CanAm Announces Fourth Quarter and Full 2012 Financial

CALGARY, ALBERTA--(Marketwired - April 26, 2013) - CanAm Coal Corp. (TSX VENTURE:COE)(OTCQX:COECF) ("CanAm" or the "Company") has filed its audited consolidated financial statements and related management discussion and analysis for the year ended December 31, 2012. These audited 2012 financial statements include a restatement of the 2011 financials and of Q1 and Q2 for 2012 which is discussed at the end of this press release. Definitions of commonly used non-IFRS financial measures (EBITDA and Free Cash Flow) are also included at the end of this press release.

Full Year 2012 and Q4 Highlights

The Company announced today its full year 2012 and fourth quarter financial results for the period ending December 31, 2012. Full year revenue, EBITDA and net loss for the year were $55.4 million, $10.2 and ($6.1) million respectively as compared to $38.9 million, $8.5 million and ($1.7) million in the prior year. Fourth quarter revenue, EBITDA and net loss were $14.6 million, $3.2 million and ($2.3) million respectively as compared to $8.4 million, $1.7 million and ($1.0) million in the prior year. Excluding one- time impairment charges and a correction of an error in the calculation of mineral property amortization, the fourth quarter loss was ($0.7) million as compared to ($1.0) million in Q4 of 2011.

The Company continued its momentum from Q3 and our fourth quarter operating results were in-line with third quarter results. Our quarter over quarter and full 2012 key performance indicators highlight the significant progress the Company has achieved during the year:

		Q1				Q2				Q3				Q4				2012
Production (in tons)			117,192				130,517				157,900				153,841				559,450
(in $ per Ton)
Revenue		$	114			$	106			$	94			$	96			$	99
Production Cost			71				65				47				49				56
RTO			21				21				20				18				19
EBITDA		$	14			$	14			$	21			$	20			$	18
(in $'millions)			Q1				Q2				Q3				Q4				2012
Operating Cash Flow		$	1.3			$	1.6			$	1.0			$	3.1			$	7.0
EBITDA			1.8				1.9				3.3				3.2				10.2
Capex			(5.4	)			(5.2	)			(5.2	)			(1.6	)			(17.4	)
Free Cash Flow		$	(3.6	)		$	(3.3	)		$	(1.9	)		$	1.6			$	(7.2	)

• Sales for the year were at record levels and were up 95% on an original reported basis and 39% on a restated basis. Sales for Q4 of 153,841 tons were in line with Q3 but were impacted by delayed customer shipments over the Christmas holiday period.
• Long term off-take contracts enabled the Company to achieve better than market pricing for our high quality coals. Average sales price per ton has however gone down quarter over quarter as a result of our changing coal mix following the additional 30% acquisition of BCC who only produces and sells thermal coal.
• Contracted sales for 2013 are in the range of 700,000 to 800,000 tons which corresponds to between 85% and 100% of expected production of our new mine complement.
• Focus on operational excellence through ongoing cost improvement initiatives, integration and centralization of our mining operations across all mines and entities and improved mining conditions resulted in a significant reduction in production cost which started in Q3 and continued in our fourth quarter. Fourth quarter production cost per ton was $49 as compared to $71 in Q1 2012.
• Operating cash flow continued to improve throughout the year and set a record level in Q4 of $3.1 million.
• Investment in equipment and mine development was significant during the year and totaled $17.4 million. This investment was required in order to position the Company for continued growth and involved the opening and development of three new mines and the purchase and upgrade/refurbishment of equipment. The Company's investment program is substantially completed and 2013 capital expenditures will be significantly lower.
• Transition to our new mine complement and configuration, which commenced in October 2012, is nearly complete and the Company expects to reach full production in early Q2 2013.
• Free cash flow turned positive in the fourth quarter and amounted to $1.5 million. This represents a major milestone for the Company as we can now start to build our cash position which will enable us to improve our overall working capital and position us to start paying down our debt.
• One-time provisions of $2.2 million were recorded in Q4 to correct an error in the calculation of mineral property amortization and to write down certain equipment and project development expenses to their net realizable value.

Company President and CEO, Jos De Smedt commented: "CanAm completed another record year and continued its progress towards becoming an intermediate coal producer with a goal to achieving annual production of between 2 to 3 million tons within the next 5 years. Although we achieved a number of major milestones in 2012, including the acquisition of an additional 30% ownership in BCC and obtaining three new major mining permits, 2012 was not without its challenges. Delays in obtaining our mine permits, consolidation and integration of our mine operations, significant mine development and infrastructure work at our new mines and transitioning our resources, both people and equipment, to our new mines, all contributed to a challenging operating and work environment. In spite of these challenges, the hard work of our team paid off and the operational improvements achieved at our mines in the second half of the year, coupled with improved mining conditions, resulted in higher production levels and a significantly lower cost structure. This contributed to continued improvement in our cash flow from operations and, for the first time, the Company generated free cash flow.

