VANCOUVER, BRITISH COLUMBIA -- (Marketwire) -- 03/12/13 -- EastCoal Inc. (TSX VENTURE: ECX)(AIM: ECX) ("EastCoal" or the "Company") is pleased to announce that, at the end of February, it restarted its wash plant at the Menzhinsky mine following the completion of engineering improvements and that it expects wash plant production to ramp up over the next few weeks.
The geological challenges experienced at the Menzhinsky underground mine, announced on 8 February 2013, continued into March and, as a result, the Board has ordered the immediate discontinuation of the current longwall, two months earlier than originally planned. The Company will continue with the development of the Central longwall, which should be ready for production on 1 May 2013, in line with the expected timing set out in the Company's recent AIM Admission document. The Directors believe that the Central longwall should have the capacity to produce 7,000 tonnes of coal per month.
The Company will also reduce headcount at its Ukrainian operations by approximately 400 people, principally to improve operational efficiency. The Company currently employs approximately 1,200 employees across its Menzhinsky and Verticalnaya operations.
The Company is pleased to announce that on 12 March 2013 it reached an agreement with Aponet Enterprises Limited to amend the CDN$0.65 conversion price of its US$4 million debenture issued as part of the acquisition of Inter Invest, the owner of the Menzhinsky mine, to CDN$0.23, and to convert the debenture into 17,391,305 common shares of EastCoal Inc. effective 12 March 2013. The Company has applied to the TSX-V for approval for the conversion which it expects to receive shortly (following which the debenture will be converted). The debenture had an interest rate of 2% over the 3-month LIBOR rate per annum compound quarterly and a maturity date of 31 May 2016. Application will be made for these new common shares (which rank equally with the existing common shares in the Company) to be admitted to trading on AIM and the TSX-V and, subject to receipt of the said approval, it is expected that admission will occur on 18 March 2013.
Following admission of the new common shares, the Company will have 343,048,493 common shares in issue, which will represent the total number of voting rights in the Company. This figure should be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the Company under the FSA's Disclosure and Transparency Rules.
As a consequence of the unexpected shut down of the wash plant at the Menzhinsky mine and the geological problems encountered at the Menzhinsky underground mine in January and February, very little revenue was received by the Company during that period. As a result, the Company's short term working capital requirements need to be resolved to allow continued implementation of its current operational strategy. The Directors, who believe that these challenges are temporary and that the long term value of the Company's assets remains intact, are working on an appropriate financial solution.
John Byrne, executive chairman commented. "We have moved swiftly to address the challenges at the Menzhinsky mine and while production over the next two months will still be impacted, the Board is confident that the steps that we are taking should resolve these issues. The reduction in staff is regrettable but reflects both current operational requirements and our continuing efficiency improvements.
The restructuring of the Aponet debt significantly strengthens EastCoal's balance sheet and the conversion price agreed, relative to the December 2012 issue price and the current market price, emphasises Aponet's continued belief in the value creation potential of EastCoal's asset portfolio."
About EastCoal Inc.
EastCoal Inc. is currently producing coking coal from the Menzhinsky mine, which is operated by its 100% owned subsidiary Inter-Invest Coal, and developing the Verticalnaya anthracite mine, which is operated by its 100% owned subsidiary East Coal Company.
This press release contains projections and forward-looking information that involve various risks and uncertainties regarding future events. Such forward-looking information can include without limitation statements based on current expectations involving a number of risks and uncertainties and are not guarantees of future performance. There are numerous risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking information. These and all subsequent written and oral forward-looking information are based on estimates and opinions on the dates they are made and are expressly qualified in their entirety by this notice. Except as required by law, EastCoal assumes no obligation to update forward-looking information should circumstances or management's estimates or opinions change.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
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