Western Canadian Coal Announces Fiscal Second Quarter 2010 Results
Operating highlights for the fiscal second quarter:
- The acquisition of Cambrian Mining Plc ("Cambrian") closed on July
13, 2009. The Company has consolidated the results of the operations
from Cambrian from July 14, 2009.
- Earned consolidated income from mining operations of $10.4 million.
- The Canadian Operations:
- 42% higher shipments and 23% higher production volumes when
comparing Q2-2010 to Q1-2010.
- 30% lower coal prices in Q2-2010 than Q1-2010 which is a result of
not selling any coal year 2008 carry-over tonnage, not having any
spot sales, and the impact of the stronger Canadian dollar in
relation to the US dollar in the second quarter 2010.
- The Canadian dollar strengthened by an average of 8% from first
quarter 2010 to second quarter 2010, which reduced sales by
approximately $6.1 million.
- Cash costs (cost of products sold plus transportation costs), on a
per unit basis, were $100 per tonne or 13% lower than in Q1-2010.
- The US Operations contributed to the current quarter's results,
earning operating margins of 18%.
Other highlights in the second quarter include:
- Oversubscription of a $60 million equity fundraising which closed
August 2009.
- Continued strong financial position with net working capital over
$120 million, debt to equity at 0.40, and cash in the bank of
$94.6 million.
- Announcement of plans to grow the current production base from
7 million tonnes of installed capacity to 10 million tonnes.
- Announcement of changes that strengthen and deepen the management
team with Keith Calder as President and Chief Executive Officer,
Craig Dirk as Chief Operations Officer, Canadian Operations and Braam
Jonker as Chief Financial Officer.
Mr.
“We continue to make strong progress on lowering our mining costs to the lowest level in years. The lower cost structure will ensure we generate even higher returns for our shareholders in an environment of higher coal prices next year. We continue to meet the increasing demand from our customers; considering the strong demand, constrained supply conditions and the impact of the weaker US dollar, we expect next year’s coal contract prices to be significantly higher. Layer in our plans to aggressively grow our operations and reduce our costs, and we are quickly delivering on our plans to become a premium mid-tier international coal company.”
“I would also like to highlight our employees at our US Operations for earning the very prestigious Sentinel of Safety Award and the Joseph Holmes Safety Certificate of Honor. Since the current operations at
The Company has updated operational guidance for the remainder of fiscal 2010 and expects to generate improved cash flows from increased shipments and lower costs than it achieved in the first half of fiscal 2010. The Company now expects to ship 1.3 to 1.4 million tonnes from the Canadian operations at a sales price of
News Release
This news release is prepared as at
Financial Summary - unaudited:
(In thousands of Canadian dollars, September 30, March 31,
except tonnes and per share data) 2009 2009
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Cash & cash equivalents $ 94,598 $ 74,853
Amounts receivable 64,570 40,080
Inventory 49,704 62,376
Total current assets 212,993 217,943
Total assets 790,853 662,337
Current liabilities $ 92,100 $ 72,304
Long-term liabilities 129,128 124,625
Non-controlling interests 16,374 -
Shareholders' equity 553,251 465,408
Total liabilities and shareholders' equity 790,853 662,337
Current ratio (current assets/current liabilities) 2.31 3.01
Debt to equity ratio (total debt/shareholders'
equity) 0.40 0.42
Three months ending Six months ending
September 30, September 30,
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2009 2008 2009 2008
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Revenue $ 107,637 $ 167,455 $ 183,335 $ 297,848
Cost of goods sold 97,266 85,546 153,315 162,963
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Income from mining
operations 10,371 81,909 30,020 134,885
Other expenses 7,858 13,284 17,859 29,339
Income tax recovery
(expense) (352) (23,878) (6,612) (1,094)
Non-controlling interests 197 - 197 -
