Pacific Coal Resources Ltd. announces first quarter 2013 financial results

TORONTO, May 31, 2013 /CNW/ - Pacific Coal Resources Ltd. (TSXV: PAK) has filed its unaudited interim condensed consolidated financial statements for three months ended March 31, 2013, together with its management's discussion and analysis ("MD&A") for the corresponding period. All financial figures contained herein are expressed in U.S. dollars unless otherwise noted. These documents will be posted on the Company's website at www.pacificcoal.ca and under the Company's profile at www.sedar.com.

Hernan Martinez, Executive Chairman, commented: '"The first quarter of 2013 began to bear positive results as a consequence of the strategic changes undertaken by the Company in the second half of 2012. We will continue to aspire to greater cost savings and leveraging our assets to maximize the Company's potential."

Financial and Operating Summary

A summary of the financial and operating results for the fourth quarter and full year of 2012 is as follows:

First Quarter Highlights

• The Company produced 223,346 tonnes of coal in the first quarter of 2013.  Production at the Cerro Largo mine (104,366 tonnes) increased by 17% when compared to the fourth quarter of 2012 (86,414 tonnes). The Cerro Largo stripping ratio of 12.24:1 in the first quarter of 2013 was the lowest stripping ratio the Company has recorded since commencing full-time operation of the mine.  This represents a 24% decrease from the first quarter of 2012 (16.19:1) and 32% decrease from the fourth quarter of 2012 (17.95:1).

• Total revenues for the first quarter of 2013 were $21.9 million, reflect sales of approximately 220,751 tonnes of coal at an average realized price of $99.10 per tonne. Coal sales in the first quarter of 2013 were approximately 70% on an FOB basis.

• The total operating margin loss on a per tonne sold basis in the first quarter of 2013 was 85% lower than the first quarter of 2012 operating margin loss, due largely to cost reductions at the Cerro Largo mine and selling cost savings company-wide in the first quarter of 2013, in addition to a work stoppage and operational issues at the La Caypa mine in the first quarter of 2012.

• In the second half of 2012, the Company worked to identify its operational issues and consider changes to its future strategic plans.  In the first quarter of 2013 a new mine operator began work at La Caypa mine and in April 2013 the Company began operating the Cerro Largo mine in-house. The Company also signed a Memorandum of Understanding ("MOU") in January 2013 to explore entering into a joint venture to utilize Cerro Largo's thermal coal for a power plant operation.

• During the first quarter of 2013, the Company recorded the lowest quarterly G&A since its incorporation, significantly ahead of its quarterly goal and representing an improvement of 25% over the fourth quarter of 2012. The Company had anticipated a quarterly G&A run rate of approximately $1.9 million, with actual G&A for the quarter totaling $1.6 million.

• The Company has suspended updating the Company's mine 43-101 technical reports for the La Caypa and Cerro Largo mines due to the Company's operational changes in the fourth quarter of 2012, with the plan to re-start studies in the third quarter of 2013 and an anticipated release of the reports by the end of the year.

Q1 2013 - La Caypa

During the first quarter of 2013, the Company produced 118,980 tonnes at La Caypa, down approximately 36% from 185,175 tonnes produced in the first quarter of 2012. The reduction is attributed to the fact that a new operator at the mine began production in the middle of February 2013, after the former operator stopped operations suddenly after being notified of the Company's plan to change operators in December 2012. In the interim period, the Company had limited production through its own operation, although the amount produced was approximately 25% in January and 57% in February of what the new operator produced at full-operation in March 2013. With the new operator at full-operation, the Company continues to anticipate production of 1.0 million tonnes at La Caypa in 2013, a 12% production increase from 2012.

Operational stripping ratio at La Caypa was 8.57 in the first quarter of 2013 compared to 7.01 in the same period of 2012. The increase was also attributed to the change in operator during the quarter, including the removal and installation of equipment. The total stripping ratio for the first quarter of 2013 includes development work which took place at the south pit to prepare the site for production, which is expected to begin by the end of the first quarter of 2014.

Q1 2013 - Cerro Largo

In the first quarter of 2013, the Company produced 104,366 tonnes from the Cerro Largo mine, compared to 131,895 tonnes in the first quarter of 2012 (which was the mine's record high). Although production was greater than the fourth quarter of 2012 (86,414 tonnes), production was affected by the operator of Cerro Largo transitioning to become the new operator at La Caypa, as the Company made the decision to take over as operator of Cerro Largo in April 2013. The Cerro Largo mine stripping ratio of 12.24 in the first quarter of 2013 was the lowest recorded since the mine has been at full operation.  This stripping ratio represents a 24% decrease compared to the first quarter of 2012 (16.19:1).  The Company credits the improved stripping ratio to the resolution of mud concentration issues late in the fourth quarter of 2012.

