Caledon Resources sets 700 kt coal sales target for 2010 as prices and demand recover

Caledon Resources (AIM: CDN) said coal demand has picked up in the final quarter of 2009 and recovery in prices continued in Q1 2010 after the demand fell earlier in the year amid the economic downturn, impacting coal prices and driving down the company’s revenues.

Sales for the full year increased from 463 kt (kilotonnes) to 479 kt, however, revenues fell from A$121.9 to A$67.8 million as coal prices plummeted from A$264/t (tonne) to A$141/t. Meanwhile, unit cost of sales declined 23% from A$171/t in the first half to A$131/t in the second half, costs and cash flows at the Cook mine were contained and operational capability of the mine preserved. Still, the company posted a pre-tax loss of A$23.8 million after achieving a profit of A$10.4 million in 2008.

Caledon also said that Argo South mining development at the Cook mine is well advanced to facilitate expansion of mining activities with the ABM25 continuous miner and Prairie mobile haulage system refurbished and relocated to the site.

Other operational developments included the termination of the strategic review process and completion of an advanced concept study at the Minyango project, where a base-line ecological study is currently in progress.

"The first half of 2009 was a difficult period for the coal industry. As the global financial crisis took hold, demand for coal fell and many buyers reneged on off-take agreements - both in terms of price and tonnage. Our response was to reduce manning and costs to the minimum possible while keeping a productive mining team intact and preparing the Cook mine for future expansion... Cook enters 2010 with the Argo South area established and most of the mains development required for the coming year already completed,” said Managing Director of Caledon Resources Mark Trevan.

After growing sales volumes in 2009, the company is now recruiting additional mine employees, aiming to sell a minimum of 700 kt in 2010 based on increased demand and market reports of a likely increase in prices in April 2010 contract year.

The company secured additional working capital by raking in £4.2 million in a fundraising post year end in February 2010 after its cash balance fell to A$13.6 million from A$44.2 million in 2008.

http://www.proactiveinvestors.co.uk/companies/news/13772/caledon-resources-sets-700-kt-coal-sales-target-for-2010-as-prices-and-demand-recover-13772.html