
towards the end of November."
Diversification Strategy & Frac Sand Acquisition
In October, following a strategic review, the Board of
Directors concluded that given the current depressed coal markets and the
challenging junior mining financing environment and the poor public market
perception of the coal industry, the Company's strategic goal of achieving
annual coal production in excess of 2 million tons in the foreseeable future
would be very difficult to accomplish. Therefore, the Board mandated Management
to explore other growth initiatives within the mining industry in order to
enhance and improve shareholder value.
On October 29, 2014, the Company signed a binding Letter of
Intent ("LOI") to acquire a 100% interest in an Alberta Metallic and Industrial
Minerals Permit covering approximately 1,200 acres (567 ha) of land containing
high quality silica sand (or Frac Sand) in Western Canada (the "Property").
The Property has a number of compelling attributes:
- Based on an historical resource calculation, the property may contain at
least 10 million cubic yards of sand. This estimate however is non NI 43-101
compliant and therefore cannot, and should not be relied upon.
- Initial tests, performed by Loring Laboratories (Alberta) Ltd., indicated
that the sand meets the criteria of Tier 1/Tier 2 quality for sphericity and
roundness which would make this a highly desirable product for the fracking
industry. The Company has initiated further tests to confirm these initial
results.
- The Property's strategic location in Western Canada provides it with a
significant logistics cost advantage due to its relative proximity to major
Western Canadian shale plays such as the Duvernay and Montney. Industry
experts estimate that logistics (transportation and handling/transloading) can
account for 60%+ of the delivered cost to the end consumer and such costs
could be as high as $150/ton for sand imported from the US. Currently, the
majority of the sand used in the Canadian market is imported from the US and
can travel up to 3,000 km from the frac sand producing States of Wisconsin,
Nebraska and Minnesota.
The Company anticipates closing this acquisition in early
December at which time it will aggressively move forward with an exploration and
development program with the objective of issuing a NI 43-101 resource report in
Q2 of 2015.
Liquidity and Financial Position Highlights
As at September 30, 2014, the Company had a working capital
deficit of $7.1 million as compared to $7.9 million at June 30, 2014 and $22.8
million at December 31, 2013. The significant improvement of the working capital
is the result of a number of initiatives taken by the Company including the
refinancing of the May 2014 debentures with a new $14 million secured
non-convertible debenture and the additional US$3 million financing by a major
US financial institution. Also, on July 25, 2014, the Company completed its debt
to equity conversion of $7.6 million.
The impact of the additional equipment financing, the extension
of the equipment financing loan term, the successful refinancing of the May
debentures, the debt to equity conversion and other measures taken by the
Company have significantly improved the financial position and capital structure
of the Company:
- Working capital improvement of approximately $15.7 million as compared to
December 31, 2013;
- Net debt decrease of $7.6 million; and
- Debt to equity ratio improvement of 76:1 at June 30, 2014 to 8:1 at
September 30, 2014.
Also, over the remaining term of the August 2016 debentures,
the debt to equity conversion will reduce the Company's interest cost by
approximately $1.4 million, including approximately $0.3 million in 2014.
Subsequent to quarter end, the Company renewed its US $4
million Operating Line Facility with a US based financial institution which
provides for operational needs and letters of credit for reclamation bonding
purposes. The facility bears interest at the LIBOR rate + 3% and matures on
October 31, 2015.
Also, in November 2014, the Company obtained additional short
term financing from a US based financial institution in the amount of US $1.5
million and approximately $1.6 million of short term loans from insiders of the
Company. These short term loans mature on May 31, 2015 and will be used to fund
the cash purchase price of the frac sand acquisition and certain other related
expenses and for general working capital purposes.
The Company continues to focus on improving its working capital
position and capital structure and evaluates on an ongoing basis a number of
potential measures including maximizing customer coal shipments, improving
operating efficiencies and implementing cost reduction opportunities,
accelerating the sale of current coal inventories, selling excess equipment and
identifying additional sources of funding.
