Atlantic Coal Regulatory News (ATC)

Atlantic Coal plc ("Atlantic" or the "Company")

Index: AIM / Epic: ATC / Sector: Mining

Final results and notice of AGM

Atlantic Coal plc, the AIM listed anthracite coal production and processing company with activities in Stockton, Pennsylvania, USA ("Stockton") is pleased to announce its final results for the year ended 31 December 2014.

Highlights

· The loss of the Group for the year ended 31 December 2014 before taxation amounts to $3,539,560 (year ended 31 December 2013 - $1,478,707)

· Cash at bank at the year end $725,517 (2013: $877,003)

· Sales of $18,397,465 (2013: $19,661,639)

· Gross profit $409,718 (2013: $3,618,233)

· Record production of over 165,000 tons in 2014

· Average sales price for Stockton anthracite (all grades) increased by 2.3% from $117.89 in 2013 to $120.79 in 2014

· Commenced mining a cut of almost solid coal in the Mammoth seam ranging from 29 to 32 feet thick

· Wardell Armstrong (international mining consultants) re-assessed the reserve at Stockton from 1.65 million to 2.22 million tons, which at circa 165,00 tons produced in 2014, equates to a 37% increase in reserves and a 3 years mine life

· First quarter production in 2015 a new record, an increase of over 40% from 2014

· Agreement with Komatsu for a US$20m of new fleet which was ordered in 2014 and started to arrive in first half 2014 and was fully operational by June 2015

· Run of mine and clean coal inventory as at date of this report at a record $8.9 million value

The annual report and financial statement for the year ended 31 December 2014 (the "Report and Accounts") has been posted to shareholders together with a notice of its annual general meeting ("AGM").

The Company will be holding its AGM at the offices of Allenby Capital, 3 St Helen's Place, London, EC3A 6AB on 30 June 2015 at 4:00pm.

Copies of the Reports and Accounts and the AGM notice will be made available shortly from the Company's website, www.atlanticcoal.com, in accordance with AIM Rule 20.

For further information on the Company, visit: www.atlanticcoal.com or contact:

Steve Best Atlantic Coal plc Tel: 0191 386 6392

Nick Naylor Allenby Capital Limited Tel: 020 3328 5656

Alex Price Allenby Capital Limited Tel: 020 3328 5656

CHAIRMAN'S REPORT

2014 has seen a lot of exciting and positive developments at Stockton Mine which are feeding through into our performance for 2015 and provide us with a sound basis for optimism going forward. That said, despite record production it was disappointing not to make a profit which was primarily caused by lower sales volumes and low prices towards the end of the year.

The worst winter for twenty years in Pennsylvania severely curtailed production in the first quarter of 2014 with particular problems of washing anthracite at consistently low temperatures. We did, however, make a strong recovery throughout the rest of the year to achieve record production at Stockton of 165,046 tons in 2014.

In December 2014 we started to mine a cut of almost solid coal in the Mammoth seam ranging from 29 to 32 feet thick. While we reached this highly productive area of the mine too late in the year to affect the 2014 results, the Directors anticipate that this will have a positive effect on operational costs in that the working ratio (cubic yards of overburden excavated per ton of clean coal) will be reduced.

Following confirmation of solid coal in the new cut, Wardell Armstrong, international mining consultants, have re-assessed the Stockton reserve which is now estimated at 2.220 million tons as at 31 December 2014 compared with the John T. Boyd estimate of 1.626 million tons at 31 December 2013. Bearing in mind that over 165,000 tons were produced in 2014 this equates to a 37% increase in the reserve base and has a positive effect on the mining ratio, the primary determinant of mining costs at Stockton.

The improved mining conditions and prospects at Stockton have given the Board of Directors the confidence to enter into an agreement with the Reading Blue Mountain & Northern Railway to construct a rail loading facility at Stockton this summer, providing us with commercial advantage in the region. Earlier this year, Komatsu, the world's second largest manufacturer of heavy mining plant has shared that confidence in Atlantic Coal such that their wholly owned US subsidiary, Midlantic, entered a partnership with Atlantic Coal to provide new mining plant costing US$20m funded through an asset backed lease purchase agreement.

On 7 April we were delighted to report an excellent first quarter performance in 2015, and with the additional 2015 tranche of new plant, production rates continue to be extremely positive. I would like to thank all our employees for making 2014 a year of consolidation in what has, at times been difficult working and trading conditions but most importantly in laying down the foundations for a sound future for your company going forward and which is already bearing fruit as we progress through the first part of 2015.

