Forbes & Manhattan Coal Corp. (TSX:FMC) ("Forbes Coal" or the "Company") is
pleased to announce results for its fiscal year ended February 28, 2011. All
figures are in Canadian dollars, unless otherwise stated.
Highlights include:
-- Total revenue of $12.0 and $27.7 million for the two and fourteen months
ended February 28, 2011 respectively which includes only seven months of
operations from Slater Coal.
-- South African stand-alone operations generated EBITDA of $5.5 million
and $9.8 million (see non GAAP measures) during the two and seven months
ended February 28, 2011 respectively. On a monthly basis, the last two
months have shown a substantial increase in EBITDA compared to when
Forbes Coal acquired the assets in August 2010 as the attached
financials attest. EBITDA for Slater Coal for the 12 months ending
February 2011 was $16.5 million (Forbes Coal owner 76.75% of Slater
Coal).
-- EBITDA Margin increased to 45% (Slater stand-alone EBITDA/Sales) for
January and February 2010 as a result of higher production and coal
sales. The average EBITDA margin for Slater Coal was 35% for the 12
month period from March 1, 2010 to February 28, 2011.
-- Production and EBITDA for January 2011 and February 2011 indicates that
ramp up program is on track (see non GAAP measures).
-- At February 28, 2011, the Company's working capital position was $27.4
million (see non GAAP measures) including a cash balance of $15.3
million and inventory at cost of $10.5 million.
-- Slater Coal's year to date production from March 1, 2010 to February 28,
2011 was 933,993t Run of Mine ("ROM"). Seven months or 593,234t ROM were
consolidated into Forbes Coal annual financial statements.
-- At the Magdalena mine, the new continuous miner and expansion of section
4 is expected to add up to 330,000 tonnes per year of saleable
production.
-- The Company completed its' bought deal financing with a 15% over-
allotment option exercised in full for aggregate gross proceeds in the
amount of $41.9 million.
-- The Company increased its port capacity at Richards Bay - Grindrod
Terminals for the shipment of coal products in the following amounts:
-- 2011 - 600 000 metric tons (m/t) per annum
-- 2012 - 720 000 metric tons (m/t) per annum
-- 2013 - 960 000 metric tons (m/t) per annum
-- Forbes Coal signed a three-year off-take agreement with Vitol S.A., a
leading energy company, for the sale of 1.75 million tonnes of
bituminous coal.
-- The Company has changed its year end to February 28 to align itself with
Slater Coal, consequently, the year ended February 28, 2011 is a
fourteen month year.
In releasing these results, Stephan Theron, President and Chief Executive
Officer of Forbes Coal, commented, "Our annual performance highlights strong
production results from both the Magdalena and Aviemore properties. We are on
track with the planned production ramp up. Furthermore, entering into the Vitol
off-take agreement and improved logistics performance sets a positive trend for
the next fiscal year. Our management team is now at full strength and the
Company is set to capitalize on a strong demand for thermal and metallurgical
coal."
Operational highlights
The Forbes Coal management team took control of the Slater Coal operations in
August 2010. The ramp-up programme, launched in the second quarter under
guidance of the previous management team, continued to gain momentum. The
following key points are noted:
ROM Production
-- Total ROM production from all operations for the period August 2010 to
February 2011 was 593,234t ROM vs. 702,094t ROM planned.
-- Total production from March 2010 to February 2011 was 933,993 t ROM vs.
1,040,000t ROM originally planned for the financial year.
-- The production for the last two months was 27.9% higher than the monthly
average for the financial year to date preceding this period (March 2010
to December 2010).
-- The production ramp-up is generally going according to plan and is
nearing the completion of the first phase, Phase 1, of the Forbes Coal
initiated production ramp-up at the Magdalena and Aviemore operations. A
delay in the delivery and commissioning of the new Section 4 Continuous
Miner as well as unplanned maintenance on the original Section 1
Continuous Miner, significantly contributed to the downward adjustment
in production for the period ending February 2011.
-- Magdalena operations, underground and open pit combined, produced
463,068 t ROM vs 558,138 t ROM planned for the period August 2010 to
February 2011. The average ROM produced per month between August and
February 2011 was 74,621t, but excluded the December shut down period.
