Calgary, AB - November 28, 2013 - CanAm Coal Corp. (TSXV: COE) (OTCQX: COECF) ("CanAm" or the "Company") has filed its condensed interim consolidated financial statements and related management discussion and analysis for the period ended September 30, 2013. These Q3 2013 financial statements include a restatement of the comparative Q3 2012 financials which is discussed in detail in the Q3 Management & Discussion Analysis ("MD&A"). Definitions of commonly used non-IFRS financial measures (EBITDA from operations and Free Cash Flow) are included at the end of this press release.
The Company announced today its third quarter 2013 financial results for the period ending September 30, 2013. Revenue, EBITDA from operations and loss for the quarter were $17.9 million, $3.4 million and ($0.9) million respectively as compared to $14.7 million, $3.3 million and ($1.0) million in the prior year. Sales for the quarter were 195,750 tons as compared to 157,900 tons in Q3 2012 or an increase of 24%.
For the nine month period ended September 30, 2013, revenue, EBITDA from operations and loss were $47.3 million, $7.9 million and ($4.3) million respectively as compared to $40.8 million, $7.1 million and ($3.8) million in the prior year. Sales for the six month period were 513,691 tons compared to 405,609 tons in the prior year, an increase of 27%.
As previously discussed, our first and second quarter were mainly considered transition quarters as we migrated the majority of our operations into a new mine complement: Knight, Posey Mill 2 and Old Union 2. Together with our existing Powhatan mine, the productive capacity of this new mine complement is expected to consistently be in the range of 60,000 to 80,000 tons per month. Our mine transition was completed towards the end of Q2 and therefore we were able to run steady state level production at all of our mines during this quarter. As a result, the Company was able to deliver a record quarter of production, revenue, EBITDA and free cash flow. We achieved records at all levels of our operations:
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Note: Refer to the definition of EBITDA from operations and Free Cash Flow on the last page of this press release.
With steady state and consistent production at our mines, we are now looking to optimize our cost structure and drive operational efficiencies across all of our mines. In this context, we are also targeting to closely match our production to our projected monthly and quarterly sales in order to minimize coal inventories. Although our costs have been coming down over the last couple of quarters, from $56/ton in Q1 to $51/ton in Q3, we are targeting to bring the average production cost per ton at or below $50/ton.
Third Quarter and YTD 2013 Financial Results
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Key quarterly statistics for 2013 and Q3 2012 are as follows:
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Note: Operating cash flow is before changes in non-cash working capital
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-.Sales for the quarter were 195,750 tons, an increase of 16% over Q2 2013 sales and 31% over Q1 2013 sales. Record sales of 67,500 tons were achieved in July.
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-.Long term off-take contracts continue to enable the Company to achieve better than market pricing for our high quality coals. Average sales price per ton for Q3 was consistent with prior 2013 quarters. The slightly lower average price as compared to last year is a result of our changing coal mix (i.e. a higher ratio of thermal coal versus metallurgical coal) and the termination of a met coal contract in early 2013.
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-.All of our production is currently committed into our off-take contracts with our customers and we are fully contracted for the remainder of the year.
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-.Average production cost per ton continues to trend down and was $51/ton as compared to $56/ton in Q1 of 2013 or a decrease of 9%. With all mines at steady state production now and with an ongoing focus on operational efficiencies, we are targeting to achieve an average cost per ton of at or below $50/ton. Q3 production costs were unfavorably impacted primarily by higher than anticipated fuel costs, mainly as a result of the spike of WTI oil prices during the third quarter, and higher than anticipated equipment repairs.
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-.Operating cash flow of $2.0 million was double the cash flow achieved in the comparable quarter of 2012.
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-.Investment in equipment and mine development was $1.7 million as compared to $5.2 million in the comparable period last year. On a year to date basis, capital expenditures were $6.6 million through the end of September or less than half of the $14.5 million in expenditures in the comparable prior year period. The Company does not anticipate any significant new equipment purchases for the remainder of the year.
