ATH Resources plc Trading Update (9886N)

TIDMATH

RNS Number : 9886N

ATH Resources plc

05 October 2012

5 October 2012

ATH Resources plc

("ATH" or the "Company" or the "Group")

Trading Update

ATH Resources plc (AIM: ATH), one of the UK's largest coal producers, today issues the following trading update ahead of the Group's preliminary results for the year ended 30 September 2012.

Current Trading

Sales volumes for the financial year ended 30 September 2012 were approximately 1.6 million tonnes (2011: 1.6 million tonnes). Volumes in the second half of the year were broadly in line with expectations following the reserve downgrade announced at Muir Dean earlier this year. Average sales prices for the year increased by around 14% to approximately GBP57 per tonne (2011: GBP50 per tonne).

Production costs increased during the year due to higher mining ratios and gas oil, which has risen in the last few weeks to return to price levels similar to the end of last year. However, the Group has maintained its focus on reducing cost elsewhere in the business which has resulted in savings of around GBP3 million. Overall, the Group expects performance before exceptional items to be close to management expectations.

Despite weak coal prices and increased production costs the Group has remained cash generative, delivering a reduction in net debt of GBP9.5 million to GBP22.0 million (2011: GBP31.5 million).

Review

International coal prices are at a level some 30% below that of the beginning of the financial year, and commodity markets continue to forecast that future prices will not stage any meaningful recovery in the medium term. Accordingly the Group is undertaking a full review of its anticipated future operations and performance together with the associated working capital requirement. As part of this review it will assess the appropriateness of its accounting policies as well as the carrying value of Group assets. It is expected that this will result in significant non-cash write downs.

Banking Facilities

As previously announced, the Group's existing banking facilities with its lenders, which were entered into in September 2011, are scheduled to expire in May 2013.

During the year, the Group has met in full the planned reductions in its facilities from GBP23.5 million to currently GBP18 million, although it will require an increase in this level to meet its operational requirements from December onwards. Whilst there is no certainty that adequate facilities can be secured, positive progress has been made towards agreeing new banking facilities with the Group's existing lenders based upon a revised mining plan that concentrates on existing sites and extensions only, with significantly lower levels of investment in new development projects for as long as current coal prices persist. Given this restriction in future investment, the Board also needs to seek the agreement of other key stakeholders of the Group.

The Board will provide an update to the market on progress as appropriate.

Coal reserve update

On 26 September 2012, Dumfries and Galloway Council approved planning permission of the Rigg North site, subject to certain conditions, which added 1.0 million tonnes to permitted reserves. A planning application has been lodged with Fife Council in respect of Muir Dean Revised (0.8 million tonnes) with a decision expected later this year. Year end proved and probable reserves will be 2.5 million tonnes (2011: 5.0 million tonnes) and 3.5 million tonnes (2011: 2.8 million tonnes) respectively. During the next 12 months it is expected that new applications totalling around 0.75 million tonnes will enter the planning system.

Carbon Reduction Commitment ("CRC") Scheme

The Board remains of the view that the electricity consumption of its 12 kilometre conveyor should be exempt from the CRC Scheme and its application for a judicial review hearing has now been accepted. No date has yet been set but the Board anticipates a hearing date early in 2013. As previously announced, the potential impact to the Group, if it fails to win exemption from the CRC Scheme, would be an increase in costs by a further GBP1.1 million per annum for each of the three years from April 2011. The Board will provide an update on progress as appropriate.

Outlook

The Board anticipates that trading conditions will remain challenging given the current weakness in the coal market and consequently, production volumes will be lower and will remain so for the foreseeable future. The Group has a mixture of fixed and floating priced supply contracts which means future revenues and profitability will remain susceptible to movements in international coal prices.

The immediate focus of the Board is to secure the support of all stakeholders to a refinancing plan that concentrates on coal production from existing sites and extensions, with capital expenditure in respect of new site development kept to a minimum. The Board is currently undertaking a review on how best to attract the investment required to develop these future sites.

-End-

Contacts and enquiries:

 
ATH Resources plc 
David Port, Non Executive Chairman              Tel: +44 (0) 7836 693798 
Alistair Black, Chief Executive                Tel: +44 (0) 1302 760 462 
                                                           www.ath.co.uk 
 
Seymour Pierce Limited                         Tel: +44 (0) 207 107 8000 
Stewart Dickson (Nominated Adviser)                www.seymourpierce.com 
Richard Redmayne / Katie Ratner (Broker) 
 
Hudson Sandler                                 Tel: +44 (0) 207 796 4133 
 Andrew Leach / Charlie Jack / Katie Matthews      www.hudsonsandler.com

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.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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