-- Aviemore produced a total of 130,166 t ROM between August 2010 and
February 2011 vs 143,956 t ROM planned.
-- Aviemore anthracite operation, reopened in June 2010, regularly exceeded
targeted output of 22,000 t ROM per month, with an average of 20,339 t
ROM produced per month between August and February 2011, but excluding
the December shut down period. The daily running rates during the short
January and February months remain in line with targets.
-- Anthracite Calcine unit was successfully started at the end of August
and operates near production targets with 33,790 t anthracite peas
calcined between September 2010 and February 2011. Calcine yield
performance remains consistent at 84%.
-- Magdalena underground took delivery of new Sandvik ABM30 Continuous
Miner for the development of the new Section 4. This section is expected
add up to 330,000 tonnes per year in saleable production.
-- Start-up activities for the new section commenced December 2010, and
continued throughout January and February 2011. Production from this new
section was in line with realistic expectations during the ramp-up
period.
-- Additional staffing and equipment were deployed at Magdalena U/G to
support the ramp-up programme, including the successful commissioning of
a new 2,500 KVA power supply to Magdalena U/G operations.
Coal Sales
-- Saleable coal production for August 2010 to February 2011 was 418,437 t.
The total calculated yield from plant feed was 70.9% in this period.
-- Total Saleable production for the financial year, March 2010 to February
2011 was 648,048 t from the two mines. This equates to 69.4% yield on
ROM production and 69.1% yield on Feed-to-Plant.
-- Yield performance was above expectations and reflects well on ongoing
interventions to improve process plant throughput and yield performance.
-- Total reconciled sales of bituminous coal, anthracite and calcined
products from March 2010 to February 2011 is 529,256 t, with 176,270 t
moved in the last three months. The average Sales for January and
February reflects a 63% increase in monthly Sales compared to the
monthly average for 10 months preceding this period.
-- Coal is transported by rail and truck to domestic and export customers.
Forbes Coal successfully negotiated an agreement with Grindrod Navitrade
port terminal for incremental capacity of up to 960,000 tonnes per annum
over a three year period.
Highlights include:
-- Grindrod Terminals shall provide export capacity in the Terminal for the
shipment of coal products as follows:
-- 2011 - 600 000 metric tons (m/t) per annum
-- 2012 - 720 000 metric tons (m/t) per annum
-- 2013 - 960 000 metric tons (m/t) per annum
-- At current coal spot prices, the increased throughput of coal could
potentially lead to incremental cash flows of up to $30 million per
annum.
-- Grindrod Terminals provide certain logistical, handling and stock piling
services to shippers in connection with the shipment of bulk cargoes
through the dry bulk coal Terminal known as the Navitrade Terminal (and
its associated facilities), connected to berths in the Port of Richards
Bay.
-- Grindrod Terminals will provide up to 70,000 t in stockpile capacity to
receive the coal at the terminal. Forbes Coal can deliver coal to the
Terminal either by road or rail.
-- Forbes Coal railed 42,301 tonnes of saleable product to the Navitrade
port to the end of February in preparation of the first shipment.
-- Forbes Coal signed a three year offtake agreement for 1.75 million
tonnes (total) with Vitol S.A. ("Vitol"), a leading energy trading
company. Vitol will be purchasing thermal coal produced at the Magdalena
property at market related prices.
-- Forbes Coal's management team is mobilized at site and has integrated
very well with the Slater Coal management team.
