TIDMATC
RNS Number : 2672N
Atlantic Coal PLC
27 September 2012
Atlantic Coal plc / Index: AIM / Epic: ATC / Sector: Mining
27 September 2012
Atlantic Coal plc ("Atlantic" or the "Company")
Interim Results
Atlantic Coal, the AIM listed open cast coal production and
processing company with primary activities in Pennsylvania, USA,
announces its results for the six months ended 30 June 2012.
Overview:
-- Increased production and revenues in the first half of 2012:
o 17% increase in clean coal production to 69,415 tons (H1 2011:
59,553 tons)
o 19% increase in revenues to $8,866,364 (H1 2011:
$7,481,880)
o 79% increase in gross profit to $1,510,722 (H1 2011:
$843,106)
-- Increase in loss before tax $1,366,923 (H1 2011: $1,052,524)
-- Railway diversion provides access to c. 1.0 million tons of previously unworkable coal
-- Options acquired over Pott & Bannon anthracite coal
mining property in Schuykill County believed to contain 4.1 million
tons of clean coal as well as further anthracite mining asset
Atlantic Coal Managing Director Steve Best said, "This has been
a period of exciting progress in terms of delivering on our
strategy to become a mid-tier producer of anthracite in
Pennsylvania. Production at Stockton reached record highs during Q2
2012. We are confident this momentum will be built on and were
particularly pleased to receive a report from independent
consultants that production of 160,000 tons per annum of clean coal
at Stockton is achievable during 2012, as announced on 18 April
2012. We are continuing with our due diligence on a number of
possible acquisition sites over which we have secured lease
options, which, if successful, will fulfil our strategy and with
domestic demand for our product consistently strong, I believe we
are increasingly well placed to capitalise upon this and build
value for shareholders."
Chairman's statement
This has been an active and successful period for Atlantic. Our
strategy remains dual focussed, aimed at increasing the production
levels and capacity of our primary asset, the Stockton Colliery
("Stockton"), in tandem with consolidating our position in the
Pennsylvanian coal field through the acquisition of complimentary
projects. I am therefore pleased to report that solid progress has
been made in both areas and we look forward to updating
shareholders further on this at the appropriate time.
As shareholders will know, we operate in a region which is
anthracite rich and politically stable. Importantly, domestic
demand for our product remains strong, and Stockton generated
increased revenues during the period. Over the period we
successfully transformed its production profile following the
completion of our structured investment programme to improve access
to the anthracite and our productivity. In particular we completed
the Norfolk Southern Railroad diversion, which allowed access to a
further 1.0 million tons ("Mt") of previously unworkable coal
reserves and with a positive trend in production in Q2 2012, we are
now on track to deliver our targeted production figures for the
year ending 31 December 2012.
In January 2012 we announced the entry into a lease option
agreement with Pennsylvania based Reading Anthracite Company which
holds a permitted 410 acre anthracite mining property. We estimate
the site to contain Reserves of approximately 12Mt ROM coal at 3.9
ratio. This equates to approximately 4.1Mt of clean coal, thus
providing the potential to more than double our existing anthracite
reserves. Further detail on the reserve estimates are contained in
the announcement made in January 2012 together with a statement by
a qualified person within the meaning of the AIM Rules for
Companies. Importantly, the site is located 25 miles from the
Company's Stockton site which has established infrastructure and
domestic and international demand for anthracite coal. Should we
decide to proceed with the acquisition, a consideration of c.
US$6.0 million in cash and shares will be paid to Reading
Anthracite Company ("RAC"), along with the grant of US$3.0 million
of warrants in Atlantic at 0.75 pence per share. As announced on 26
September 2012 we extended our due diligence evaluation period
until 27 March 2013 (and were able to agree these extensions
without Atlantic Coal being required to make any further payments
to RAC). The US$250,000.00 escrow payment made by Atlantic Coal to
RAC in January 2012 remains held in an escrow account and is
repayable to Atlantic Coal in the event that it does not wish to
exercise the Lease Option. Further announcements will be made at
the appropriate time.
