Pacific Coal Resources Ltd. announces second quarter 2013 financial results
TORONTO, Aug. 29, 2013 /CNW/ - Pacific Coal Resources Ltd. (TSXV: PAK) has filed its unaudited interim condensed consolidated financial statements for three months ended June 30, 2013, 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: '"The second quarter of 2013 delivered tangible results of the Company's strategic overhaul in the form of several milestones, including the highest quarterly production at La Caypa and the first positive adjusted EBITDA since incorporation. The Company also continued to cut costs, recording a quarterly G&A expense less than the forecast for the second quarter in a row. We are extremely pleased with the Company's progress and look forward to even better results in the future."
Financial and Operating Summary
A summary of the financial and operating results for the second quarter of 2013 is as follows:
| Second Quarter | ||
| (000's except per share and operating data) | 2013 | 2012 |
| Operational | ||
| Tonnes of coal produced | 398,865 | 335,008 |
| Average stripping ratio - operations | 8.28:1 | 9.60:1 |
| Tonnes of coal sold | 349,818 | 338,775 |
| Average realized price per tonne sold | $ 106.05 | $ 98.93 |
| Operating margin per tonne sold(1) | $ 13.60 | $ (12.42) |
| Financial | ||
| Revenues | $ 37,100 | $ 35,197 |
| Gross margin(1) | 2,651 | (7,271) |
| Adjusted EBITDA(1) | 3,112 | (8,217) |
| Earnings from operations | 413 | (49,635) |
| Net earnings (loss) attributed to shareholders | 2,051 | (37,577) |
| Basic and fully diluted (loss) earnings per share(2) | 0.04 | (0.82) |
| Total cash | 6,423 | 2,858 |
| Total assets | 255,889 | 332,067 |
| Total debt(3) | 67,623 | 42,013 |
| (1) | Adjusted EBITDA and operating margin per tonne sold are non-GAAP finance performance measures and gross margin is an additional GAAP financial performance measure, none of which have standardized definitions under IFRS. See pages 17-19 of the Company's Second Quarter of 2013 MD&A for further details. |
| (2) | At a special meeting held on March 11, 2013, the Company's shareholders approved a share consolidation, in which seven old common shares of the Company were exchanged for one new common share. This also resulted in a consolidation of the Company's outstanding share purchase warrants and stock options. |
| (3) | Total debt includes bank indebtedness, long-term debt, finance leases and interest accruing amounts owed to Masering S.A.S. (June 30, 2013 - $23.9 million, June 30, 2012 - $14.8 million). This Masering S.A.S. ("Masering") amount excludes $1.6 million that is currently under negotiation with Masering and $3.1 million for the current operations of La Caypa mine (paid subsequent to June 30, 2013 as per the Masering La Caypa mine contract). |
Second Quarter Highlights
- The Company produced 398,865 tonnes of coal in the second quarter of 2013. This represents a 19% increase over the second quarter of 2012 (335,008) and a 79% increase over the first quarter of 2013 (223,346). Quarterly production of 320,436 tonnes at La Caypa was the highest for the mine since the first quarter of 2011 and represented 111% of planned mine production for the quarter. The Cerro Largo stripping ratio of 9.35:1 in the second quarter of 2013 was the lowest stripping ratio the Company has recorded since acquiring the mine. This represents a 63% decrease from the second quarter of 2012 (25.53:1) and 24% decrease from the first quarter of 2013 (12.24:1).
- Total revenues in the second quarter of 2013 of $37.1 million reflect sales of 349,818 tonnes of coal at an average realized price of $106.05 per tonne. The second quarter revenue represents a 5% increase over the second quarter of 2012 ($35.2 million) and a 70% increase over the first quarter of 2013 ($21.9 million).
- Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") for the second quarter of 2013 was $3.1 million, positive for the first time since the first quarter of 2011. This represented a significant improvement over the second quarter of 2012 and the first quarter of 2013 (loss of $8.2 million and $2.5 million, respectively). The total operating margin of $13.60 on a per tonne sold basis in the second quarter of 2013 was also the highest since 2011.
- Earning from operations and net earnings in the second quarter of 2013 were the highest the Company has ever recorded ($0.4 million and $2.1 million respectively), as a result of an increased average realized price per tonne sold and the continued cost reduction at the Company's La Caypa mine site.
- The second quarter of 2013 was the first full quarter under the new mine operator at La Caypa mine, in addition to the Company beginning operation of the Cerro Largo mine in-house in April 2013. At Jam, a rental agreement for use of the Company's coke plant was signed in August 2013, expiring December 31, 2014. Lastly, the Company signed a Memorandum of Understanding ("MOU") in June 2013 for development of the Barranquilla port, the concession of which is owned through the Company's subsidiary S.P. Terminal de las Flores S.A. ("SPTF").
- The Company continued to record a quarterly G&A lower than forecasted in the second quarter of 2013. The $1.7 million recorded (including $0.1 million of non-cash depreciation) is consistent with the first quarter of 2013, 23% lower than the fourth quarter of 2012 and 7% less than the $1.9 million forecasted.
