CanAm Coal Corp.
TSX VENTURE : COE

CanAm Coal Corp.

December 29, 2010 18:54 ET

CanAm Coal Reports Third Quarter Financial Results

CALGARY, ALBERTA--(Marketwire - Dec. 29, 2010) - CanAm Coal Corp. (TSX VENTURE:COE) ("CanAm" or the "Company") has filed its unaudited interim consolidated financial statements and related management's discussion and analysis for the three and nine month period ended October 31, 2010. Copies of these documents may be obtained via the SEDAR website.

"CanAm delivered another strong quarter with production in Q3 on pace with the second quarter and record production of 11,051 tons in the month of August. More importantly, the Company successfully completed the acquisition of an additional 49% ownership in RAC Mining LLC and became the 98% owner effective November 8, 2010," said Tim Bergen, CEO of CanAm. "Our objective is to create long- term shareholder value by more than doubling average monthly production for 2011 to between 17,000 and 24,000 tons per month from organic growth alone."

Highlights and events for the third quarter ended October 31, 2010 include:

  • Total production for the quarter at RAC Mining LLC was 23,281 tons as compared to 25,131 tons in Q2 and 20,305 tons in Q1.Record production of 11,051 tons was achieved in the month of August 2010.
  • Generated revenue and income from mining operations for the three and nine month period ended October 31, 2010 of $1,216,885 and $109,780 and $3,775,686 and $504,172, respectively;
  • Generated cash flow from operations, before working capital changes, of $42,575 for the nine month period ended October 31, 2010 as compared to $(485,085) for the comparable period ending October 31, 2009.
  • Closed a 12% unsecured convertible debenture financing for $2.5 million.
  • Raised additional funds as a result of the exercise of warrants for proceeds of approximately $2.0 million.
  • Completed the third quarter of fiscal 2011 with approximately $4.0 million of cash and working capital of $4.1 million as compared to $1.3 million and $1.1 million, respectively at the end of the third quarter in fiscal 2010.
  • Retained the services of Brisco Capital Partners Corp. to provide investor relations services. In this capacity, Brisco will initiate and maintain contact with the financial community, shareholders, investors and other stakeholders for the purpose of increasing awareness of the company and its activities.

Highlights and events subsequent to the third quarter ended October 31, 2010 include:

  • Completed the acquisition of an additional 49% ownership interest in RAC Mining LLC and certain other assets associated with the Powhatan mine site for a purchase price of US$1,486,250 which resulted in the Company now owning 98% of RAC Mining LLC. As a result, the Company will double its production, revenue and income from mining operations starting in the fourth quarter of our current fiscal year. The acquisition was effective on November 8, 2010.
  • Concurrent with the acquisition, RAC also acquired mining equipment for a total purchase price of US$976,600.
  • Raised additional funds of $57,800 through the exercise of warrants and $185,000 of the Company's 12% debentures were converted into shares.
  • Continued building the leadership team by appointing Robert Power to the board of directors and hiring Paul Widinski to become the mine manager and be responsible for the day-to-day operations at the Powhatan site. Mr. Widinski has over 35 years of experience in the coal industry including the management of several surface mines.

Financial results for the three and nine month period ended October 31, 2010 were as follows:

    Three Month Period   Nine Month Period
    Ended October 31,   Ended October 31,
    2010   2009   2010   2009
 
Revenue $ 1,216,885 $ - $ 3,775,686 $ -
Income from mining operations $ 109,780 $ - $ 504,172 $ -
Other income (expenses) $ (411,002) $ (196,031) $ (780,862) $ (547,308)
Profit (loss) before tax $ (301,222) $ (196,031) $ (276,690) $ (547,308)
Net profit (loss) $ (311,877) $ (196,031) $ (328,365) $ (547,308)

Mine operating results for the three and nine month period ended October 31, 2020 were as follows:

    Three Month Period   Nine Month Period
    Ended October 31, 2010   Ended October 31, 2010
    RAC   CanAm   RAC   CanAm
 
Coal sales revenue $ 2,319,045 $ 1,180,200 $ 7,169,139 $ 3,644,084
Equipment rental revenue $ 72,063 $ 36,685 $ 258,904 $ 131,601
Income from mining operations $ 218,735 $ 109,780 $ 1,001,001 $ 504,172
 
Coal sales (in tons)   23,281   11,408   68,718   33,672
 
Average coal price $ 100 $ 103 $ 104 $ 108
Average cost of product sold $ 65 $ 68 $ 65 $ 67
Average cost of royalties                
transportation and other $ 23 $ 24 $ 24 $ 25
Average income from mining $ 9 $ 10 $ 15 $ 15

Note: RAC represents 100% of production and is quoted in US$ whereas CanAm represents the Company's proportionate 49% share and is quoted in CDN$.

Coal Sales

As previously reported coal sales for the quarter of 23,281 tons were slightly lower than sales of 25,131 in the second quarter as a result of contractor equipment failure and ongoing transition of mining operations from the contract miner to RAC Mining LLC. Higher thermal coal recovery rates from the Mary Lee coal seam resulted in a 66/34% metallurgical/thermal coal mix. Average production mix for the nine month period ended October 31, 2010 was 77/33%. Despite the overall lower production in Q3 (as compared to Q2), record production of 11,051 tons was achieved in the month of August 2010.

Revenue and Income from Mining Operations

Revenue and income from mining operations in the third quarter were lower as compared to the second quarter mainly as a result of lower realized average coal prices. Although prices for metallurgical coal and thermal coal remained consistent, the Company's coal mix of 66/34% metallurgical/thermal coal brought down the average coal price from $111/ton in the second quarter to $103/ton in the third quarter. On a year to date basis, the Company realized an average sale price of $108/ton. Production cost and cost of royalties, transportation and other remained consistent with prior quarters.

