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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| West. Coal | LSE:WTN | London | Ordinary Share | CA95801T1075 | COM SHS NPV |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 758.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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TIDMWTN
RNS Number : 0089W
Western Coal Corporation
11 November 2010
Immediate Release Release
11 November 2010
Western Coal Corp
Western Coal Net Income Up 18-fold on 105% Revenue Growth in
Fiscal Second Quarter 2011
Vancouver, B.C., November 10, 2010 - Western Coal Corp. (TSX: WTN & WTN.WT and
AIM: WTN) announced today that its net income for the fiscal second quarter
ended September 30, 2010 was $40.8 million, up 18-fold from $2.2 million a year
earlier. Basic earnings per share were $0.15, up 15-fold from $0.01. Revenue was
$220.4 million, up 105% from $107.6 million.
"Our record production in the second quarter demonstrated strong growth and that
our strategy and delivery plan is working", said Keith Calder, President and
Chief Executive Officer. "Our objective is to create long term shareholder value
by more than tripling production to 10 million tonnes over the next three years
through organic growth alone. We remain on track to reach that objective by
fiscal 2013."
Net income for the second fiscal quarter of 2011 included a non-cash unrealized
gain on forward exchange contracts of $10.8 million and a $6.1 million provision
for underlying impairment losses in equity investments. Excluding these two
items, adjusted net income and basic earnings per share were $36.1 million
(fiscal Q2 2010 - $10.0 million loss) and $0.13 (fiscal Q2 2010 - $0.04 loss),
respectively.
Fiscal Q2 2011 operations highlights, compared with Fiscal Q2 2010
· Revenue $220.4 million, up 105% from $107.6 million
· Net income $40.8 million, up from $2.2 million
· Earnings per share $0.15, up from $0.01
· Cash cost of sales per tonne:
o Consolidated - $91, down 4% from $95
o Canada - $102, up 2% from $100
o US - $68, down 19% from $84
· Coal production 1.5 million tonnes, up 90% from 0.8 million tonnes
· Consolidated average realized coal price $169 per tonne, up 41% from $120
per tonne
· Capital expenditures $84.8 million, up from $3.0 million
First Half Fiscal 2011 operations highlights, compared with First Half Fiscal
2010
· Revenue $423.9 million, up 131% from $183.3 million
· Net income $61.0 million, up from $5.6 million
· Earnings per share $0.23, up from $0.02
· Cash cost of sales per tonne:
o Consolidated $92, down 9% from $101
o Canada - $103, down 3% from $106
o US - $70, down 17% from $84
· Coal production 2.8 million tonnes, up 131% from 1.2 million tonnes
· Consolidated average realized coal price $163 per tonne, up 19% from $137
per tonne
· Capital expenditures $156.9 million, up from $3.4 million
Other highlights and significant items in Fiscal Q2 2011:
· Completed the acquisition of the remaining 45.3% interest in Energybuild
Group Plc ("Energybuild") that the Company did not previously own on August 9,
2010, issuing 8,551,578 new common shares of Western to shareholders of
Energybuild
· Completed a US$125 million revolving two-year credit facility in August
2010
· Executive management team was strengthened by the appointments of Mr. Jim
Griffin as Global Head of Commercial and Business Development and Mr. Keenan
Hohol as Global Head of Legal
· Appointed Mr. Graham Mascall as a non-executive director to the Board
effective November 1, 2010 following Mr. Julian Treger's resignation
Overview
Western's business is the exploration, development and production of coal.
Approximately 80% of our coal is metallurgical, which in the long term is in
short supply to meet global demand from steelmakers. The remainder of our coal
is thermal, used for electric power generation. We have a global customer base
and supply five of the largest steel mills in the world with our high quality
metallurgical coal.
Western has three mines in British Columbia, Canada; four mines in West
Virginia, USA; and one mine in Wales, UK. The Company also is actively engaged
in coal exploration and seeks to acquire new coal assets. The table below shows
the geographic distribution of our coal production for the most recent and
comparative reporting periods.
+---------+---------------+--------------+------------+------------+
| | Three months |Three months | Six | Six |
| Country | ended | ended | months | months |
| |September 30, | September | ended | ended |
| | 2010 | 30, 2009 | September | September |
| | | | 30, 2010 | 30, 2009 |
+---------+---------------+--------------+------------+------------+
| Canada | 67% | 62% | 68% | 75% |
+---------+---------------+--------------+------------+------------+
| US | 31% | 34% | 30% | 23% |
+---------+---------------+--------------+------------+------------+
| UK | 2% | 4% | 2% | 2% |
+---------+---------------+--------------+------------+------------+
| Total | 100% | 100% | 100% | 100% |
+---------+---------------+--------------+------------+------------+
Guidance
Production
Western's three-year organic growth strategy is to increase production by 212%
to 10 million tonnes for fiscal 2013 from 3.2 million tonnes produced in fiscal
2010.
The production target for the current fiscal year is 6.1 million tonnes, up 91%
from 3.2 million tonnes a year earlier. The table below shows our expected
production for fiscal 2011 by country, compared with actual production for
fiscal 2010 (in millions of tonnes):
+------------+------------+------------+---------+
| Country | Fiscal | Fiscal | Change |
| | 2011 | 2010 | |
+------------+------------+------------+---------+
| Canada | 4.2 | 2.1 | 100% |
+------------+------------+------------+---------+
| US | 1.8 | 1.0 | 80% |
+------------+------------+------------+---------+
| UK | 0.1 | 0.1 | - |
+------------+------------+------------+---------+
| Total | 6.1 | 3.2 | 91% |
+------------+------------+------------+---------+
For the second half (H2) of fiscal 2011, the production targets by country
compared with the second half fiscal 2010 and first half (H1) 2011 are as
follows (in millions of tonnes):
+----------+----------+--------+------------+------------+----------+
| Country | H2 | H2 | H2 Fiscal |H1 Fiscal | H2 |
| | Fiscal |Fiscal | 2011 vs. | 2011 | Fiscal |
| | 2011 | 2010 | H2 Fiscal | Actual |2011 vs. |
| |Forecast |Actual | 2010 | | H1 |
| | | | | | Fiscal |
| | | | | | 2011 |
+----------+----------+--------+------------+------------+----------+
| Canada | 2.3 | 1.2 | 92% | 1.9 | 21% |
+----------+----------+--------+------------+------------+----------+
| US | 0.9 | 0.7 | 29% | 0.8 | 13% |
+----------+----------+--------+------------+------------+----------+
| UK | 0.1 | 0.1 | - | 0.1 | - |
+----------+----------+--------+------------+------------+----------+
| Total | 3.3 | 2.0 | 65% | 2.8 | 18% |
+----------+----------+--------+------------+------------+----------+
The Company expects to achieve the targeted second half fiscal 2011 increase in
production primarily by the increase in capacity resulting from the deployment
of new trucks and shovels and through further productivity improvement
initiatives.
