Cobalt Coal Corp. Announces Annual Results and Operational Review
5/3/2011 1:19:49 PM - Market Wire
CALGARY, ALBERTA, May 3, 2011 (Marketwire via COMTEX News Network) --
Cobalt
Coal Corp. ("Cobalt" or the "Company") (TSX VENTURE:CBT), announces its
2010 financial results and its review of operations.
Annual Results
The
Company announces it has filed its financial statements and Management
Discussion & Analysis for the year ended December 31, 2010 on SEDAR
(www.sedar.com).
The Independent Auditors' Report on the 2010
financial statements includes a section "Emphasis of Matters" pertaining
to the appropriateness of presenting the financial statements on a
going concern basis. The Company has incurred a net loss for the year of
$1,782,261 and has a working capital deficiency of $2,016,367 at
December 31, 2010. Note 2 to the 2010 financial statements entitled
"Forbearance and Going Concern" further describe issues impacting the
Company.
Operational Review
Over the past few weeks, the
Company has undertaken a thorough review of operations focusing on the
impediments that are restricting the Company from being profitable. The
Company has arrived at the conclusion that it will be very difficult to
achieve profitable operations in the near term or quite possibly at all
under the current financial structure.
Due to insufficient cash
flow to meet mining costs together with interest payments and corporate
administrative costs the Company faces a short-term cash crisis which is
expected to require an additional $150,000 to fund operations to the
end of June 2011. Most of this is attributable to inconsistent
production in April resulting in smaller cash receipts than were
anticipated from April coal revenues. The Company believes it will able
to solve this short-term cash requirement, however, management further
believes that a significant financial restructuring is required and is
currently exploring various restructuring options.
The significant impediments that are contributing to the continued operating losses include the following:
-- Lack of working capital - as an example, the Company has been unable to
inventory key spare parts and as a result they are obtained on an as
needed basis resulting in longer than necessary production shutdowns
-- Power - mining equipment is currently being powered by diesel generators
that are expensive to operate and prone to shutdowns. The mine requires
electrical power from the main grid that could reduce operating costs by
as much as $50,000 per month and allow uninterrupted service and
therefore much improved recoveries. Such electrical power is currently
not available at the mine but rather a power line over approximately
four (4) miles of rugged terrain is required to be built.
-- Equipment - the Company needs to acquire additional equipment in order
to achieve what would be considered a "full spread" thus providing
increased operational efficiency.
-- Debt - the Company will soon require additional equity. The bridge loan
of $1.2 million is due to be repaid by June 30, 2011 and has a 15%
interest rate attached to it. There are currently no definite
arrangements in place to repay this amount. In addition to the bridge
loan are debentures payable which also carry an interest rate of 15% and
are required to be repaid in the next sixteen (16) months.
-- Loading area - as the Company expands into the Westchester Expansion
lease, more loading area will be required as the coal is mined and
inventoried awaiting trucking to the wash plant which will require
obtaining additional land by lease or purchase.
Operations
During
the first quarter of 2011, Cobalt sold 9,003 clean tons and experienced
considerable downtime due to weather conditions and required mine
maintenance requested by regulators. Equipment downtime and preparation
for future mining activities in the Westchester Expansion reserve base
also impacted production during the period. Clean ton production during
January and February 2011 averaged 2,728 tons and production for March
2011 was 3,547 clean tons. During March 2011, while operating during
normal production conditions without downtime, the mine achieved
production of 250 clean tons per day which is management's targeted
production rate, however, the mine was operating for only half of the
available days.
Cobalt's coal sales revenue for Q1 2011 was approximately $990,000.
Also,
during Q1 2011, Cobalt began providing contract mining services on a
coal property located in Fayette County, West Virginia. Contract mining
activities resulted in additional revenues of $281,426 for Q1.
During Q1, Cobalt commenced the permitting process for Westchester Expansion reserve base.
About Cobalt:
Cobalt
is a publicly traded coal exploration and production company
headquartered in Calgary, Alberta, Canada with a regional office in
Welch, West Virginia USA. Cobalt was created in August 2007 to
capitalize on the growth opportunities that exist in the modem
metallurgical coal mining industry.
The securities of Cobalt
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 or to, or for the account or benefit of,
U.S. persons absent U.S. registration or an applicable exemption from
U.S. registration requirements. This release does not constitute an
offer for sale of securities in the United States.
READER ADVISORY
Statements
in this news release may contain forward-looking information including
the timing of closing of the Offering and the intended use of proceeds
of the Offering. The reader is cautioned that assumptions used in the
preparation of such information may prove to be incorrect. Events or
circumstances may cause actual results to differ materially from those
predicted, a result of numerous known and unknown risks, uncertainties,
and other factors, many of which are beyond the control of the Company.
These risks include, but are not limited to, the risks associated with
the coal mining industry, commodity prices and exchange rate changes.
Industry related risks could include, but are not limited to,
operational risks in exploration, development and production, delays or
changes in plans, risks associated to the uncertainty of reserve
estimates, health and safety risks and the uncertainty of estimates and
projections of production, costs and expenses. The reader is cautioned
not to place undue reliance on this forward-looking information.
SOURCE: Cobalt Coal Corp.
Cobalt
Coal Corp. Mike Crowder CEO 304-436-2390 mike@newtechmining.eom Cobalt
Coal Corp. Michael Marshall Investor Relations 403-616-8918
investors@cobaltcoalcorp.com
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