| ||July 06, 2010|
CanAm Coal Signs LOI to Become 98% Owner of RAC Mining LLC
| ||Calgary, AB -- July 6, 2010 -- CanAm Coal Corp. (TSXV: COE) ("CanAm or the "Company") is pleased to announce that it has signed a letter of intent (the "LOI") to acquire an additional 49% ownership stake in RAC Mining LLC ("RAC") and certain other assets (the "Transaction") from Job Land & Mineral Inc. ("JLM"), its current partner in RAC and contract miner on the property. "This transaction will effectively double our interest in RAC Mining from 49% to 98% and, as such, we will see our share of production double overnight. With our share of current production at approximately 5,000 tons per month and our ultimate goal of achieving 10,000 to 15,000 tons of production per month, this acquisition would be significantly accretive to current earnings upon closing which is anticipated to occur by the end of August. In addition, we anticipate the introduction of highwall mining or auger mining later on this year which will add between 5,000 to 12,000 tons per month to our production. On this basis, we anticipate fiscal 2011 exit production of between 15,000 and 27,000 tons" said Timothy Bergen, CEO of CanAm. |
HIGHLIGHS OF THE TRANSACTION
- Double ownership from 49% to 98% of RAC Mining LLC
- Achieve production of 10,000 to 15,000 tons from the Powhatan surface mine operation
- Achieve production of 5,000 to 12,000 tons from the Powhatan highwall mine operation
- Minable portfolio of 370 acres of permitted and 80 acres of non-permitted lands at the Powhatan mine
- Mineral leases on 640 acres of lands at the Davis Mine
- High quality Bleu Creek (metallurgical) coal and Mary Lee (thermal) coal
- 80% of production is comprised of metallurgical coal which is being sold at prices between $109 and $125 per ton
Pursuant to the LOI, the Transaction will result in CanAm purchasing from JLM: its 49% ownership share in RAC, its ASMC and ADEM permits associated with the Powhatan mine and its leases associated with the Powhatan lands (the "Acquired Assets"). In consideration for the Acquired Assets, CanAm will pay a purchase price of US$1,650,000 comprised off: a cash payment of US$625,000 to JLM, assumption by CanAm of a maximum of US$950,000 of JLM's indebtedness and a US$75,000 gross overriding royalty payable at a rate of US$1 per ton mined subsequent to the closing of the Transaction. In addition, CanAm will also replace reclamation bonds, in the amount of approximately US$400,000, posted by JLM for coal mined on certain Powhatan lands. As JLM will have substantially completed reclamation work on such lands, bond money will be released to CanAm in accordance with applicable mining regulations in the state of Alabama.
The LOI contemplates the negotiation and execution of definitive documents in relation to the Transaction by August 31, 2010. Upon completion of the Transaction, JLM will transition all mining operations at the Powhatan site to RAC who, at that time, will take on day-to-day responsibilities for mining operations. The LOI contains standstill provisions such that JLM and CanAm will not participate in any activities which may reduce the likelihood of the success of the Transaction and contains a break fee in the event JLM withdraws from the transaction. The break fee is comprised of the transfer of 2% of JLM's interest in RAC.
RAC currently has two main coal properties, the Powhatan mine in Jefferson County, Alabama and the Davis Mine in the Franklin, Marion and Winston counties in Alabama.
RAC operates a surface mine at the Powhatan site and started operations on December 2, 2009. The mineable land portfolio at the Powhatan mine includes 370 acres of permitted and 80 acres of non-permitted lands. The Company is mining two high quality coal seams; the Blue Creek seam (metallurgical coal) and the Mary Lee seam (thermal or steam coal) with approximately 80% of current production being metallurgical coal. Coal is sold as mined and does not require any further washing/processing and the mine's location, at a river load-out and in proximity of its customers, reduces the handling and hauling costs. The coal is currently being sold into the local markets to both industrial users (metallurgical coal) and power plant customers (thermal coal) and the metallurgical coal is also sold into the seaborne markets. Metallurgical coal is sold at prices ranging between $109 and $125 per ton and thermal at prices between $61 and $70 per ton. Income from mining operations through the first quarter of fiscal 2011 was on average $15 per ton of coal sold.
Since start-up, larger capacity mining equipment has been added to the operations and as a result RAC anticipates mine production to increase to between 10,000 and 15,000 tons per month for the remainder of fiscal 2011.
RAC also anticipates the introduction of highwall mining or auger mining at the Powhatan site which will add between 5,000 to 12,000 tons of production per month. The decision whether to use highwall mining or auger mining is currently under consideration and a decision as to the method of mining to be employed will be made in the near term.
