Hillsborough Resources Limited
TSX : HLB

Hillsborough Resources Limited

August 14, 2009 19:57 ET

Hillsborough Resources Reports Q2 2009 Results

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 14, 2009) - Hillsborough Resources Limited (TSX:HLB) ("Hillsborough", "Corporation") announces a net loss of $4,492,731, or $0.06 per share, in the second quarter of fiscal year 2009. Net loss of $1,927,171, or $0.02 per share, is reported for the six (6) months ended June 30, 2009. On a cash basis, the Corporation's cash net loss for the three months ended June 30, 2009 was $403,282 ($0.01 per share) after adjusting for non-cash items. A cash net income for the six months ended June 30, 2009 was $3,888,128 ($0.05 per share) after adjusting for non-cash items.

During the quarter, the Corporation and the Vitol Group of Companies ("Vitol") concluded negotiations and signed an amended coal off-take agreement ("Agreement"). The Agreement provided for (1) increased volume of thermal coal committed to Vitol to 700,000 tonnes, (2) an extension of the contract term to 2012, and (3) a price reduction to $80 per tonne to align the sales price to current market conditions. In exchange, the Corporation received (1) a total of $3.5 million cash (US $3.0 million), (2) the release of its obligations with respect to the convertible note and term loans held with Vitol, currently, a combined value of $18.6 million (US $16.0 million), (3) a $6.0 million revolving line of credit limited to 75% of the FOB value of each barge consigned to the Texada Island shipping terminal, and (4) revised coal quality specifications to reflect the quality of coal currently produced at the Quinsam Mine. The sum of the cash and cancelled debt, as required by Canadian GAAP, has been recorded as deferred revenue and will be recognized in earnings ratably over the term of the Agreement. Had the sum of the cash and cancelled debt been recognized in income, the net income of the Corporation for the three and six months ended June 30, 2009 would have been $9,603,202 ($0.12 per share) and $12,168,762 ($0.15 per share) respectively.

The six months ending June 30, 2009 showed positive equity earnings of $360,102 from Hillsborough's 13.36% share of Peace River Coal Limited Partnership ("PRC") and an average price for Quinsam coal of $116.15 per tonne, which represents an increase of 114% over the same period in 2008.

David J. Slater, President and CEO, said, "Quinsam and PRC have performed very well in the second quarter and year to date. The new contract with Vitol was extremely beneficial to the Corporation in terms of settling outstanding debt and committing long term international sales. It is very unfortunate that, due to applicable accounting rules, the true economic effects of the transaction cannot be presented in current income. In addition, the market outlook for thermal and metallurgical coals remains positive. With the continued demand for Quinsam and PRC coals and the expectation of improved efficiencies and reduced operating costs from these mines, we maintain our projection for improved financial performance for 2009."

The Corporation's interim financial statements and related management's discussion and analysis for the three months and six months ended June 30, 2009 will be available on www.sedar.com. Highlights for the six months ended June 30, 2009 include the following:

- The Corporation cancelled the February 12, 2008 off-take agreement with Vitol, with subsequent amendments dated April 23, 2008 and July 8, 2008, in exchange for a $22.1 million (US $19.0 million) cancellation fee. With the proceeds of the cancellation fee, the Corporation repaid all obligations with respect to the convertible note of $11.9 million (US $10.2 million) and the term loans of $6.7 million (US $5.8 million) held with Vitol. The cancellation fee, net of the $3.4 million debt settlement expense, has been recorded as deferred revenue and will be recognized in earnings ratably over the term of the agreement.

- Net loss of $1,927,171 ($0.02 per share) compared to a net loss of $2,541,415 ($0.04 per share) for the same period in 2008. On a cash basis, the Corporation's cash net loss for the three months ended June 30, 2009 was $403,282 ($0.01 per share) after adjusting for non-cash items (2008 - $281,368, $0.00 per share). A cash net income for the six months ended June 30, 2009 was $3,888,128 ($0.05 per share) after adjusting for non-cash items (2008 - cash net loss of $1,561,547, $0.02 per share).

- Non-cash charges of $1,611,963 of accretion of equity to debt, $977,548 write down of inventory and $443,728 write down of assets.

- Exchange rate loss of $245,280.

- Equity earnings of $360,102 from the Corporation's 13.36% interest in Peace River Coal Limited Partnership ("PRC").

- 114% increase in the average price of Quinsam coal compared with the same period in 2008 ($116.15 per tonne and $54.28 per tonne respectively to June 30, 2009 and June 30, 2008).

- Clean coal production from Quinsam of 199,512 tonnes, compared to 232,954 for the same period in 2008.

- Cost per tonne sold for Quinsam of $73.32, compared to $53.05 for the same period in 2008. The Corporation projects that average 2009 costs will be more in line with 2008 costs due to the revised mine plan (implemented in April, 2009) which includes depillaring and the mining of thicker coal seams.

About the Corporation

Hillsborough Resources Limited is a coal mining company that:

- Operates the Quinsam underground thermal coal 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, which is being considered for a coal fly ash disposal site, but the mine remains in reclamation at this time.

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

This document contains the term "cash net income/loss", which does not have a standardized meaning prescribed by Canadian GAAP and therefore may not be comparable with the calculation of similar measures by other companies. The Corporation uses this measure to analyze financial and operating performance. The Corporation feels this benchmark is a key measure of profitability and overall sustainability for the company. The term is not intended to represent operating profits nor should it be viewed as an alternative to cash flow provided by operating activities, net earnings or other measures of financial performance calculated in accordance with GAAP. Cash net income/loss is calculated as Cash Flows from Operations.

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
    (604) 684-3178 (FAX)
    or
    Hillsborough Resources Limited
    Ian Kirk, C.A.
    C.F.O.
    (604) 684-9288
    (604) 684-3178 (FAX)
    www.hillsboroughresources.com