Equity (loss) related to
equity investment (172) - (172) -
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Net income $ 2,186 $ 44,747 $ 5,574 $ 104,452
Earnings per share, basic $ 0.01 $ 0.26 $ 0.02 $ 0.67
Earnings per share,
diluted $ 0.01 $ 0.24 $ 0.02 $ 0.61
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Results of Operations
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The results of the operations are reported in the following segments:
Canadian Operations
Three Three Six Six
In thousands of months months months months
Canadian dollars ended ended ended ended
unless otherwise September September September September
noted 30, 2009 30, 2008 30, 2009 30, 2008
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Financial Excerpts
Revenues $ 75,585 $ 167,455 $ 151,283 $ 297,848
Cost of goods sold 70,342 85,546 126,391 162,963
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Income from mining
operations $ 5,243 $ 81,909 $ 24,892 $ 34,885
Production (tonnes):
Hard coking coal 327,000 315,000 686,000 655,000
Low-vol PCI coal 173,000 282,000 220,000 556,000
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Total Production 500,000 597,000 906,000 1,211,000
Sales (tonnes):
Hard coking coal 370,000 273,000 672,000 631,000
Low-vol PCI coal 248,000 327,000 381,000 552,000
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Total Sales 618,000 600,000 1,053,000 1,183,000
Per unit:
Coal price realized $ 122 $ 279 $ 144 $ 252
Coal price realized
(USD) $ 111 $ 268 $ 126 $ 245
Cost of goods sold
Cost of product sold $ 71 $ 95 $ 77 $ 93
Transportation and
other $ 29 $ 37 $ 29 $ 33
Depletion, amorti-
zation and accretion $ 14 $ 11 $ 14 $ 12
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$ 114 $ 143 $ 120 $ 138
The impact of the global economic recession has resulted in a 55% decrease in revenues from the second quarter 2010 to second quarter 2009, which is reflected in both the decrease in sales price realized partially offset by a higher sales volume. The decrease in sales price is a result of lower coal contract prices for fiscal 2010, which are
For the three month period ended
Production of hard coking coal increased 12,000 tonnes when comparing the three month period ended
Production of low-vol PCI coal from the
The 20% decrease in the per unit costs of goods sold from
US Operations
Three Three Six Six
In thousands of months months months months
Canadian dollars ended ended ended ended
unless otherwise September September September September
noted 30, 2009 30, 2008 30, 2009 30, 2008
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Financial Excerpts
Revenues $ 27,338 $ - $ 27,338 $ -
Cost of goods sold 22,433 - 22,433 -
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Income from mining
operations $ 4,905 - $ 4,905 -
Production (short tons*):
Metallurgical coal 102,000 - 102,000 -
Thermal coal 202,000 - 202,000 -
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Total Production 304,000 - 304,000 -
Sales (short tons):
Metallurgical coal 95,000 - 95,000 -
Thermal coal 182,000 - 182,000 -
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Total Sales 277,000 - 277,000 -
Per unit:
Coal price realized $ 99 $ - $ 99 $ -
Coal price realized
(USD) $ 92 $ 92
Cost of goods sold $ 81 $ - $ 81 $ -
* 1 short ton = 0.907 tonnes
On
Revenues for the three month period ended
Cost of goods sold for the three months ended
UK Operations
Three Three Six Six
In thousands of months months months months
Canadian dollars ended ended ended ended
unless otherwise September September September September
noted 30, 2009 30, 2008 30, 2009 30, 2008
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Financial Excerpts
Revenues $ 3,044 $ - $ 3,044 $ -
Cost of goods sold 2,781 - 2,781 -
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Income from mining
operations $ 263 - $ 263 -
Production (tonnes): 29,000 - 29,000 -
Sales (tonnes): 31,000 - 31,000 -
Per unit:
Coal price realized $ 99 $ - $ 99 $ -
Coal price realized pnds (pnds
(pnds stlg) stlg) 55 $ - stlg) 55 $ -
Cost of goods sold $ 90 $ - $ 90 $ -
On
Revenues for the three month period ended
Cost of goods sold for the three months ended
AGD Mining Pty Ltd.
