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Forbes & Manhattan Coal Corp. (TSX:FMC) ("Forbes Coal" or the "Company")
announces results for its fourth quarter ended December 31, 2011. All figures
are in Canadian dollars, unless otherwise stated.
Highlights include:
-- Management believes the Company is on track to meet its production and
EBITDA targets.
-- Reported total revenue was $9.03 million and $15.66 million during three
and five months ended December 31, 2010 which includes three and five
months of operations from Slater Coal respectively.
-- On December 7th, 2010, the Company announced increased port capacity at
Richards Bay - Grindrod Terminals (the "Terminal") to provide export
capacity of coal product through the Terminal for the shipment of coal
products in the following amounts:
-- 2011 - 600 000 metric tons (m/t) per annum
-- 2012 - 720 000 metric tons (m/t) per annum
-- 2013 - 960 000 metric tons (m/t) per annum
-- South African operations generated EBITDA of $1.24 million and $4.32
million (See non GAAP measures) during the three and five months ended
December 31, 2010 respectively and management estimates that there is
approximately $11.39 million of finished goods in inventory at December
31, 2010.
-- Slater Coal's year to date production March 1 to December 31, 2010 was
743,715 t Run of Mine ("ROM"). Five months, or 402,956 t ROM were
consolidated into Forbes Coal.
-- A new continuous miner was delivered to Magdalena site on November 29,
2010 and the expansion of section 4 of the Magdalena property is well
under way
-- The production target for Slater Coal for its fiscal year ending
February 2011 is an estimated 976,000 ROM Subsequent to December 31,
2010, the Company announced a $36.4 million bought deal co-led by GMP
Securities L.P and Canaccord Genuity Corp. with a 15% over-allotment
option for aggregate gross proceeds in the amount of $41,860,000.
-- The Company has changed its year end to February 28 to align itself with
Slater Coal, consequently, the year ended February 28, 2011 will be a
fourteen month year.
In releasing this information, President and Chief Executive Officer of Forbes
Coal, Stephan Theron, commented, "Our fourth quarter results highlight strong
production results from both the Magdalena and Aviemore properties. We are in
the process of commissioning the new continuous miner at Magdalena and expect a
commensurate increase in production over the next quarter. Furthermore, with the
expanded port capacity and a strong focus on logistics management, we believe
the Company is in a strong position to benefit from rising coal prices in the
near future."
Operational highlights
Forbes Coal management team took control of the Slater Coal operations in August
2010. The ramp-up programme, launched in the second quarter under guidance of
the previous management team, continued to gain momentum through December 31,
2010. The following key points are noted:
-- Aviemore anthracite operation, reopened in June 2010, regularly exceeded
targeted output of 22,000 t ROM per month, with average of 22,742 t ROM
produced per month between August and November 2010. The target
performance was achieved two months ahead of schedule.
-- Mining production halted on December 10, 2010 for scheduled year-end
maintenance and the production team holiday break. A total of 99,099 t
ROM was produced at Aviemore between August 2010 and December 2010.
-- Anthracite Calcine unit was successfully commissioned at the end of
August with 25,151 t anthracite peas calcined between September 2010 and
December 2010.
-- Additional staffing and equipment were deployed at the Magdalena
underground site to support the ramp-up programme, including the
successful commissioning of a new 2,500 KVA power supply to Magdalena
underground operations.
-- Magdalena underground took delivery of a new continuous miner for the
development of the new Section 4. It is anticipated that the development
of this section will add up to 330,000 tonnes per year in saleable
production.
-- Magdalena operations, underground and open pit combined, produced
303,857 t ROM for the period August to December 2010.
-- Total ROM production from all operations for the period August to
December 2010 was 402,956 t ROM .
-- Total production from March 2010 to December 2010 is 743,715 t ROM.
March 2010 to July 2010 production was prior to the Company's
acquisition of Slater Coal and is therefore not attributable to the
Company
-- The production forecast for the fiscal year ending February 2011 is
976,000 t ROM. ROM planned. The March 2010 to July 2010 production
included in these estimates was prior to the Company's acquisition of
Slater Coal and is therefore not attributable to the Company
-- The production ramp-up plan is generally going according to plan. A
delay in the delivery and commissioning of the new Section 4 continuous
miner, in addition to unplanned maintenance on the original Section 1
continuous miner, significantly contributed to the downward adjustment
in forecast production for the period ending February 2011.
