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Coalcorp Announces 2008 First Quarter Results and Feasibility Study for Development of La Francia Pit C/D

Thursday, November 15th, 2007

Coalcorp Mining Inc. announce its results for the first quarter ended September 30, 2007. Coalcorp reported a net loss of $7.8 million or $0.09 per share as compared to a loss of $10.7 million or $0.19 per share in the four month period ended September 30, 2006 (all figures in U.S. dollars). Last year, the Company changed its year end from May 31 to June 30 and therefore the comparative prior fiscal period was four months.
For the three months ended September 30, 2007, the Company realized revenues of $19.7 million based on sales of 492,000 tonnes at an average realized price of $40 per tonne as compared to revenue of $36.3 million in the prior period derived from sales of 834,000 tonnes sold at an average price of $44 per tonne. The prior year period includes a greater proportion of higher priced FOB deliveries as well as an extra month of operations due to the change in the Company’s year end.
Total coal production in the first quarter amounted to 563,000 tonnes as compared to 869,000 tonnes in the four months ended September 30, 2006. Mine operating costs in the quarter averaged $39 per tonne, with transport and handling costs adding an additional $5 per tonne. Mine operating costs remain above normal due to above-average stripping ratios. Stripping ratios at La Francia and Caypa of 9.2:1 and 10.3:1, respectively, represented improvements from the stripping ratios experienced in the fourth quarter ended June 30, 2007. However, total material mined and coal production were lower than expected in the current quarter primarily due to heavier seasonal rainfall and haul truck availability being lower than planned. Steps are currently being taken at both mines to increase haul truck availability and to add additional equipment to increase mining volumes to planned levels for the balance of the year.
In fiscal 2008, Coalcorp is expected to produce 3.3 million tonnes, with stripping ratios at La Francia and Caypa expected to improve to approximately 8:1 and 9:1, respectively, with a corresponding improvement in direct operating costs. Sales already booked for the balance of fiscal 2008 include 0.6 million tonnes FOT at an average price of $39 per tonne and 1.7 million tonnes FOB at an average price of $55 per tonne. After cash used in operations of $16 million and capital investments of $15 million, the Company had unrestricted cash and short-term investments amounting to $42.9 million at September 30, 2007. In addition, the Company had $7.1 million of restricted cash that will become available in the next 12 months to fund capital projects.
Development of La Francia Pit C/D
The Company has received a final feasibility study with respect to development of Pit C/D at La Francia and the adjoining La Francia II property, a copy of which was filed on SEDAR earlier today under the title “Technical Report on the La Francia Pit C/D, Colombia, South America”. The feasibility study is dated November 2007 and was prepared in accordance with National Instrument 43-101 (NI 43-101) by Terry L. Kremmel P.E. of Marston & Marston Inc., who is a “qualified person” under NI 43-101 and is independent of Coalcorp. The disclosure in this news release related to the feasibility study has been reviewed and approved by Mr. Kremmel. The following is a summary of the feasibility study.
Based on 104 drill holes totalling 23,964 metres, in situ measured and indicated coal resources amounted to 103.5 million tonnes with a stripping ratio of 9.6:1 and coal quality of 11,391 btu, 0.7% sulphur and 5.6% ash within 250 metres of surface. After contact loss, dilution and mining recovery of 97.2%, mineable coal resources totalled 53.1 million tonnes. With 336.2 bank cubic metres of waste, the projected stripping ratio was 6.9:1 with coal quality of 11,123 btu, 0.6% sulphur and 6.8% ash.
With annual coal production estimated at 3.5 tonnes, this resulted in a 17-year mine life. Average direct mining costs over the life of the mine are estimated at $14.66 per tonne, with an additional $12.43 per tonne for transportation, port handling, administration and royalties, resulting in a total cash cost per tonne of $27.09 per tonne.
Capital expenditures include $178 million for equipment and $30 million for site infrastructure, for a total $208 million, of which $140 million is initial capital and the balance is ongoing or sustaining in nature. In addition, initial waste stripping of $37 million, net of revenues is included in mining costs. Excluding capital equipment, first year funding requirements total $55 million.
The study assumed an average selling price of $47 per tonne. Including the $124.8 million acquisition cost for the property, the project has an internal rate of return of 15.4%, assuming no additional resources are found elsewhere on the property. Additionally, for each dollar of revenue above $47, the internal rate of return increases by almost 1%.
The Company is currently reviewing the results of this study and in conjunction with the identification of export infrastructure, expects to make a production decision in the coming months.
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