Corsa Coal announces completion of Quintana Transaction

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TORONTO, July 31, 2013 /CNW/ - Corsa Coal Corp. (TSXV: CSO) ("Corsa" or the "Company") announces that it has completed today the previously announced transaction with Quintana Kopper Glo Investment, LLC ("QKGI"), a portfolio company of Quintana Energy Partners L.P. and its affiliated investment funds (collectively, "Quintana"), which, has resulted in Corsa having raised a total of US$40 million at Cdn$0.17 per share and acquiring Kopper Glo, a Tennessee-based coal producer, and Quintana having acquired a control position in Corsa.

George Dethlefsen, Managing Director at Quintana Capital Group stated, "We are pleased to have received the support of the shareholders of Corsa Coal to complete this transaction.  We look forward to executing on the Company's vision to build a leading producer of high quality metallurgical and thermal coal.  The combination of the two companies creates a well-capitalized platform with an industry leading operating cost profile and an attractive set of growth opportunities."

Corsa and QKGI, signed a binding agreement (the "Investment Agreement") dated March 21, 2013. The transactions contemplated pursuant to the Investment Agreement have been completed and accordingly (i) the Cdn$10.2 million convertible note issued, by way of a private placement, to a Quintana affiliate on March 21, 2013 has been converted into 60.2 million common shares of Corsa at Cdn$0.17 a share; (ii) Corsa has, by way of a private placement, issued to, and Quintana affiliates have purchased, 182.4 million common shares of Corsa at a price of Cdn$0.17 per share for aggregate proceeds of US$30 million; and (iii) Corsa has acquired QKGI in exchange for the issuance to Quintana affiliates of 134.6 million common shares of Corsa and 230.2 million common membership units of Wilson Creek Energy, LLC ("Wilson  Creek"), Corsa's US operating subsidiary, which are redeemable for cash on a per unit basis equivalent to the fair market value of a common share of Corsa subject to the option of Corsa to exchange such units for common shares of Corsa on a one for one basis.

As a result, QKGI New Holdings LP and QKGI Legacy Holdings LP, two entities controlled by Quintana, hold an aggregate of 377.2 million common shares of Corsa and 230.2 million redeemable membership units of Wilson Creek, representing 56.5% of the issued and outstanding common shares of Corsa and 25.6% of the membership units of Wilson Creek.  Assuming the redemption of the membership units of Wilson Creek and exchange for common shares of Corsa, the two Quintana entities will hold 67.7% of Corsa's outstanding common shares.  There are now a total of 667.1 million common shares of Corsa outstanding (897.3 million assuming redemption for shares of all the redeemable membership units of Wilson Creek). The common shares and redeemable membership units held by QKGI New Holdings LP and QKGI Legacy Holdings LP are subject to an escrow in accordance with the requirements of the TSX Venture Exchange for a period of eighteen months from today with periodic releases as described in the Filing Statement. The transaction was approved by a majority of Corsa's shareholders as evidenced by signed shareholder consents in accordance with the requirements of the TSX Venture Exchange.

A filing statement dated July 24, 2013 (the "Filing Statement") in respect of the Transaction has been filed in connection with the Transaction.  A copy of the Filing Statement is available on www.sedar.com under Corsa's profile.

Credit Facility

In connection with the Transaction, the US$25 million credit facility with Sprott Resource Lending has been repaid in full using proceeds of the US$30 million financing.

Highlights of the Transaction:

With the completion of the transactions, Corsa is fully funded and well positioned as both a new and expanding US supplier of quality low volatile metallurgical coal with a growing customer base of domestic and international steel producers with its northern Appalachia operations and projects and as an established and reliable supplier of high BTU thermal and industrial coal given its existing sales contracts for 2013 and 2014 from its Tennessee operations.