-- Mining production halted earlier on December 10, 2010 for the scheduled
year-end maintenance and the production team holiday break.
-- Saleable coal production for August 2010 to December 2010 was 280,128 t
vs 296,000 t targeted. The total yield was 69.5% in this period.
-- Total sales from March 2010 to December 2010 is 399,482 t, with 102,834
t moved in the last three months. The March 2010 to July 2010 sales were
prior to the Company's acquisition of Slater Coal and is therefore not
attributable to the Company
-- Coal is transported by rail and truck to domestic customers, while
export coal reports to the Richards Bay Coal Terminal by rail.
-- Forbes Coal successfully negotiated an agreement with Grindrod Navitrade
port terminal for incremental capacity of up to 960,000 tonnes per annum
over a three year period.
-- Grindrod Terminals provide certain logistical, handling and stock
piling services to shippers in connection with the shipment of bulk
cargoes through the dry bulk coal Terminal known as the Navitrade
Terminal (and its associated facilities), connected to berths in the
Port of Richards Bay.
-- Grindrod Terminals will provide up to 70,000 t in stockpile capacity
to receive the coal at the terminal. We can deliver coal to the
Terminal either by road or rail.
Financial highlights
1. Slater Coal financial highlights
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Summarized Financial Results (Actual)
Slater Coal
Date of
1-Oct-10 acquisition to 1-Mar-10
31-Dec-10 31-Dec-10 31-Dec-10
3 months 5 months 10 months
Run of Mine (ROM) (t) 228,157 402,956 743,715
Saleable production (t) 149,588 280,128 509,739
Plant feed (t) 219,549 402,500 750,836
Yield (%) on ROM 65.6% 69.5% 68.5%
Yield (%) on Plant feed 68.1% 69.6% 67.9%
Inventory tonnes balance open 139,212 86,742 74,704
Inventory tonnes balance close 173,791 173,791 173,791
Sales (t) 102,834 181,908 399,482
Revenue 000,000's ($) 9.03 15.66 34.72
EBITDA 000,000's ($) 1.24 4.32 11.02
CDN$: US$ (average) 1.01 1.02 1.03
ZAR: CDN$(average) 6.82 6.91 7.10
Selling price (average) / sold 87.82 86.08 85.67
production t (CAD$)
Selling price (average) / sold 86.95 84.38 83.16
production t (US$)
Cash cost of sales and 7.60 10.99 23.18
operating expenses 000,000
(CAD $)
Cash cost of sales and 73.89 60.41 58.02
operating expenses / sold
production t (CDN$)
Cash cost of sales and 73.16 59.22 56.51
operating expenses / sold
production t (US$)
Capital expenditures 000,000's 1.83 2.46 5.62
(CAD$)
Capital expenditures per t of 12.30 8.77 11.03
saleable production $
Numbers in this chart are
derived from the Slater Coal
stand alone financial
statements
The Company acquired Slater
Coal at the end of July 2010.
The March 1, 2010 to December
31, 2010 results include
information prior to the
acquisition of Slater coal and
are presented here for
reference purposes only
See non GAAP measures
----------------------------------------------------------------------------
2. Forbes and Manhattan Coal Corp consolidated financial highlights
The Company has determined that Slater Coal is a variable interest entity
("VIE") where the Company is the primary beneficiary, as the Company will absorb
the majority of Slater Coal's expected losses and will receive the majority of
Slater Coal's expected residual returns. Consequently, under CICA accounting
guideline AcG-15, the Company has consolidated 100% of Slater Coal as a variable
interest entity.
The Company completed the acquisition of Slater Coal at the end of July 2010.
Consequently, five months of results for Slater Coal were consolidated into the
Company.