Financial highlights
Slater Coal financial highlights
SUMMARIZED FINANCIAL RESULTS OF SLATER COAL
Summarized Financial Results (Actual)
Slater Coal
January 1, Date of
2011 acquisition to March 1, 2010
February 28, February 28, February
2011 2011 28, 2011
2 months 7 months 12 months
Run of Mine (ROM) (t) 190,278 593,234 933,993
Saleable production (t) 137,576 418,437 648,048
Plant feed (t) 187,312 589,812 938,148
Yield (%) on ROM 72.3% 70.5% 69.4%
Yield (%) on Plant feed 73.4% 70.9% 69.1%
Inventory tonnes balance open 173,791 86,742 74,704
Inventory tonnes balance
close 189,778 189,778 189,778
Sales (t) 129,774 311,682 529,256
Revenue 000,000's ($) 12.0 27.7 46.7
EBITDA 000,000's ($) 5.5 9.8 16.5
CDN$: US$ (average) 0.99 1.01 1.02
ZAR: CDN (average) 7.13 6.94 7.09
Selling price (average) /
sold production t (CAD$) 92.62 88.81 88.31
Selling price (average) /
sold production t (US$) 93.48 87.57 86.50
Cash cost of sales and
operating expenses CAD
000,000's ($) 5.4 16.4 28.6
Cash cost of sales and
operating expenses / sold
production t (CDN$) 41.54 52.56 53.98
Cash cost of sales and
operating expenses / sold
production t (US$) 41.93 57.83 52.88
Capital expenditures
000,000's (CAD$) 9.22 11.68 14.84
Capital expenditures per t of
saleble production $ 67.02 27.91 22.90
Numbers in this chart are derived from the Slater Coal stand alone financial
statements
these are not affected by the adjustments related to the purchase price
allocation or consolidation adjustments
See non GAAP measures
RESULTS OF OPERATIONS
Total Comprehensive Income
The net income and net loss for the two and fourteen months ended February 28,
2011, was net income of $1.8 million and a net loss of $15.04 million,
respectively, compared to a net loss of $0.04 million for the period ended
December 31, 2009. Comprehensive loss for the two and fourteen months ended
February 28, 2011, was $4.60 million and $15.58 million respectively compared
$0.04 million for the period ended December 31, 2009. Forbes & Manhattan (Coal)
Inc., was incorporated in November 2009. Forbes & Manhattan Coal Corp, is the
continuing combined entity following the September 2010 Transaction between
Forbes & Manhattan (Coal) Inc. and Nyah whereby Nyah, a public company listed on
the Toronto Venture Stock Exchange ("TSX-V"), acquired all of the outstanding
shares of the Company in exchange for common shares of Nyah. Also, the Company
changed its year end to the end of February in order to align itself with its
subsidiaries in South Africa. Consequently, there is no two month period for
comparison in 2009, also the 2009 results contain only minimal overhead expenses
as the Company had recently been incorporated. Following completion of the
Transaction, the Forbes & Manhattan (Coal) Inc board and management team became
the board and management team of the combined entity, which was renamed Forbes &
Manhattan Coal Corp. Forbes and Manhattan Coal Corp. began trading on the TSX
under the symbol "FMC" as of September 27, 2010.
The Company completed the acquisition of Slater Coal at the end of July 2010.
Consequently seven months of results for Slater Coal have been consolidated into
Forbes & Manhattan Coal Corp.
Revenue
Coal sales during the two and fourteen months ended February 28, 2011 were
$12.02 million and $27.68 million, respectively. The summary of Slater Coal's
physical tonnages included in these sales numbers along with production tonnage
is outlined below:
January 1, 2011 Date of acquisition to
February 28,
2011 February 28, 2011
2 months 7 months
----------------------------------------------------------------------------
Sales from:
-Aviemore operations (t) 8,411 23,166
-Calcine operations (t) 2,915 10,750
-Magdalena operations (t) 118,449 277,767
Total sales (t) 129,774 311,682
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Run of Mine production
from:
-Aviemore operations (t) 31,067 130,166
-Magdalena operations (t) 159,211 463,068
Total ROM production (t) 190,278 593,234
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Saleable production from:
-Aviemore operations (t) 20,493 84,179
-Magdalena operations (t) 117,083 334,258
Total saleable production (t) 137,576 418,437
----------------------------------------------------------------------------
The Company experienced a logistics backlog which generated stockpiles at
February 28, 2011. The Company acquired 86,742 tonnes of stockpile as at the
acquisition date in July, 2011 and produced 418,437 saleable tonnes while only
311,682 tonnes were sold during the seven months since the acquisition.
The production target for Slater Coal for its fiscal year, twelve months ending
February 2011 was an estimated 650,000 tonnes of coal. Slater produced 648,044
tonnes of salable coal during the period or 95.3% of target. Historically Slater
Coal had conducted the majority of its coal sales in the domestic market.