The combined company has immediate cash flow from the Kopper Glo operations which had cash flow from operating activities of US$14.1 million (audited) for the year ended December 31, 2012. Corsa's existing operations produce a high quality, low volatile metallurgical coal that is used by domestic and international steel manufacturers as a component in their coking coal blends with 2013 sales guidance at 300,000 to 320,000 tons with significant production growth ahead with its Casselman mine and the Acosta Deep and Keyser projects. Kopper Glo's existing operations are located in Tennessee and produce a low-cost, high BTU thermal coal product expected to produce over one million tons in 2013 and are positioned to gain regional market share as higher cost Appalachian production is scaled back.

Changes to the Board of Directors and Management

As was set out in the Investment Agreement, five nominees of Quintana have been appointed to the board of directors and three nominees of Corsa remain.  Corbin Robertson III, Alan De'ath, George Dethlefsen, Daniel Smith and Ronald Stovash were appointed to the Board of Corsa as nominees of Quintana. Mr. Robertson has been appointed Chairman of the Board. Michael Harrison, John Craig and Robert Scott remain on the Board of Corsa. Timothy Phillips, Patrick Connelly and Charles Pitcher have resigned as directors.  Corsa recognizes with thanks the efforts and contribution made by the board members who resigned today and by Mr. Charter, and wishes them well.

Pursuant to the terms of his employment arrangements, this transaction constitutes a termination of Donald Charter's employment. Having established Corsa as a new US metallurgical coal producer and after leading Corsa to the successful completion of this transformative transaction, Mr. Charter has elected to step down as President, Chief Executive Officer and director of Corsa.

Keith Dyke, the President of Kopper Glo, has been appointed by the Board as the President of Corsa.

Change of Year End

In connection with the completion of the transactions, Corsa has changed its fiscal year end from November 30^th to December 31^st. As a result, the Company will next be reporting for the period ending September 30, 2013.

Quintana Investor Rights and Wilson Creek LLC Agreement

As provided under the Investment Agreement, Corsa and Quintana have entered into an Investor Rights Agreement and a Registration Rights Agreement which provides Quintana certain rights. In addition, Wilson Creek entered into an amended limited liability company agreement.

The Investor Rights Agreement provides Quintana with certain ongoing rights including the right to nominate a majority of the board while they hold over 50% of Corsa's common shares (including membership units of Wilson Creek) and proportional representation if their holding remains between 50% and 10%. The Investor Rights Agreement also provides Quintana with pre-emptive rights on future share issuances as long as they hold at least 20% of Corsa's common shares (including membership units of Wilson Creek) and certain information rights and consent rights in respect of shareholder rights plans as long as they hold at least one-third of Corsa's common shares (including membership units of Wilson Creek).

The Registration Rights Agreement provides Quintana with rights to demand registration of Corsa's shares under U.S. securities laws and to file a prospectus under Canadian securities laws in certain circumstances so long as they hold at least 10% of Corsa's common shares.

The amended limited liability company agreement of Wilson Creek gives effect to certain changes to the capital structure of Wilson Creek, including the following, (a) the addition of QKGI Legacy Holdings LP as a member and appointment of a wholly-owned subsidiary of Corsa as the managing member charged with the day-to-day operation of Wilson Creek; (b) the creation of new classes of units, namely common units which are redeemable by Quintana and non-voting units; (c) the imposition of certain change of control restrictions under which Corsa is not permitted to consummate a transaction that would result in a change of control unless QKGI Legacy Holdings LP is first offered an opportunity to redeem its membership units of Wilson Creek.

In addition, pursuant to the terms of the amended limited liability company agreement, Wilson Creek is subject to a "mirroring" structure, under which substantially all assets and operations of Corsa must be held and conducted by Wilson Creek and its subsidiaries and all changes in the equity capital structure of Corsa must be reflected by equivalent changes in the equity capital structure of Wilson Creek (and vice versa). This mirroring structure is intended to cause the membership units of Wilson to represent substantially the same economic interest in the assets and operation of Corsa as Corsa's common shares.