Total comprehensive loss
The net loss for the three and twelve months ended December 31, 2010, was $5.17
million and $16.88 million, respectively, compared to $0.04 million and $0.04
million for the comparative periods in 2009. Comprehensive loss for the three
and twelve months ended December 31, 2010, was $0.17 million and $10.98 million
respectively compared to $0.04 million and $0.04 million for the comparable
periods in 2009. As described in the "Overview of the Company" section of this
report Forbes & Manhattan (Coal) Inc., was incorporated in November 2009. Forbes
& Manhattan Coal Corp, is the continuing combined entity following the September
2010 business combination between Forbes & Manhattan (Coal) Inc. and Nyah
Resources Corp. whereby Nyah, a public company listed on the Toronto Venture
Stock Exchange ("TSX-V"), acquired all of the outstanding shares of the Company
in exchange for common shares of Nyah (the "Transaction"). Consequently, the
comparative results for Q4 2009 contain only minimal overhead expenses as the
Company had recently been incorporated. Following completion of the Transaction,
the Forbes & Manhattan (Coal) Inc Board of Directors and management team became
the Board of Directors and management team of the combined entity, which was
renamed Forbes & Manhattan Coal Corp. Forbes and Manhattan Coal Corp. began
trading on the TSX under the symbol "FMC" as of September 27, 2010.
The Company completed the acquisition of Slater Coal at the end of July 2010.
Consequently five months of results for Slater Coal have been consolidated into
Forbes & Manhattan Coal Corp.
Revenue
Coal sales during the three and twelve months ended December 31, 2010 were $9.03
million and $15.66 million, which represented 102,834 and 181,908 tonnes sold
respectively. During the quarter ended December 31, 2010, 83,854 tonnes were
sold from the Magdalena operation, 11,960 tonnes were sold from the Aviemore
anthracite operation and 7,020 tonnes were sold for the Calcine operation. Run
of Mine production generated 228,157 gross tonnes and 149,588 saleable tonnes
were produced (33,198 tonnes from Aviemore and 116,390 tonnes from Magdalena).
The Company has experienced a logistics backlog which generated stockpiles as
228,157 saleable tonnes were produced and 180,908 tonnes were sold during the
five months since the acquisition.
The Company has taken initiatives to increase its' port allocations in order to
sell the backlogged inventory and provide increased capacity for the future.
The Company has entered into agreements with Transnet Freight Rail ("TFR"), and
Grindrod Terminals Richards Bay, a division of Grindrod South Africa (Pty) Ltd.,
to export coal produced by Forbes Coal from the Slater Coal operations in Dundee
through the Port of Richards Bay.
The production target for Slater Coal for its fiscal year ending February 2011
is an estimated 680,000 tonnes of attributable coal production. Currently Forbes
Coal conducts the majority of its coal sales in the domestic market and
continues to have the availability to ship up to 197,000 tonnes per annum from
Richards Bay Coal Terminal in addition to the new agreements.
Cost of sales and operating expenses
Cash cost of sales and operating expenses for the three and twelve months ended
December 31, 2010, was $7.60 million and $10.99 million respectively ($73.89 per
tonne and $60.41 per tonne). This amount includes transportation, rail and port
handling costs. Amortization and depletion amounted to $0.18 million and $1.97
million.
The cash cost of sales and operating expenses were high during the 4th quarter
for the following reasons;
-- the December production was low as the mine was in operation for only 11
days due to the holiday and maintenance shutdown;
-- higher downtime on the continuous miner as a function of maintenance in
certain sections of the mine; and
-- lower than forecasted sales as previously discussed.
Expenses
The Company recorded expenses of $6.95 million during the three months and
$16.17 million during the twelve months ended December 31, 2010, respectively.
During the three months ended December 31, 2010 the Company recorded $5.80
million in stock based compensation primarily related to the issuance of
2,175,000 options granted during the 4th quarter. The Company also recorded non
cash expenses of $7.73 million during the 3rd Quarter of the year in stock based
compensation primarily related to the issuance of performance special warrants.
On July 20, 2010, prior to the transaction with Nyah, the original shareholders
of the Company were issued the 2,700,000 performance special warrants as per the
underwriting agreement. Each Performance Special Warrant automatically exercised
into one common share of the Company (each "Performance Share" and,
collectively, the "Performance Shares") for no additional consideration
immediately prior to the completion of the Nyah acquisition, provided that such
Performance Shares shall be deposited in escrow with an escrow agent (the
"Escrowed Shares"), to be released as follows:
i. 50% of the Escrowed Shares (the "First Tranche Escrowed Shares") will be
released once the Company achieves US$22,000,000 in EBITDA from the
Slater Coal Properties over a 12 consecutive month period by July 20,
2013. In the event of not achieving US$22,000,000 in EBITDA from Slater
Coal Properties, the above mentioned Escrowed Shares will be cancelled;
ii. The remaining Escrowed Shares will be released once the Company achieves
US$35,000,000 in EBITDA from the Slater Coal Properties over a 12
consecutive month period within a three year period following the
release of the First Tranche Escrowed Shares. For further clarity,
EBITDA generated from the Slater Coal Properties will exclude any gains
or losses generated by the combined company from the disposition of the
Slater Coal Properties. In the event of not achieving US$35,000,000 in
EBITDA from Slater Coal Properties, the above mentioned Escrowed Shares
will be cancelled. (EBITDA is a non-GAAP measure and defined as earnings
before interest, taxes, depreciation and amortization).
