Hillsborough Resources Limited
TSX : HLB

Hillsborough Resources Limited

May 15, 2006 04:00 ET

Hillsborough Resources: Hillsborough Announces First Quarter Results for Fiscal 2006

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - May 15, 2006) - Hillsborough Resources Limited (TSX:HLB) is pleased to announce its results for the first quarter of 2006. Operations at the Quinsam mine on Vancouver Island were strong as the combined effect of increased contract prices and lower production costs delivered a contribution margin on coal sales of 29.1%, compared to 20.0% for full-year 2005. The new Crossville mine in Tennessee continued to progress through its start-up phase, with ongoing hiring of qualified miners and deployment of further equipment into initial production. The substantial costs of Crossville's start-up phase are reflected in the first quarter results, and they will impact the second quarter as well. However, the ramping up of production at the Crossville mine will continue through 2006, with the gains from that ramp-up expected to reflect particularly through the third and fourth quarters of 2006 and with full rate production anticipated to be achieved by early 2007.

Exploration and development work continued through the quarter on Hillsborough's resource properties, with particular focus on the Horizon project group in Northeast British Columbia. A technical report on the Barbour-Horizon area of that project group was completed and filed on SEDAR in February, 2006 delineating a total of 45.6 million tonnes of measured and indicated in-place, surface mineable, bituminous coal resources and a further 8.2 million tonnes of inferred resources. A second report covering the remainder of the project group including the Northridge area is in progress and is anticipated to be completed in the second quarter of 2006. Hillsborough is continuing its work on the feasibility study for the Horizon Mine with both open pit and underground design and mine planning based on a production level of up to 1.6 million tonnes of coking coal product per year. Anglo Coal has now assumed responsibility for the continuing exploration and development activity on the Murray River project group with the completion in February of the Coal Projects Agreement and is currently developing plans for the summer 2006 field season.

Hillsborough recorded a net loss for the first quarter of 2006 of $37,345 or nil per share versus net earnings of $1,027,293 or $0.02 per share for the first quarter of 2005. The results from the first quarter of 2005 include the effects of an international shipment made from Quinsam that quarter, while no international shipments were made during the first quarter of 2006. The results of the first quarter of 2006 reflect the strong operating results from Quinsam, offset primarily by the mining and administrative costs associated with the Crossville operations as that mine progresses through the early stages of its start-up. Hillsborough's net working capital at March 31, 2006 was a deficit of $0.2 million compared to a net positive balance of $5.8 million at December 31, 2005, reflecting the impact through the quarter of continued capital investment in the exploration and development of the Northeast properties, particularly the Horizon project group, as well as expenditures at Crossville on mining equipment purchases, the posting of reclamation security deposits on the completion of certain mining permit transfers, reclamation expenditures required in connection with the former surface operations at the Crossville site, and operational support as the mine progresses through its start-up phase.

In April 2006, Hillsborough executed a fuel supply agreement with AESWapiti Energy Corporation ("AESWapiti"). Under the terms of the agreement, Hillsborough's Wapiti property would be the exclusive supplier of thermal coal for a proposed power generation plant to be sited on the property, located between Tumbler Ridge and Dawson Creek in Northeast BC. AESWapiti has entered a bid submission under the current BC Hydro open call for power tender process, and the fuel supply agreement establishes pricing and other fuel supply terms in support of the submission. Submissions made under the open call for tenders are being reviewed and assessed by BC Hydro over the coming months, and it is understood that the decision for awards of energy purchase agreements by BC Hydro will be made during the third quarter of 2006.

On May 11, 2006, Hillsborough completed an offering of 7,446,000 units for gross proceeds of $8,562,900, and will use the net proceeds from this offering to continue with the exploration, development, expansion and operation of its North American mining and resource properties and for general working capital.

Hillsborough's unaudited interim consolidated financial statements with accompanying notes for the three months ended March 31, 2006 and management's discussion and analysis of financial condition and results of operations for that same period, as well as additional information relating to Hillsborough, are available on SEDAR at www.sedar.com as well as on Hillsborough's website at www.hillsboroughresources.com.

Hillsborough Resources Limited is a coal mining company that operates the Quinsam underground thermal coal mine in Campbell River, British Columbia serving the local and west-coast U.S. cement industry, and the Crossville underground thermal coal mine in Tennessee serving the regional power utility and industrial markets. The Corporation is also developing substantial metallurgical coal properties near Tumbler Ridge in the Northeast of British Columbia, as well as the Bingay Creek metallurgical coal project in the Elk Valley region of Southeast British Columbia.

David J. Slater,

President & Chief Executive Officer

This release may contain forward-looking statements regarding the Company's business or financial condition. All statements in this release, other than statements of historical facts, that address future production, reserve potential, exploration drilling, exploitation activities and events or developments that the Company expects are forward-looking statements. Although the Company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Actual results could differ materially from those described in this news release as a result of factors including but not limited to the following: adverse exploration or development results; adverse due diligence findings; re-assessments of corporate or development objectives and requirements; additional technical developments and considerations; unexpected increases in the costs of producing coal, changes in international coal or transportation markets, a rapid change in the value of the Canadian dollar particularly with respect to the US dollar, a fundamental slow down in the North American, Asian or worldwide economies; and other factors. Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements.

Contact Information

  • Hillsborough Resources Limited
    David Slater
    President & CEO
    (604) 684-9288
    (604) 684-3178 (FAX)