Coalcorp agrees to sell La Francia coal mine to Goldman Sachs

Coalcorp Mining ("Coalcorp") (TSX-CCJ) has entered into agreements to sell its La Francia mine and related infrastructure assets, and all of the issued and outstanding shares of Adromi Capital (the holder of the La Francia II concession), to Goldman Sachs for US$151 million.

Also a part of the sale, Coalcorp has assigned a coal supply agreement providing for the sale of 2.4 metric tonnes of coal, which has a mark-to-market value of approximately US$50 million. The cash consideration for the purchase price and the current estimated value arising from the assignment of the Coal Contract, the approximate total value of the Proposed Transaction is USD$200 million, stated Coalcorp.

Assuming the transaction attains shareholder and Colombian regulatory approval, Coalcorp will use part of the proceeds to repay US$115 million 12% senior secured notes.

Coalcorp has also entered into a $5 million credit agreement with Goldman Sachs to fund certain working capital and capital expenditure obligations of Coalcorp until the closing date of the Proposed Transaction.

Also in connection with sale, Coalcorp’s mining contractor, Consorcio Minero del Cesar will agree to reduce the production of waste from 1.7 million BCMs per month to 900,000 BCMs per month. This will result in overall coal production falling from approximately 250,000 tonnes per month to 125,000 tonnes of coal per month until December, 2010. Production will then resume at 1.7 million BCMs per month and 250,000 tonnes per month from January 1, 2011.

As part of the agreement with CMC, Coalcorp has agreed to pay certain standby costs, which will be reimbursed, of approximately USD$8.5 million to CMC and has agreed to make a contribution of USD$1 million for CMC to implement voluntary retirement packages for 120 employees.

"We believe that among the different proposals and options available to the Corporation and based on the Corporation's current financial position, the Proposed Transaction offers the best alternative, at this time, for maximising the value of the Corporation's assets upon terms and conditions acceptable to the Corporation", said Richard Lister, Chairman of the Board and Chairman of the Special Committee.

Post sale, Coalcorp expects to have approximately US$20 million in cash and will still retain a 60% interest in Carbones Colombianos del Cerrejon ("CCC") which owns the La Caypa coal mine in Colombia. CoalCorp is still owed USD$19 million related to the sale of its 40% equity interest in CCC in July, 2008.

The company reiterated its commitment to continue pursuing legal actions and claims against former directors and officers of the company, which it alleges participated in “improper transactions that were harmful to Coalcorp and its shareholders.” Coalcorp is claiming C$161 million in damages. “Coalcorp intends to vigorously proceed with this action to realize and recover value for its shareholders following the Proposed Transaction, and will possess sufficient funds to enable it to do so". http://www.proactiveinvestors.com/companies/news/3506/coalcorp-agrees-to-sell-la-francia-coal-mine-to-goldman-sachs-3506.html