During the three and twelve months ended December 31, 2010 the Company recorded
a gain of $0.54 million and a loss of $2.59 million in other items.
Included in these amounts are the transaction costs associated with the Slater
Coal purchase and the Nyah Transaction, totaling $1.22 million. The Company has
adopted CICA handbook section 1582 and consequently these transaction costs have
been expensed to the consolidated statements of operational loss and
comprehensive loss and deficit.
Other items
The Company has also recorded the estimated fair value of the two cash payments
of Rand 140 million (approximately $21.14 million) payable by March 1, 2011 and
Rand 140 million (approximately $21.14 million) payable by March 1, 2012 (See
Press Release dated September 20, 2010). The estimated fair value of these
payments was calculated using a Random Walk method. Probabilities were assigned
to the amounts are based on various scenarios and management's and other
expert's expectations of the scenarios materializing. The results were present
valued using a discount rate of 10%. As a result an amount of $0.98 million and
$1.62 million has been accreted during the quarter and twelve months ended
December 31, 2010 respectively related to the current and long term portion of
the amounts due which are included on the consolidated balance sheets under
acquisition obligations. As at December 31, 2010, based on revised estimates
related to production targets, the Company has adjusted the estimated fair value
of the contingent consideration related to the payments. The current portion of
the liability related to the March 1, 2011 payment has been reduced by $3.15
million and the long term portion of the liability related to the March 1, 2012
has been increased by $0.43 million. These adjustments have resulted in a net
recovery on the estimated fair value of the contingent liability of $2.72
million being recorded.
The Company recorded other income of $0.06 million and $0.21 million during the
three and twelve months ended December 31, 2010 respectively. Other income,
results from small scrap sales, dividends received, discounts received and
certain fair value adjustments.
The Company recorded interest income of $0.08 million and $0.11 million during
the three and twelve months ended December 31, 2010 respectively and interest
expense of $0.08 million and $0.32 million during the three and twelve months
ended December 31, 2010 respectively. Investment revenue results primarily from
interest bearing deposits held in banks. The Company invests its excess cash in
liquid low risk investments.
The Company has also recorded foreign exchange losses of $1.07 million and $2.48
million respectively for the three and twelve months ended December 31, 2010. As
previously discussed, the Company owes Rand 280 million, payable in two
instalments in March 2011 and March 2012. Movements in the South African Rand
against the Canadian dollar from July 31 to December 31 have generated
significant non cash foreign exchange movements.
NON-GAAP PERFORMANCE MEASURES
The Company has included in this document certain non-GAAP performance
measures that are detailed below. These non-GAAP performance measures do not
have any standardized meaning prescribed by GAAP and, therefore, may not be
comparable to similar measures presented by other companies. The Company
believes that, in addition to conventional measures prepared in accordance
with GAAP, certain investors use this information to evaluate the Company's
performance. Accordingly, they are intended to provide additional
information and should not be considered in isolation or as a substitute for
measures of performance prepared with GAAP. The definition for these
performance measures and reconciliation of the non-GAAP measures to reported
GAAP measures are as follows:
Working Capital
December 31, December 31,
2010 2009
$000's $000's
Current Assets
Cash and cash equivalents 4,390.06 52.18
Restricted cash 1,872.40 -
Accounts receivable and other receivables 8,461.75 0.60
Inventories 12,135.73 -
Prepaid expenses 68.08 7.14
----------------------------------------------------------------------------
26,928.02 59.92
Current Liabilities
Accounts payable and accrued liabilities 7,268.23 32.36
Acquisition obligation 19,915.72 -
Other financial liabilities 1,393.43 -
Loans payable 616.41 -
----------------------------------------------------------------------------
29,193.79 32.36
Working capital (deficiency)
----------------------------------------------------------------------------
Current assets less current liabilities $ (2,265.77) 27.57
----------------------------------------------------------------------------
Johan Odendall, B.Sc.(Geol.), B.Sc.(Hons)(Min. Econ.), M.Sc. (Min. Eng.), a
director of Minxcon and an independent Qualified Person, as defined in National
Instrument 43-101, has reviewed and approved the scientific and technical
information contained in this release.
