Western Coal announces fiscal third quarter 2010 results
Despite the lower price environment for coal and lower sales volumes both of which are a result of the economic downturn in fiscal 2010 when compared to fiscal 2009, the Company has been successful in reducing its per unit cash costs. Western has also been able to maintain a strong financial position through the global economic recession while continuing to invest in the business.
Key operating points for the fiscal third quarter:
- Consolidated revenues of $118.7 million were 10% higher than fiscal
second quarter 2010, partially due to 175,000 tonnes of coal sold at
previous coal year prices
- Consolidated income from mining operations of $37.8 million or a
margin of 32%
- Continued lower costs with Canadian operations cash costs (cost of
product sold plus transportation costs) at $96 per tonne which was 4%
lower than the previous quarter; US operations cash costs of US$66
per short ton or 7% lower than the previous quarter
- Approximately 260,000 tonnes of low volatile PCI and hard coking coal
scheduled for shipment in December 2009 were delayed, due to the late
arrival of two ships, to the first week of January 2010
- Commenced operations on a permit for Maple Coal surface mine which
increases reserves of marketable tons to over 10 million short tons,
which is a 67% increase in the Maple surface reserves
Other key points for the fiscal third quarter:
- Continued strong financial position with cash in the bank as at
December 31, 2009 of $150.1 million or $55.5 million more than
September 30, 2009
- Approved $23.9 million investment for six 250-tonne haul trucks and
front-end loading equipment at the Wolverine mine. The new equipment,
which is expected to arrive in Q1-2011 as the mines increase
production rates, will replace eight 150-tonne trucks, which could be
redeployed at Brule and Willow Creek. Overall productivity and costs
should improve at the mines which will allow the Company to take
advantage of the strengthening coal markets
- Sold AGD Mining Pty on November 30, 2009 for a gain of $7.0 million
- Commenced a share buy-back program on December 17, 2009. No shares
have been purchased on this program as at the date of this release
- Participated in the Energybuild Group Plc fundraising which increased
the Company's ownership to 55%. The funds were raised to grow
Energybuild's operations
- Further strengthening of the Board with the appointment of Owen Ryan
on December 7, 2009
- Appointment of Keith Calder as Director, President and Chief
Executive Officer on December 1, 2009
"I am quite excited for the Company's future. We have come out of the global economic recession with a lower and improved cost structure, which combined with the increasing demand for the Company's products and higher coal prices into the future, means Western is well positioned to generate higher shareholder returns. Our strategy will be to take advantage of these improved conditions to grow and expand our business which will further bolster our competitive position."
News Release
This news release is prepared as at
Financial Summary - unaudited:
(In thousands of Canadian
dollars, except tonnes December 31, March 31,
and per share data) 2009 2009
-------------------------------------------------------------------------
Cash & cash equivalents $ 150,146 $ 74,853
Amounts receivable 26,257 40,080
Inventory 60,755 62,376
Total current assets 242,162 217,943
Total assets 836,111 662,337
Current liabilities $ 99,072 $ 72,304
Long-term liabilities 134,871 124,625
Non-controlling interests 25,841 -
Shareholders' equity 576,327 465,408
Total liabilities and shareholders' equity 836,111 662,337
Current ratio (current assets/current
liabilities) 2.44 3.01
Debt to equity ratio (total debt/shareholders'
equity) 0.41 0.42
Three months ending Nine months ending
December 31, December 31,
-------------------------------------------------------------------------
2009 2008 2009 2008
-------------------------------------------------------------------------
Revenue $ 118,662 $ 176,561 $ 301,997 $ 474,409
Cost of goods sold 80,912 82,410 234,227 245,373
-------------------------------------------------------------------------
Income from mining
operations 37,750 94,151 67,770 229,036
Other (expenses) (6,908) (3,849) (24,767) (33,188)