Cash Costs
Western's cash cost of production target range for its Canadian operations in
fiscal 2011 is $94 to $99 per tonne (FOB), down from $102 per tonne in fiscal
2010. The US operations cash cost of production target range for fiscal 2011 is
US$68 to US$72 per tonne, compared with US$72 per tonne in the prior year. The
Company has not yet set cash cost targets for its UK operations.
Western expects to achieve these reductions in its cash costs by improving
productivity primarily through the introduction of larger equipment, namely more
efficient trucks and shovels, and productivity improvement initiatives. The
equipment additions to the fleet are mostly company-owned and are part of a
strategy of phasing out reliance on contractor fleets.
In addition, the Company expects its Canadian operations to begin to benefit by
the fourth fiscal quarter of 2011 from the completion of a new 60-kilometre
Falling Creek Connector road from the Brule mine to the Willow Creek processing
facility. The Falling Creek Connector road is an alternative to the
100-kilometre part public highway currently used and allows for the use of more
efficient 110 tonne haulage trucks compared to the current 40 tonne trucks. In
addition to reducing haulage costs by an expected 25%, the new road will allow
the Brule mine to achieve its growth production targets.
Market Outlook
Substantially all of Western's fiscal 2011 coal production from Canada is under
contract for sale to international steel producers. The price for our Canadian
coal is predominantly established on a quarterly basis, although one contract to
a major European steel mill is on an annual basis. Prices for US production
generally are established annually and prices for UK production are reviewed on
a three and six monthly basis.
For the fiscal third quarter of 2011, we negotiated benchmark prices for our
Canadian hard coking coal products in the range of US$205-US$208 per tonne and
for low volatile pulverized coal injection coal at US$150 per tonne, in line
with other producers. Prices are Free On Board and Trimmed (FOBT).
For hard coking coal, the benchmark represents an increase of 63% from US$126
per tonne from the fiscal third quarter of 2010 but a decrease of approximately
9% from US$225 in the second quarter of fiscal 2011. For low volatile
pulverized injection coal (LV-PCI) the benchmark represents an increase of 67%
from US$90 per tonne from the fiscal third quarter of 2010 but a decrease of
approximately 17% from US$180 in the fiscal second quarter of 2011.
The Canadian metallurgical coal prices reflect steel company production cuts in
the seasonally slow September quarter. However, subsequent to the quarterly
negotiations, Queensland's mining and infrastructure operations experienced
heavy rainfall, triggering a number of force majeure declarations. These events,
in addition to weather forecasts indicating the looming Australian summer could
be the wettest ever recorded for coal regions, have dramatically altered market
sentiment and suggest firmer prices for Western's fiscal fourth quarter.
In early October 2010, the World Steel Association (WSA) issued its Short Range
Outlook (SRO), which projected global apparent steel use to increase by 13.1%
year-on-year to 1,272 million tonnes in 2010 after contracting by 6.6% in 2009.
In calendar 2011, WSA forecasts that world steel demand will grow by 5.3% to
reach a record 1,340 million tonnes, suggesting a steady and stable steel
recovery, boding well for both LV-PCI and hard coking coal markets. Key elements
of the outlook include strong growth in steel usage in China and India.
In the longer term, the market fundamentals - strong demand and shortage of
supply for high quality metallurgical coal - are expected to prevail, which
should provide continued opportunity for Western as it expands production to
increasingly diversify its international markets. China, India and South
America remain the driving forces for this increase in demand.
Results of Operations
+----------+-------------+-+---------------------+----------------+--------+------------------+-------------+--------+------------------------------+-----------------------------+-----------------------------+-----------------------------+
| | | | (i) | (ii) | (iii) | (iv) |
+------------------------+-------------------------------------------------+-----------------------------------------+------------------------------+-----------------------------+-----------------------------+-----------------------------+
| | In | Three | Three | Change | Six | Six | Change | |
| | thousands | months | months | % | months | months | % | |
| | of Canadian | ended | ended | | ended | ended | | |
| | dollars | September | September | | September | September | | |
| | unless | 30, 2010 | 30, 2009 | | 30, 2010 | 30, 2009 | | |
| | otherwise | | | | | | | |
| | noted | | | | | | | |
+----------+---------------+---------------------+----------------+--------+------------------+-------------+--------+------------------------------------------------------------------------------------------------------------------------+
| | | | | | | | | |
+----------+---------------+---------------------+----------------+--------+------------------+-------------+--------+------------------------------------------------------------------------------------------------------------------------+
| | Financial | | | | | | | |
| | Highlights: | | | | | | | |
+----------+---------------+---------------------+----------------+--------+------------------+-------------+--------+------------------------------------------------------------------------------------------------------------------------+
| | Revenues | $ | $ | 105 | $ | $ | 131 | |
| | | 220,350 | 107,637 | | 423,887 | 183,335 | | |
+----------+---------------+---------------------+----------------+--------+------------------+-------------+--------+------------------------------------------------------------------------------------------------------------------------+
| | Cost of | 134,238 | 97,266 | 38 | 267,146 | 153,315 | 74 | |
| | goods sold | | | | | | | |
+----------+---------------+---------------------+----------------+--------+------------------+-------------+--------+------------------------------------------------------------------------------------------------------------------------+
| | Income from | 86,112 | 10,371 | 730 | 156,741 | 30,020 | 422 | |
| | mining | | | | | | | |
| | operations | | | | | | | |
+----------+---------------+---------------------+----------------+--------+------------------+-------------+--------+------------------------------------------------------------------------------------------------------------------------+
| | Operating | 39% | 10% | | 37% | 16% | | |
| | margin | | | | | | | |
+----------+---------------+---------------------+----------------+--------+------------------+-------------+--------+------------------------------------------------------------------------------------------------------------------------+
