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CanAm Completes Transition to Three New Mines and Delivers $1.9 million EBITDA in Q1 2013

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CALGARY, ALBERTA -- (Marketwired) -- 05/28/13 -- CanAm Coal Corp. (TSX VENTURE: COE) (OTCQX: COECF) ("CanAm" or the "Company") has filed its condensed interim consolidated financial statements and related management discussion and analysis for the period ended March 31, 2013. These Q1 2013 financial statements include a restatement of the comparative Q1 2012 financials 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.

First Quarter 2013 Highlights

The Company announced today its first quarter 2013 financial results for the period ending March 31, 2013. Revenue, EBITDA and net loss for the quarter were $13.9 million, $1.9 and ($1.8) million respectively as compared to $12.8 million, $1.8 million and ($1.2) million in the prior year. Sales for the quarter were 150,000 tons as compared to 117,000 tons in Q1 of 2012 and were on par with sales in Q3 (158,000 tons) and Q4 (154,000 tons) of 2012.

The first quarter of 2013 was mainly a transition quarter during which the Company: 1) undertook major mine development work at Old Union 2 and Knight; 2) completed mine operations at Old Union and winded down operations at Bear Creek, 3) performed mine reclamation work at Gooden Creek and Old Union and 4) moved equipment between our mines. While these transition activities took place, the Company still delivered sales of approximately 150,000 tons in the quarter, on par with Q3 and Q4 of 2012 and substantially higher than in Q1 2012. This multitude of activities throughout the quarter resulted in less than optimal operating conditions and therefore the Company was not able to sustain its normal production level efficiencies and the average production cost per ton was $56/ton, on par with the 2012 average production cost but higher than the Company's target of approximately $50/ton.

Key statistics for Q1 2013 and 2012 and the previous quarter of Q4 2012 are as follows:

---------------------------------------------------------------------------- Q1 Q1 Q4 2013 2012 2012----------------------------------------------------------------------------Production (in tons) 149,453 117,192 153,841----------------------------------------------------------------------------(in $ per Ton)Revenue $ 93 $ 109 $ 96Production Cost 56 68 49RTO 19 20 18----------------------------------------------------------------------------EBITDA $ 12 $ 16 $ 20--------------------------------------------------------------------------------------------------------------------------------------------------------(in $'millions)----------------------------------------------------------------------------Operating Cash Flow $ 1.5 $ 0.5 $ 3.1EBITDA 1.9 1.8 3.2Capex (2.5) (5.4) (1.6)----------------------------------------------------------------------------Free Cash Flow $ (0.6) $ (3.6) $ 1.6------------------------------------------------------------------------------ Sales for the quarter were 149,453 tons, more than double the Q1 2012 originally reported tons of 67,153 and up 27% on a restated basis of 117,192 tons.-- Long term off-take contracts continue to enable the Company to achieve better than market pricing for our high quality coals. However, average sales price per ton is down quarter over quarter as a result of our changing coal mix following the additional 30% acquisition of BCC. BCC only produces and sells thermal coal. The Q1 2013 price decline also relates to lower quality coals being sold in the power market due to end of mine situations mainly at the Bear Creek mine.-- Two new customer contracts were signed for a thermal and blend product for average monthly volumes of some 10,000 tons. A met coal contract for 4,000 tons a month was terminated in February and replaced in April with a new monthly off take arrangement for approximately 3,000 tons, albeit at a lower price. On this basis, contracted sales for 2013 are now 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.-- Average production cost per ton of $56/ton was significantly better than Q1 2013 as a result of operational improvements implemented throughout 2012, was on par with the average 2012 production cost of $56/ton but higher than our target cost of approximately $50/ton.-- Operating cash flow of $1.5 million was triple the cash flow achieved in the comparable quarter of 2012 but below our Q4 performance as a result of the transition and resulting operating challenges.-- Investment in equipment and mine development was $2.5 million as compared to $5.4 million in the comparable period last year. Mine development expenditures were $1.3 million which was higher than anticipated as transition to the new mines took longer than anticipated due to adverse weather conditions but also unanticipated engineering challenges with pond and road construction. Approximately $1.2 million of capital expenditures was for major repairs on equipment.-- Free cash flow at ($0.6) was significantly better than in the comparable prior period but below our Q4 performance as a result of the transition and resulting operating challenges, including higher than expected expenditures on mine development.-- Transition to our new mine complement and configuration, which commenced in October 2012, is now complete and the Company expects to reach full production in Q2 2013.



