Pacific Coal Resources Limited has filed its unaudited interim condensed consolidated financial statements for the three and 6 months ended June 30th 2012, together with its management's discussion and analysis for the corresponding period. All financial figures contained herein are expressed in US dollars unless otherwise noted.
Q2 highlights;
The Company produced 335,008 tonnes of coal during the Q2 of 2012, representing a 6% increase over 317,070 tonnes produced in the prior quarter. In addition the Company's stripping ratio from operations improved 11% from 10.83:1 in the Q1 of 2012 to 9.60:1 during the Q2 of 2012.
Production at La Caypa was 267,321 tonnes representing an increase of approximately 45% from the Q1 of 2012 and 96% of its planned production for the quarter. Production at the Cerro Largo mine was 67,687 tonnes, representing a decrease of approximately 50% from the record highs reached during the Q1 of 2012, negatively impacted by additional work undertaken to address difficulties encountered with mud concentrations at the bottom of the open pit and to maintain high wall and foot wall stability.
Total revenues for the Q2 of 2012 were USD 35.2 million up 24% from USD 28.4 million in the Q1 of 2012 on the strength of coal sales of 338,775 tonnes, 89% of which were sold on an FOB basis at an average realized price of USD 102.95 per tonne. Exploration at both the La Caypa and Cerro Largo mines was completed during the Q2 in coordination with SRK Consulting (UK) Limited pursuant to updating the NI 43-101 technical reports in connection with the open pit and underground resources at both mines. The updated technical reports are expected to be released during the third quarter of 2012.
The net loss of USD 49.5 million or USD 0.15 per share in the Q2 of 2012 includes USD 37.5 million or USD 0.12 per share non cash impairment write down of Cerro Largo and other non current assets triggered by the recent trend in coal market prices. A change in this trend could result in a reversal of this write down in a future period.
The Company's production at Cerro Largo of 67,687 tonnes in the Q2 of 2012 was approximately 50% lower than the record highs in the previous quarter. Production at Cerro Largo during the quarter was negatively impacted due to significant work required to address mud concentrations at the bottom of the open pit and work necessary for maintaining high wall and foot wall stability. The Company expects these improvements to result in greater production from the mine in the second half of the year.
During the Q2 of 2012, there was a fundamental decrease in current and forward looking Atlantic basin seaborne coal prices. Consequently, the fair value of the Cerro Largo property, based on estimated cash flows using these current and forward looking prices, declined below its carrying value at June 30th 2012, and the Company recorded a $35.6 million non-cash impairment charge on its Cerro Largo non-current assets in the second quarter. Under IFRS, future improvements in such coal prices that result in an increase in the fair value of the property could result in a reversal of the impairment write down in future periods.
As a result of production for the first half of 2012, the Company's 2012 production target at La Caypa has been reduced from 1,200,000 tonnes to 1,150,000 tonnes, including expected coal production from the south pit expansion. At Cerro Largo, in light of the second quarter results and the ongoing work required to clear the mud concentration in the pit, the Company has revised its 2012 production target for Cerro Largo from 800,000 tonnes to 700,000 tonnes.
Mr Luis Carvajales CEO of Pacific Coal Resources said that '"We continued to make progress with regard to the Company's production during the second quarter of 2012, producing 335,008 tonnes of thermal coal at our La Caypa and Cerro Largo mines. Important progress continues with the development work at La Caypa's south pit, Cerro Largo's integrated mine plan and the CI Jam project. We have also implemented a comprehensive cost reduction plan, given actual thermal coal and metcoke market trends, that will reduce our G&A expenses by 35% or approximately USD 6 million annually. We realized savings in the second quarter of 2012 with G&A expenses down 9% from the Q1 of 2012 in addition to the 12% decrease previously realized in the Q1 of 2012 with further reductions in G&A planned for the Q3 of 2012 and the remainder of the year."
Source - Pacific Coal Resources
(www.coalguru.com)