| | Other | 12,623 | 7,858 | 61 | 46,931 | 17,859 | 163 | |
| | expenses | | | | | | | |
+----------+---------------+---------------------+----------------+--------+------------------+-------------+--------+------------------------------------------------------------------------------------------------------------------------+
| | Net income | 40,812 | 2,186 | 1,767 | 61,011 | 5,574 | 995 | |
+----------+---------------+---------------------+----------------+--------+------------------+-------------+--------+------------------------------------------------------------------------------------------------------------------------+
| | Earnings | $ | $ | | $ | $ | | |
| | per share, | 0.15 | 0.01 | | 0.23 | 0.02 | | |
| | basic | | | | | | | |
+----------+---------------+---------------------+----------------+--------+------------------+-------------+--------+------------------------------------------------------------------------------------------------------------------------+
| | Weighted | 269,475 | 236,486 | | 263,831 | 223,664 | | |
| | average | | | | | | | |
| | shares | | | | | | | |
| | outstanding | | | | | | | |
| | (thousands) | | | | | | | |
+----------+---------------+---------------------+----------------+--------+------------------+-------------+--------+------------------------------------------------------------------------------------------------------------------------+
| | | | | | | | | |
+----------+---------------+---------------------+----------------+--------+------------------+-------------+--------+------------------------------------------------------------------------------------------------------------------------+
| | Production | | | | | | | |
| | (tonnes): | | | | | | | |
+----------+---------------+---------------------+----------------+--------+------------------+-------------+--------+------------------------------------------------------------------------------------------------------------------------+
| | Canadian | 573,000 | 327,000 | 75 | 1,060,000 | 686,000 | 55 | |
| | operations | | | | | | | |
| | - Hard | | | | | | | |
| | coking | | | | | | | |
+----------+---------------+---------------------+----------------+--------+------------------+-------------+--------+------------------------------------------------------------------------------------------------------------------------+
| | Canadian | 457,000 | 173,000 | 164 | 830,000 | 220,000 | 277 | |
| | operations | | | | | | | |
| | - Low vol | | | | | | | |
| | PCI | | | | | | | |
+----------+---------------+---------------------+----------------+--------+------------------+-------------+--------+------------------------------------------------------------------------------------------------------------------------+
| | US | 205,000 | 93,000 | 120 | 381,000 | 93,000 | 310 | |
| | operations | | | | | | | |
| | - | | | | | | | |
| | Metallurgical | | | | | | | |
+----------+---------------+---------------------+----------------+--------+------------------+-------------+--------+------------------------------------------------------------------------------------------------------------------------+
| | US | 270,000 | 183,000 | 48 | 468,000 | 183,000 | 156 | |
| | operations | | | | | | | |
| | - Thermal | | | | | | | |
+----------+---------------+---------------------+----------------+--------+------------------+-------------+--------+------------------------------------------------------------------------------------------------------------------------+
| | UK | 28,000 | 29,000 | (3) | 62,000 | 29,000 | 114 | |
| | operations | | | | | | | |
| | - | | | | | | | |
| | Anthracite | | | | | | | |
+----------+---------------+---------------------+----------------+--------+------------------+-------------+--------+------------------------------------------------------------------------------------------------------------------------+
| | Total | 1,533,000 | 805,000 | 90 | 2,801,000 | 1,211,000 | 131 | |
| | production | | | | | | | |
| | (a) | | | | | | | |
+----------+---------------+---------------------+----------------+--------+------------------+-------------+--------+------------------------------------------------------------------------------------------------------------------------+
| | | | | | | | | |
+----------+---------------+---------------------+----------------+--------+------------------+-------------+--------+------------------------------------------------------------------------------------------------------------------------+
| | Sales | | | | | | | |
| | (tonnes): | | | | | | | |
+----------+---------------+---------------------+----------------+--------+------------------+-------------+--------+------------------------------------------------------------------------------------------------------------------------+
| | Canadian | 535,000 | 370,000 | 45 | 963,000 | 672,000 | 43 | |
| | operations | | | | | | | |
| | - Hard | | | | | | | |
| | coking | | | | | | | |
+----------+---------------+---------------------+----------------+--------+------------------+-------------+--------+------------------------------------------------------------------------------------------------------------------------+
| | Canadian | 305,000 | 248,000 | 23 | 672,000 | 381,000 | 76 | |
| | operations | | | | | | | |
| | - Low vol | | | | | | | |
| | PCI | | | | | | | |
+----------+---------------+---------------------+----------------+--------+------------------+-------------+--------+------------------------------------------------------------------------------------------------------------------------+
| | US | 159,000 | 86,000 | 85 | 358,000 | 93,000 | 285 | |
| | operations | | | | | | | |
| | - | | | | | | | |
| | Metallurgical | | | | | | | |
+----------+---------------+---------------------+----------------+--------+------------------+-------------+--------+------------------------------------------------------------------------------------------------------------------------+
| | US | 271,000 | 165,000 | 64 | 534,000 | 165,000 | 224 | |
| | operations | | | | | | | |
| | - Thermal | | | | | | | |
+----------+---------------+---------------------+----------------+--------+------------------+-------------+--------+------------------------------------------------------------------------------------------------------------------------+
| | UK | 31,000 | 31,000 | - | 66,000 | 31,000 | 113 | |
| | operations | | | | | | | |
| | - | | | | | | | |
| | Anthracite | | | | | | | |
+----------+---------------+---------------------+----------------+--------+------------------+-------------+--------+------------------------------------------------------------------------------------------------------------------------+
| | Total sales | 1,301,000 | 900,000 | 45 | 2,593,000 | 1,342,000 | 93 | |
| | (b) | | | | | | | |
+----------+---------------+---------------------+----------------+--------+------------------+-------------+--------+------------------------------------------------------------------------------------------------------------------------+
| | | | | | | | | | | | | |