Additionally, on 15 February 2012 we announced that we had
entered into an option agreement to acquire additional anthracite
mining assets in Pennsylvania. This option, which is exercisable
entirely at the Company's discretion, has an exercise price of
US$35 million and the exercise period ends on 31 October 2012. As a
result of the size of the exercise price, the acquisition of the
assets in question would be likely to constitute a reverse takeover
under the AIM Rules for Companies and would therefore be, inter
alia, subject to shareholder approval. Due diligence is on-going
although is unlikely to be completed prior to the expiry of the
option exercise period. The Company has had discussions with the
vendor in connection with the extension of the option exercise
period and anticipates that this will be agreed shortly. However,
there can be no certainty that the vendor will in fact agree an
option extension or that such an extension will be on acceptable
terms to the Company. Further announcements will be made in this
regard at the appropriate time.
Operations review
Developments made over the period have had a transformational
effect on operations at Stockton. As mentioned previously, a
pivotal milestone for the Company was the completion of the Norfolk
Southern Railroad diversion in April. This enabled us to access
over approximately 1.0 Mt of previously unworkable coal reserves at
Stockton.
Additionally, over the past year we have made significant
investment in on-site machinery to ensure that production is
maximised and efficient. As well as having an anthracite
preparation plant capable of washing 300,000 tons of coal per
annum, the Group's equipment now includes a Komatsu PC2000
hydraulic excavator and a Liebherr 9250 19-yard bucket hydraulic
excavator ("Liebherr 9250"). Haulage efficiency has also been
improved by the acquisition of three Volvo A40 articulated dump
trucks for haulage of Run of Mine ("ROM") coal from the pit to the
preparation plant. This allows the fleet of twelve 100 ton capacity
Terex and Caterpillar dump trucks to be used solely for overburden
haulage. As announced previously, the Company has ordered a second
Liebherr 9250 and, with the Group's machinery at Stockton currently
sufficient for its production requirements, it is envisaged that
the new Liebherr 9250 will be put to work at one of the potential
acquisition sites. Accordingly, delivery has been delayed until H1
2013.
We were delighted to announce that our production figures
reached record highs during Q2 2012. Clean coal production
increased 18.8% compared with the previous quarter, bringing total
clean coal production for H1 2012 to 69,415 tons (H1 2011: 59,553).
This represents an increase of 16.6% year on year.
Additionally, the Company removed 1,844,672 Bank Cubic Yards
("BCY") of overburden (H1 2011: 1,641,727 BCY) and washed 174,673
tons of coal ROM (H1 2011: 123,037 tons ROM), representing year on
year growth of 12.4% and 42% respectively. Importantly, the sales
price achieved has also remained strong during the first half of
2012 and the average sales price achieved for the period was
US$166.41 (H1 2011: US$136.14) as a result of consistent demand for
Stockton's anthracite.
Financial review
Revenue increased substantially to $8,866,364 (H1 2011:
$7,481,880) and we are reporting an increased gross profit of
$1,306,603 for the period (H1 2011: $843,106). The Company's loss
for the period has increased to $1,366,923 as a result of costs of
the rail road diversion, exploratory drilling and due diligence
costs (H1 2011: $1,052,524).
Having made substantial investment at Stockton, at the end of
the period the Company had a solid cash position of $2,158,171.
This was down on the cash balance as at 30 June 2011 of $15,707,669
and the bulk of the expenditure by the Company since that time has
been on the purchase of plant and equipment, due diligence costs
for potential acquisitions, the railway relocation and the Gowen
reclamation as well as on debt repayments and interest.
The net asset position of the Group as at 30 June 2012 was
$11,909,505.
Outlook
Key development milestones met over the period have placed
Atlantic for growth. Having significantly increased production at
Stockton and made substantial investments in our operations, we
look forward to benefiting from increased production over the rest
of the year and beyond.
We are now focussed on increasing our regional presence through
the acquisition of prime assets in Pennsylvania, and having made
solid progress to date, we hope to make further developments in the
near to medium term.
I would like to take this opportunity to thank our team,
shareholders and associates for their support over recent months.
We look forward to providing further updates at the appropriate
time.
Adam Wilson
Chairman
Atlantic Coal (LSE:ATC)
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