Adam R Wilson

Chairman

STRATEGIC REPORT

The Directors of the Company and its subsidiary undertaking (which together comprise the Group) present their Strategic Report on the Group for the year ended 31 December 2014.

The Strategic Report is a statutory requirement under section 414a of the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013 and is intended to provide fair and balanced information that enables the Directors to be satisfied that they have complied with section 172 of the Companies Act, which sets out the Directors duty to promote the success of the Company.

Business Review

Mining at Stockton

The producing Stockton Mine is located in the Pennsylvania Anthracite Coalfield and includes an anthracite preparation plant capable of washing 450,000 tons of ROM coal per annum. The site is operated by Coal Contractors (1991) Inc., a 100% owned subsidiary of Atlantic Coal.

In December 2014 we started to mine a cut of almost solid coal in the Mammoth seam; old underground mine plans indicated this area as being largely unworked but it was only when we actually reached this area that we could confirm this. The Directors anticipate that the Company will be working these favourable conditions in the Mammoth seam with higher levels of coal remaining through the remainder of the Stockton reserve area. While we reached this highly productive area of the mine too late in the year to affect the 2014 results, the Directors anticipate that this will have a positive effect on operational costs in that the working ratio (cubic yards of overburden excavated per ton of clean coal) will be reduced.

Wardell Armstrong, international mining consultants, have been able to re-assess the Stockton reserve following the confirmation of this area of solid coal, and have estimated a 37% increase in the reserve base. Whilst previous reserve assessments by John T. Boyd had estimated 1.626 million tons remaining at 31 December 2013, our current figure, taking into account the 165,000 tons produced in 2014, now stands at 2.220 million tons at 31 December 2014. This is primarily attributable to the increased reserves in the Mammoth seam but also to a higher proportion of coal remaining from previous underground mining in the Primrose, Orchard and Diamond seams than previously estimated.

While more detailed survey work and assessment has identified a higher overburden excavation figure the higher coal reserve has still resulted in a substantial decrease in the mining ratio to 13.99 cubic yards of overburden to 1 ton of clean coal (John T. Boyd figure from 2013 was 19.40 to 1). As mining ratio is the primary determinant of mining cost the Company considers that this 28% decrease in the ratio bodes well for our mining costs as we go forward. The Directors consider that these additional reserves will potentially extend Stockton's life by approximately three years.

The reduction in the amount of old underground mine workings which we are now encountering also means we have less rock dilution in the run of mine (ROM) coal which also has the effect of reducing haulage and washing costs as we are transporting and washing proportionately less rock and more coal. The wash recovery rate in 2014 was just under 40% but with the increased coal content in the ROM is now around 52-54% with the additional potential to recover a further 25% from the discard giving a total wash recovery rate of approximately 64%.

Mining at sites such as Stockton in synclinal basins over 400 feet deep is by its very nature a cyclical operation with peaks of production when the bottom of the basin is reached, particularly now that this is almost solid 29 to 32 feet thick Mammoth seam, and also with lower production and higher cost phases, for instance as we now excavate down through the basin working the thinner upper seams and the Mammoth seam in the "limbs" of the syncline which tend to have been quite heavily worked underground.

While we did achieve record production in 2014, the cyclical nature of the mining operation meant that we only worked one cut in the lucrative bottom of the basin Mammoth seam and our mining ratio for the year at 19 to 1 was therefore higher than the overall ratio for the mine at 13.99 to 1. Consequently, our mining costs per ton were higher than they might otherwise have been. This year, however, with the increased mining capacity the new plant gives we anticipate working two full basin cuts in 2015. We completed coal extraction in the first cut in May of this year but will reach the bottom of the basin in the next cut before the end of the year. This will be particularly positive not only in terms of production but also in terms of lower costs since, unlike 2014, we will be working at the overall mine ratio and we anticipate that this should continue to be the case as we progressively mine westwards through the basin.

On 7 April we were delighted to report an excellent first quarter performance in 2015. Despite another desperately cold winter in Pennsylvania we surpassed our Q1 2014 performance by some considerable margin and broke a number of production records with record quarterly ROM production (136,981 tons) and overburden removal (1,082,028 cubic yards) and, had it not been for persistent sub-zero temperatures and the adverse effect on coal washing operations, we anticipate that we would also have achieved record clean coal production albeit this was still 32% up on Q1 2014 (Q1 2015 - 45,669 tons, Q1 2014 - 34,451 tons).

