ATH Resources plc Trading Update (9886N)
October 05 2012 - 2:00AM
UK Regulatory
TIDMATH
RNS Number : 9886N
ATH Resources plc
05 October 2012
5 October 2012
ATH Resources plc
("ATH" or the "Company" or the "Group")
Trading Update
ATH Resources plc (AIM: ATH), one of the UK's largest coal
producers, today issues the following trading update ahead of the
Group's preliminary results for the year ended 30 September
2012.
Current Trading
Sales volumes for the financial year ended 30 September 2012
were approximately 1.6 million tonnes (2011: 1.6 million tonnes).
Volumes in the second half of the year were broadly in line with
expectations following the reserve downgrade announced at Muir Dean
earlier this year. Average sales prices for the year increased by
around 14% to approximately GBP57 per tonne (2011: GBP50 per
tonne).
Production costs increased during the year due to higher mining
ratios and gas oil, which has risen in the last few weeks to return
to price levels similar to the end of last year. However, the Group
has maintained its focus on reducing cost elsewhere in the business
which has resulted in savings of around GBP3 million. Overall, the
Group expects performance before exceptional items to be close to
management expectations.
Despite weak coal prices and increased production costs the
Group has remained cash generative, delivering a reduction in net
debt of GBP9.5 million to GBP22.0 million (2011: GBP31.5
million).
Review
International coal prices are at a level some 30% below that of
the beginning of the financial year, and commodity markets continue
to forecast that future prices will not stage any meaningful
recovery in the medium term. Accordingly the Group is undertaking a
full review of its anticipated future operations and performance
together with the associated working capital requirement. As part
of this review it will assess the appropriateness of its accounting
policies as well as the carrying value of Group assets. It is
expected that this will result in significant non-cash write
downs.
Banking Facilities
As previously announced, the Group's existing banking facilities
with its lenders, which were entered into in September 2011, are
scheduled to expire in May 2013.
During the year, the Group has met in full the planned
reductions in its facilities from GBP23.5 million to currently
GBP18 million, although it will require an increase in this level
to meet its operational requirements from December onwards. Whilst
there is no certainty that adequate facilities can be secured,
positive progress has been made towards agreeing new banking
facilities with the Group's existing lenders based upon a revised
mining plan that concentrates on existing sites and extensions
only, with significantly lower levels of investment in new
development projects for as long as current coal prices persist.
Given this restriction in future investment, the Board also needs
to seek the agreement of other key stakeholders of the Group.
The Board will provide an update to the market on progress as
appropriate.
Coal reserve update
On 26 September 2012, Dumfries and Galloway Council approved
planning permission of the Rigg North site, subject to certain
conditions, which added 1.0 million tonnes to permitted reserves. A
planning application has been lodged with Fife Council in respect
of Muir Dean Revised (0.8 million tonnes) with a decision expected
later this year. Year end proved and probable reserves will be 2.5
million tonnes (2011: 5.0 million tonnes) and 3.5 million tonnes
(2011: 2.8 million tonnes) respectively. During the next 12 months
it is expected that new applications totalling around 0.75 million
tonnes will enter the planning system.
Carbon Reduction Commitment ("CRC") Scheme
The Board remains of the view that the electricity consumption
of its 12 kilometre conveyor should be exempt from the CRC Scheme
and its application for a judicial review hearing has now been
accepted. No date has yet been set but the Board anticipates a
hearing date early in 2013. As previously announced, the potential
impact to the Group, if it fails to win exemption from the CRC
Scheme, would be an increase in costs by a further GBP1.1 million
per annum for each of the three years from April 2011. The Board
will provide an update on progress as appropriate.
Outlook
The Board anticipates that trading conditions will remain
challenging given the current weakness in the coal market and
consequently, production volumes will be lower and will remain so
for the foreseeable future. The Group has a mixture of fixed and
floating priced supply contracts which means future revenues and
profitability will remain susceptible to movements in international
coal prices.
The immediate focus of the Board is to secure the support of all
stakeholders to a refinancing plan that concentrates on coal
production from existing sites and extensions, with capital
expenditure in respect of new site development kept to a minimum.
The Board is currently undertaking a review on how best to attract
the investment required to develop these future sites.
-End-
Contacts and enquiries:
ATH Resources plc
David Port, Non Executive Chairman Tel: +44 (0) 7836 693798
Alistair Black, Chief Executive Tel: +44 (0) 1302 760 462
www.ath.co.uk
Seymour Pierce Limited Tel: +44 (0) 207 107 8000
Stewart Dickson (Nominated Adviser) www.seymourpierce.com
Richard Redmayne / Katie Ratner (Broker)
Hudson Sandler Tel: +44 (0) 207 796 4133
Andrew Leach / Charlie Jack / Katie Matthews www.hudsonsandler.com
The information in this report relating to exploration results,
mineral resources or mineral reserves is based on information
compiled by Mr. Peter Morgan, a full-time employee of the Group,
who is a Fellow of the Institute of Materials, Minerals and Mining.
Mr. Morgan has sufficient experience which is relevant to the style
of mineralisation and type of deposit under consideration. He has
reviewed and consents to the inclusion in the report of the matters
based on his information in the form and context in which it
appears. A glossary of terms is available on our website -
www.ath.co.uk.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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