Hillsborough Resources Limited
TSX : HLB

Hillsborough Resources Limited

August 13, 2008 10:00 ET

Hillsborough Resources Issues Financial Results for Second Quarter of Fiscal 2008

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 13, 2008) - Hillsborough Resources Limited (TSX:HLB) advises that it has now issued its interim financial results for the three month and six month periods ended June 30, 2008.

Hillsborough incurred a net loss of $909,331 during the second quarter of 2008, compared to a net loss in the second quarter of 2007 of $71,836. Hillsborough's net loss for the first six months of 2008 was $2,541,415 compared to a net loss for the first six months of 2007 of $262,312. Hillsborough's loss from continuing operations for the three month and six month periods ended June 30, 2008 were $653,495 and $1,851,490 compared to the same periods ended June 30, 2007 of $502,964 and $363,121.

Demand for the quality thermal coal produced by Quinsam remained strong during the second quarter. Unfortunately, due to the terms of domestic supply contracts, the company was unable to obtain increased prices from its three principal customers. These low prices, however, were partially offset by significantly higher prices available from other, smaller, domestic customers, more in line with the movement in the international thermal coal price being experienced. A material contract ends on December 31, 2008; the termination of this contract will allow the corporation to take advantage of the strong coal market in which it operates.

At the Quinsam mine, clean coal production for the three and six month periods ended June 30, 2008 was 124,275 tonnes and 232,954 tonnes respectively, compared to 108,138 and 235,201 tonnes for the same periods in 2007, from raw coal production of 191,027 tonnes and 380,963 respectively in 2008 compared to 169,237 tonnes and 358,844 tonnes in 2007. Adversely affecting the production cost of coal during the second quarter of 2008 was the effect of continued training of new personnel, faulting experienced in new sections of the mine and equipment breakdowns.

During the three months ended June 30, 2008 the Corporation began development of an underground access route which will allow depillar mining of up to 700,000 tonnes of raw coal. While coal extraction continues concurrently in other sections of the mine, the development of this access route is expected to be completed no later than Q1 of 2009. As a result, raw coal was a by-product of the development (63,217 clean tonnes); consequently $560,797 was capitalized to development which represented costs incurred of $2,568,486 offset by revenues derived from the sales of the processed coal of $2,025,689. Therefore, the revenues and cost of sales associated with the coal produced from the development of this access route have not been included in the income statement.

Quinsam's non-capitalized cost of production for coal sold during the three month and six month periods ended June 30, 2008, which includes transportation costs, was $52.01 and $53.05, respectively, per clean tonne compared to $47.17 and $46.24 during 2007 and $46.22 per clean tonne for the full year 2007.

Quinsam's average revenue per tonne of coal sold during the three and six month periods ended June 30, 2008 was $57.14 and $54.28 respectively compared to $52.99 and $53.02 for 2007, due to the sales mix by customer at contracted rates. The contribution margin on coal sales during the three and six months ended June 30, 2008 was 9.0% and 2.3% respectively versus 11.0% and 12.8% for 2007, reflecting the impact of the additional labour coupled with equipment issues.

Quinsam Development Activity

During the six months ended June 30, 2008, a follow-up drill program was initiated on the Quinsam North block, located immediately north of and adjacent to the Corporation's existing Quinsam mine. The purpose of the program is to further define the resources described in the National Instrument 43-101 ("NI 43-101") compliant technical report completed in July 2006, and to provide additional technical data for preparation of a mine development plan.

In addition to the Quinsam North drilling and coring work, a number of infill drill/core holes were completed at the Quinsam 7-South area. These holes will provide a closer drill spacing to provide more confidence in the coal quality of the No. 4 Seam at 7-South, and to provide enough drilling control to facilitate the design of an underground mine plan.

A measured and indicated in-situ coal resource of 20.82 million tonnes, within an area measuring approximately 4 km long by 1 km wide, has been calculated. Further work aimed at refining this in-situ number is being carried out and additional potential exists to the north and west. Coal quality results are being received from the lab and compiled. Data compilation and interpretation work is continuing for both the Quinsam North and 7-South areas.

Wapiti Property

At the Wapiti thermal coal property in northeast BC, an NI 43-101 compliant technical report was completed and filed in February 2006 providing an updated resource estimate of 80.1 million tonnes measured and indicated plus a further 35.2 million tonnes inferred.

With new funding, the Corporation is resuming development work on Wapiti to advance the project to mine development and production. To this end, more detailed planning is in progress for the contour-highwall (auger) plan and planning for a contour-highwall (continuous miner) system is also underway.

The development plan is based on the Heritage and Centre Blocks only to support a plan with production of up to 900,000 tonnes per year for a 12-year mine life.

Management plans to initiate a scoping level study on underground mining potential (both room-and-pillar and longwall) on the Centre and Jackpine Blocks where the seam is under deeper cover not accessible by the contour-highwall methods. With the gentle dips and absence of structure, it appears that underground mining may be attractive.

The environmental and regulatory program will be resumed in the near future to advance the project through the environmental assessment and mine permitting process. Since the report for the initial phase is nearly complete, we expect to be able to initiate the process quickly.

Given the timelines for the design and regulatory process, a tentative target for start of mine development and construction is Q3 2009.

Bingay Creek

At the Bingay metallurgical coal property in southeast BC, an NI 43-101 compliant technical report was completed and filed in August 2005 providing a resource estimate of 15.5 million tonnes measured and indicated plus a further 2.4 million tonnes inferred.

Work to date has identified a recoverable resource of about 8 million tonnes at a relatively low strip ratio of 4:1 BCM:tROM (bank cubic metres to a tonne of run-of-mine coal). On a conceptual basis it could support a 500,000 tonnes product per year operation for 10 to 12 years.

A new drilling program is being planned for this fall to delineate the resource for pit design and feasibility purposes and to develop a more detailed coal quality database. New geological modeling and mine layout planning will be started in the near future and detailed design will follow the planned drilling program. The drilling program will include drilling the lower seams not currently in the resource base, and testing the potential northward extension of the deposit.

Given the timelines for the geological programs, feasibility and regulatory process, a tentative target for start of mine development and construction is mid-2010.

Peace River Coal

In northeast British Columbia, Peace River Coal (PRC), in which the Corporation holds a 14.1% interest, continued to make good progress on increasing productivity, especially in the wash plant, where new circuits have added capacity and improved recovery percentages. An automatic loader was commissioned at PRC's rail load out near Tumbler Ridge, and a second train set leased to improve rolling stock availability. A decision was made to start replacing some of the contractor equipment at the mine-site with owner-operated units, and the first of these is now on site.

For the three and six month periods ended June 30, 2008, the Corporation's 14.1% interest in the Peace River Coal Limited Partnership yielded equity earnings of $1,327,886 and $280,223 respectively. During the quarter, $1.89 million was contributed by the Corporation to PRC in respect of cash calls made to cover both operating costs as well as certain capital expenditures. As a result, the Corporation's 14.1% interest has remained intact.

This release may contain forward-looking statements regarding the Corporation'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 Corporation expects are forward-looking statements. Although the Corporation 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 & C.E.O.
    (604) 684-9288
    or
    Hillsborough Resources Limited
    Ian Kirk, C.A.
    C.F.O.
    (604) 684-9288
    (604) 684-3178 (FAX)
    Website: www.hillsboroughresources.com