With our new mines fully permitted, mine development nearing completion and full production levels achieved in Q2 of 2013, further significant growth is expected in 2013. In addition, the Company's $14.5 million investment in equipment in 2012 positions CanAm to efficiently optimize production and sales from these new mines. With these building blocks in place, we look forward to strong growth in 2013."

Detailed Financial Results and Discussion
2012		Coal Sales					Revenue					EBITDA
		Tons					$'000's					$'000's
Q1 Restated		117,192					12,789					1,854
Q1 Original		67,153					7,672					973
Q2 Restated		130,517		11	%		13,310		4	%		1,932		4	%
Q2 Original		76,577					8,153					1,080
Q3		157,900		21	%		14,741		11	%		3,281		70	%
Q4		153,841		-3	%		14,553		-1	%		3,150		-4	%
2012		559,450		39	%		55,392		42	%		10,217		21	%
2011 Restated		402,766					38,946					8,479
2011 Original		256,221					24,432					4,606

Q1, Q2 and comparative 2011 financial information has been restated to reflect full (100%) consolidation accounting of BCC commencing with the purchase of the initial 50% ownership stake in May 2011 (see end of press release for full discussion and EBITDA definition). The previously reported results are presented for reference.

Summary of Recent Operations History and Mine Transition

Since May 2011, the Company has mined an average of between 40,000 and 60,000 tons of coal per month at four mines located in Alabama: Bear Creek, Old Union, Gooden Creek and Powhatan. In Q4, the Company commenced a significant repositioning of its mining operations, as follows:

1. Opened the first of three pits of a new mine, Old Union 2. Old Union 2 replaces the original Old Union mine, which completed mineable operations in Q1 2013.
2. Temporarily suspended mining operations at Gooden Creek and accelerated plans to open pits 2 and 3 at Old Union 2. These pits were opened during Q1 2013.
3. Received final permitting for the Knight mine, which replaces the Bear Creek mine (mined out in Q2 2013). The Knight mine achieved initial commercial level production in March 2013.
4. In January, received final permitting for the Posey Mill 2 mine, with first production scheduled for Q2 2013.

Upon completion of the mine transition the Company will operate 4 mines with 6 pits (Knight, Old Union 2 (3 pits), Posey Mill 2 and Powhatan) with productive capacity of 60,000 to 80,000 tons per month, significantly in excess of the capacity of the old mine complement. In excess of 85% of 2013 production, or approximately 750,000 tons, is contracted for. The Company is pursuing permitting and other development stage activities to facilitate further expansion in early 2014.

Financial Results Analysis
			Three month period ended (Unaudited)				Two month period ended (Unaudited, Restated)				Twelve month period ended (Audited)				Eleven month period ended (Audited, Restated)
			Dec 31, 2012				Dec 31, 2011				Dec 31, 2012				Dec 31, 2011
Tons sold
Metallurgical coal sales			21,250				9,152				68,266				52,355
Thermal coal sales			132,591				78,313				491,184				350,411
Total			153,841				87,465				559,450				402,766
Coal sales revenue		$	14,553,219			$	8,429,742			$	55,392,400			$	38,945,873
Income from mining operations			284,975				(36,363	)			1,370,584				3,446,785
Other expenses			(3,631,438	)			(1,122,028	)			(9,399,515	)			(5,318,492	)
Loss for the period			(2,258,175	)			(1,074,220	)			(6,057,784	)			(1,715,677	)
EBITDA			3,150,091				1,650,738				10,217,499				8,478,832
Per ton metrics
Average metallurgical coal price		$	127				138			$	142				139
Average thermal coal price			90				92				93				90
Average overall coal price			96				96				99				99
Average production cost			49				54				56				53
Average RTO cost			18				18				19				18
Income from mining			2				(0	)			2				9
EBITDA		$	20			$	19			$	18			$	21

Q1, Q2 and comparative 2011 financial information has been restated to reflect full (100%) consolidation accounting of BCC (see end of press release for full discussion and EBITDA definition). The previously reported results are presented for reference. In 2011, the Company changed its year-end from January to December. As a result, the comparative financial information presented is for the two and 11 month periods ended.

