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CanAm Reports Record Revenue of $15.6 Million and Delivers $2.6 Million of EBITDA from Operations, an Increase of 40% Over Q1 2013

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TORONTO, ONTARIO -- (Marketwired) -- 08/30/13 -- 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 June 30, 2013. These Q2 2013 financial statements include a restatement of the comparative Q2 2012 financials which is discussed at the end of this press release. Definitions of commonly used non-IFRS financial measures (EBITDA from operations and Free Cash Flow) are also included at the end of this press release.

Second Quarter 2013 Highlights

The Company announced today its second quarter 2013 financial results for the period ending June 30, 2013. Revenue, EBITDA from operations and loss for the quarter were $15.6 million, $2.6 million and ($1.5) million respectively as compared to $13.3 million, $1.9 million and ($1.6) million in the prior year. Sales for the quarter were 168,500 tons as compared to 130,500 tons in Q2 2012 or an increase of nearly 30%.

For the six month period ended June 30, 2013, revenue, EBITDA from operations and loss were $29.5 million, $4.5 million and ($3.4) million respectively as compared to $26.1 million, $3.8 million and ($2.8) million in the prior year. Sales for the six month period were 318,000 tons compared to 248,000 tons in the prior year, an increase of 28%.

During the second quarter of 2013, the Company continued its transition and mine development activities at the Old Union 2, Knight and Posey Mill 2 mines. The Old Union 2 mine reached steady state production levels early in Q2, the Knight mine started production in April and the Posey Mill 2 mine had first mine production in May. Toward the end of Q2, steady state production was achieved at all mines and this translated into increased production and sales for Q2. Average monthly coal sales for Q2 were 56,000 tons as compared to 50,000 tons for Q1 and June sales were a record 61,400 tons or an increase of 23% over the average monthly sales for Q1.

In spite of these improved production/sales levels, the Company continued to work through transition and mine development activities in Q2 which still resulted in less than optimal operating conditions. As such the Company was not able to achieve its normal production level efficiencies and the average production cost per ton was $55/ton, slightly lower than Q1 production cost and significantly lower than the prior year cost of $62/ton. Once the Company reaches steady state production at all of its mines, starting in Q3 2013, average production cost should be approximately $50/ton.

Key statistics for Q2 2013 and 2012 and Q1 2013 are as follows:

-------------------------------------------------------------------------- Q2 Q1 Q2 2013 2013 2012--------------------------------------------------------------------------Production (in tons) 168,488 149,453 130,517--------------------------------------------------------------------------(in $ per Ton)Revenue $92 $93 $102Production Cost 55 56 62RTO 17 19 19--------------------------------------------------------------------------EBITDA from operations $16 $12 $15----------------------------------------------------------------------------------------------------------------------------------------------------(in $'millions)--------------------------------------------------------------------------Operating Cash Flow $2.5 $1.5 $0.5----------------------------------------------------------------------------------------------------------------------------------------------------EBITDA from operations 2.6 1.9 1.9Capex (2.4) (2.5) (3.9)--------------------------------------------------------------------------Free Cash Flow $0.2 ($0.6) ($2.0)--------------------------------------------------------------------------Note: Operating cash flow is before changes in non-cash working capital-- Sales for the quarter were 168,488 tons, an increase of 13% over Q1 2013 sales and 29% over Q2 sales of the prior year. Record sales were achieved in June of 61,400 tons.-- Long term off-take contracts continue to enable the Company to achieve better than market pricing for our high quality coals. Average sales price per ton for Q2 was consistent with Q1 but lower than Q2 2012. The lower average price as compared to last year is a result of our changing coal mix (i.e. a higher ratio of thermal coal versus metallurgical coal) and the termination of a met coal contract in early 2013.-- All of our production is currently sold into our off-take contracts with our customers and we are fully contracted for the remainder of the year.-- Average production cost per ton of $55/ton was significantly better than Q2 2012 as a result of operational improvements implemented throughout 2012 and was on par with the average of Q1 2013. With all mines at steady state production, we anticipate our average cost per ton to be approximately $50/ton.-- Operating cash flow of $2.5 million was five times the cash flow achieved in the comparable quarter of 2012 and 67% better than in Q1 2013.-- Investment in equipment and mine development was $2.4 million as compared to $3.9 million in the comparable period last year. Mine development expenditures were down significantly, $0.5 million in Q2 as compared to $1.3 million in Q1 2013, as mine transition and development was substantially completed during Q2. On a year to date basis, capital expenditures were $4.9 million through the end of June or almost half of the $9.3 million in expenditures in the comparable prior year period. We anticipate capex for the second half of 2013 to be lower compared to the first half which should contribute significantly to free cash flow.-- Free cash flow at $0.2 million, compared to ($2.0) million in Q2 of 2012, continues to improve and will accelerate in the second half of 2013.-- Repayment of equipment financing obligations continues at a healthy pace and through June 30, 2013, the Company repaid $2.8 million of these obligations.-- All mines are now operating at steady state production levels and in July the Company set a new sales record and shipped approximately 67,500 tons to its customers, a further 10% improvement over its June sales record.