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-.Free cash flow at $1.7 million is significantly up from ($1.9) million in Q3 2012 and from ($0.6) million and $0.2 million in Q1 and Q2 of 2013 and has turned positive following increased EBITDA performance and significantly reduced capital expenditures.
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-.Repayment of equipment financing obligations continues at a healthy pace and through September 30, 2013, the Company repaid $5.7 million of these obligations.
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-.Repaid $0.5 million of our August 2013 debenture and refinanced $0.6 million with a maturity date of May 8, 2014.
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-.Improved our financial flexibility with approximately $3.1 million of undrawn credit facilities.
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-.Reviewing options with respect to the repayment and/or refinancing of all or a portion of the May 2014 debentures.
Company President and CEO, Jos De Smedt commented: "We are extremely pleased with our quarterly results as the hard work of our team to transition from mine development to steady state production at all of our mines is now paying off for our Company. From an operational perspective, record production and sales is certainly evidence that we can operate at these levels at our new mines and, from a financial perspective, our metrics continue to improve. Record EBITDA of $3.4 million and especially record free cash flow of $1.7 million are additional indicators that we will be able to start building our cash position going forward. Also, recently obtained additional credit facility has improved our financial flexibility. We need to continue to build upon this Q3 momentum as we close out 2013 and position ourselves for 2014. With 85+% of our business contracted for in 2014, we are well positioned for a successful 2014. "
Outlook for the remainder of 2013
Although all of our mines are now positioned to produce at optimum levels and all of our 2013 production is committed into our off-take contracts, we anticipate sales for Q4 to be below Q3 levels due to plant maintenance and other factors at three main customers and overall reduced shipping days during the year-end holiday season. These factors are temporary and sales at these customers are expected to revert to normal quarterly levels in January. In this context, for November and December, the Company has taken a decision to scale back production in order to monetize existing inventory levels and match our production to our anticipated sales levels and thus realize production cost savings. Full scale production is expected to resume in January. October production exceeded 70,000 tons.
The Company continues to believe its existing equipment fleet is sufficient for the foreseeable future with its existing mine plan. On this basis, no significant new equipment purchases are planned for the rest of 2013 and possibly all of 2014.
On the basis of the forgoing and the fact that all of 2013 production and the majority of 2014 production has been sold into off-take contracts with our customers, the Company expects to consistently generate free cash flow for the remainder of 2013 and 2014.
For Further Information:
CanAm Corporate Office:
Jos De Smedt, President & CEO
Tel: 403.262.3797
Toll Free: 1.877.262.5888
Email: [email protected]
EBITDA from operations and Free Cash Flow
Statements throughout this MD&A make reference to EBITDA from operations and Free Cash Flow which are non-IFRS financial measures commonly used by financial analysts in evaluating financial performance of companies, including companies in the mining industry. Accordingly, management believes EBITDA from operations and Free Cash Flow may be a useful metric for evaluating the Company's performance as it is a measure management uses internally to assess performance, in addition to IFRS measures. As there is no generally accepted method of calculating EBITDA from operations and Free Cash Flow, the terms used herein are not necessarily comparable to similarly titled measures of other companies. The items excluded from EBITDA from operations and Free Cash Flow are significant in assessing the Company's operating results and liquidity. EBITDA from operations and Free Cash Flow have limitations as an analytical tool and should not be considered in isolation from, or as an alternative to, net income or other data prepared in accordance with IFRS. EBITDA from operations is calculated as income from mining operations plus depreciation, depletion, accretion and amortization less general and administrative costs. Free Cash Flow is calculated as EBITDA from operations less financed and non-financed capital expenditures. Other financial data has been prepared in accordance with IFRS.
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.
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 and BCC mines may be considered a financial outlook. These forward-looking statements were approved by management of the Company on November 26, 2013. 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.