Sales volume and pricing

Consolidated fourth quarter sales volumes were 153,841 tons compared to 87,465 tons sold in the two month period ended December 31, 2011. Both thermal and metallurgical sales volumes exceeded the prior year even taking into account the additional month of results. Q4 production reached an all-time high of 174,000 as a result of initial production from the first pit at the new Old Union 2 mine and strong performance at Powhatan, Old Union and Bear Creek. Sales were lower (153,841 tons) due to shipment curtailments during the Christmas period. The difference between Q4 production and sales is reflected as inventory in the year-end accounts.

Full year thermal and metallurgical volumes also significantly exceeded the prior year. The increase in full year results is partially attributable to inclusion of a full year of BCC, but also reflects important operational improvements realized in the second half of 2012. These improvements stemmed from a combination of improved mining conditions (better strip ratios) and improved operating efficiency at all of our mines, which resulted from a decision taken in Q2 to centralize all of the Company's mine operations under BCC management. Previous to this, the Powhatan mine was managed separately. A key benefit of this change was a realignment of our equipment packages, which contributed to performance improvement at all of our mines.

Overall fourth quarter average pricing was $96 per ton, the same price realized in the previous year. Metallurgical coal pricing was lower than the previous year due to coal specification issues encountered with one of our customers. Full year average pricing was $99 per ton, the same price realized in the previous year.

Cost of Product Sold, Cost of Royalties, Transportation & Other (RTO)

Fourth quarter cost of product sold was $49 per ton compared to $47 per ton in Q3. This compares with $54 per ton achieved in the previous year and $56 per ton for the full year. The substantial reduction can be attributed to the operational improvements previously discussed, which resulted in higher production levels and a lower cost structure. Additionally, the Company made significant investment in new equipment and major repairs to existing equipment (particularly at Powhatan) in the first three quarters of 2012 and this contributed to lower repairs and maintenance expenditures in Q4.

Q4 royalty, transportation and other (RTO) costs were $18 per ton sold as compared to $18 per ton in the prior year. Full year RTO costs were $19 per ton compared to $18 per ton the previous year. RTO tend to be directly variable with sales volumes and only minor quarter to quarter per/ton fluctuations are expected.

EBITDA

Fourth quarter consolidated EBITDA was $3.2 million compared to $3.3 million in the previous quarter, $1.8 million in the first quarter and $1.9 million in the second quarter. Full year EBTIDA was $10.2 million compared to $8.5 million in the prior year. The significant increase achieved in the second half of the year can be attributed to increased production and sales levels and lower production costs previously discussed. EBITDA per ton was $20, compared to $21 per ton in Q3. EBITDA per ton in Q1 and Q2 was $14 per ton.

Net Income

Notwithstanding improved operating results, the Company recorded a Q4 loss of $2.3 million contributing to a full year loss of $6.1 million. The substantial majority of the Q4 loss relates to the following provisions and error corrections ($2.2 million (pre-tax)) recorded in Q4, as follows:

• A $770,000 charge was recorded against equipment to restate certain units to appraised value.
• The Company's investments in coal to liquids and related technologies and certain other project investments ($190,000) were written off on the basis that future commercialization is uncertain.
• The Company corrected an error in the calculation of mineral property amortization at the BCC level. The 2011 comparatives were also restated to correct the error related to this period. The Q4 adjustment was $188,000.
• During Q4, the Company changed its estimate of the carrying value of the asset retirement obligation at the BCC level, resulting in a Q4 charge of $826,000 million.
• The Company recorded a provision for doubtful accounts of $184,000 against certain old trade receivables.

Capital Expenditures

Fourth quarter capital expenditures on new equipment, capital repairs and mineral property development totalled $1.6 million, compared to $5.2 million in the previous quarter. The Company financed $200,000 of this investment and funded the remainder from cash flow.

For the year ended December 31, 2012 new equipment, capital repair and mineral property development expenditures totalled $17.4 million, including $14.5 million of equipment additions. As described above, the Company has made significant capital investments in anticipation of its 3 new mines opening. The Company's investments in new equipment were substantially completed in Q3 2012. New equipment purchases in Q4 totalled $200,000 and no new equipment was purchased in Q1 2013. The main portion of the Company's investment in new mine infrastructure occurs in Q4 2012, Q1 2013 and the first half of Q2 2013.

Liquidity

In Q4, the Company generated free cash flow from operations (EBTIDA less capital expenditures) of $1.5 million. At December 31, 2012 the Company had cash on hand of $2.4 million, compared to $3.5 million at December 31, 2011. In addition, the Company has undrawn operating lines of credit of $2.1 million, undrawn capital equipment facilities of $1 million and restricted cash of $384,000.

