ATH Ath Resources

TIDMATH

RNS Number : 0023Q

ATH Resources plc

12 October 2011

 
 Press Release   12 October 2011 
 

ATH Resources plc

("ATH Resources" or the "Group")

Pre-Close 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 2 October 2011 which are expected to be announced on Wednesday, 7 December 2011.

Current Trading

Sales volumes in the second half of the year of 960,000 tonnes were significantly higher than the six months to March 2011 (706,000 tonnes). Average sales prices for the year increased by around 15% to over GBP50 per tonne (2010: GBP43.68 per tonne) and trading profits before exceptional items, but including the costs of the unsuccessful takeover talks, will be close to market expectations.

Costs have increased significantly during the year, with expenditure on gas oil and tyres some GBP6 million higher than in the same period last year. The Board now believes that there is little likelihood that the current level of these costs will reduce in the foreseeable future and has therefore increased the provision for the future restoration of its sites by an additional GBP1.6 million. This additional exceptional item will increase the loss before tax indicated at the half year.

The Group's cash position has been managed well, with year end debt levels reduced by some GBP3 million. Additionally, the Group has renegotiated its bank facilities with its existing lenders to extend the life of these facilities whilst also providing greater flexibility. However, given the continued impact of the legacy contracts and the significant increase in costs, particularly in gas oil, the Board does not anticipate reinstating the dividend payment at this time. It will however review the position at the time of next year's interim results.

Coal reserve update

In line with expectations, production this year will exceed new sites entering the planning system and therefore year end proved and probable reserves will be lower at 7.9 million tonnes (2010: 8.6 million tonnes). During the next 12 months it is expected that new applications totalling around 2 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. However, the Government is challenging the Group's decision not to opt into the Scheme and a hearing to clarify the situation is expected towards the end of the current calendar year. The potential impact to the Group if it fails to win exemption from the CRC Scheme would be an increase in its costs by a further GBP1.4 million per annum for each of the three years from April 2011.

Outlook

It is expected that the exceptional non-cash write offs which have been a feature of recent Group results have now been completed. This, together with the imminent completion of the first of the three legacy contracts which have significantly held back the profitability of the Group and with average selling prices continuing to increase, will result in an early return to profitability for ATH. The new site at Netherton is now in full production and is producing coal at expected volumes and quality whilst work has begun at a new site at Duncanziemere with production due to commence in the first quarter of the new financial year. Muir Dean has recently secured a new extension and Glenmuckloch continues production in line with management expectations. The end of the second legacy contract in March 2013 should see a further significant lift in earnings with a commensurate step change in the Group's profitability.

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.

- Ends -

For further information:

 
 ATH Resources plc 
 David Port, Executive Chairman       Tel: +44 (0) 7836 693798 
  Alistair Black, Chief Executive    Tel: +44 (0) 1302 760 462 
                                                 www.ath.co.uk 
 
 
 Seymour Pierce Ltd 
 Sarah Jacobs / John Cowie (Nominated   Tel: +44 (0) 207 107 8000 
  Adviser) 
 Richard Redmayne / Katie Ratner 
  (Broker) 
                                            www.seymourpierce.com 
 

Media enquiries:

 
 Abchurch 
 Joanne Shears / Mark Dixon / Oliver   Tel: +44 (0) 207 398 7729 
  Baxendale 
 mark.dixon@abchurch-group.com            www.abchurch-group.com 
 

Notes to Editors

ATH Resources was listed on the AIM market of the London Stock Exchange in June 2004 and operates four surface coal mines in Scotland; Skares Road and Netherton in East Ayrshire, Glenmuckloch in Dumfries and Galloway and Muir Dean in Fife. The Group is currently one of the largest producers of coal in the UK providing coal principally to the electricity supply industry and also the industrial and house coal markets. Coal is used to generate around a third of the UK's electricity and the Group holds coal supply contracts with four of the UK's main electricity generating companies.

Further information on ATH Resources can be found at www.ath.co.uk

This information is provided by RNS

The company news service from the London Stock Exchange

END

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