Company President and CEO, Jos De Smedt commented: "Our first quarter was extremely challenging from an operations perspective which translated in reasonable but weaker financial results. Operationally we continued the migration of our 2012 mine complement, comprised of our Bear Creek, Gooden Creek, Old Union and Powhatan mines, to an almost entire new mine configuration comprised of the Knight, Old Union 2, Posey Mill 2 and Powhatan mines. This transition and migration exercise involved major mine development work at our new mines, close out and reclamation activities at our old mines and moving of equipment and other resources from our old mines to our new mines. Basically our work force was building roads, stockyards and ponds at our new mines, closing and reclaiming our old mines, moving equipment between locations while at the same time producing and selling 150,000 tons of coal in the quarter. This complex transition resulted in less than optimal operating conditions and efficiency circumstances. Despite these challenges, which included usually wet weather through much of the quarter, the Company achieved sales levels on par with Q3 and Q4 of last year.

With our new mines fully permitted, major mine development now completed and full production levels to be achieved in the latter part of Q2 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 into the remaining of 2013."

Detailed Financial Results and Discussion

---------------------------------------------------------------------------- EBITDA from Coal Sales Revenue operations2012 Tons $'000's $'000's----------------------------------------------------------------------------Q1 Restated 117,192 12,788 1,854----------------------------------------------------------------------------Q2 Restated 130,517 11% 13,310 4% 1,932 4%Q3 157,900 21% 14,741 11% 3,281 70%Q4 153,841 -3% 14,553 -1% 3,150 -4%2013----------------------------------------------------------------------------Q1 149,453 -3% 13,887 -5% 1,868 -41%----------------------------------------------------------------------------Q1, Q2 and comparative 2012 financial information has been restated toreflect full (100%) consolidation accounting of BCC commencing with thepurchase of the initial 50% ownership stake in May 2011 (see end of pressrelease for full discussion and EBITDA definition).



Recent Operations History

Starting in Q4 2012, the Company commenced a significant repositioning of its mining operations, as follows:

a) During Q4 2012, opened the first pit of a new mine, Old Union 2, an eventual 3 pit mine configuration under a permit covering 1,393 acres. Old Union 2 replaced the Old Union mine, which completed mineable operations in Q1 2013.b) During Q4 2012, received final permitting for the Knight mine, which covers 178 acres. The Knight mine replaces the Bear Creek mine, which was mined out in April 2013. The Knight mine achieved initial commercial level production in March 2013.c) In Q1 2013, opened the second and third pits at Old Union 2.d) In Q1 2013, received final permitting for the Posey Mill 2 mine, which covers 781 acres. Operations have started in May 2013 utilizing the equipment package currently operating at the Bear Creek mine.



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). Once fully operational, the productive capacity of the new mine complement is expected to be in the range of 60,000 to 80,000 tons per month, significantly in excess of the capacity of the old mine complement.