+----------+-------------+-+---------------------+----------------+--------+------------------+-------------+--------+------------------------------+-----------------------------+-----------------------------+-----------------------------+
(a) Includes pre-production at Willow Creek mine
(b) Excludes pre-production at Willow Creek mine
The results of operations are reported in the following segments:
Canadian Operations
+------------------------+-----------------+------------------+------------------+---------------+
| In thousands of | Three | Three | Six | Six |
| Canadian dollars | months | months | months | months |
| unless otherwise noted | ended | ended | ended | ended |
| | September | September | September | September |
| | 30, 2010 | 30, 2009 | 30, 2010 | 30, 2009 |
+------------------------+-----------------+------------------+------------------+---------------+
| | | | | |
+------------------------+-----------------+------------------+------------------+---------------+
| Financial Highlights: | | | | |
+------------------------+-----------------+------------------+------------------+---------------+
| Revenues | $ | $ | $ | $ |
| | 180,152 | 75,585 | 338,876 | 151,283 |
+------------------------+-----------------+------------------+------------------+---------------+
| Cost of goods sold | 96,481 | 70,342 | 189,692 | 126,391 |
+------------------------+-----------------+------------------+------------------+---------------+
| Income from mining | $ | $ | $ | $ |
| operations | 83,671 | 5,243 | 149,184 | 24,892 |
+------------------------+-----------------+------------------+------------------+---------------+
| | | | | |
+------------------------+-----------------+------------------+------------------+---------------+
| Production (tonnes): | | | | |
+------------------------+-----------------+------------------+------------------+---------------+
| Hard coking | 573,000 | 327,000 | 1,060,000 | 686,000 |
+------------------------+-----------------+------------------+------------------+---------------+
| Low-vol PCI | 457,000 | 173,000 | 830,000 | 220,000 |
+------------------------+-----------------+------------------+------------------+---------------+
| Total production | 1,030,000 | 500,000 | 1,890,000 | 906,000 |
+------------------------+-----------------+------------------+------------------+---------------+
| | | | | |
+------------------------+-----------------+------------------+------------------+---------------+
| Sales (tonnes): | | | | |
+------------------------+-----------------+------------------+------------------+---------------+
| Hard coking | 535,000 | 370,000 | 963,000 | 672,000 |
+------------------------+-----------------+------------------+------------------+---------------+
| Low-vol PCI | 305,000 | 248,000 | 672,000 | 381,000 |
+------------------------+-----------------+------------------+------------------+---------------+
| Total sales | 840,000 | 618,000 | 1,635,000 | 1,053,000 |
+------------------------+-----------------+------------------+------------------+---------------+
| | | | | |
+------------------------+-----------------+------------------+------------------+---------------+
| Per sales tonne: | | | | |
+------------------------+-----------------+------------------+------------------+---------------+
| Coal price realized | $ | $ | $ | $ |
| | 214 | 122 | 207 | 144 |
+------------------------+-----------------+------------------+------------------+---------------+
| Coal price realized | $ | $ | $ | $ |
| (USD) | 206 | 111 | 200 | 126 |
+------------------------+-----------------+------------------+------------------+---------------+
| Cost of goods sold | | | | |
+------------------------+-----------------+------------------+------------------+---------------+
| Cost of product sold | $ | $ | $ | $ |
| | 68 | 71 | 69 | 77 |
+------------------------+-----------------+------------------+------------------+---------------+
| Transportation and | 34 | 29 | 34 | 29 |
| other | | | | |
+------------------------+-----------------+------------------+------------------+---------------+
| Depletion, | 13 | 14 | 13 | 14 |
| amortization and | | | | |
| accretion | | | | |
+------------------------+-----------------+------------------+------------------+---------------+
| Total cost of goods | $ | $ | $ | $ |
| sold | 115 | 114 | 116 | 120 |
+------------------------+-----------------+------------------+------------------+---------------+
Comparing the Three Months Ended September 30, 2010 to the Three Months Ended
September 30, 2009.
Revenues increased by 138% reflecting a 36% increase in shipments to customers
and an 86% increase in realized prices, partially offset by the adverse effect
of a weakening of the US dollar against the Canadian dollar. The average US
dollar relative to the Canadian dollar exchange rate for the three month period
ended September 30, 2010 was $1.03, compared to $1.10 in the comparable period
in the prior year. Realized prices benefitted from higher coal contract prices
for the second fiscal quarter of 2011, for which benchmark prices were US$225
per tonne for hard coking coal and US$180 per tonne for ULV-PCI compared to
US$126 per tonne and US$90 per tonne, respectively, for fiscal 2010. The
increase in shipments reflected the continuing recovery in demand for the
Company's coal products due to improvement in the global economy.
Total production increased by 106% due to operational efficiencies, improved
processing yields and the favourable impact of the Company's program to increase
equipment capacity to 4.0 million tonnes per year, up 54% from the 2.6 million
tonnes per year before the program commenced.
Cost of product sold per tonne, which primarily represents mining and plant
costs, declined 4% to $68 per tonne, while transportation and other costs, which
include rail, port and haulage costs, increased 17% to $34 per tonne, is
principally attributable to higher fuel costs and temporary costs incurred to
haul coal from Brule to a third-party load-out facility. The temporary costs
incurred at the third party load-out facility will be eliminated once the
Falling Creek Connector Road is commissioned in December 2010. Overall, cash
cost of goods sold increased slightly to $102 per tonne, but were down from $105
per tonne in the first fiscal quarter 2011.
Comparing the Six Months Ended September 30, 2010 to the Six Months Ended
September 30, 2009
Revenues increased by 124% reflecting a 55% increase in shipments to customers
and a 59% increase in realized prices, partially offset by the adverse effect of
a weakening of the US dollar against the Canadian dollar. The average US dollar
relative to the Canadian dollar exchange rate for the six month period ended
September 30, 2010 was $1.03, compared to $1.14 in the comparable period in the
prior year. Realized prices benefitted from higher coal contract prices as
discussed above. The increase in shipments reflected the continuing recovery in
demand for the Company's coal products due to the improvement in the global
economy.