Prospecting Right - Aviemore
Further to the press release of the Company dated September 20, 2010, the
Company is pleased to announce that Zinoju Coal (Pty) Ltd., an indirectly held
subsidiary of the Company, has entered into a purchase and sale agreement with
Leeuw Mining & Exploration (Pty) Ltd., with respect to the acquisition by Zinoju
Coal (Pty) Ltd. of certain mining claims comprising the Aviemore property.
Closing of the acquisition is expected to occur on or about August 31, 2011, and
shall remain subject to receipt of all necessary regulatory approval, including
but not limited to, the statutory approval for the transfer of such mining
rights in accordance with the South African Mineral and Petroleum Resources Act.
About Forbes Coal
The Company holds a 53.5% interest in Slater Coal (Pty) Ltd., a South African
company ("Slater Coal") which has a 70% interest in Zinoju Coal (Pty) Ltd.
("Zinoju"). Zinoju holds a 100% interest in certain coal mines in South Africa
(the "Slater Coal Properties"). The Slater Coal Properties comprise the
operating Magdelena bituminous mine (the "Magdelena Property") and the Aviemore
anthracite mine (the "Aviemore Property") and have a substantial resource base
of bituminous and anthracite coal. The Slater Coal Properties are located in the
Klipriver coalfield, near Dundee, in the KwaZulu Natal Province of South Africa
and can be accessed via the N3, N11 Ladysmith and R102 Dundee tarred national
highways that run between Johannesburg and Durban, South Africa. The other 46.5%
of Slater Coal is beneficially owned by members of the Slater family.
This press release does not constitute an offer of securities for sale in the
United States. The securities being offered have not been, nor will be,
registered under the United States Securities Act of 1933, as amended, and may
not be offered or sold within the United States absent U.S. registration or an
applicable exemption from U.S. registration requirements. This press release
shall not constitute an offer to sell or the solicitation of an offer to buy nor
shall there be any sale of the Common Shares or Warrants in any jurisdiction in
which such offer, solicitation or sale would be unlawful.
Cautionary Note Regarding Forward-Looking Information This press release
contains "forward-looking information" within the meaning of applicable Canadian
securities legislation. Forward-looking information includes, but is not limited
to, statements with respect to the anticipated production results with respect
to the Slater Properties, future financial or operating performance of the
Company and its projects, statements regarding the prospects for the business of
the Company, requirements for additional capital, government regulation of the
mineral exploration industry, environmental risks, acquisition of mining
licences, title disputes or claims, limitations of insurance coverage and the
timing and possible outcome of pending litigation and regulatory matters.
Generally, forward-looking information can be identified by the use of
forward-looking terminology such as "plans", "expects" or "does not expect", "is
expected", "budget", "scheduled", "estimates", "forecasts", "intends",
"anticipates" or "does not anticipate", or "believes", or variations of such
words and phrases or state that certain actions, events or results "may",
"could", "would", "might" or "will be taken", "occur" or "be achieved".
Forward-looking information is subject to known and unknown risks, uncertainties
and other factors that may cause the actual results, level of activity,
performance or achievements of the Company to be materially different from those
expressed or implied by such forward-looking information, including but not
limited to: general business, economic, competitive, foreign operations,
political and social uncertainties; a history of operating losses; delay or
failure to receive board or regulatory approvals; timing and availability of
external financing on acceptable terms; not realizing on the potential benefits
of the proposed transaction; conclusions of economic evaluations; changes in
project parameters as plans continue to be refined; future prices of mineral
products; failure of plant, equipment or processes to operate as anticipated;
accidents, labour disputes and other risks of the mining industry; and, delays
in obtaining governmental approvals or required financing or in the completion
of activities. Although the Company has attempted to identify important factors
that could cause actual results to differ materially from those contained in
forward-looking information, there may be other factors that cause results not
to be as anticipated, estimated or intended. There can be no assurance that such
information will prove to be accurate, as actual results and future events could
differ materially from those anticipated in such statements. Accordingly,
readers should not place undue reliance on forward-looking information. The
Company does not undertake to update any forward-looking information, except in
accordance with applicable securities laws.
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