Nine Month 2014 Financial Results
|
|
Three month |
|
|
Three month |
|
|
Nine month |
|
|
Nine month |
|
|
|
period ended |
|
|
period ended |
|
|
period ended |
|
|
period ended |
|
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
|
Sept
30, 2014 |
|
|
Sept
30, 2013 |
|
|
Sept
30, 2014 |
|
|
Sept
30, 2013 |
|
Revenue (coal sales) |
$ |
16,670,022 |
|
$ |
17,873,253 |
|
$ |
50,662,089 |
|
$ |
47,343,408 |
|
Production cost |
|
(10,417,978 |
) |
|
(10,038,614 |
) |
|
(31,327,902 |
) |
|
(27,684,638 |
) |
Royalties, Transportation & Other |
|
(2,979,282 |
) |
|
(3,541,453 |
) |
|
(9,309,559 |
) |
|
(9,209,623 |
) |
Depletion & amortization |
|
(3,439,973 |
) |
|
(3,272,002 |
) |
|
(10,139,634 |
) |
|
(9,116,176 |
) |
Income from mining operations |
|
(167,211 |
) |
|
1,021,184 |
|
|
(115,006 |
) |
|
1,332,971 |
|
General & administrative |
|
(766,824 |
) |
|
(903,727 |
) |
|
(2,237,047 |
) |
|
(2,579,345 |
) |
Other expenses (excluding G&A) |
|
(1,877,858 |
) |
|
(1,310,131 |
) |
|
(4,940,965 |
) |
|
(4,654,003 |
) |
Loss before tax |
|
(2,811,893 |
) |
|
(1,192,674 |
) |
|
(7,293,018 |
) |
|
(5,900,377 |
) |
Income tax recovery |
|
312,612 |
|
|
297,729 |
|
|
1,632,206 |
|
|
1,625,837 |
|
Loss for the period |
|
(2,499,281 |
) |
|
(894,945 |
) |
|
(5,660,812 |
) |
|
(4,274,540 |
) |
Loss attributable to owners of the parent |
|
(2,400,329 |
) |
|
(964,172 |
) |
|
(5,424,020 |
) |
|
(4,227,587 |
) |
Loss attributable to non-controlling interest |
|
(98,952 |
) |
|
69,227 |
|
|
(236,792 |
) |
|
(46,953 |
) |
|
|
(2,499,281 |
) |
|
(894,945 |
) |
|
(5,660,812 |
) |
|
(4,274,540 |
) |
EBITDA from operations |
$ |
2,505,938 |
|
$ |
3,389,459 |
|
$ |
7,787,581 |
|
$ |
7,869,802 |
|
Key statistics are as follows:
|
2014 |
2013 |
|
Q1 |
Q2 |
Q3 |
YTD |
Q1 |
Q2 |
Q3 |
YTD |
Coal Sales (in tons)
|
167,955 |
186,033 |
169,752 |
523,740 |
149,453 |
168,488 |
195,750 |
513,691 |
(in $ per Ton) |
|
|
|
|
|
|
|
|
Revenue |
$98 |
$94 |
$98 |
$97 |
$93 |
$92 |
$91 |
$92 |
Production Cost |
60 |
58 |
61 |
60 |
56 |
55 |
51 |
54 |
RTO |
17 |
18 |
18 |
18 |
19 |
17 |
18 |
18 |
EBITDA from operations
|
$16 |
$14 |
$15 |
$15 |
$12 |
$16 |
$17 |
$15 |
|
|
|
|
|
|
|
|
|
(in $'millions) |
|
|
|
|
|
|
|
|
Operating Cash Flow
|
$1.9 |
$1.8 |
$1.7 |
$5.4 |
$1.5 |
$2.5 |
$1.1 |
$5.1 |
|
|
|
|
|
|
|
|
|
EBITDA from operations |
$2.7 |
$2.6 |
$2.5 |
$7.8 |
$1.9 |
$2.6 |
$3.4 |
$7.9 |
Capex |
($1.9) |
($1.6) |
($0.1) |
($3.6) |
($2.5) |
($2.4) |
($1.7) |
($6.6) |
Free Cash Flow |
$0.8 |
$1.0 |
$2.4 |
$4.2 |
($0.6) |
$0.2 |
$1.7 |
$1.3
|
Note: Operating cash flow is before changes in non-cash working
capital
- Sales for the quarter were 170,000 tons as compared to 196,000 in Q3 2013.