Total production increased by 109% for the reasons discussed above.
The slight decrease in the unit cost of goods sold is primarily due to improved
productivity at the Wolverine mine which included a decline in the stripping
ratio and higher coal recoveries.
US Operations
+----------------------------+-------------------+---------------------+------------+----------------+
| | Three | Three | Six | Six |
| In thousands of Canadian | months | months | months | months |
| dollars unless otherwise | ended | ended | ended | ended |
| noted | September | September | September | September |
| | 30, 2010 | 30, 2009 | 30, 2010 | 30, 2009 |
+----------------------------+-------------------+---------------------+------------+----------------+
| | | | | |
+----------------------------+-------------------+---------------------+------------+----------------+
| Financial Highlights: | | | | |
+----------------------------+-------------------+---------------------+------------+----------------+
| Revenues | $ | $ | $ | $ |
| | 35,424 | 27,338 | 76,107 | 27,338 |
+----------------------------+-------------------+---------------------+------------+----------------+
| Cost of goods sold | 33,037 | 22,433 | 69,076 | 22,433 |
+----------------------------+-------------------+---------------------+------------+----------------+
| Income from mining | $ | $ | $ | $ |
| operations | 2,387 | 4,905 | 7,031 | 4,905 |
+----------------------------+-------------------+---------------------+------------+----------------+
| | | | | |
+----------------------------+-------------------+---------------------+------------+----------------+
| Production (tonnes): | | | | |
+----------------------------+-------------------+---------------------+------------+----------------+
| Metallurgical | 205,000 | 93,000 | 381,000 | 93,000 |
+----------------------------+-------------------+---------------------+------------+----------------+
| Thermal | 270,000 | 183,000 | 468,000 | 183,000 |
+----------------------------+-------------------+---------------------+------------+----------------+
| Total production | 475,000 | 276,000 | 849,000 | 276,000 |
+----------------------------+-------------------+---------------------+------------+----------------+
| | | | | |
+----------------------------+-------------------+---------------------+------------+----------------+
| Sales (tonnes): | | | | |
+----------------------------+-------------------+---------------------+------------+----------------+
| Metallurgical | 159,000 | 86,000 | 358,000 | 86,000 |
+----------------------------+-------------------+---------------------+------------+----------------+
| Thermal | 271,000 | 165,000 | 534,000 | 165,000 |
+----------------------------+-------------------+---------------------+------------+----------------+
| Total sales | 430,000 | 251,000 | 892,000 | 251,000 |
+----------------------------+-------------------+---------------------+------------+----------------+
| | | | | |
+----------------------------+-------------------+---------------------+------------+----------------+
| Per sales tonne: | | | | |
+----------------------------+-------------------+---------------------+------------+----------------+
| Coal price realized | $ | $ | $ | $ |
| | 82 | 109 | 85 | 109 |
+----------------------------+-------------------+---------------------+------------+----------------+
| Coal price realized (USD) | $ | $ | $ | $ |
| | 80 | 92 | 83 | 92 |
+----------------------------+-------------------+---------------------+------------+----------------+
| Cost of goods sold | | | | |
+----------------------------+-------------------+---------------------+------------+----------------+
| Operating expenses | $ | $ | $ | $ |
| | 68 | 84 | 70 | 84 |
+----------------------------+-------------------+---------------------+------------+----------------+
| Depletion, amortization | 9 | 5 | 7 | 5 |
| and accretion | | | | |
+----------------------------+-------------------+---------------------+------------+----------------+
| Total cost of goods sold | $ | $ | $ | $ |
| | 77 | 89 | 77 | 89 |
+----------------------------+-------------------+---------------------+------------+----------------+
On July 13, 2009, Western acquired its US operations, which consist of an
underground mine and an open pit mine on each of the Maple and Gauley Eagle
properties in West Virginia. The US operations are included in the Company's
results from July 14, 2009.
Revenues for the three month period ended September 30, 2010 increased by 30%
compared with the corresponding 2009 period reflecting a 71% increase in
shipments to customers, partially offset by a 13% decrease in realized prices.
The higher shipments reflected increased demand for both metallurgical and
thermal coal in the United States due to general economic improvement year over
year. Revenues for the six month period ended September 30, 2010 increased by
178% compared with the corresponding 2009 period reflecting a 255% increase in
shipments to customers, partially offset by a 10% decrease in realized prices.
The higher shipments were primarily due to the aforementioned increase in demand
and the inclusion of results for two quarters in fiscal 2011. The decrease in
realized prices for both periods was primarily due to the sale of certain lower
quality coal at reduced spot prices resulting from mining lower quality seams at
the Gauley Eagle surface mine.
Total production increased by 72% and 208% in the three and six month periods
ended September 30, 2010, respectively, due to operational efficiencies,
improved processing yields and the favourable impact of the Company's program to
increase equipment capacity. In addition, the six month period ended September
30, 2010 included the results of two quarters.
Cost of goods sold per tonne for the three and six month periods ended September
30, 2010 were lower than the corresponding 2009 periods as a result of improved
production rates and operating efficiencies.