Production rates continue to be extremely positive. We have built up a healthy inventory of clean coal (17,840 tons at end of Q1 2015 compared with 1,396 tons at the end of Q1 2014) which has risen to over 30,000 tons by mid-May (1 June 2014 - 6,779 tons) to enable us to both compete effectively in the market and also to benefit from the higher prices which traditionally materialise as we move into July and onwards. We have also built up a healthy inventory of ROM (over 94,000 as at 30 May 2016 (1 June 2014: 94,000 tons)) to keep our washing plant fully utilised and maintain clean coal production. This has enabled us to generate further sales of over 25,000 tons of ROM to date to other processors and has started to contribute to our revenues. The value of our coal inventory at the date of this report is around US$ 8.9 million.

We continue to seek new anthracite mining properties in Pennsylvania to add to our Stockton Mine with a view to giving us the productive capacity to compete more effectively in both the US and export markets. For example, export contracts often now look for between 40,000 and 50,000 ton shipments which are equivalent to over 25% of our current production and it would be challenging to supply such contracts at the present time whilst maintaining our current sales commitments.

We continue to undertake geological and engineering design work on our Pott and Bannon property which we see as a strategic reserve to ultimately replace the Stockton Mine at the end of its mine life. As stated previously, our main focus on new anthracite mining properties is to acquire operational mines with a good reserve base which would enable us to quickly increase production without the need for substantial mine development costs. To this end we are evaluating a number of mining properties and further announcements will be made at the current time.

New rail loading facility

In June 2015 we entered into an agreement with the Reading Blue Mountain & Northern Railway to construct a rail loading facility at Stockton. Construction will begin this summer, initially allowing for a minimum of four railcar spots directly adjacent to the mine, with the option to expand the facility if needed at a later date. This will provide significant cost savings and commercial advantage in supplying customers that require rail delivery.

Major new mining equipment acquisition

In February 2015, the purchase of new equipment in partnership with Komatsu was announced. The full complement of new equipment is to be funded through an asset backed lease purchase agreement at a total cost of $20 million over six years, and consisted of the following pieces of equipment:

· PC3000 hydraulic excavator;

· Four Komatsu Model HD785-7 100 ton haul trucks;

· Two Komatsu Model HM400-3 articulated haul trucks;

· One Komatsu Model PC490LC-10 hydraulic excavator;

· Two Komatsu Model D275AX-SEO dozers;

· One Komatsu Model WA500-7 wheel loader.

This is in addition to the six Komatsu Model HD785-7 100 ton haul trucks delivered to Stockton in March and April 2014. We will shortly be installing a new larger barrel in our washing plant, partly as a replacement for the original barrel which is now worn out, but also to process the additional quantity and quality of ROM we are now producing and to maximise efficient coal recovery. While most of this new equipment arrived beyond the time frame to impact on the 2014 results we are now fully re-equipped to exploit the Stockton reserves.

Market Review

Sales Prices and Trends in 2014

2013 saw a marked slowdown in demand throughout the Pennsylvania anthracite sector due to overcapacity on the international market, as countries such as Russia, the Ukraine, Vietnam and North Korea increased their anthracite exports. This was partly relieved in 2014, as the Ukraine crisis saw disruption to the country's anthracite production, and cessation of its anthracite exports will have had a positive effect on prices internationally.

On the other hand, falling US steel production and rising steel imports have dampened US anthracite demand and prices. Whilst the average sales price* for Stockton anthracite (all grades) increased by 2.3% from $117.89 in 2013 to $120.79 in 2014, sales at 153,698 tons were down 8% on the 2013 figure of 166,780 tons.

In Pennsylvania, the market was very competitive towards the end of the year which has had a negative effect on prices but there are now signs that this situation is easing and I am pleased to report that the average sale price in Q1 increased to $124, a 2.6% increase on the overall 2014 figure. Anthracite sales to the home heating sector remained strong in 2014, thanks in part to the low temperatures seen in Q1 2014.

We also note that anthracite prices have also been much less volatile than other types of coal. Metallurgical (coking) coal prices have recently fallen to a six year low with Australian prices down over 60% on four years ago. Thermal coal prices have also fallen substantially caused by competition from cheap shale gas with prices down over 40% on four years ago. Over the same period our anthracite prices have fallen by only 20%.

This is partly down to the high quality of the product but also the fact that anthracite has a wide variety of uses based on its high heat value, high carbon content and purity which renders it less susceptible to fluctuations in single market areas which is the situation with metallurgical and thermal coal. This gives us the confidence to continue to invest in the anthracite mining industry.

