Corsa Provides Update on Casselman Mine and US$25 Million Credit Facility Extension
Toronto, Ontario – Corsa Coal Corp. (TSXV: CSO) (“Corsa” or the “Company”) is pleased to provide an update on progress at its Casselman underground mine, the extension of its US$25 million credit facility and met coal shipment schedule.
The Casselman Underground Mine
The previously announced delays due to the initial mining conditions encountered underground at the Casselman mine have been resolved. The Company expects to achieve normal production levels this month.
The Casselman mine is a long life underground metallurgical coal mine located in Garrett County, approximately two miles south of Grantsville, Maryland, USA. This project is approximately 31 miles by truck from Corsa’s Wilson Creek coal preparation plant in Somerset County Pennsylvania.
Credit Facility Extension
The Company has a US$25 million senior credit facility (the “Facility”) consisting of two separate loans, of which both have been fully drawn. The first loan is for U.S. $5.5 million with a term of 13 months to June 2012. The second loan is for US$19.5 million with an initial term to November 18, 2011, subject to an extension at the option of Corsa for a further 6 month term. The Company has exercised its option to extend the second loan of US$19.5 million for a further six months, until May 18, 2012. In accordance with the terms of the loan, the Company will issue 1.4 million common shares to the lenders.
The loans are evidenced by two separate debentures secured by a pledge by Corsa of the shares of its principal subsidiary Wilson Creek Holdings, Inc. No interest is payable for the initial terms of the loans. Should the loans remain outstanding after maturity (or in the event of a default), the loans will bear interest at a rate of 5% per annum payable semi-annually, which interest may be satisfied by the issuance of common shares of Corsa at a price equal to 95% of the market price (as determined in accordance with the policies of the TSX Venture Exchange) determined at the date of payment.
In connection with the Facility Corsa issued, in May 2011, 3 million two year warrants (the “Warrants”) to purchase common shares in the capital of Corsa, and 1.6 million common shares, and will issue prior to November 18, 2011 an additional 1.4 million common shares. The Warrants are exercisable at an exercise price of $1.15 per share until May 17, 2013. There were no standby or commitment fees payable by Corsa in respect of the Facility. The lenders (each as to 50% of the aggregate principal amount of the Facility) are Zebra Holdings and Investments S.a.r.l. and Lorito Holdings S.a.r.l. Zebra Holdings and Investments S.a.r.l. and Lorito Holdings S.a.r.l. are two companies wholly owned by a Lundin family trust.
As indicated in its third quarter results, the Company’s ability to hit targeted 2011 production was largely dependent on the frequency of rail trains to its Wilson Creek coal preparation plant. With what appears to be a general slowdown in met coal shipments, the Company has received fewer trains than expected from its buyers in October and does not expect to receive the expected number of trains for November. For October the expected shipments were to be approximately 70,000 to 75,000 tons, while actual shipments totalled 50,000 tons including train and truck shipments. The Company expects this situation to continue for November and December. While the Company has the production capacity from its surface and underground mines and purchased coal and the plant capacity to meet its expected delivery schedule, the Company will be temporarily reducing production to match the current expected shipment schedule. This does not change the Company’s outlook for 2012.
Information about Corsa
Corsa’s main operating subsidiary is Wilson Creek Energy LLC based in Somerset County, Pennsylvania. Its primary business is the mining, processing and selling of metallurgical coal, as well as actively exploring, acquiring and developing resource properties consistent with its coal business.
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Certain information set forth in this press release contains “forward-looking statements” and “forward-looking information” under applicable securities laws. Except for statements of historical fact, certain information contained herein constitutes forward-looking statements which include management’s assessment of future plans and operations and are based on current internal expectations, estimates, projections, assumptions and beliefs, which may prove to be incorrect. Some of the forward-looking statements may be identified by words such as “estimates”, “expects” “anticipates”, “believes”, “projects”, “plans”, “outlook” and similar expressions. These statements are not guarantees of future performance. Such forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause Corsa’s actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to: risks that transactions referred to will not be completed; liabilities inherent in coal mine development and production; geological, mining and processing technical problems; inability to obtain required mine licenses, mine permits and regulatory approvals required in connection with the mining and processing of coal; unexpected changes in coal quality and specification; risks that the Wilson Creek coal preparation plant will not operate at production capacity during the relevant period; variations in the coal preparation recovery rates; dependence on third party coal transportation systems; competition for, among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel; incorrect assessments of the value of acquisitions; changes in commodity prices and exchange rates; changes in the regulations in respect to the use, mining and processing of coal; changes in regulations on refuse disposal; the effects of competition and pricing pressures in the coal market; the oversupply of, or lack of demand for, coal; currency and interest rate fluctuations; various events which could disrupt operations and/or the transportation of coal products, including labor stoppages and severe weather conditions; the demand for and availability of rail, port and other transportation services; and management’s ability to anticipate and manage the foregoing factors and risks. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. The reader is cautioned not to place undue reliance on forward-looking statements. The Company does not undertake to update such forward looking statements, unless required to do so by law.
The TSX Venture Exchange has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release. Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.