CanAm Coal reports records out of Alabama operations

CanAm Coal (TSX VENTURE: COE) (OTCQX: COECF) reported May 1 production records for the 11-month fiscal year that ended Dec. 31, 2012.

The Canada-based company, with coal mines in Alabama, had changed the end of its fiscal year from Jan. 31 to Dec. 31, leading to a transitional 11-month year.

Since late 2009, CanAm has repositioned itself as an active coal mine producer and since then the company has gained control of RAC Mining LLC, a predominantly metallurgical coal producer, and last year acquired a 50% ownership stake in Birmingham Coal & Coke Inc., a predominantly thermal coal producer, with a five-year option to purchase the remaining 50%.

With currently four mines in operation – Powhatan, Bear Creek, Old Union and Gooden Creek – the company has steadily improved financial and operational metrics with record results in fiscal year 2011. Production in the 11-month fiscal year was 256,221 tons, up from only 48,361 tons in the prior 12-month period.

“This was unquestionably the break-out year for Can Am with record financial and operational metrics at all levels”, said Tim Bergen, CEO of CanAm. “Our BCC acquisition was no doubt the turning point for our company as we significantly increased and diversified our production capacity, were able to leverage the customer relationships and off-take contracts and, last but not least, gained access to an experienced and qualified coal mining team with a proven track record of running safe, reliable and profitable operations. As to 2012, our team will continue on its path of aggressive growth at all levels as we remain bullish in the outlook for the overall coal markets and remain confident in our ability to execute on our 2012 growth plan of achieving between 450,000 and 550,000 tons of annual production.”

BCC has three operating mines and a brokerage business in Alabama. CanAm has an option to purchase an additional 30% ownership within the next two years and the remaining 20% within five years. CanAm completed an independent reserve report for BCC which determined the coal resource at 6 million tons of proven reserves. On this basis, and considering current production levels, average mine life for the BCC mines is 10 years.

The ratio of metallurgical/thermal coal for the eleven-month period ended Dec. 31 at the Powhatan mine was 57%/43% as compared to 74%/26% in fiscal 2010. The company’s target coal mix is 60%/40%.

Coal sales were 49,852 tons in the fourth quarter of fiscal 2011 as compared to 14,633 tons in the fourth quarter of fiscal 2010 or an increase of 35,219 tons. BCC’s mines and the Powhatan mine contributed 37,613 tons and 12,239 tons, respectively.

Coal sales at the Powhatan mine were below target as production slowed down as a result of a lower than usual recovery rate on thermal coal, greater than usual equipment downtime during a cycle of higher than average strip ratios and extra vacation days taken over the Christmas holiday. The ratio of metallurgical/thermal coal for the fourth quarter at the Powhatan mine was 75%/25% as a result of a lower recovery rate on the thermal coal.

CanAm remains committed to execute on its aggressive growth plan for 2012 of achieving between 450,000 to 550,000 tons of annual production. In order to achieve this growth in 2012, the company is looking to expand production at some of its current mines and is working to open up any of the following new mines: Davis, Posey Mill 2, Knight and Old Union 2. Each of these properties are at various stages of the permitting and are, for the most part, adjacent to current mines. Up to 85% of estimated 2012 production has been contracted for with a variety of customers including the Alabama Coal Cooperative and various industrial users.

Further expansion and growth will continue to be pursued by either adding adjacent lands to its reserve portfolio or by pursuing accretive acquisitions with a focus on high quality thermal or met coal.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.