Other Income (Expenses)

Other expenses for the three month period ended October 31, 2010 were $411,002 as compared to $196,031 in fiscal 2010 or an increase of $214,971. The increase is mainly the result of: higher professional and consulting fees of some $35,000 as a result of the increased activity in the Company's operations including the hiring of a new President, debenture interest and financing charges of some $94,000 (nil – Q3 2010), a foreign exchange loss of $37,019 as compared to a gain of $11,051 in Q3 2010 as a result of the strengthening Canadian dollar, higher stock based compensation expense of some $26,000 resulting from options awarded to new management, directors and consultants and equipment interest expense of some $8,000 (nil – Q3 2010).

The Company's overall financial position as at October 31, 2010 improved significantly as a result of the $2.5 million debenture financing and the additional funds of some $2.0 million generated through the exercise of warrants. Working capital and cash from operations (before working capital changes) at October 31, 2010 was $4.0 million and $42,575, respectively as compared to $1.1 million and $(0.5) million, respectively at October 31, 2009.

Outlook

With the acquisition of the additional 49% ownership interest in RAC Mining LLC and the ongoing transition of mining operations to RAC, the Company anticipates that these transition activities will have a temporary impact on production levels for the fourth quarter. Production will resume to normalized levels in the first quarter of 2011 and the Company will also make a final decision as to the start-up of highwall mining operations at the Powhatan mine site. In addition, the Company will continue to evaluate other mining opportunities in the Appalachia region of the United States of America and in particular in the state of Alabama. With the strong coal market and the increasing pricing environment, management intends to expand on its current portfolio of coal assets through strategic acquisitions and/or alliances with local coal producers.

About CanAm Coal Corp.

CanAm is a coal producer and development company focused on growth through the acquisition, exploration and development of coal resources and resource-related technologies. CanAm's main activities and assets include its Alabama coal mine operations, the exclusive rights to a proprietary Coal to Liquids technology which converts coal into liquid fuels (such as oil, jet fuel) at an economical cost with zero airborne emissions and the Buick Coal Project which holds significant coal resources, 188 million indicated and 103 million inferred resources, in Colorado, USA (see the technical report entitled "Limon Lignite Project, Elbert County, Colorado, USA," dated October 26, 2007 and filed on SEDAR on November 2, 2007). Other coal and related opportunities continue to be evaluated on an ongoing basis.

Forward-Looking Information and Statements

This press release contains certain forward-looking statements and forward-looking information (collectively referred to herein as "forward-looking statements") within the meaning of applicable Canadian securities laws. All statements other than statements of present or historical fact are forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "could", "should", "can", "anticipate", "estimate", "expect", "believe", "will", "may", "project", "budget", "plan", "sustain", "continues", "strategy", "forecast", "potential", "projects", "grow", "take advantage", "well positioned" or similar words suggesting future outcomes. In particular, this press release contains forward-looking statements relating to: the future production of the Powhatan mine; the permitting of the Davis mine; and the potential production at the Davis mine. This forward looking information is based on management's estimates considering typical strip mining operations, equipment requirements and availability and typical permitting timelines.

In addition, forward-looking statements regarding the Company are based on certain key expectations and assumptions of the Company concerning anticipated financial performance, business prospects, strategies, the sufficiency of budgeted capital expenditures in carrying out planned activities, the availability and cost of services, the ability to obtain financing on acceptable terms, the actual results of exploration projects being equivalent to or better than estimated results in technical reports or prior exploration results, and future costs and expenses being based on historical costs and expenses, adjusted for inflation, all of which are subject to change based on market conditions and potential timing delays. Although management of the Company consider these assumptions to be reasonable based on information currently available to them, these assumptions may prove to be incorrect.

By their very nature, forward-looking statements involve inherent risks and uncertainties (both general and specific) and risks that forward-looking statements will not be achieved. Undue reliance should not be placed on forward-looking statements, as a number of important factors could cause the actual results to differ materially from the Company's beliefs, plans, objectives and expectations, including, among other things: general economic and market factors, including business competition, changes in government regulations or in tax laws; the early stage development of the Company and its projects; general political and social uncertainties; commodity prices; the actual results of current exploration and development or operational activities; changes in project parameters as plans continue to be refined; accidents and other risks inherent in the mining industry; lack of insurance; delay or failure to receive board or regulatory approvals; changes in legislation, including environmental legislation, affecting the Company; timing and availability of external financing on acceptable terms; conclusions of economic evaluations; and lack of qualified, skilled labour or loss of key individuals. These factors should not be considered exhaustive. Many of these risk factors are beyond the Company's control and each contributes to the possibility that the forward-looking statements will not occur or that actual results, performance or achievements may differ materially from those expressed or implied by such statements. The impact of any one risk, uncertainty or factor on a particular forward-looking statement is not determinable with certainty as these risks, uncertainties and factors are interdependent and management's future course of action depends upon the Company's assessment of all information available at that time.

Forward -looking statements in respect of the future production of the Powhatan mine may be considered a financial outlook. These forward-looking statements were approved by management of the Company on December 17, 2010. The purpose of this information is to provide an operational update on the company's activities and strategies and this information may not be appropriate for other purposes.

The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement. The forward-looking statements included in this press release are made as of the date of this press release and the Company does not undertake and is not obligated to publicly update such forward-looking statements to reflect new information, subsequent events or otherwise unless so required by applicable securities laws.

Neither the 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 release.

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