Company President and CEO, Jos De Smedt commented: "Completion of the second quarter was a major milestone for the Company as by the end of Q2 we had transitioned all of our mines to a steady state level of production. As we accomplished this, the results of our hard work became evident in our June production/sales level of over 61,400 tons and, more importantly, in our July numbers of approximately 67,500 tons of sales. With a mine complement in place that has the ability to produce between 60,000 to 80,000 tons on a monthly basis, the second half of 2013 should see significant growth in sales and production. From a financial perspective, Q2 showed definitive improvement; operating cash flow was 5 times better than in the prior year, free cash flow was slightly positive compared to a deficit of $2.0 million in the prior year and first half 2013 capex was half of capex in the prior year. This combined with expected sales levels of between 60,000 to 70,000 tons on a monthly basis, should improve free cash flow significantly in the second half of 2013 and in 2014."

Operating Results Summary

The table below sets out operating results for the past six quarters. Q1 and Q2 2012 comparatives reflect full consolidation accounting of the Company's investment in BCC.

-------------------------------------------------------------------------- EBITDA from Coal Sales Revenue operations2012 Tons $'000's $'000'sQ1 Restated 117,192 12,788 1,854--------------------------------------------------------------------------Q2 Restated 130,517 11% 13,310 4% 1,933 4%--------------------------------------------------------------------------Q3 157,900 21% 14,741 11% 3,281 70%Q4 153,841 -3% 14,553 -1% 3,150 -4%--------------------------------------------------------------------------2013Q1 149,453 -3% 13,887 -5% 1,868 -41%--------------------------------------------------------------------------Q2 168,488 13% 15,583 12% 2,613 40%--------------------------------------------------------------------------Note: Please refer to the definition of EBITDA on the last page of thisMD&A.



During Q2 2013, the Company completed its mine transition started in Q4 2012, which included closing down mines, performing reclamation activities and building infrastructure for its new mines at OU2, Knight and Posey Mill 2. This transition continued into Q2, mainly at the Knight and Posey Mill 2 mines. Notwithstanding the continued investment in time and materials in completing the transition, the Company made considerable progress towards its goal of achieving a production/sales level of between 180,000 to 210,000 tons per quarter. Q2 coal sales were 168,000 tons, up 13% over the 149,000 tons sold in Q1 and highlighted by June sales of 61,400 tons, a record for the Company. Compared to Q2 2012, sales are up 29%. Average pricing was consistent with the first quarter.

Operating costs per ton for Q2 were on par with Q1 and significantly better than production costs in Q1 and Q2 of 2012.

Sales Volume and Pricing

-------------------------------------------------------------------------- Three month Six month Three month period ended Six month period ended period ended (Unaudited, period ended (Unaudited, (Unaudited) Restated) (Unaudited) Restated) -------------------------------------------------------- Jun 30, Jun 30, Jun 30, Jun 30, 2013 2012 2013 2012--------------------------------------------------------------------------Tons sold 168,488 130,517 317,941 247,709--------------------------------------------------------------------------Revenue $ 15,583,114 $ 13,310,149 $ 29,470,155 $ 26,098,171--------------------------------------------------------------------------Average overall coal price 92 102 93 105--------------------------------------------------------------------------



Summary

Three month Q2 2013 revenue was 17% ($2.3 million) higher than Q2 2012. The increase is attributable to a 29% increase in tons sold offset by a lower average overall realized price. The lower average realized price is mainly the result of a change in the overall coal mix which in 2013 included a larger proportion of thermal coal versus metallurgical coal. Compared to Q1 2013, revenue was 12% higher. The increase was entirely due to higher volumes. Quarter on quarter average coal price realized was consistent.

Six month 2013 revenue was 13% higher than 2012. The increase is attributable to a 28% increase in volumes offset by a lower average overall realized price.