During Q4, the Company's working capital position declined from the end of Q3 principally as a result of capital expenditures on new mine development and expenditures on exploration project opportunities. At December 31, 2012, the Company had a working capital deficiency of $4.8 million ($3.7 million excluding the repayment of a $1.1 million, 12% convertible debenture due in August 2013) compared to a deficiency of $3.7 million at September 30, 2012 (restated to include current portion of asset retirement obligations) and $2.8 million as at December 31, 2011.

The Company believes it has sufficient cash reserves, capital and operating line credit access and other available cash sources (e.g. restricted cash, surplus equipment, which it intends to auction in Q2 2013) to finance the final development of its new mine complement. Once complete, the Company anticipates generating significant free cash flow from its new mines (from additional coal sales and reduced mine development capital spending requirements).

Reserves

The Company's most recent 43-101 report (dated May 2011) identified 6 million tons of reserves covering Bear Creek, Posey Mill, Old Union, Old Union 2 and Gooden Creek. The report does not cover Knight, Powhatan and the Company's other lease holdings. The Company intends to obtain an updated 43-101 report during 2013.

Subsequent Events

Subsequent to year end, the Company achieved a number of significant milestones including:

• Commenced mining at the Knight Mine. Production is anticipated to reach optimum levels by the middle of Q2 2013.
• Received a final permit from the Alabama Surface Mining Commission for the Posey Mill 2 mine. First production is anticipated during Q2 2013.
• Won two important new sales contracts with industrial customers for 2013. The opportunity exists to grow production at both clients and to secure long-term off take agreements.
• Mutually agreed to terminate a sales contract with an existing customer covering 4,000 tons per month of metallurgical coal sales, effective February 2013. Secured a six month purchase order to sell the coal impacted by the termination to a new customer commencing April 2013.
• Signed a three year surface coal mining lease covering approximately 1,500 acres close to the Company's existing mines.

Outlook

The Company is in an important period of transition as it repositions its mine portfolio from a 40,000 to 60,000 ton per month run rate to an operating platform capable of producing 60,000 to 80,000 tons a month and beyond. As of the date of this press release, the Company has substantially completed the mine build out of all 3 pits at Old Union 2 and the Knight mine. Full scale commercial production is underway as of April, 2013. Mine development is well underway at the Posey Mill 2 mine and first production is anticipated before the end of Q2 2013. Therefore, full scale production at all of the mines is anticipated in Q2 2013.

The transition to the new mines has taken longer than anticipated. This has partially been due to adverse weather conditions but also unanticipated engineering challenges with pond and road construction, which occurred during February and March. In addition, coal deliveries into two new customers were lower than expected as these customers were burning off coal inventory acquired from previous suppliers and the Company only replaced its lost met coal order with a new customer in April. As a result, the Company had a slower start to the year and anticipates sales for Q1 to be around 150,000 tons, in line with Q3 and Q4 of 2012 but below the sales range the Company expects to achieve with its new mine complement.

The outlook for 2013 remains positive and the Company believes that it can achieve significant production and sales growth as compared to 2012. The mine build out is nearly complete and the Company's customers have been scaling up deliveries to originally planned levels in April and this is expected to continue. For 2013, the Company has sales commitments in the range of 700,000 to 800,000 tons which corresponds to between 85% and 100% of the expected production of our new mine complement. As a result, overall average 2013 pricing is expected to be relatively consistent with 2012. Capital expenditures for 2013 are expected to be significantly lower than in 2012 and will be in the range of $7 to $9 million.

The Company will provide an update to its 2013 sales guidance after all of its new mines have achieved commercial production.

Restatement of 2011 Comparative Financial Information

The comparative financial information included in the 2012 consolidated financial statements and accompanying MD&A has been restated.

Prior to July 1, 2012, the Company proportionally consolidated its 50% investment in BCC. Coincident with its July 1, 2012 acquisition of an additional 30% interest in BCC, the Company commenced full (100%) consolidation of BCC's financial results.

The Company has determined that it should have fully (100%) consolidated the financial results of BCC starting at the time of the original 50% acquisition in May 2011. At that time, the Company acquired not only a 50% interest in BCC but also the option, at the Company's sole discretion to acquire the remaining 50% interest along with control of BCC's board, before May 2016. In accordance with IAS 27, the Company's ownership position and sole discretion option constituted effective control of the Company.

The Company has restated the comparative financial information in the 2012 financial statements, as well as comparative information for Q1 and Q2 2013 to reflect consolidation accounting commencing May 2011. Additionally, the Company has restated the comparative financial information in the 2012 financial statements to correct an error in the calculation of mineral property amortization.

About CanAm Coal Corp.

