ATH Resources (LSE:ATH)
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RNS Number : 2052A
ATH Resources plc
28 March 2012
Press Release 28 March 2012
ATH Resources plc
("ATH Resources" or the "Group")
ATH Resources plc (AIM:ATH), one of the UK's largest coal producers, today issues the following trading update ahead of its interim results for the six months to 1 April 2012.
The Group's sales volumes for the first six months of the year are expected to be approximately 790,000 tonnes (2011: 706,000 tonnes), 12% ahead of the same period last year. However, as highlighted in the AGM statement in February, the two fundamental issues impacting the Group in the first half were the continued rise in gas oil prices, which are now 10% higher than the start of the year, combined with a weakening international price of coal which has fallen by over 20% during the same period.
In recent weeks the Group's sales of high margin Domestic product have not recovered from the low demand due to the mild winter and are unlikely to pick up in the remainder of the year given the high stock levels being held by customers. In addition, the Group has begun to experience a much higher level of old workings than previously encountered in the final phase of mining at its Muir Dean site. If this situation continues throughout the remaining life of the mine to the end of September 2012, total annual expected sales volumes for the Group will fall to approximately 1.65 million tonnes, slightly below last year's total of 1.67 million tonnes. Together, these issues are expected to result in a loss of revenues for the remainder of the year of over GBP4 million and the loss of reserves will also likely lead to an exceptional write down of deferred (non-cash) stripping costs (work in progress) of approximately GBP2 million.
The Group has been able to mitigate, in part, the impact on operating margins of falling coal prices and rising gas oil costs through the successful renegotiation of the price of its two remaining legacy contracts and can confirm that its third legacy contract has now been fulfilled. However, the combined impact of the issues referred to above will result in the trading performance for the full year being substantially below expectations.
Debt levels at the end of March 2012 are expected to be slightly lower than at the last year end. With the Group's bank facilities expiring in May 2013, the Group has commenced discussions with its bankers to refresh these facilities before the end of the financial year.
Whilst the Group is now cautiously optimistic that the Carbon Reduction Commitment Scheme will be abolished this autumn following the Chancellor's recent Budget statement, it has decided to proceed in registering its participation within the Scheme to avoid incurring any penalties should the Group ultimately have to participate in the Scheme. The latest estimate of the cost of participation to the Group could be in the order of GBP1.1 million for each of the three years from April 2012, GBP300,000 per annum lower than previous estimates.
In the event that the Scheme is not abolished but is implemented in its current draft form, the Group intends to take its Appeal to judicial review. The Group will provide a further update when it issues its interim results.
The Group remains on track to submit over two million tonnes of reserves into planning by the end of this calendar year.
- Ends -
For further information:
ATH Resources plc
David Port, Executive Chairman Tel: +44 (0) 7836 693798
Alistair Black, Chief Executive Tel: +44 (0) 1302 760 462
Seymour Pierce Ltd
Sarah Jacobs / Stewart Dickson (Nominated Tel: +44 (0) 207 107 8000
Richard Redmayne / Katie Ratner
Joanne Shears / Mark Dixon Tel: +44 (0) 207 398 7729
Notes to Editors
ATH Resources was listed on the AIM market of the London Stock Exchange in June 2004 and operates four surface coal mines in Scotland; Skares Road and Netherton in East Ayrshire, Glenmuckloch in Dumfries and Galloway and Muir Dean in Fife. The Group is currently one of the largest producers of coal in the UK providing coal principally to the electricity supply industry and also the industrial and house coal markets. Coal is used to generate around a third of the UK's electricity and the Group holds coal supply contracts with four of the UK's main electricity generating companies.
Further information on ATH Resources can be found at www.ath.co.uk
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