The membership units of Wilson Creek are non-transferrable other than a transfer in connection with a redemption, transfer to an affiliated investment fund of QKGI Legacy Holdings, L.P., or a transfer made with the consent of Corsa, provided that such transfer is made either (i) pursuant to a transaction exempt from, or not subject to, applicable Canadian take-over bid rules; or (ii) an identical offer (in terms of price per security) is made for the common shares of Corsa.

The terms of these agreements are described in the Filing Statement, including in Appendix B to the Filing Statement, and copies thereof will be filed on SEDAR under Corsa's profile. The above references are qualified in their entirety by the detailed terms and conditions thereof.

Information about Quintana

Quintana was formed by Quintana Capital Group, L.P. to make control-oriented equity investments across the oil and natural gas, coal and power industries. Since 2006, Quintana and related private equity funds have invested in 27 transactions including six investments in coal-related businesses. The address of Quintana is 601 Jefferson Street, Suite 3600, Houston, Texas. Quintana 's acquisition of a control position in Corsa was made as a strategic investment and Quintana may increase or decrease its investment, directly or indirectly, in Corsa from time to time, depending on market conditions or any other relevant factors.

A copy of the early warning report to be filed by Quintana will be available shortly under Corsa's profile at www.sedar.com and further information can be obtained by contacting George Dethlefsen, Managing Director at 713-751-7527.

The securities described herein have not been registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States unless registered thereunder or unless an exemption from registration is available.

Forward-Looking Statements

Certain information set forth in this press release contains "forward-looking statements" and "forward-looking information" under applicable securities laws. Except for statements of historical fact, certain information contained herein relating to projected sales constitutes forward-looking statements which include management's assessment of future plans and operations and are based on current internal expectations, estimates, projections, assumptions and beliefs, which may prove to be incorrect. The forward-looking statements are set out above under the heading "Highlights of the Transaction". These statements are not guarantees of future performance and undue reliance should not be placed on them. Such forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause the Company's actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to: risks that the actual production or sales for the 2013 fiscal year will be less than projected production or sales for these periods; risks that the prices for coal sales will be less than projected or expected; liabilities inherent in coal mine development and production including restarting idled mines; geological, mining and processing technical problems; inability to obtain required mine licenses, mine permits and regulatory approvals or renewals required in connection with the mining and processing of coal; risks that coal preparation plants will not operate at production capacity during the relevant period, unexpected changes in coal quality and specification; variations in the coal mine or coal preparation plant recovery rates; dependence on third party coal transportation systems; competition for, among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel; incorrect assessments of the value of acquisitions; changes in commodity prices and exchange rates; changes in the regulations with respect to the use, mining and processing of coal; changes in regulations on refuse disposal; the effects of competition and pricing pressures in the coal market; the oversupply of, or lack of demand for, coal; inability of management to secure coal sales or third party purchase contracts; currency and interest rate fluctuations; various events which could disrupt operations and/or the transportation of coal products, including labour stoppages and severe weather conditions; the demand for and availability of rail, port and other transportation services; the ability to purchase third party coal for processing and delivery under purchase agreements; and management's ability to anticipate and manage the foregoing factors and risks. The forward-looking statements and information contained in this press release are based on certain assumptions regarding, among other things, coal sales being consistent with expectations; future prices for coal; the regulatory framework representing royalties, taxes and environmental matters where the Company conducts business; coal production levels; and the Company's ability to retain qualified staff and equipment in a cost-efficient manner to meet its demand. 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. The reader is cautioned not to place undue reliance on forward-looking statements. The Company does not undertake to update any of the forward-looking statements contained in this press release unless required by law. The statements as to the Company's capacity to produce coal are no assurance that it will achieve these levels of production or that it will be able to achieve these sales levels.

The TSX Venture Exchange has neither approved nor disapproved the contents of this press release.  Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

SOURCE: Corsa Coal Corp.

Corsa Coal Corp.:
Paul Caldwell
Chief Financial Officer
416-214-9800
[email protected]
www.corsacoal.com