UK Operations
+------------------------------+-----------+-----------+-----------+-----------+
| In thousands of Canadian | Three | Three | Six | Six |
| dollars unless otherwise | months | months | months | months |
| noted | ended | ended | ended | ended |
| | September | September | September | September |
| | 30, 2010 | 30, 2009 | 30, 2010 | 30, 2009 |
+------------------------------+-----------+-----------+-----------+-----------+
| | | | | |
+------------------------------+-----------+-----------+-----------+-----------+
| Financial Highlights: | | | | |
+------------------------------+-----------+-----------+-----------+-----------+
| Revenues | $ | $ | $ | $ |
| | 4,774 | 3,044 | 8,904 | 3,044 |
+------------------------------+-----------+-----------+-----------+-----------+
| Cost of goods sold | 4,720 | 2,781 | 8,378 | 2,781 |
+------------------------------+-----------+-----------+-----------+-----------+
| Income from mining | 54 | $ | $ | $ |
| operations | | 263 | 526 | 263 |
+------------------------------+-----------+-----------+-----------+-----------+
| | | | | |
+------------------------------+-----------+-----------+-----------+-----------+
| Production (tonnes) | 28,000 | 29,000 | 62,000 | 29,000 |
+------------------------------+-----------+-----------+-----------+-----------+
| | | | | |
+------------------------------+-----------+-----------+-----------+-----------+
| Sales (tonnes) | 31,000 | 31,000 | 66,000 | 31,000 |
+------------------------------+-----------+-----------+-----------+-----------+
| | | | | |
+------------------------------+-----------+-----------+-----------+-----------+
| Per sales tonne: | | | | |
+------------------------------+-----------+-----------+-----------+-----------+
| Coal price realized | $ | $ | $ | |
| | 154 | 98 | 135 | $ |
| | | | | 98 |
+------------------------------+-----------+-----------+-----------+-----------+
| Coal price realized (GBP) | GBP | GBP | GBP | GBP |
| | 98 | 55 | 86 | 55 |
+------------------------------+-----------+-----------+-----------+-----------+
| Cost of goods sold | $ | $ | $ | $ |
| | 152 | 90 | 127 | 90 |
+------------------------------+-----------+-----------+-----------+-----------+
On July 13, 2009, the Company acquired a controlling interest in its UK
operations, of which the primary operation is the Aberpergwm underground mine.
On August 9, 2010 the Company acquired the remaining 45.3% interest in
Energybuild that it did not previously own. The UK operations are included in
the Company's results from July 14, 2009.
Revenues for the three month period ended September 30, 2010 increased by 57%
compared to the corresponding 2009 period reflecting significantly higher
realized prices. Revenues for the six month period ended September 30, 2010
increased by 193% compared to the corresponding 2009 period which was due to
significantly higher realized prices. In addition, the six month period ended
September 2009 included the results of the UK operations from July 14, 2009.
Cost of goods sold per tonne for the three and six month periods ended September
30, 2010 were higher than the corresponding 2009 periods primarily due to
increased costs from the underground mine. The underground mine is still in the
expansion phase and its production cost is expected to fluctuate depending on
tonnes produced during each phase of development. The current reported unit
cost is not reflective of the expected long-term cost of the operation.
Other expenses
Other expenses for the three and six months ended September 30, 2010 include the
following:
+-----------------------+-----------+-----------+-----------+-----------+
| In thousands of | Three | Three | Six | Six |
| Canadian dollars | months | months | months | months |
| unless otherwise | ended | ended | ended | ended |
| noted | September | September | September | September |
| | 30, 2010 | 30, 2009 | 30, 2010 | 30, 2009 |
+-----------------------+-----------+-----------+-----------+-----------+
| | | | | |
+-----------------------+-----------+-----------+-----------+-----------+
| General and | $ | $ | $ | $ |
| administration | 14,022 | 7,463 | 25,786 | 11,888 |
+-----------------------+-----------+-----------+-----------+-----------+
| Sales and marketing | 4,434 | 3,128 | 9,352 | 4,250 |
+-----------------------+-----------+-----------+-----------+-----------+
| Coal exploration | 1,153 | 1,057 | 3,434 | 2,360 |
+-----------------------+-----------+-----------+-----------+-----------+
| Interest, accretion | 1,066 | 3,603 | 3,470 | 6,245 |
| and financing fees | | | | |
+-----------------------+-----------+-----------+-----------+-----------+
| Loss (gain) on | (9,967) | (14,571) | 6,395 | (21,270) |
| forward exchange | | | | |
| contracts | | | | |
+-----------------------+-----------+-----------+-----------+-----------+
| Other expense | 1,915 | 7,178 | (1,506) | 14,386 |
| (income) | | | | |
+-----------------------+-----------+-----------+-----------+-----------+
| Total other expenses | $ | $ | $ | $ |
| | 12,623 | 7,858 | 46,931 | 17,859 |
+-----------------------+-----------+-----------+-----------+-----------+
General and Administration
For the three month period ended September 30, 2010, general and administration
expenses increased $6,559,000, or 88%, over the corresponding 2009 period. The
increase was primarily due to the growth of the Company's operations, which
contributed to higher stock-based compensation, reflecting the granting of stock
options to new employees, and higher recruiting, legal and audit, and consulting
expenses. Recruiting expenses increased due to the strengthening of the senior
leadership team, renewal of the Board of Directors and the continued building of
competence in the Company's core mining and engineering functional areas. This
recruitment was primarily focused on building and developing the workforce in
both the Canadian and UK operations. During this period, the Company recruited
160 employees as part of this ongoing exercise. Higher legal and audit and
consulting expenses reflected the defence of the potential class action,
preparation for the intended migration to the main market of the London Stock
Exchange, group restructuring, fees associated with the new US$125 million
credit facility and other strategic initiatives.
For the six month period ended September 30, 2010, general and administration
expenses increased $13,898,000, or 117%, over the corresponding 2009 period. The
increase reflects the related expenses of the Cambrian group that was acquired
in July 2009 as well as higher salaries, benefits and other remuneration,
stock-based compensation, legal and audit, consulting and recruiting expenses.
The increase in salaries, benefits and other remuneration was due to higher
annual incentive plan payments, severance payments due to restructuring
activities and an increase in corporate and operational staff to support the
Company's growth objective. Stock-based compensation, recruiting, legal and
audit, and consulting expenses increased for the reasons discussed above.
Sales and Marketing
For the three and six month periods ended September 30, 2009, sales and
marketing expenses increased $1,306,000, or 42%, and $5,102,000, or 120%,
respectively, over the corresponding 2009 periods. These increases were
principally attributable to higher sales volumes and prices.
Coal Exploration
Coal exploration includes property development expenditures, field programs,
consultants, coal licenses and leases, engineering, environmental matters and
other project administration. Exploration costs are charged to income in the
quarter in which they are incurred, except where these costs related to specific
properties for which economically recoverable reserves have been established, in
which case they are capitalized. Also included are the carrying costs of the
Willow Creek mine prior to its reopening on June 4, 2010.