Q2 2013 - La Caypa
| Production of Coal (metric tonnes) |
Waste (BCM (1)) |
Strip Ratio | |
| North Pit | 320,436 | 2,570,805 | 8.02:1 |
| South Pit | - | 1,490,721 | - |
| Total | 320,436 | 4,061,526 | 12.67:1 |
| (1) | "BCM" is Bank Cubic Metres |
During the second quarter of 2013, the Company produced 320,436 tonnes at La Caypa, achieving 111% of its planned production, and a 20% increase from the 267,321 tonnes produced in the second quarter of 2012. The increase can be attributed to the positive results of the collaboration between the Company's La Caypa team and the mine's new operator, as the second quarter represented the operator's first full quarter of operations. Given that La Caypa produced 439,416 tonnes of coal in the first half of 2013, including the limited production in the first quarter as the new operator ramped-up, the Company continues to anticipate production of 1.0 million tonnes at La Caypa in 2013. This would represent a 12% production increase from 2012.
The operational stripping ratio was 8.02 in the second quarter of 2013, compared to 5.57 in the second quarter of 2012, attributable to the operator's focus for the quarter being an area of the main pit with greater waste. The ratio realized in the second quarter of 2012 neared historic lows and was well below the main pit's quarterly average. The total stripping ratio (12.67:1) for the second quarter of 2013 includes development work which took place at the south pit to prepare the site for production, which is expected to begin by the end of 2013.
Q2 2013 - Cerro Largo
| Production of Coal (metric tonnes) |
Waste (BCM) |
Strip Ratio | |
| Total | 78,429 | 733,167 | 9.35:1 |
In the second quarter of 2013, the Company produced 78,429 tonnes from the Cerro Largo mine, compared to 67,687 tonnes in the second quarter of 2012, an increase of 16%. The increase can be attributed to the work undertaken to address mud concentrations at the bottom of the open pit in the second quarter of 2012. The production in the second quarter of 2013 represented 49% of what was planned, as production was limited by the Company transitioning to operating the mine in-house during the quarter. In-house operations progressed well during the quarter, with the production tonnage in June 2013 more than doubling from April 2013. The Company's production target in 2013 for Cerro Largo is between 0.5 million and 0.6 million tonnes, a 50% increase from 2012. The Cerro Largo mine stripping ratio of 9.35 in the second quarter of 2013 was the lowest recorded since the mine has been at full operation. This stripping ratio represents a 63% decrease compared to the second quarter of 2012 (25.53:1). The Company noted that the reduction was the result of production in a section of the pit with a high concentration of coal, as compared to other sections of Cerro Largo.
Q2 2013 - Jam
The Company's metcoal production at Jam has been suspended since late in the second quarter of 2012 as a consequence of high costs and weak international prices. The plant has focused on processing third party purchased materials for use in the production of coke. Coke production has been held at minimal levels since the suspension, with activity during the quarter concentrated on conducting repairs to the coking infrastructure. The Company held costs to a minimum during the second quarter of 2013, with an operating loss of $0.3 million.
In August 2013, an agreement was signed with a third party for the rental of the Company's coke processing plant and related equipment for approximately $0.3 million annually. This agreement ends December 31, 2014, coinciding with the long-term plan of the Company to re-start metcoal and coke production in 2015 at which point the Company hopes international prices will have rebounded.
Corporate update
In the second quarter of 2013, the Company progressed with the strategic and operational plans that were implemented in the first quarter of 2013 as part of the Company's core competency re-focus. Operationally, the re-focus was evident in the second quarter as the Company's adjusted EBITDA was positive for the first time since the first quarter of 2011. Improving the profitability of its operating mines will continue to be a focus of the Company going forward. Strategically, management continued to investigate different avenues to raise funds. As part of this process, the Company engaged the financial advisory firm of LW Securities in April 2013 to explore alternatives to consolidate the Company's bank indebtedness and reduce amounts owed to Masering.
Underground mine
Negotiations are being finalized with a third party to perform a pilot project for underground operations at La Caypa beginning in the first quarter of 2014. If the pilot project is successful, the Company and the third party plan to sign a long-term deal.
La Tigra exploration
The Company has signed an agreement with a third-party to perform analysis of the results of asphaltite exploration at the La Tigra property, at the third-party's cost, to determine the site's prospects. The Company is awaiting the analysis, at which time the Company will determine an adequate course of action for the property.
Barranquilla port
In the second quarter of 2013, the Company signed an MOU with the hopes of jointly developing the Barranquilla port with a related party for shipment of liquids. The arrangement was approved by the shareholders of the Company in August 2013; therefore the Company expects the final arrangement to be signed in the near future, subject to approval by the TSX Venture Exchange.
Cost reduction program
The Company continued to exceed cost cutting expectations in the second quarter of 2013, after forecasting the 2013 quarter run rate at $1.9 million late last year. G&A for the second quarter surpassed expectations by $0.2 million ($1.7 million) and $0.4 million for the six months ended June 30, 2013 ($3.4 million). To be conservative, the Company continues to forecast the annual G&A expense at $7.5 million (a quarterly run rate of $1.9 million), but additional cost savings continues to be a top priority.
Option grant
The Company also announces that on August 19, 2013 it granted options to purchase 57,143 common shares of the Company to a newly appointed director of the Company, subject to regulatory approval. The stock options were granted pursuant to the Company's stock option plan and are exercisable at a price of $0.45 per share, set to expire on August 19, 2018.
Re-organization of Norcarbon S.A.S.
In order to address the working capital deficit, Norcarbon S.A.S., the subsidiary of the Company whose assets include the Cerro Largo title, intends to file for a re-structuring under the Colombian Superintendencia de Sociedades 'Law 1116 of 2006'.
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.
Melissa Krishna
Deputy General Counsel & Secretary
(416) 360-8725
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