Caledon Resources grows FY production and cuts costs, optimistic about 2010 recovery

Caledon Resources (AIM: CND, ASX: CCD) released its annual financial report today, reporting lower revenues that resulted in a full year loss due to lower prices and unfavourable currency movements, but projecting a rebound in 2010 after growing production and cutting sales costs during 2009.

Caledon operates the Cook underground coking coal mine and is working towards a feasibility study of the nearby Minyango coking coal deposit in Queensland.

The company called the year “challenging” as the annual contract price of Cook coking coal more than halved from US$280/t (tonne) to US$107/t, while the Australian dollar gained 40% against the US dollar during the year. These factors resulted in a loss of A$11.4 million incurred by the group compared to an after tax profit of A$8.2 million in 2008.

Caledon has mined 604,000 tonnes of coal in 2009, up from 548,000t in 2008. Coking coal production amounted to 406,900t against the previous year’s 378,000t, while coking coal sales increased from 397,000t of to 403,000t. The company has produced and sold 79,000t and 76,000t of thermal coal during the year, compared to 66,000t produced and sold in 2008.

The operational focus during the year was on the completion of primary and secondary extraction of the northernmost panels, where mining is now complete and the area is currently being progressively sealed up. By April 2010 the mine is expected to have developed and have access to four production panels, which will facilitate greater flexibility in moving productive units if necessary, and be in a position to start lower cost secondary extraction from the first South Argo production panel.

During the year, the Cook’s JORC compliant resource estimate was increased by 230 Mt to 406 Mt and the Minyango Resource by 50 Mt to 342 Mt. After putting its plans to increase output on hold, the company intends to increase production from the 485,000t achieved in 2008 to 700,000t in 2010.

Capex (capital expenditure) at the Cook mine was brought down from A$11 million to A$2.6 million. Despite higher production, cost of sales declined from US$82.5 million to US$71.8 million.

The company said that the outlook for 2010 has improved dramatically with reports that BHP (LON:BLT, ASX:BHP) has agreed prices for its benchmark coking coals with a number of its Asian customers at US$200/t for the April to June period.

Caledon’s report stated that the overall pricing trend is now clear and supports the decision to increase saleable production at Cook to a forecast 700,000t, adding that the company was positioned to capitalize on the recovery in the markets that it said were evident in 2010. The re-entry into the market of traditional consumers coupled with China’s development into a new major importer of coking coal.

http://www.proactiveinvestors.co.uk/companies/news/15111/caledon-resources-grows-fy-production-and-cuts-costs-optimistic-about-2010-recovery-15111.html