Cobalt Coal Ltd.

Cobalt Coal Ltd.

August 17, 2011 20:22 ET

Cobalt Coal Ltd. Provides Operations and Restructuring Update

CALGARY, ALBERTA--(Marketwire - Aug. 17, 2011) - Cobalt Coal Ltd. ("Cobalt" or the "Company") (TSX VENTURE:CCF), is pleased to provide an operations and restructuring update.

Mining Production and Electrification

Cobalt has continued to produce coal during its restructuring with coal sales values continuing to improve. A total of 2951 clean tons of coal were sold during July 2011. Production remains constrained by inadequate equipment and equipment breakdowns. As previously reported, sales volumes are not expected to materially improve until the necessary infrastructure upgrades are completed and additional mining equipment is secured.

Cobalt has entered into a letter of intent with an industry partner to install electrification to the Westchester mine site. The Company is now securing construction quotes.

Westchester Coal Limited Partnership Purchase

Documentation has now been finalized pursuant to which 96% of the Class A Limited Partnership Units and 92% of the Class C Limited Partnership Units of the Westchester Coal Limited Partnership have agreed to tender to the offer made by Cobalt to purchase the Class A and Class C Limited Partnership Units not already owned by Cobalt. Cobalt intends to serve notice to the remaining Class A and Class C unitholders whereby Cobalt will acquire the remaining units pursuant to the provisions of the Limited Partnership Agreement.

Cobalt Debentures

Holders of over 90% in face value of the outstanding debentures of Cobalt (the "Debentures") have agreed to the conversion proposal made to them by Cobalt whereby they will receive repayment of 50% of the face value of the Debentures by the issuance of Cobalt common shares at a deemed price of $0.12 per share and the balance in cash payable on or before December 15, 2011 (the "Debenture Conversion").

Senior Indebtedness

A formal agreement has been entered into between Cobalt's chairman, Al Kroontje, and Echo Merchant Fund ("Echo"), pursuant to which Mr. Kroontje has agreed to purchase the outstanding debt and security held by Echo. Echo will receive cash payments from Mr. Kroontje including an immediate $100,000 deposit and a $400,000 cash payment on or before September 7, 2011. Cobalt has also agreed to issue 2,350,000 common shares at a deemed price of $0.12 per share to Echo to repay $282,000 of the debt on or before September 7, 2011. A final payment of $500,000 is required on or before November 30, 2011. A condition in favor of Echo is that a minimum of $2,000,000 in new equity is raised by Cobalt.

Brokered Private Placement

Cobalt is in negotiations with an investment dealer in respect of the previously announced proposed private placement of common shares to raise $6,000,000. The engagement letter contemplates that the restructuring will have been completed. Management believes it will be in a position to finalize terms and execute the engagement letter shortly after closing the restructuring.

Restructuring Closing

Cobalt expects to close the purchase of the Westchester Coal Limited Partnership, the Debenture Conversion and the non-brokered $2 million private placement of Cobalt common shares later this week.

About Cobalt

Cobalt is a publicly traded coal exploration and production company headquartered in Calgary, Alberta, Canada with a regional office in Welch, West Virginia USA. Cobalt was created to capitalize on the growth opportunities that exist in the metallurgical coal mining industry.

The securities of Cobalt being offered have not been, nor will be, registered under the United States Securities Act of 1933, as amended, and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons absent U.S. registration or an applicable exemption from U.S. registration requirements. This release does not constitute an offer for sale of securities in the United States.


Statements in this news release may contain forward-looking information including the timing of closing of the Private Placement. The reader is cautioned that assumptions used in the preparation of such information may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted, a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of the Company. These risks include, but are not limited to, the risks associated with the coal mining industry, commodity prices and exchange rate changes. Industry related risks could include, but are not limited to, operational risks in exploration, development and production, delays or changes in plans, risks associated to the uncertainty of reserve estimates, health and safety risks and the uncertainty of estimates and projections of production, costs and expenses. The reader is cautioned not to place undue reliance on this forward-looking information.

Neither TSX Venture Exchange nor its Regulation Service 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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