Outlook

The Directors believe anthracite is the most versatile and high quality metallurgical coal, with a range of applications in the steel industry; it is also used as a component in the sugar industry, as a process carbon in the manufacture of bricks, wire, silicon and glass, and in water purification and filtration. The home and industrial heating market which continues to be a large part of our sales (47% of our total sales in 2015) has remained stable as many homes throughout North East USA are still unconnected to the mains gas supply, and this is expected to continue throughout 2015 and beyond. This of Stockton's anthracites products supports demand for our products remaining strong, if not increasing.

Only 1% of the world's coal reserves is made up of anthracite, and even then few of the reserves are of as high a quality as the North East Pennsylvania Coalfield, or benefit from the same level political stability, established infrastructure and an industry-friendly jurisdiction. This suggests a future supply imbalance, supporting future price increases. 

Atlantic Coal is confident that demand for its products will continue across key domestic markets. The Group is now well positioned to take advantage of these opportunities in that the almost solid coal in the Mammoth seam that was reached in in late 2014, has allowed for an increase in both ROM and Clean Coal inventory levels in comparison to June 2014 as demonstrated below;

Sales prices for ROM Coal have averaged $53.5 per ton and clean coal $120 per ton in 2015.

Results and Financial Review

The loss of the Group for the year ended 31 December 2014 before taxation amounts to $3,539,560 (year ended 31 December 2013: $1,478,707).

Key financial highlights for the year to 31 December 2014 are:

· The Group's cash position during 2014 continued to decrease as we used existing cash balances to repay debt and finance leases. The Group also used cash to complete the Gowen mine reclamation and to pursue opportunities to acquire additional anthracite mining assets. We have again improved the production capacity at our Stockton Mine and increased coal reserves.

· Total debt increased by over $9 million in 2014, used to fund equipment assets previously mentioned.

· Restoration obligations decreased with the final completion of seeding work at Gowen.

Working Capital

In order to provide working capital the Company entered into a loan backed by a standby equity distribution agreement with YA Global Masters SPV Limited ("Yorkville"). Subsequently the Company entered into an equity swap agreement with Yorkville. The details of all the transactions with Yorkville are set out in Note 28.

The total funds available under these arrangements are US$5,000,000 and to date the Company has utilised $4,000,000, repaid $4,000,000, utilised a further $1,000,000, meaning that at the year end the Company has access to $4,000,000 under this arrangement.

During the year the Company changed its bankers to the Community Bank and as a result obtained access to a $200,000 overdraft facility which is open to extension in the near term.

STATEMENT OF FINANCIAL POSITION

As at 31 December 2014

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2014

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2014

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2014

Basis of Preparation of Financial Statements

The Financial Statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRS IC) interpretations as adopted by the European Union and the Companies Act 2006 applicable to companies reporting under IFRS. The Financial Statements have also been prepared under the historical cost convention as modified by the revaluation of certain financial assets to fair value through the profit or loss.

The Financial Statements are presented in US Dollars rounded to the nearest dollar.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's Accounting Policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Financial Statements are disclosed in Note 2.

Segmental Information

Management has determined the operating segments based on reports reviewed by the Board of Directors that are used to make strategic decisions. During the year the Group had interests in two geographical segments, the United Kingdom and the United States of America ("USA"). Activities in the UK are mainly administrative in nature whilst the activities in the USA relate to coal production and sale of coal.

The reportable operating segments derive their revenue from the sale of prepared coal to industrial and retail customers.

Included in the UK segment for 2014 is the reversal of impairment of investment in subsidiary described in Note 6.

A reconciliation of operating loss to loss before taxation is provided as follows:

Information about major customers

Revenues of approximately $3.598 million (2013: $2.197 million) were derived from a single external customer. These revenues were all generated in the USA.

Cash and Cash Equivalents

Earnings per Share

The calculation of the basic earnings per share of (0.09) cents (31 December 2013 earnings per share: (0.03) cents) is based on the loss attributable to ordinary shareholders of $3,717,274 (31 December 2013 loss: $1,478,707) and on the weighted average number of ordinary shares of 3,944,272,016 (31 December 2013: 3,881,348,728) in issue during the year.

The basic and diluted earnings per share is the same, as the effect of the exercise of share options and warrants would be to decrease the loss per share.

Details of share options and warrants that could potentially dilute earnings per share in future periods are set out in Note 12.