PACIFIC COAL RESOURCES LTD TORONTO, Dec. 1, 2014 /PRNewswire/ - 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, December 31,
2014 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 Waste (bcm)(1) Stripping Ratio
(metric tonnes)
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 Waste (bcm) Stripping Ratio
(metric tonnes)
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.
