Hillsborough Resources Limited

Hillsborough Resources Limited

June 24, 2009 09:00 ET

Hillsborough Resources Provides Operations Update

Positive Financial Outlook for 2009

VANCOUVER, BRITISH COLUMBIA--(Marketwire - June 24, 2009) - Hillsborough Resources Limited (TSX:HLB) ("Hillsborough", "the Corporation") is pleased to provide the following operations update for 2009.

Vitol Agreement

Further to the news release of March 31, 2009, the Corporation is pleased to announce that agreement in principle has been reached with the Vitol Group of Companies ("Vitol") on the revised terms of the 2008 agreement. In addition to the shipment of 68,294 tonnes at USD$130 delivered in January, 2009, 700,000 MT of Quinsam thermal coal (+/- 10% at Vitol's option) will be shipped at the base price of CDN$80/MT. Price adjustments for quality have been revised in Hillsborough's favor. In terms of deliveries, two more shipments of approximately 70,000 tonnes each are planned for 2009. The remaining tonnage will be delivered between January 1, 2010 and December 31, 2012, with the tentative schedule of three shipments per year.

In consideration of Hillsborough's acceptance of the revised contract terms, Vitol will cancel and forgive approximately USD$16,000,000 of debt owed by Hillsborough and its affiliates, pay to Hillsborough approximately USD$3,000,000 in cash and continue to provide Hillsborough with a line of credit in the amount of CDN$6,000,000. The agreement is subject to the prior receipt of all necessary consents and approvals, certain corporate restructuring by Hillsborough and compliance with all applicable laws.

Quinsam Mine

The budgeted production for the Quinsam mine has been revised to 435,000 tonnes of saleable coal during calendar year 2009 at a cost of CDN$72 to CDN$75 per tonne FOB vessel. Based on current contracts, total 2009 deliveries will be in the range of 385,000 tonnes to 455,000 tonnes, at an average sales price of CDN$84 per tonne to CDN$87 per tonne. This includes international shipments of 194,000 tonnes to 223,000 tonnes at an average price of CDN$106 to CDN$110 per tonne. The remaining tonnage is committed primarily to cement manufacturers in the Vancouver and Seattle areas. In the event that additional coal is produced by Quinsam during 2009, Management expects that it will be either sold at market prices within the current year, or stockpiled to prepare for shipments in 2010.

A number of initiatives have been deployed at the Quinsam mine to reduce costs. The new mining equipment added in 2008 is now fully commissioned, and increased operating efficiencies and availability are being experienced. The mine plan has been revised to maximize coal extraction from thick seams, and an increase in the proportion of depillared coal is expected in 2009 compared to 2008.

The corporation has filed an updated NI 43-101 report on the Quinsam North Project, based on the completion of 8 additional cored holes in 2008. The new study verifies the presence of 23.797 million tonnes of measured coal resources, with an additional inferred resource of 1.498 million tonnes. The additional drillholes confirmed that the Quinsam North coal resources correlate directly to the Quinsam No. 4 Coal Seam, which is the subject of detailed mine engineering and permitting at the company's 7 South deposit, an advanced stage development area within the present Quinsam Mining Block. At this time, Management feels that focus should remain on developing the 7 South deposit due to its proximity to existing infrastructure. Mining conditions and produced coal quality at 7 South will contribute greatly to the knowledge and forward planning for ultimate development at Quinsam North.

Peace River Coal Limited Partnership ("PRC")

Based on firm orders to date and anticipated additional sales, PRC is expected to be cash positive for the balance of 2009. Accordingly, management's outlook is that the cash call obligations for the remainder of 2009 will be funded by the distributions generated by PRC.