Income tax (expense) (7,743) (27,824) (14,355) (28,918)
Non-controlling interests (111) - 86 -
Equity earnings 1,042 - 870 -
-------------------------------------------------------------------------
Net income $ 24,030 $ 62,478 $ 29,604 $ 166,930
Earnings per share, basic $ 0.10 $ 0.30 $ 0.13 $ 0.96
Earnings per share,
diluted $ 0.09 $ 0.29 $ 0.13 $ 0.84
-------------------------------------------------------------------------
Results of Operations
---------------------
The results of the operations are reported in the following reportable segments:
Canadian Operations
In thousands of Canadian Three Three Nine Nine
dollars unless otherwise months months months months
noted ended ended ended ended
December December December December
31, 2009 31, 2008 31, 2009 31, 2008
-------------------------------------------------------------------------
Financial Excerpts
Revenues $ 83,781 $ 176,561 $ 235,064 $ 474,409
Cost of goods sold 49,946 82,410 176,337 245,373
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Income from mining
operations $ 33,835 $ 94,151 $ 58,727 $ 229,036
Production (tonnes):
Hard coking coal 354,000 280,000 1,040,000 935,000
Low-vol PCI coal 179,000 329,000 399,000 885,000
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total Production 533,000 609,000 1,439,000 1,820,000
Sales (tonnes):
Hard coking coal 301,000 318,000 973,000 949,000
Low-vol PCI coal 146,000 195,000 527,000 747,000
-------------------------------------------------------------------------
Total Sales 447,000 513,000 1,500,000 1,696,000
Per sales unit:
Coal price realized $ 187 $ 344 $ 157 $ 280
Coal price realized
(USD) $ 177 $ 279 $ 141 $ 255
Cost of goods sold
Cost of product sold $ 67 $ 116 $ 74 $ 100
Transportation and
other $ 29 $ 30 $ 29 $ 32
Depletion,
amortization
and
accretion $ 16 $ 15 $ 15 $ 13
-------------------------------------------------------------------------
-------------------------------------------------------------------------
$ 112 $ 161 $ 118 $ 145
The impact of the global economic recession has resulted in a 33% decrease in revenues from third quarter 2009 to third quarter 2010, which results from the decrease in sales price realized as well as a lower sales volume. The decrease in sales price is a result of lower coal contract prices for fiscal 2010, which are US$126 per tonne for hard coking coal and US$90 per tonne for ultra-low volatile PCI ("ULV-PCI") compared to US$300 per tonne and US$248 per tonne respectively for fiscal 2009. These lower sales prices in the quarter ended
For the three month period ended
Production of hard coking coal increased 74,000 tonnes when comparing the three month period ended
Production of ULV-PCI coal from the Brule mine decreased 150,000 tonnes when comparing the three month period ended
The 31% decrease in the per unit costs of goods sold from
US Operations
In thousands of Canadian Three Three Nine Nine
dollars unless otherwise months months months months
noted ended ended ended ended
December December December December
31, 2009 31, 2008 31, 2009 31, 2008
-------------------------------------------------------------------------
Financial Excerpts
Revenues $ 29,821 $ - $ 57,159 $ -
Cost of goods sold 25,933 - 48,366 -
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Income from mining
operations $ 3,888 - $ 8,793 -
Production (short tons*):
Metallurgical coal 120,000 - 222,000 -
Thermal coal 243,000 - 445,000 -
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total Production 363,000 - 667,000 -
Sales (short tons*):
Metallurgical coal 114,000 - 209,000 -
Thermal coal 232,000 - 414,000 -
-------------------------------------------------------------------------
Total Sales 346,000 - 623,000 -
Per sales unit:
Coal price realized $ 86 $ - $ 92 $ -
Coal price realized
(USD) $ 80 $ - $ 85 $ -
Cost of goods sold $ 75 $ - $ 78 $ -
* 1 short ton = 0.907 tonnes
On
Revenues for the three month period ended
Cost of goods sold for the three months ended
During the current quarter, the Company commenced operations under a valley fill permit at the Maple coal property. The permit will increase the marketable reserves on the property to over 10,000,000 short tons of high quality thermal coal, which is a 67% increase in the Maple surface reserves. This permit will extend the life of the surface mine at Maple by ten years and employ over seventy people.