RAC has mineral leases on approximately 640 acres of land in the Franklin, Marion and Winston counties in Alabama. This site, referred to as the Davis Mine, is currently in the process of being permitted and a formal application is expected to be submitted within the next 3 months. As part of this process, approximately 18 drill holes were completed with the aim to determine a USGS (United States Geology Survey) compliant resource estimate. Once permitted, RAC plans to operate the mine at an average of 15,000 tons per month and sell the thermal coal in the local power markets.
The LOI is subject to certain conditions including due diligence by CanAm, approval of the Transaction by CanAm's board, acceptance of the Transaction by the TSX Venture Exchange and other conditions customary for transactions similar in nature to the Transaction. The Transaction would be an arm's length transaction. There can be no assurance that the Transaction will be completed as proposed or at all.
William Collins P. Geo., a qualified person, has reviewed and verified the technical mining information contained in this news release.
About CanAm Coal Corp.
CanAm is a coal producing and development company focused on growth through the acquisition, exploration and development of coal resources and resource-related technologies. CanAm's main activities and assets include its 49% owned Alabama coal mine operations, the exclusive rights to a proprietary Coal to Liquids technology which converts coal into liquid fuels (such as oil, jet fuel) at an economical cost with zero airborne emissions and the Buick Coal Project which holds significant coal resources, 188 million tons of indicated and 103 million tons of inferred coal resources, in Colorado, USA (see the technical report entitled "Limon Lignite Project, Elbert County, Colorado, USA," dated October 26, 2007 and filed on SEDAR on November 2, 2007). Other coal and related opportunities continue to be evaluated on an ongoing basis.
For Further Information:
Corporate Head Office:
Timothy J. Bergen, President
Toll Free: 1.877.262.5888
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Forward Looking Information and Statements
This press release contains certain forward looking statements and forward looking information (collectively referred to herein as "forward looking statements") within the meaning of applicable Canadian securities laws. All statements other than statements of present or historical fact are forward looking statements. Forward looking statements are often, but not always, identified by the use of words such as "could", "should", "can", "anticipate", "estimate", "expect", "believe", "will", "may", "project", "budget", "plan", "sustain", "continues", "strategy", "forecast", "potential", "projects", "grow", "take advantage", "well positioned" or similar words suggesting future outcomes. In particular, this press release contains forward looking statements relating to: the future production of the Powhatan mine; the permitting of the Davis mine; and the potential production at the Davis mine. This forward looking information is based on management's estimates considering typical strip mining operations, equipment requirements and availability and typical permitting timelines.
In addition, forward looking statements regarding the Company are based on certain key expectations and assumptions of the Company concerning anticipated financial performance, business prospects, strategies, the sufficiency of budgeted capital expenditures in carrying out planned activities, the availability and cost of services, the ability to obtain financing on acceptable terms, the actual results of exploration projects being equivalent to or better than estimated results in technical reports or prior exploration results, and future costs and expenses being based on historical costs and expenses, adjusted for inflation, all of which are subject to change based on market conditions and potential timing delays. Although management of the Company consider these assumptions to be reasonable based on information currently available to them, these assumptions may prove to be incorrect.
By their very nature, forward looking statements involve inherent risks and uncertainties (both general and specific) and risks that forward looking statements will not be achieved. Undue reliance should not be placed on forward looking statements, as a number of important factors could cause the actual results to differ materially from the Company's beliefs, plans, objectives and expectations, including, among other things: general economic and market factors, including business competition, changes in government regulations or in tax laws; the early stage development of the Company and its projects; general political and social uncertainties; commodity prices; the actual results of current exploration and development or operational activities; changes in project parameters as plans continue to be refined; accidents and other risks inherent in the mining industry; lack of insurance; delay or failure to receive board or regulatory approvals; changes in legislation, including environmental legislation, affecting the Company; timing and availability of external financing on acceptable terms; conclusions of economic evaluations; and lack of qualified, skilled labour or loss of key individuals. These factors should not be considered exhaustive. Many of these risk factors are beyond the Company's control and each contributes to the possibility that the forward-looking statements will not occur or that actual results, performance or achievements may differ materially from those expressed or implied by such statements. The impact of any one risk, uncertainty or factor on a particular forward-looking statement is not determinable with certainty as these risks, uncertainties and factors are interdependent and management's future course of action depends upon the Company's assessment of all information available at that time.
Forward -looking statements in respect of the future production of the Powhatan mine may be considered a financial outlook. These forward-looking statements were approved by management of the Company on June 24, 2010. The purpose of this information is to provide an operational update on the company's activities and strategies and this information may not be appropriate for other purposes.
The forward looking statements contained herein are expressly qualified in their entirety by this cautionary statement. The forward looking statements included in this press release are made as of the date of this press release and the Company does not undertake and is not obligated to publicly update such forward looking statements to reflect new information, subsequent events or otherwise unless so required by applicable securities laws.
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