Crossville Mine

On March 30, 2009, Hillsborough announced the signing of a Memorandum of Understanding with a Tennessee contracting company with respect to the sale of Crossville Coal Inc. The final agreement will be for the sale of the assets of Crossville Coal Inc., and is subject to securing a contract for fly ash disposal on the mine site. The Corporation is pleased to announce that the first major step to permit the mine for fly ash disposal has been achieved. On June 15, 2009, the commissioners of Cumberland County, Tennessee, approved a resolution which clears the way for a company to seek a permit to use the mine site as a monofill site for coal fly ash. Terms of the sale agreement will include the purchaser assuming all past and future reclamation liability for the Crossville mine site, such that bonding totaling USD $3,150,000 will be returned to the Corporation.

"With the accelerated cash receipts from Vitol, solid sales and projected improvements at the Quinsam mine, the forecast self-funding of the Corporation's interest in Peace River Coal LP, and the anticipated sale of the Crossville mine, Hillsborough Resources expects improved financial performance for 2009," stated David J. Slater, President and CEO of Hillsborough. "This positive outlook provides a foundation to continue our efforts to improve efficiencies and grow the company through expanding existing operations, developing current projects and pursuing opportunities such as acquisitions and partnerships."

About the Corporation

Hillsborough Resources Limited is a coal mining company that:

- Operates the Quinsam underground thermal mine near Campbell River, British Columbia, serving the local and west-coast U.S. cement industry and the export market.

- Is a limited partner in the Peace River Coal Limited Partnership (with 13.36 %), which has substantial metallurgical coal properties both in production (Trend Mine) and under development near Tumbler Ridge, British Columbia.

- Owns the Crossville Mine in Tennessee on which options for new mine development are being evaluated but the mine remains in reclamation at this time.

- Holds the Wapiti thermal coal property north of Tumbler Ridge, and is planning development of a mine.

- Holds the Bingay Creek metallurgical coal property located in the Elk Valley region of southeast British Columbia.

Certain statements and information herein, including all statements that are not historical facts, contain forward-looking statements and forward-looking information within the meaning of applicable securities laws. Such forward-looking statements or information include but are not limited to statements or information as to estimates, forecasts, future financial or operating performance of the Corporation, future production, costs of production, capital requirements, operating expenditures, reserve potential, exploration drilling, exploitation activities and activities and events or developments that we expect to occur. Often, but not always, forward-looking statements and information can be identified by the use of words such as "may", "will", "should", "plans", "expects", "intends", "anticipates", "believes", "budget", "forecasted" and "scheduled" or the negative thereof or variations thereon or similar terminology.

With respect to forward-looking statements and information contained herein, we have made numerous assumptions including among other things, assumptions about prices, anticipated costs and our ability to achieve our goals. In particular, our statements regarding future production expectation is based on current existing current resource/reserve estimates, production contracts in place, historical costs and mining conditions.

Forward-looking statements and information are necessarily based upon a number of estimates and assumptions that, while considered by management to be reasonable and to be based on reasonable assumptions, are inherently subject to significant business, economic and competitive uncertainties and contingencies and involve known and unknown risks. Readers are cautioned that any such forward-looking statements and information are not guarantees and there can be no assurance that such statements and information will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from the Corporation's expectations include adverse exploration or development results; interruptions in the ability of the Corporation to produce coal from any of its mines; inability to meet production volumes required; 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. See our recent annual information form and quarterly and annual management's discussion and analysis filed on SEDAR for additional information on risks, uncertainties and other factors relating to the forward-looking statements and information.

Although we have identified factors that would cause actual actions, events or results to differ materially from those disclosed in the forward-looking statements or information, there may be other factors that cause actual results, performance, achievements or events not to be as anticipated, estimated or intended. Accordingly, readers should not place undue reliance on the forward-looking statements or information. We expressly disclaim any intention or obligation to update or revise any forward-looking statements and information whether as a result of new information, future events or otherwise, except as required by law. All written and oral forward-looking statements and information attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements.

Contact Information

  • Hillsborough Resources Limited
    David Slater
    President & C.E.O.
    (604) 684-9288
    Hillsborough Resources Limited
    Ian Kirk, C.A.
    (604) 684-9288
    (604) 684-3178 (FAX)