UK Operations
In thousands of Canadian Three Three Nine Nine
dollars unless otherwise months months months months
noted ended ended ended ended
December December December December
31, 2009 31, 2008 31, 2009 31, 2008
-------------------------------------------------------------------------
Financial Excerpts
Revenues $ 4,076 $ - $ 7,120 $ -
Cost of goods sold 3,142 - 5,923 -
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Income from mining
operations $ 934 - $ 1,197 -
Production (tonnes): 44,000 - 73,000 -
Sales (tonnes): 42,000 - 73,000 -
Per sales unit:
Coal price realized $ 97 $ - $ 98 $ -
Coal price realized (pnds (pnds (pnds (pnds
(pnds stlg) stlg) 55 stlg) - stlg) 55 stlg) -
Cost of goods sold $ 75 $ - $ 81 $ -
On
Revenues for the three month period ended
Cost of goods sold for the three months ended
AGD Mining Pty Ltd.
In thousands of Canadian Three Three Nine Nine
dollars unless otherwise months months months months
noted ended ended ended ended
December December December December
31, 2009 31, 2008 31, 2009 31, 2008
-------------------------------------------------------------------------
Financial Excerpts
Revenues $ 984 $ - $ 2,654 $ -
Cost of goods sold 1,891 - 3,601 -
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Income from mining
operations (907) - (947) -
On
Other expenses
Other expenses, for the three and nine months ended
In thousands of Canadian Three Three Nine Nine
dollars unless otherwise months months months months
noted ended ended ended ended
December December December December
31, 2009 31, 2008 31, 2009 31, 2008
-------------------------------------------------------------------------
General and
administration $ 9,134 $ 4,210 $ 21,022 $ 14,564
Sales and marketing 3,403 1,322 7,653 3,496
Coal exploration and
other mine costs 1,369 4,276 3,729 5,224
Interest, accretion and
financing fees on
liabilities 2,713 2,948 8,958 19,535
Other (income) (9,711) (8,907) (16,595) (9,631)
-------------------------------------------------------------------------
Total other expenses $ 6,908 $ 3,849 $ 24,767 $ 33,188
General and Administration
For the three month period ended
Sales and Marketing
For the three month period ended
Coal Exploration and Other Mine Costs
Coal exploration and other mine maintenance costs for the three month period ended
Interest, Accretion and Financing Fees on Liabilities
For the three month period ended
Other Income
In thousands of Canadian Three Three Nine Nine
dollars unless otherwise months months months months
noted ended ended ended ended
December December December December
31, 2009 31, 2008 31, 2009 31, 2008
-------------------------------------------------------------------------
Net foreign exchange
(gains) losses $ (8,979) $ (5,127) $ 7,341 $ (4,950)
Unrealized loss (gain) on
forward exchange
contracts 4,872 (3,403) (10,632) (3,403)
Gain on disposal of
subsidiary (6,996) - (6,996) -
Gain on redemption of
convertible
debentures - - (4,155) -
Interest expense (income) 1,804 (449) (1,709) (1,011)
Other (income) expense (412) 72 (444) (267)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
$ (9,711) $ (8,907) $ (16,595) $ (9,631)
For the three month period ended
Non-Controlling Interests
For the three month period ended
Equity Earnings
For the three month period ended
Net Income
Net income for the three month period ended
The major impact on the net income for the three and nine month periods ended
Market Outlook
Canadian Operations
-------------------
Through the year, the Company has seen a strong recovery in the demand for its metallurgical coal products, resulting from renewed strength in the steel sector worldwide. In
In the longer term, the market fundamentals for metallurgical coal are expected to remain strong, which will provide continued opportunity for the Company. The Company's Wolverine hard coking coal forms a key blend component with many of the world's leading steel mills, while the Brule mine ULV-PCI coal is consistently ranked among the top PCI coals worldwide. These high quality coals, in conjunction with highly efficient rail and port infrastructure in northern British Columbia, continue to provide the Company a competitive advantage to continue to grow and diversify its customer base.