Three Three Six Six
In thousands of months months months months
Canadian dollars ended ended ended ended
unless otherwise September September September September
noted 30, 2009 30, 2008 30, 2009 30, 2008
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Financial Excerpts
Revenues $ 1,670 $ - $ 1,670 $ -
Cost of goods sold 1,710 - 1,710 -
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Income from mining
operations (40) - (40) -
On
Other expenses
Other expenses, for the three and six months ended September 30, 2009
include the following:
Three Three Six Six
In thousands of months months months months
Canadian dollars ended ended ended ended
unless otherwise September September September September
noted 30, 2009 30, 2008 30, 2009 30, 2008
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General and admin-
istration $ 7,463 $ 5,409 $ 11,888 $ 10,354
Sales and marketing 3,128 884 4,250 2,174
Coal exploration 1,057 385 2,360 948
Interest, accretion
and financing fees
on liabilities 3,603 6,828 6,245 16,587
Other (income) (7,393) (222) (6,884) (724)
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Total other expenses $ 7,858 $ 13,284 $ 17,859 $ 29,339
General and Administration
For the three month period ended
Sales and Marketing
For the three month period ended
Coal Exploration and Other Mine Maintenance Costs
Coal exploration and other mine maintenance costs for the three month period ended
Interest, Accretion and Financing Fees on Liabilities
For the three month period ended
Other Expenses (Income)
Three Three Six Six
In thousands of months months months months
Canadian dollars ended ended ended ended
unless otherwise September September September September
noted 30, 2009 30, 2008 30, 2009 30, 2008
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Foreign exchange losses $ 11,106 $ 157 $ 16,320 $ 176
Gain on redemption of
convertible debentures (4,155) - (4,155) -
Unrealized gain on forward
exchange contracts (12,324) - (15,504) -
Interest income (2,020) (325) (3,513) (562)
Other income - (54) (32) (338)
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(7,393) (222) (6,884) (724)
For the three month period ended
Non-Controlling Interests
For the three month period ended
Equity (Loss) Related to Equity Investment
For the period from
Net Income
Net income for the three month period ended
The major impact on the net income for the three month period ended
Market Outlook
The Company has seen an increase in the demand for its metallurgical coal products, resulting from recent strength in the steel sector, led by
In the longer term, the market fundamentals for metallurgical coal are expected to continue to improve, which will provide continued opportunity for the Company. The Company’s Wolverine hard coking coal forms a key blend component with many of the world’s leading steel mills, while the
The Company’s
Guidance
Canadian Operations
For the remaining six months of fiscal 2010, the Company expects to produce between 1,200,000 and 1,300,000 tonnes of metallurgical coal from its two operating mines in
The Company expects to ship in the remaining six months of fiscal 2010 between 1,300,000 and 1,400,000 tonnes of metallurgical coal, which will consist of 850,000 to 900,000 tonnes of hard coking coal and 450,000 to 500,000 tonnes of ULV-PCI. These expected low-vol PCI sales reflect a drawdown of inventory stockpiles. This guidance is dependent upon the continued demand of the Company’s customers, clean coal production at the mines, rail service and vessel arrivals.
All of the Company’s current fiscal 2010 coal production is under contract for sale to international steel producers. Contracted coal prices for fiscal 2010 are approximately
Expected cash cost of production (FOB) at the Canadian operations is expected to be
The Company has entered into foreign currency contracts totaling 75% of sales or
US Operations
The Company expects to produce and sell for the remaining six months of fiscal 2010 approximately 650,000 short tons of coals from its mines in
For the remainder of fiscal 2010 average cash production costs at the US operations are expected to be approximately
Conference Call
The Company will be hosting a conference call to discuss those results at
The call will be webcast live and will be available at www.westerncoal.com
About Western
Western is a producer of high quality metallurgical and thermal coal from mines located in northeast
Forward-Looking Information
This release may contain forward-looking statements that may involve risks and uncertainties. Such statements relate to the Company’s expectations, intentions, plans and beliefs. As a result, actual future events or results could differ materially from those suggested by the forward-looking statements. Readers are referred to the documents filed by the Company on SEDAR. Such risk factors include, but are not limited to changes in commodity prices; strengths of various economies; the effects of competition and pricing pressures; the oversupply of, or lack of demand for, the Company’s products; currency and interest rate fluctuations; various events which could disrupt the Company’s construction schedule or operations; the Company’s ability to obtain additional funding on favourable terms, if at all; and the Company’s ability to anticipate and manage the foregoing factors and risks. Additionally, statements related to the quantity or magnitude of coal deposits are deemed to be forward-looking statements. The reliability of such information is affected by, among other things, uncertainties involving geology of coal deposits; uncertainties of estimates of their size or composition; uncertainties of projections related to costs of production; the possibilities in delays in mining activities; changes in plans with respect to exploration, development projects or capital expenditures; and various other risks including those related to health, safety and environmental matters.
SOURCE Western Coal Corp.