The Company has taken initiatives to increase its' export sales and port
allocations in order to move the backlogged inventory and provide increased
capacity for the future.
The Company has entered into agreements with Transnet Freight Rail ("TFR"), and
Grindrod Terminals Richards Bay, a division of Grindrod South Africa (PTY) Ltd.,
to export coal produced by Forbes Coal from the Slater Coal operations in Dundee
through the Port of Richards Bay. The Company has also signed a three year
off-take agreement for 1.75 million tonnes (total) with Vitol S.A. ("Vitol"), a
leading energy trading company. Vitol will be purchasing thermal coal from the
Slater Coal properties at market prices.
Cost of Sales and Operating Expenses
Operating expense for the two and fourteen months ended February 28, 2011, was
$8.94 million and $19.93 million respectively ($68.86 per tonne and $63.92 per
tonne). This amount includes transportation, rail and port handling costs.
Amortization and depletion amounted to $1.54 million and $3.51 million
respectively for the two and fourteen months. Cash cost of sales also includes
the fair value adjustment to the inventory purchased at July 31, 2010 totaling
$2.49 million. The Company purchased the stockpile at July 31, 2010 when it
acquired Slater Coal. The margin on the sale of the 86,742 tonnes acquired was
essentially $nil, consequently cash cost of sales was increased related to these
acquired tonnes by $2.49 million.
Excluding the adjustment related to the fair value of the acquired inventory,
the cash cost of sales and operating expenses per tonne were lower during the
two months due:
-- lower downtime on the continuous miner,
-- higher monthly sales compared to the previous period.
Expenses
The Company recorded expenses of $2.08 million during the two months and $18.25
million during the fourteen months ended February 28, 2011, respectively. During
the fourteen months ended February 28, 2011 the Company recorded $13.52 million
in stock based compensation comprised of $6.32 million related to the issuance
of 2,435,000 options and $7.20 million related to issuance of 2,700,000
performance special warrants.
The Company also recorded $0.43 million and $1.81 million in consulting and
professional fees and $1.61 million and $2.73 million related to general and
administrative expenses for the two and fourteen months ended February 28, 2011
respectively. The general and administrative expense appears high for the two
month period. Upon acquisition of Slater the Company underwent a review of all
cost categories and classifications and determined that certain expenses related
to administration had been included in operating expenses. The Company adjusted
the classification in order to provide more accurate historical information for
comparative purposes. The Company has been steadily building its management team
and engaging professionals as it embarks on its new coal operations.
Other items
During the two and fourteen months ended February 28, 2011 the Company recorded
a gain of $2.24 million and a loss of $0.35 million in other items.
Included in these amounts are the transaction costs associated with the Slater
Coal purchase and the Nyah Transaction totaling $1.34 million. The Company has
adopted CICA handbook section 1582 and consequently the transaction costs
related to Slater Coal have been expensed to the consolidated statements of
operational loss and comprehensive loss and deficit.
The Company has also recorded the estimated fair value of the two cash payments
of Rand 140 million (approximately $21.14 million) payable by March 1, 2011 and
Rand 140 million (approximately $21.14 million) payable by March 1, 2012 as
described under the "Acquisition of Slater Coal" section of this report. The
estimated fair value of these payments was calculated using a Random Walk
method. Probabilities were assigned to the amounts as described in the "Purchase
of Slater Coal" section of this report based on various scenarios and
management's and other expert's expectations of the scenarios materializing. The
results were present valued using a discount rate of 10%. As a result an amount
of $0.63 million and $2.24 million has been accreted during the two and fourteen
months ended February 28, 2011 respectively related to the current and long term
portion of the amounts due which are included on the consolidated balance sheets
under acquisition obligations. As at December 31, 2010, based on revised
estimates related to production targets, the Company adjusted the estimated fair
value of the contingent consideration related to the payments. The current
portion of the liability related to the March 1, 2011 payment was reduced by
$3.15 million and the long term portion of the liability related to the March 1,
2012 was increased by $0.43 million. These adjustments have resulted in a net
recovery on the estimated fair value of the contingent liability of $2.72
million being recorded.