US Operations
-------------
The increased demand for metallurgical quality coals has also benefitted the Company's West Virginia operations. This has enabled the Company to sell some of its premium thermal coal from Gauley Eagle into the high-vol metallurgical coal market, while at the Maple mine, production capacity is being reviewed in an attempt to meet the increased demand.
UK Operations
-------------
In Wales, where the Company has a 54.7% interest in Energybuild, considerable interest is being expressed in the Aberpergwm anthracite product for use in the steel sector. Energybuild's major customers are an energy plant and steel mill within 25 miles of the mine. Both of these customers are importing almost all of their thermal and PCI coal. This captive market provides a competitive advantage for Energybuild. Energybuild, with its recent fundraising will be increasing production to meet its customer's needs.
Guidance
Canadian Operations
-------------------
For the remaining three months of fiscal 2010, the Company expects to produce between 600,000 and 700,000 tonnes of metallurgical coal from its two operating mines in
The Company expects to ship between 850,000 and 950,000 tonnes of metallurgical coal in the remaining three months of fiscal 2010, which will consist of 550,000 to 600,000 tonnes of hard coking coal and 300,000 to 350,000 tonnes of ULV-PCI. The expected ULV-PCI sales reflect a drawdown of inventory stockpiles. This guidance is dependent upon the continued demand from the Company's customers, clean coal production at the mines, rail service and vessel arrivals.
All of the Company's fiscal 2010 coal production from its Canadian operations is under contract for sale to international steel producers. Contracted prices for fiscal 2010 are approximately US$126 per tonne for hard coking coal and US$90 per tonne for its ULV-PCI coal. Coal deliveries during fiscal 2010 included certain quantities of fiscal 2009 carryover tonnages at fiscal 2009 prices. As at
Expected cash cost of production (FOB) at the Canadian operations is
The Company has entered into foreign currency contracts totaling US$184,400,000 at
US Operations
-------------
The Company expects to produce and sell for the remaining three months of fiscal 2010 approximately 365,000 short tons of coals from its mines in West Virginia. This consists of 260,000 short tons of thermal coal and 105,000 short tons of coking coal.
For the remainder of fiscal 2010 average cash production costs at the US operations are expected to be approximately US$69 to US$74 per short ton with expected average coal sales price realizations of approximately US$78 to US$83 per short ton.
Conference Call
The Company will be hosting a conference call to discuss those results at
The call will be webcast live and will be available at www.westerncoal.com.
About Western
Western is a producer of high quality metallurgical and thermal coal from mines located in northeast British Columbia (
Forward-Looking Information
This release may contain forward-looking statements that may involve risks and uncertainties. Such statements relate to the Company's expectations, intentions, plans and beliefs. As a result, actual future events or results could differ materially from those suggested by the forward-looking statements. Readers are referred to the documents filed by the Company on SEDAR. Such risk factors include, but are not limited to changes in commodity prices; strengths of various economies; the effects of competition and pricing pressures; the oversupply of, or lack of demand for, the Company's products; currency and interest rate fluctuations; various events which could disrupt the Company's construction schedule or operations; the Company's ability to obtain additional funding on favourable terms, if at all; and the Company's ability to anticipate and manage the foregoing factors and risks. Additionally, statements related to the quantity or magnitude of coal deposits are deemed to be forward-looking statements. The reliability of such information is affected by, among other things, uncertainties involving geology of coal deposits; uncertainties of estimates of their size or composition; uncertainties of projections related to costs of production; the possibilities in delays in mining activities; changes in plans with respect to exploration, development projects or capital expenditures; and various other risks including those related to health, safety and environmental matters.
For further information: David Jan, Director, Investor Relations, Phone: (604) 694-2891, Email: [email protected]
Share this article