Financial Results Analysis

---------------------------------------------------------------------------- Three month Three month Three month period ended period ended period ended (Unaudited, (Unaudited) (Unaudited) Restated) ------------------------------------------------------- Mar 31, 2013 Dec 31, 2012 Mar 31, 2012 -------------------------------------------------------Tons sold----------------------------------------------------------------------------Metallurgical coal sales 19,540 21,250 15,281Thermal coal sales 129,913 132,591 101,911----------------------------------------------------------------------------Total 149,453 153,841 117,192----------------------------------------------------------------------------Revenue $ 13,887,041 $ 14,553,219 $ 12,788,022Income from mining operations (180,327) 284,975 (127,468)Other expenses (2,375,837) (3,631,438) (1,574,579)Loss for the period (1,831,953) (2,258,175) (1,174,147)EBITDA 1,867,749 3,150,091 1,853,791----------------------------------------------------------------------------Per ton metrics----------------------------------------------------------------------------Average metallurgical coal price 122 127 151Average thermal coal price 88 90 103Average overall coal price 93 96 109----------------------------------------------------------------------------Average cost of production sold 56 49 68Average RTO cost 19 18 20Income from mining (1) 2 (1)EBITDA $ 12 $ 20 $ 16----------------------------------------------------------------------------Q1 comparative 2012 financial information has been restated to reflect full(100%) consolidation accounting of BCC (see end of press release for fulldiscussion and EBITDA definition).



Sales volume and pricing

Summary

Q1 2013 revenue was 9% ($1.1 million) higher than Q1 2012 but 5% ($0.67 million) lower than Q4 2012. The more meaningful comparison is to the previous quarter. The revenue decrease to Q4 is a combination of slightly lower volumes (down 2.9% or 4,400 tons) and a $3 per ton lower average realized sales price. Both reductions are primarily the result of the transition to the new mine complement and are considered temporary. We expect volumes and average sales price to improve as our new mines achieve operational efficiency.

Volumes

Q1 2013 sales volumes were 149,453 tons compared to 117,192 tons sold in Q1 2012 and 153,841 tons sold in Q4 2012. Volumes (both thermal and metallurgical) were significantly higher than Q1 2012 due to improved mine operating efficiency implemented in the second half of 2012. As described in the 2012 MD&A, the Company made important management and operational changes during 2012, which resulted in improved production performance in the last half of 2012 and Q1 2013.

The decline from Q4 is explained by the mine transition, as well as lower than expected volumes from two new customers. Both customers were burning off inventory from their previous suppliers and requested temporary curtailments. Contracted volume levels have recently resumed.

Pricing

Overall Q1 2013 average pricing was $93 per ton compared to $109 per ton realized in Q1 2012 and $96 per ton in Q4 2012. Metallurgical coal pricing was lower due to the February termination of a 4,000 ton per month contract as described in the Q4 2012 MD&A. Metallurgical volumes for the remainder of the quarter were primarily used in a blend product, which realized a lower price. The Company secured a new off take arrangement for metallurgical volumes starting in Q2 2013, albeit at a lower price.

Q1 2013 thermal pricing was $88 per ton in Q1 compared to $103 per ton in Q1 2012 and $90 per ton in Q4 2012. Q1 2012 pricing was unusually high due to several one-off factors and is not a meaningful comparative. The $2 per ton price decline to Q4 2012 relates to lower quality coal being sold into the power market partially offset by higher pricing achieved on our new contracts. At the Bear Creek mine, coal quality has been declining the last 2 quarters as that mine nears the end of its useful life. The Company believes this price decline is temporary and that average thermal pricing will improve back over $90 (and on increased volumes) once the Knight mine (which replaces the Bear Creek mine) achieves full production during Q2.

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

Q1 2013 cost of production sold was $56 per ton compared to $68 per ton in Q1 2012 and $49 per ton in Q4 2012. The significant improvement over Q1 2012 was due to the operational changes made in mid- 2012, which substantially improved operational efficiency. These changes were described in our 2012 MD&A.

Q1 2013 cost of production sold was higher than Q4 2012 due to the inefficiencies associated with the mine transition as previously described. Q1 coal production was148,000 tons, compared to 174,000 tons produced in Q4 2012 resulting in higher cost of production sold on a per ton basis. Going forward, the Company's objective is to increase production substantially, which is expected to reduce average production cost per ton sold in future quarters.

Q4 royalty, transportation and other (RTO) costs were $19 per ton sold, which was slightly lower than Q1 2012. The Company expects RTO to trend in the range of $18 to $20, on average.