Coal exploration for the three month period ended September 30, 2010 increased
slightly to $1,153,000 from $1,057,000 in the corresponding 2009 period. For the
six month period ended September 30, 2010, these costs increased by $1,074,000
to $3,434,000 from $2,360,000 in the corresponding 2009 period. These increases
reflect increased exploration and operating activities.
Interest, Accretion and Financing Fees
For the three month period ended September 30, 2010, interest, accretion and
financing fees decreased $2,537,000 to $1,066,000 from $3,603,000 in the
corresponding 2009 period. For the six month period ended September 30, 2010,
interest, accretion and financing fees decreased $2,775,000 to $3,470,000 from
$6,245,000. These decreases were due to the conversion into equity of the
Company's convertible debentures in May 2010 and the repayment of certain
long-term debt, resulting in lower debt levels, partially offset by interest on
additional capital lease obligations relating to the purchase of equipment.
Loss (Gain) on Forward Exchange Contracts
The Company has operations in Canada, the US and UK, and therefore foreign
exchange risk exposures arise from transactions denominated in foreign
currencies. All sales revenues for the Canadian operations are denominated in US
dollars, while the majority of costs are denominated in Canadian dollars. The
Company may also become exposed to currency fluctuations on the purchase of
certain equipment or facilities for its new and existing mines which could be
denominated in US dollars. To minimize the exposure of foreign currency
fluctuations on sales revenues from its Canadian operations, the Company from
time to time enters into forward exchange contracts to fix the rate at which
future anticipated flows of US dollars are exchanged for Canadian dollars.
For the three month period ended September 30, 2010, the Company recorded gains
on its forward exchange contracts in the amount of $9,967,000 compared to gains
of $14,571,000 for the corresponding 2009 period. For the six month period ended
September 30, 2010, the Company recorded losses of $6,395,000 compared with
gains of $21,270,000 in the corresponding 2009 period. The US dollar relative to
the Canadian dollar exchange rate as of September 30, 2010 was 1.03 compared
with 1.02 at March 31, 2010. The Company reversed an unrealized mark-to-market
gain of $2,201,000 on its forward exchange contracts included in its results for
the three month period ended March 31, 2010 and recorded an unrealized
mark-to-market loss of $2,254,000 on outstanding forward exchange contracts as
of September 30, 2010. Realized losses on forward exchange contracts in the
three and six month periods ended September 30, 2010 were $812,000 and
$1,940,000, respectively, compared with realized gains of $2,247,000 and
$5,766,000 in the corresponding 2009 periods, respectively.
The Company maximizes the benefit and limits the actual losses on its forward
exchange contracts by settling its US dollar forward contracts when they are "in
the money" or when the forward selling price is in close proximity to the actual
exchange rate for contracts that are "out of the money". During the second
fiscal quarter of 2011, the value of the Canadian dollar relative to the US
dollar fluctuated significantly in a range of 0.99 to 1.07. The average exchange
rate for the quarter was 1.03, which is consistent with the exchange rate of the
Company's outstanding foreign exchange contracts.
Other Expense (Income)
+---------------------------+-----------+-----------+-----------+-----------+
| In thousands of Canadian | Three | Three | Six | Six |
| dollars unless otherwise | months | months | months | months |
| noted | ended | ended | ended | ended |
| | September | September | September | September |
| | 30, 2010 | 30, 2009 | 30, 2010 | 30, 2009 |
+---------------------------+-----------+-----------+-----------+-----------+
| | | | | |
+---------------------------+-----------+-----------+-----------+-----------+
| Net foreign exchange loss | $ | $ | $ | $ |
| (gain) | 2,366 | 13,353 | (265) | 22,086 |
+---------------------------+-----------+-----------+-----------+-----------+
| Gain on redemption of | - | (4,155) | - | (4,155) |
| convertible debentures | | | | |
+---------------------------+-----------+-----------+-----------+-----------+
| Gain on fair value | (910) | (74) | (1,578) | (74) |
| adjustment of | | | | |
| available-for-sale | | | | |
| investments and | | | | |
| derivatives | | | | |
+---------------------------+-----------+-----------+-----------+-----------+
| Interest expense (income) | 439 | (2,020) | (82) | (3,513) |
+---------------------------+-----------+-----------+-----------+-----------+
| Other expense | 20 | 74 | 419 | 42 |
+---------------------------+-----------+-----------+-----------+-----------+
| | $ | $ | $ | $ |
| | 1,915 | 7,178 | (1,506) | 14,386 |
+---------------------------+-----------+-----------+-----------+-----------+
Net foreign exchange gains and losses principally reflect the impact of changes
in the US dollar relative to the Canadian dollar on a quarter by quarter basis
on US dollar denominated working capital. The net foreign exchange loss in the
three month period ended September 30, 2010 primarily reflects the impact of the
weakening of the US dollar relative to the Canadian dollar.
The gain on fair value adjustment of investments relates to the Company's
marketable securities which were acquired on July 13, 2009 as part of the
Cambrian acquisition.
Equity (Loss)
Equity losses of $6,054,000 and $8,724,000 for the three and six month periods
ended September 30, 2010, respectively, reflect an estimate of the Company's
share of the net loss of its investments accounted for under the equity method.
The increase in the equity loss for both periods, compared to the corresponding
2009 periods, was primarily due to an estimated asset impairment charge recorded
by one of the underlying investees. The Company is not obligated to finance its
equity investments.
Income Tax Recovery (Expense)
Income tax expense for the three and six month period ended September 30, 2010
was $26,773,000, or 36.4%, and $40,606,000, or 37.0%, respectively, of pre-tax
income, which is slightly higher than the combined federal and provincial
Canadian statutory tax rate. The Company's tax rate for each reporting period
depends largely on the nature of its income and the jurisdictions in which it is
earned. In general, mining income is subject to additional taxes while interest,
overhead costs and capital items are subject to lower rates of tax.