The Company recorded other income of $0.25 million and $0.45 million during the
two and fourteen months ended February 28, 2011 respectively. Other income,
results from small scrap sales, discounts received and certain fair value
adjustments.
The Company recorded interest income of $0.03 million and $0.14 million during
the two and fourteen months ended February 28, 2011 respectively and interest
expense of $0.40 million and $0.72 million during the two and fourteen months
ended February 28, 2011 respectively. Investment revenue results primarily from
interest bearing deposits held in banks. The Company invests its excess cash in
liquid low risk investments.
The Company has also recorded foreign exchange gains of $3.11 million and $0.63
million respectively for the two and twelve months ended February 28, 2011. As
previously discussed, the Company owed ZAR 280 million, payable in March 2011
(paid on February 24, 2011) and March 2012. Movements in the South African Rand
against the Canadian dollar from July 31, 2010 to February 28, 2011 have
generated significant foreign exchange gains.
The Company recorded an income tax recovery of $0.13 million and an income tax
expense of $0.69 million during the two and fourteen months ended February 28,
2011.
Other comprehensive income items
The functional currency of the Company is the Canadian dollar. The Company's
foreign subsidiary is considered to be a self-sustaining operation in accordance
with Section 1651 Foreign Currency Translation of the CICA handbook.
Accordingly, the results are translated to Canadian dollars using the current
method. Under this method, the assets and liabilities are translated into
Canadian dollars at the exchange rate in effect at the balance sheet date, the
revenue and expense items are translated at the exchange rate in effect on the
dates on which such items are recognized in income, and exchange gains and
losses arising from the translation are recognized in other comprehensive
income. Accordingly, for the two and fourteen months ended February 28, 2011,
losses of $6.43 million and $0.54 million respectively, have been recorded to
other comprehensive income.
NON-GAAP PERFORMANCE MEASURES
The Company has included in this document certain non-GAAP performance measures
that are detailed below. These non-GAAP performance measures do not have any
standardized meaning prescribed by GAAP and, therefore, may not be comparable to
similar measures presented by other companies. The Company believes that, in
addition to conventional measures prepared in accordance with GAAP, certain
investors use this information to evaluate the Company's performance.
Accordingly, they are intended to provide additional information and should not
be considered in isolation or as a substitute for measures of performance
prepared with GAAP. The definition for these performance measure and
reconciliation of the non-GAAP measure to reported GAAP measures are as follows:
Working Capital
----------------------------------------------------------------------------
February 28, December 31,
2011 2009
$000's $000's
Current Assets
----------------------------------------------------------------------------
Cash and cash equivalents 15,252.65 52.18
Restricted cash 1,736.00 -
Accounts receivable and other receivables 12,410.38 0.60
Inventories 10,526.68 -
Prepaid expenses 60.30 7.14
----------------------------------------------------------------------------
39,986.01 59.92
Current Liabilities
Accounts payable and accrued liabilities 7,031.20 32.36
Other financial liabilities 2,660.47 -
Future income taxes 2,200.00 -
Provisions 261.93 -
Loans payable 389.18 -
----------------------------------------------------------------------------
12,542.78 32.36
Working capital (deficiency)
----------------------------------------------------------------------------
Current assets less current liabilities 27,443.23 27.57
----------------------------------------------------------------------------
EBITDA
----------------------------------------------------------------------------
Two months ended Fourteen months ended
February 28, 2011 February 28, 2011
$000's $000's
----------------------------------------------------------------------------
Net income (loss) for the period 1,836 (15,041)
add back
Amortization and depletion 1,540 3,510
Consolidation amortization and
depletion adjustment 1,050 1,050
Operating expense related to
inventory Fair Value adjustment 2,494 2,494
Income tax expense (130) 686
Foreign exchange gain/loss (3,114) (631)
Interest and dividend income 375 577
Change in estimates on contingent
acquisition liablity - (2,725)
Accretion 627 2,242
Business combination transaction
costs 118 1,340
Mineral properties investigation
costs - 112
Sock based compensation - 13,522
General and administration (Non
Slater) 221 786
Directors' fees (Non Slater) 30 73
Consulting and professional fees
(Non Slater) 433 1,813
----------------------------------------------------------------------------
EBITDA Slater Coal 5,480 9,808
============================================================================
Johan Odendall, B.Sc. (Geol.), B.Sc. (Hons)(Min. Econ.), M.Sc. (Min. Eng.), a
director of Minxcon and an independent Qualified Person, as defined in National
Instrument 43-101, has reviewed and approved the scientific and technical
information contained in this release.
