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ATH Resources plc (AIM:ATH), one of the UK's largest coal producers, today issues the following trading statement ahead of the Group's preliminary results for the year ended 3 October 2010 which are expected to be announced on Wednesday, 8 December 2010.
As reported in the Group's interim announcement on 30 June 2010, sales volumes in the first half of the year were adversely affected by one of the worst winters Scotland has had for over 100 years. The Board is pleased to confirm that sales in the second half of the year recovered strongly, with volumes for the full year approaching expected levels of 1.8 million tonnes. Sales prices averaged over £43 per tonne in the second half of the year, in line with expectations. However, unexpected geological conditions at the Group's Glenmuckloch mine during the second half of the year reduced coal production in the latter months and the Board has taken the decision to lower its estimate of remaining reserves by 50,000 tonnes. Given that the mine is reaching the end of its life, this has led to an accelerated write down in the value of work in progress of around £750k. This write down, together with the one-off costs associated with recovering sales volumes from the Group's other mines has significantly impacted trading performance for the year. Despite this, the Group's Proved and Probable reserves now stand at a higher level than at any time in the Group's history at 8.5 million tonnes as reported below.
Whilst the Group's cash position has been managed well with net borrowings at the year end in line with management expectations, during the next 12 months the Group is required to commit £14m of investment opening up both of the new Netherton and Duncanziemere sites. The Netherton site has been redesigned to enable substantial long term restoration savings to be made but initial opening-up costs will increase as a result. This investment, in conjunction with the continuing impact of its legacy sales contracts, which are well below current market prices, has led the Board to take an early review of the level of the proposed final dividend payable in January 2011. It is the Board's current intention, just for this year, to propose a reduction in the final dividend during this investment phase to 2.0 pence per share, making dividends for the full year, including the interim dividend, in total 3.0 pence per share (2009: 6.15 pence per share).
Coal reserve update
As previously announced important planning consents were received in June 2010 for Netherton, a site close to the existing Skares Road site, and Duncanziemere, an extension to the Laigh Glenmuir mine, in total adding 2.7 million tonnes to Proved Reserves. Since then a further 0.4 million tonnes at Netherton has been added to Proved Reserves following further investigation at the site with another 0.9 million tonnes added to Probable Reserves. In addition, 1.3 million tonnes has been added to Probable Reserves from extensions to the Group's existing mines.
The Group's Proved Reserves currently stand at 6 million tonnes with Total Reserves of 8.5 million tonnes. This is an increase of 1.2 million tonnes (28%) in Proved Reserves during the course of the year.
The Board changes following the sale of the assets of ATH Regeneration in July 2010 are now complete with Alistair Black appointed Chief Executive and Andy Weatherstone joining as Group Finance Director at the start of October 2010. The new executive team believe that the investments being made in developing the Group's new mines, and its strong reserve base when combined with significantly improving selling prices which will become available as and when the legacy contracts fall away, will generate substantial improvements to future revenues and margins for the Group. The first of these legacy contracts expires during the next 18 months and the Group is already looking at opportunities to enter into new sales contracts with electricity generators.
Consideration of new accounting standards
In August 2010 the International Accounting Standards Board (IASB) issued a draft IFRIC Interpretation: "Stripping Costs in the Production Phase of a Surface Mine". The draft IFRIC, if issued in unamended final form, would have no impact on cash generated from operations, and is likely to improve reported profitability in the current year, but would result in a prior year write down in the historical level of work in progress recorded on the Group's balance sheet at the previous year end. It would also reduce the Group's current corporation tax liabilities. The Board is considering the full implications arising from any potential change and will update the market as soon as the position is clear. It is, however, likely to consider an early change in accounting in this area if it concludes that it is appropriate to do so in order to remove any future uncertainty over the likely impact of the IFRIC. If adopted, the reported profit under the new approach is likely to be at or above current market expectations.
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. The information in this report relating to exploration results, mineral resources or mineral reserves is reported in accordance with the Pan-European Code for the Reporting of Exploration Results, Mineral Reserves (the PERC Reporting Code).
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 Limited|
|Sarah Jacobs / John Cowie (Nominated Adviser)||Tel: +44 (0) 207 107 8000|
|Richard Redmayne / Katie Ratner (Broker)|
|Sarah Hollins / Mark Dixon||Tel: +44 (0) 20 7398 7729|
Notes to Editors
ATH Resources was listed on the AIM market of the London Stock Exchange in June 2004 and operates three surface coal mines in Scotland; Skares Road, in East Ayrshire, Glenmuckloch in Dumfries and Galloway and Muir Dean in Fife. The Group is currently the third largest producer of coal in the UK producing approximately 2 million tonnes per annum. 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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