Sales were down mainly as a result of the lack of production from GC2 and were
also impacted by a plant shutdown and a delay in the restart of shipments to
one of the Company's industrial customers. Q3 2013 sales of 196,000 tons were
mainly driven by record production in that quarter. Sales for the nine month
period were up 2% as compared to the prior year.
- Long term off-take contracts continue to enable the Company to achieve
better than market pricing for our high quality coals. Average realized sales
price per ton was $98 (US$90/ton) compared to $91 (US$89/ton) in Q3 2013 as a
result of the appreciation of the US$ vs. the Cdn$. In US dollar terms,
pricing was slightly higher mainly as a result of the mix of our coal
shipments. Average pricing for the nine month period was $97 (US$89/ton)
compared to $92 (US$90/ton).
- Average production cost per ton was $61 per ton (US$56/ton) compared to
$51 per ton (US$50/ton) in Q3 of 2013. Higher production costs were mainly the
result of lower overall production due to the lack of production from GC2,
geological issues at Old Union and the cost of purchasing third party coal.
For the nine month period ended September 30, 2014, cost of production was $60
per ton (US$ 55/ton) compared to $54 per ton (US$ 53/ton) in 2013.
- Operating cash flow for the quarter and the nine month period was better
than the prior year. For the nine month period ended September 30, 2014, the
Company generated $5.4 million of operating cash flow as compared to $5.1
million in the prior year.
- Investment in equipment and mine development was $0.1 million as compared
to $1.7 million in the prior year. In Q3 2014, the Company invested $0.3
million ($0.3 million in Q3 2013) in mine development in conjunction with
moving to a new mine increment at the Knight mine and expanding its footprint
at the Old Union 2 mine complex. Equipment capital repairs were $1.1 million
($1.4 million in Q3 2013) in the quarter offset by equipment sales of $1.3
million (nil in Q3 2013). For the nine month period of 2014, capex (net of
equipment sales), was $3.6 million as compared to $6.6 million in 2013.
- Free cash flow at $2.4 million for the quarter is up from $1.7 million in
Q3 2013. On a YTD basis, free cash flow was $4.2 million, significantly up
from $1.3 million in the prior year.
- Repayment of equipment financing obligations continues at a healthy pace
and in Q3 the Company repaid $2.5 million of these obligations. On a YTD
basis, the Company has repaid $6.7 million.
Outlook for balance of 2014 and 2015
With the issuance of the Gooden Creek 2 permit in late
November, the Company is now better positioned to execute on its production and
sales plan. Demand from our customers remains strong, additional sales
opportunities are becoming available and some supply has been taken out of the
local market.
The main focus of the Company for the remainder of the year and
into 2015 will be:
- to accelerate production at the Gooden Creek 2 mine;
- to optimize and tailor production at all mines in order to meet our
ongoing customer requirements;
- to continue to improve the working capital position of the Company and
evaluate on an ongoing basis a number of potential measures including
maximizing customer coal shipments, improving operating efficiencies and
implementing cost reduction opportunities, accelerating the sale of current
coal inventories and selling excess equipment; and
- to continue to improve the capital structure of the Company by identifying
and attracting additional sources of funding.
For 2015, our production is currently 75% contracted which puts
us in a favorable position to deliver on our business plan.
With respect to our recently announced frac sand acquisition,
we are looking to close that transaction in the short term and raise the
necessary funds in order to bring the property into production as soon as
possible. Initial financial modeling of a 500,000 ton per annum frac sand
operation indicates that annual EBITDA contribution to the Company would be
significant and would exceed EBITDA contribution from the current coal
operations by a ratio of 1 to 3.
For Further Information:
CanAm Corporate Office:
Jos De Smedt, Chief Executive Officer
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
November 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.
SOURCE: CanAm Coal Corp.