Liquidity and Capital Resources
The Company's financial position and liquidity continued to improve during the
three month period ended September 30, 2010, primarily as a result of higher
cash flows from operating activities. At September 30, 2010, the Company's cash
balance was $116,674,000 and working capital was $155,011,000.
For the six month period ended September 30, 2010, the Company generated
positive cash flow of $185,475,000 from sales of $423,887,000, up significantly
from cash flow of $48,119,000 from sales of $183,335,000 in the corresponding
2009 period. Cash flows generated from future shipments will depend on volumes,
settlement prices, exchange rates, the level of operating and transportation
costs and other factors noted throughout this MD&A, including the items
identified under "Risks and Uncertainties" in the Company's MD&A for the fiscal
year ended March 31, 2010.
Positive cash flow from sales is a non-GAAP measure and is reconciled in the
table below:
+----------------------------+-------------+-----------+
| In thousands of Canadian | Six | Six |
| dollars unless otherwise | months | months |
| noted | ended | ended |
| | September | September |
| | 30, 2010 | 30, 2009 |
+----------------------------+-------------+-----------+
| Sales | $ | $ |
| | 423,887 | 183,335 |
+----------------------------+-------------+-----------+
| Operating expenses | 238,412 | 135,216 |
+----------------------------+-------------+-----------+
| Positive cash flow from | $ | $ |
| sales | 185,475 | 48,119 |
+----------------------------+-------------+-----------+
Cash flow from operating activities, before net changes in non-cash working
capital items, was $136,598,000 for the six month period ended September 30,
2010, up from $18,378,000 in the corresponding 2009 period. The significant
increase is primarily the result of higher sales volumes and realized prices.
Changes in non-cash working capital items for the six month period ended
September 30, 2010 resulted in a use of cash of $61,344,000 compared with
$10,533,000 in the corresponding 2009 period. This increase in non-cash working
capital reflected higher revenues and the related impact on accounts receivable
and equipment deposits.
Expenditures on mineral property, plant and equipment were $88,168,000 in the
six month period ended September 30, 2010, up substantially from $3,417,000 in
the prior fiscal year. This increase is primarily due to the introduction of
larger and more efficient trucks and shovels to expand production at existing
operations and for infrastructure to expand the Company's mines. These
activities include restarting the Willow Creek mine and expanding the Brule mine
at the Canadian operations as well as expanding the Maple underground mine at
the US operations. The equipment additions to the fleet are part of a strategy
of phasing out reliance on contractor fleets. Total capital expenditures in the
six month period ended September 30, 2010, including equipment accruals and
equipment financed by capital leases, were $156,882,000.
To support the Company's capital expenditure program and growth plan over the
current year and future periods, the Company secured US$120,000,000 in capital
leasing facilities and entered into a new syndicated two-year revolving term
credit facility in the amount of US$125,000,000. These facilities together with
the Company's cash of $116,674,000 and cash flow from operating activities are
expected to be sufficient to fund its growth plans for the remainder of fiscal
2011.
During the six month period ended September 30, 2010, the Company made
repayments on capital lease obligations of $9,040,000 and repayments of
$3,297,000 on long-term debt, and received proceeds of $10,027,000 from the
exercise of stock options and warrants.
On May 31, 2010, the Company completed its 7.5% convertible unsecured
subordinated debenture redemption program. Other than debentures totaling
$202,000, which were redeemed for cash, all of the debentures were converted
into common shares.
On August 9, 2010, the Company acquired all the issued ordinary share capital of
Energybuild Group Plc not already held by the Company. The Company accounted for
this acquisition as an equity transaction. The purchase price of $38,051,000 was
financed by the issuance of 8,551,578 common shares of the Company valued at
$35,831,000, the issuance of 1,457,750 stock options and warrants valued at
$685,000 and included transaction costs of $1,535,000.
The Company entered into agreements to purchase equipment for its Perry Creek,
Brule and Willow Creek mines, with payments in the amount of $28,124,000
remaining, which are expected to all be delivered by the end of January 2011.
Further capital commitments were made in the UK operations aggregating
$1,978,000 as of September 30, 2010.
MD&A and Financial Statements
This news release is prepared as at November 10, 2010 and should be read in
conjunction with the Managements' Discussion and Analysis and Financial
Statements for the fiscal second quarter ended September 30, 2011 which have
been posted on Western's website at www.westerncoal.com and on SEDAR at
www.sedar.com under the Company's profile. This news release does not constitute
a MD&A as contemplated by relevant securities rules.
Webcast/Conference Call
Western's senior management will host a conference call and webcast on Thursday
November 11, 2010 at 9:00 am (Vancouver) to discuss financial and operating
results for fiscal Q2 2011. Presentation slides will accompany the webcast and
conference call and will be available
at
www.westerncoal.com/investors/financial_information.
To participate on the conference call, dial 1.888.231.8191 or 647.427.7450. A
replay of the conference call will be available at 1.800.642.1687, passcode
21777408.
To listen to the live audio webcast, visit the Company's website at
www.westerncoal.com/investors/financial_information.
About Western Coal
Western Coal is a producer of high quality metallurgical coal from three mines
in northeast British Columbia (Canada), high quality metallurgical coal and
compliant thermal coal from four mines located in West Virginia (USA), and high
quality anthracite and metallurgical coal in South Wales (UK). Other interests
owned include a 24% interest in Mandalay Resources Corporation (MND: TSX), 40%
interest in Xtract Energy (XTR: AIM), and a 20% interest in NEMI Northern Energy
& Mining (NNE.A: TSX). The Company is headquartered in Vancouver, BC, Canada,
and trades on the AIM and TSX stock exchanges under the symbol "WTN". More
information can be found at www.westerncoal.com
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.
For further information:
+---------------------------+------------------------+----------------------+
| Western Coal Corp. | Buchanan | |
| David Jan | Communications | |
| Head of Investor | Bobby Morse / | |
| Relations | Katharine Sutton | |
| +1 604 694 2891 | +44 (0)207 466 5000 | |
| David.jan@westerncoal.com | bobbym@buchanan.uk.com | |
| | | |
+---------------------------+------------------------+----------------------+
This information is provided by RNS
The company news service from the London Stock Exchange
END
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