CanAm is a coal producer and development company focused on growth through the acquisition, exploration and development of coal resources and resource-related technologies. CanAm's main activities and assets include its four operating coal mines in Alabama and the Buick Coal Project which holds significant coal resources, 188 million indicated and 103 million inferred resources, in Colorado, USA (see the technical report entitled "Limon Lignite Project, Elbert County, Colorado, USA," dated October 26, 2007 and filed on SEDAR on November 2, 2007). Other coal and related opportunities continue to be evaluated on an ongoing basis.

EBITDA and Free Cash Flow

Statements throughout this press release make reference to EBITDA and Free Cash Flow which are non-IFRS financial measures commonly used by financial analysts in evaluating financial performance of companies, including companies in the mining industry. Accordingly, management believes EBITDA and Free Cash Flow may be a useful metric for evaluating the Company's performance as it is a measure management uses internally to assess performance, in addition to IFRS measures. As there is no generally accepted method of calculating EBITDA and Free Cash Flow, the terms used herein are not necessarily comparable to similarly titled measures of other companies. The items excluded from EBITDA and Free Cash Flow are significant in assessing the Company's operating results and liquidity. EBITDA and Free Cash Flow have limitations as an analytical tool and should not be considered in isolation from, or as alternative to, net income or other data prepared in accordance with IFRS. EBITDA is calculated as income from mining operations plus depreciation, depletion, accretion and amortization less general and administrative costs. Free Cash Flow is calculated as EBITDA less financed and non-financed capital expenditures. Other financial data has been prepared in accordance with IFRS.

Forward-Looking Information and Statements

This press release contains certain forward-looking statements and forward-looking information (collectively referred to herein as "forward-looking statements") within the meaning of applicable Canadian securities laws. All statements other than statements of present or historical fact are forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "could", "should", "can", "anticipate", "estimate", "expect", "believe", "will", "may", "project", "budget", "plan", "sustain", "continues", "strategy", "forecast", "potential", "projects", "grow", "take advantage", "well positioned" or similar words suggesting future outcomes. In particular, this press release contains forward-looking statements relating to: the future production of the Powhatan mine; the permitting of the Davis mine; and the potential production at the Davis mine. This forward looking information is based on management's estimates considering typical strip mining operations, equipment requirements and availability and typical permitting timelines.

In addition, forward-looking statements regarding the Company are based on certain key expectations and assumptions of the Company concerning anticipated financial performance, business prospects, strategies, the sufficiency of budgeted capital expenditures in carrying out planned activities, the availability and cost of services, the ability to obtain financing on acceptable terms, the actual results of exploration projects being equivalent to or better than estimated results in technical reports or prior exploration results, and future costs and expenses being based on historical costs and expenses, adjusted for inflation, all of which are subject to change based on market conditions and potential timing delays. Although management of the Company consider these assumptions to be reasonable based on information currently available to them, these assumptions may prove to be incorrect.

By their very nature, forward-looking statements involve inherent risks and uncertainties (both general and specific) and risks that forward-looking statements will not be achieved. Undue reliance should not be placed on forward-looking statements, as a number of important factors could cause the actual results to differ materially from the Company's beliefs, plans, objectives and expectations, including, among other things: general economic and market factors, including business competition, changes in government regulations or in tax laws; the early stage development of the Company and its projects; general political and social uncertainties; commodity prices; the actual results of current exploration and development or operational activities; changes in project parameters as plans continue to be refined; accidents and other risks inherent in the mining industry; lack of insurance; delay or failure to receive board or regulatory approvals; changes in legislation, including environmental legislation, affecting the Company; timing and availability of external financing on acceptable terms; conclusions of economic evaluations; and lack of qualified, skilled labour or loss of key individuals. These factors should not be considered exhaustive. Many of these risk factors are beyond the Company's control and each contributes to the possibility that the forward-looking statements will not occur or that actual results, performance or achievements may differ materially from those expressed or implied by such statements. The impact of any one risk, uncertainty or factor on a particular forward-looking statement is not determinable with certainty as these risks, uncertainties and factors are interdependent and management's future course of action depends upon the Company's assessment of all information available at that time.

Forward -looking statements in respect of the future production of the Powhatan and BCC mines may be considered a financial outlook. These forward-looking statements were approved by management of the Company on April 24, 2013. The purpose of this information is to provide an operational update on the company's activities and strategies and this information may not be appropriate for other purposes. The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement. The forward-looking statements included in this press release are made as of the date of this press release and the Company does not undertake and is not obligated to publicly update such forward-looking statements to reflect new information, subsequent events or otherwise unless so required by applicable securities laws.