About Forbes Coal
Forbes Coal is an emerging mid-tier Southern African coal company. The Company
holds a 76.75% interest in Slater Coal (Pty) Ltd., a South African company
("Slater Coal") which has a 70% interest in Zinoju Coal (Pty) Ltd. ("Zinoju").
Zinoju holds a 100% interest in certain coal mines in South Africa (the "Slater
Coal Properties"). The Slater Coal Properties comprise the operating Magdalena
bituminous mine (the "Magdalena Property") and the Aviemore anthracite mine. The
Slater Coal Properties have a substantial combined resource of coal and each
mine has a current projected 18 year life of mine plan. Forbes Coal is
increasing production at both mines and has almost doubled production levels
since acquiring the Slater Coal Properties. The Company has in- place
transportation infrastructure allowing its coal to reach both export corridors
and the growing domestic coal market.
Please refer to the Company's NI 43-101 compliant technical report on the Slater
Coal Properties dated April 30, 2010 entitled "Technical Report on Slater Coal
and Subsidiaries, KwaZulu-Natal Province, South Africa", available on the SEDAR
profile of the Company at www.sedar.com. Additional information is available at
www.forbescoal.com.
This press release does not constitute an offer of securities for sale in the
United States. The securities being offered have not been, nor will be,
registered under the United States Securities Act of 1933, as amended, and may
not be offered or sold within the United States absent U.S. registration or an
applicable exemption from U.S. registration requirements. This press release
shall not constitute an offer to sell or the solicitation of an offer to buy nor
shall there be any sale of the Common Shares or Warrants in any jurisdiction in
which such offer, solicitation or sale would be unlawful.
Cautionary Note Regarding Forward-Looking Information This press release
contains "forward-looking information" within the meaning of applicable Canadian
securities legislation. Forward-looking information includes, but is not limited
to, statements with respect to the anticipated production results with respect
to the Slater Properties, future financial or operating performance of the
Company and its projects, statements regarding the prospects for the business of
the Company, requirements for additional capital, government regulation of the
mineral exploration industry, environmental risks, acquisition of mining
licences, title disputes or claims, limitations of insurance coverage and the
timing and possible outcome of pending litigation and regulatory matters.
Generally, forward-looking information can be identified by the use of
forward-looking terminology such as "plans", "expects" or "does not expect", "is
expected", "budget", "scheduled", "estimates", "forecasts", "intends",
"anticipates" or "does not anticipate", or "believes", or variations of such
words and phrases or state that certain actions, events or results "may",
"could", "would", "might" or "will be taken", "occur" or "be achieved".
Forward-looking information is subject to known and unknown risks, uncertainties
and other factors that may cause the actual results, level of activity,
performance or achievements of the Company to be materially different from those
expressed or implied by such forward-looking information, including but not
limited to: general business, economic, competitive, foreign operations,
political and social uncertainties; a history of operating losses; delay or
failure to receive board or regulatory approvals; timing and availability of
external financing on acceptable terms; not realizing on the potential benefits
of the proposed transaction; conclusions of economic evaluations; changes in
project parameters as plans continue to be refined; future prices of mineral
products; failure of plant, equipment or processes to operate as anticipated;
accidents, labour disputes and other risks of the mining industry; and, delays
in obtaining governmental approvals or required financing or in the completion
of activities. Although the Company has attempted to identify important factors
that could cause actual results to differ materially from those contained in
forward-looking information, there may be other factors that cause results not
to be as anticipated, estimated or intended. There can be no assurance that such
information will prove to be accurate, as actual results and future events could
differ materially from those anticipated in such statements. Accordingly,
readers should not place undue reliance on forward-looking information. The
Company does not undertake to update any forward-looking information, except in
accordance with applicable securities laws.
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