Q1 2013 - Jam

The Company's metcoal production at Jam has been suspended since late in the second quarter of 2012 as a consequence of high costs and weak international prices.  The plant has focused on processing third party purchased materials for use in the production of coke. Coke production has been held at minimal levels since the suspension, with activity during the first quarter of 2013 concentrated on conducting repairs to the coking infrastructure.

The Company attempted to hold costs to a minimum during the first quarter of 2013, with the operating margin held to a loss of $0.2 million as a result of fixed overhead costs of $0.1 million and an inventory impairment of $0.1 million.

Corporate update

In the first quarter of 2013, the Company began implementing the significant strategic and operational plans that were established in the second half of 2012. Strategically, management continued to investigate different avenues to raise funds.  As part of this process the Company engaged the financial advisory firm of LW Securities in April 2013 to explore alternatives to consolidate the Company's bank indebtedness and reduce amounts owed to Masering.

In terms of operational plans, the exploration of alternatives for the operation of the Cerro Largo mine led the Company to decide to convert to a self-operating mine, with the Company commencing operations in April 2013. The re-assessment of the Cerro Largo operation also led the Company to sign a long-term focused MOU with the purpose of the incorporation of a company in the future dedicated to the generation of electric power using the coal from the mine.

In the first quarter of 2013, the Company decided that the optimal decision for Jam was to enter into a commercial relationship with another mining company that has experience producing metcoal and coke, and then using the coke in its future operations or selling it to third parties.  With this approach in mind, the Company believes it can finalize a deal that would result in a coke plant production ramp-up starting in June 2013.  The Company is continuing to also look into various alternatives for refurbishment of the Jam mine to maximize operational efficiency, with the hopes to re-start metcoal production in the second quarter of 2014.

Underground mine

Conceptual design for the underground mine project at La Caypa continues to progress according to plan with in-house staff working in coordination and with the support of external local consultants. The process of hiring a leading international underground operator at La Caypa continues, with the expectation for underground mining to begin in the first quarter of 2014.

La Tigra exploration

The Company has signed an agreement with a third-party to perform analysis of the results of asphaltite exploration at the La Tigra property, at the third-party's cost, to determine the site's prospects. The analysis is expected to be completed early in the third quarter of 2013, at which time the Company will determine an adequate course of action for the property.

Barranquilla port

The Company has hired a port expert to lead a project focusing on determining an optimal use for and the ultimate development of the Barranquilla port.  Management plans on expanding its permits to facilitate the shipment of liquids from the port.

Cost reduction program

The Company has undertaken a comprehensive cost cutting program including payroll and G&A reductions.  The Company expected to reduce the first quarter G&A run rate to approximately $1.9 million in 2013, but the G&A for the first quarter surpassed expectations by $0.3 million ($1.6 million), an approximate 14% decrease from the expectation and approximately 25% lower than G&A in the fourth quarter of 2012 ($2.2 million excluding $0.1 million of DD&A). The Company continues to forecast the annual G&A expense at $7.5 million (a quarterly run rate of $1.9 million), but generating additional cost savings continues to be a top priority.

About Pacific Coal Resources Ltd.

Pacific Coal Resources Ltd. is a Canadian-based mining company engaged in the acquisition, exploration and production of coal and coal-related assets from properties located in Colombia. The Company's common shares are listed on the TSX Venture Exchange and trade under the symbol "PAK".

Forward Looking Information:

This news release contains "forward-looking information", which may include, but is not limited to, statements with respect to the future financial or operating performance of the Company and its projects. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or believes" or variations (including negative 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 statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Pacific Coal to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements contained herein are made as of the date of this press release and Pacific Coal disclaim, other than as required by law, any obligation to update any forward-looking statements whether as a result of new information, results, future events, circumstances, or if management's estimates or opinions should change, or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, the reader is cautioned not to place undue reliance on forward-looking statements.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is definedin the policies of the TSX Venture Exchange) accepts responsibility for the adequacy oraccuracy of this news release.

SOURCE Pacific Coal Resources Ltd.