EBITDA

First quarter 2013 EBITDA was $1.87 million, a slight improvement over the $1.85 million in EBITDA realized in Q1 2012. EBITDA per ton was $12 compared to $16 per ton in Q1 2012.

Net Income

In Q1 2013, the Company recorded a loss of $1.8 million compared to a loss of $1.2 million in the previous year.

In addition to the operational factors described in the previous sections, a number of other factors contributed to the increased 2013 loss including increased depreciation, amortization and depletion arising from a larger asset base, increased financing charges related to additional equipment financing and debenture issuances in 2012, increased debenture issue amortization and accretion expenses and an unrealized foreign exchange loss on the Company's US$ denominated debenture.

Capital Expenditures

Q1 2013 capital expenditures on new equipment, capital repairs and mineral property development totalled $2.5 million, compared to $5.4 million in Q1 2012 and $1.6 million in the previous quarter. During Q1, the Company invested $1.3 million in new mine development (including engineering, permitting, pond building, road construction and general site preparation) primarily at Old Union 2, Knight and Posey Mill 2. The Company capitalized major repairs to existing equipment in the amount of $1.2 million. The Company did not purchase any new equipment in the first quarter. All capital expenditures were financed out of cash flow with the exception of $395,000 of major repairs, which were financed as part of equipment manufacturer credit programs.

Q1 2013 capital expenditures were significantly lower than the comparable prior period as in 2012 the Company was investing significantly in order to position itself for growth in 2013. Also, additional expenditures were incurred in 2012 at the Powhatan mine as a result of a repositioning of the mine and the introduction of a new management team.

Liquidity

In Q1 2013, the Company generated negative free cash flow from operations (EBTIDA less capital expenditures) of $0.6 million. At March 31, 2013 the Company had cash on hand of $1.6 million, compared to $2.4 million at December 31, 2012. In addition, the Company has undrawn operating lines of credit of approximately $2 million, undrawn capital equipment facilities of $1 million and restricted cash of $392,000.

During Q1, the Company's working capital position declined. At March 31, 2013, the Company had a working capital deficiency of $7.7 million compared to a deficiency of $4.8 million at December 31, 2012. This deficiency includes the $1.1 million principal portion of a debenture due August 31, 2013 as well as a $1.1 million current liability related to the Company's reclamation liability. In respect of the reclamation liability, the current portion represents the Company's planned expenditure program as opposed to its current regulatory or contractual requirements, which are less.

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) to finance its obligations as they come due.

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.

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 MD&A, the Company has completed the mine build out of all 3 pits at Old Union 2 and the Knight mine and has substantially completed the build out of Posey Mill 2. Full scale commercial production at all 3 pits of Old Union 2 and the Knight mine is in place. Full scale production at all of the mines is anticipated before the end of Q2 2013.

As discussed, the Company faced a number of challenges in the first quarter including longer than expected development and transition to the new mines as well as lower than expected coal deliveries into two new customers as these customers were burning off coal inventory acquired from previous suppliers. Also, the Company only replaced its lost metallurgical coal order with a new customer in April. We believe we have now moved past these transitional issues and the Company is focusing on maximizing new mine production and sales to the greatest extent possible.

Notwithstanding these Q1 challenges, the Company believes that it can achieve significant production and sales growth as compared to 2012. 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. As disclosed in our 2012 MD&A, total 2013 capital expenditures are expected to 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 2012 Comparative Financial Information

The comparative financial information included in the unaudited condensed interim financial statements for the three month period ended March 31, 2013 and the MD&A has been restated.

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 2013 first quarter unaudited condensed interim financial statements to reflect consolidation accounting. Additionally, the Company has restated the comparative financial information 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. 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 May 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.

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.



Contacts:
CanAm Corporate Office:
Jos De Smedt, President & CEO
403.262.3797
Toll Free: 1.877.262.5888
jdesmedt@canamcoal.com



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