Atlantic Coal PLC Interim Results (2672N)

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