Pacific Coal Resources Ltd provided an operational update on its fourth quarter and full year 2011 production at its La Caypa, Cerro Largo, and CI Jam mines.
Mr Luis Carvajales CEO of Pacific Coal commented that "We are very pleased by the Company's production progression during the fourth quarter of 2011. The Company produced 356,542 tonnes of thermal coal this quarter from its La Caypa and Cerro Largo mines, while reducing stripping ratios at both properties. For the full 2011 year, our combined production at both mines was 1,537,624 tonnes of thermal coal, just slightly below our expectations of 1.6 million to 1.7 million tonnes. We are particularly proud of reaching these production levels, as we achieved a new historical annual record production at La Caypa by completing 101% of our target production and over 96% of our expected combined total despite weather-related delays. Going forward, we expect stabilized growth in our production. We have a strong portfolio of cash generating assets in Colombia, with exposure to thermal coal, coke and the commercialization of asphaltite. In terms of margin expansion we are working towards reducing costs on a per tonne basis. As royalty payments from La Caypa increased last quarter based on international coal prices, these increased costs significantly. It is important to clarify that these costs are prepaid a quarter in advance, and they are expected to decrease in coming quarters based on recent trends in international coal prices. Increasing efficiencies and improving costs wherever possible are still initiatives that are key areas of focus for the Company, and in conjunction with a fully committed trucking fleet in place, these costs are expected to decline as well this quarter and throughout 2012."
Current production at La Caypa
During the fourth quarter, La Caypa produced 269,245 tonnes and improved stripping ratios. For the full year 2011, production at La Caypa exceeded management's expectations, reaching 1,239,583 tonnes, 101.1% of the Company's planned production.
Due to increased efficiencies at the mine, the fourth quarter strip ratio at La Caypa continued to fall, reaching 5.79:1, versus 6.16:1 in the previous quarter, representing an approximate improvement of 6%.
As a consequence of extreme weather conditions in the month of September, a bridge located between La Caypa and Cuestecitas was washed out for 45 days. The Company utilized its own resources to repair and rebuild this bridge in order to quickly restore transportation capabilities for its coal and limit production delays. The alternative would have been for the Company to use a longer and more expensive route, thereby impacting production and deliveries while awaiting government authorities to order repairs for this bridge. The bridge reconstruction was completed on November 12, 2011 at a cost of USD 347,000 to the Company and will be included in the Company's General & Administrative expenses for the fourth quarter of 2011 as a one-time expenditure. The Company expects that this expenditure saved the Company approximately USD 1.56 million in the fourth quarter of 2011 and saves a further USD 3.26 million in each of the first and second quarters of 2012, totaling expected savings of approximately USD 8.08 million if the alternate route needed to be utilised while the situation continued to be unresolved.
Current production at Cerro Largo - La Divisa
In the fourth quarter of 2011, the Company made further progress at Cerro Largo, resulting in improvements in both production and strip ratio. Production was up quarter over quarter, improving to 87,297 tonnes versus 85,014 tonnes in the third quarter, while the strip ratio was reduced to 17.72:1, versus 19.06:1 in the third quarter. For the year 2011, the Company produced 6,151,724 tonnes, 56.5% of planned production. The Company did not meet this target due to necessary modifications implemented on the mine plan in connection with the heavy rains of October and November to ensure safety associated with high wall instability. The project is still in a ramp-up phase and management estimates that Cerro Largo will increase production by 200% (to approximately 180,000 tonnes) and improve its strip ratio by approximately 15% during the first quarter of 2012.