Volumes

Q2 2013 sales volumes were 168,488 tons compared to 130,517 tons sold in Q2 2012 and 149,453 tons sold in Q1 2013. Despite Q2 2013 being a period of transition, volumes were significantly higher than both comparative quarters. In Q2 2012, the Company was impacted by difficult mining conditions, management transition issues and other operational challenges (e.g. a damaged excavator), which impacted production. During Q1 2013, the Company was winding up production at Bear Creek and was still building out Knight and Posey Mill 2. Additionally, sales to two new customers had been curtailed as they burned off inventory from their previous suppliers. During Q2, volumes to these customers resumed back to contracted levels. Additionally, both Knight and Posey Mill 2 were opened and Q2 production and sales were realized from both mines during the quarter.

Six month sales volumes were 317,941 tons compared to 247,709 tons realized in 2012. 2012 production and sales were negatively impacted by mining conditions, management transition issues and the other operational challenges previously described.

Pricing

Overall Q2 2013 average pricing was $92 per ton compared to $102 per ton realized in Q2 2012 and $93 per ton in Q1 2013. In 2012, the Company's overall coal mix included a larger proportion of metallurgical versus thermal coal and in early 2013 the Company terminated a metallurgical coal contract. Since then, the Company has been blending its metallurgical grade coal into other products for other customers and is realizing a lower price for this blended product. Pricing realized on the Company's other contracts are comparable to the prior year and/or quarter.

Overall six month 2013 pricing was $93 per ton compared to $105 per ton realized in 2012. The explanation of the three month change described above explains the six month difference, as well.

Cost of Production Sold and Royalties, Transportation and Other (RTO)

-------------------------------------------------------------------------- Three month Six month Three month period ended Six month period ended period ended (Unaudited, period ended (Unaudited, (Unaudited) Restated) (Unaudited) Restated) -------------------------------------------------------- Jun 30, Jun 30, Jun 30, Jun 30, 2013 2012 2013 2012--------------------------------------------------------------------------Tons sold 168,488 130,517 317,941 247,709--------------------------------------------------------------------------Revenue $ 15,583,114 $ 13,310,149 $ 29,470,155 $ 26,098,171--------------------------------------------------------------------------Average overall coal price 92 102 93 105--------------------------------------------------------------------------Average cost of production sold 55 62 56 65Average RTO cost 17 19 18 19Income from mining 3 (2) 1 (1)EBITDA from operations $ 16 $ 15 $ 14 $ 15--------------------------------------------------------------------------Note: Please refer to the definition of EBITDA on the last page of thisMD&A.



Q2 2013 cost of production sold was $55 per ton compared to $62 per ton in Q2 2012 and $56 per ton in Q1 2013. Q2 2012 costs were high due to the operational challenges previously described. As a result of these challenges, the Company made important operational changes in mid-2012, which remain in place and substantially and permanently improved operational efficiency. These changes were described in our 2012 MD&A.

Consistent with Q1 2013 cost of production sold was still relatively high due to the inefficiencies associated with the mine transition. Q2 coal production was 176,000 compared to 148,000 tons produced in the previous quarter. Despite the increase, the Company's new mines had not yet achieved full scale planned production and efficiency. Going forward, the Company's objective is to increase production significantly, which is expected to reduce average production cost per ton sold in future quarters.

Q2 royalty, transportation and other (RTO) costs were $17 per ton sold, which was slightly lower than Q2 2012. The Company's royalty structure and trucking costs on certain hauls are lower than the previous year. The Company expects RTO to trend in the range of $17 to $19, on average.

Six month period ended cost of production was $56 per ton compared to $65 per ton in 2012. The decrease related to the operational challenges in the comparative period previously described.

EBITDA from operations

Second quarter 2013 EBITDA from operations was $2.61 million, a 35% improvement over the $1.93 million earned in Q2 2012 and 40% better than the $1.87 million realized in Q1 2013. Please refer to the definition of EBITDA on the last page of this press release. Loss for the period is discussed in the next section.

Detailed Financial Results Analysis

The table presents financial results for the six month period ended June 30, 2013.

-------------------------------------------------------------------------- Three month Six month Three month period ended Six month period ended period ended (Unaudited, period ended (Unaudited, (Unaudited) Restated) (Unaudited) Restated) -------------------------------------------------------- Jun 30, Jun 30, Jun 30, Jun 30, 2013 2012 2013 2012 --------------------------------------------------------Revenue (coal sales) $ 15,583,114 13,310,149 29,470,155 26,098,171 --------------------------------------------------------Production cost (9,297,476) (8,114,799) (17,646,023) (16,073,155)Royalties, Transportation & Other (2,815,194) (2,535,460) (5,668,170) (4,828,645)Depletion & amortization (2,978,330) (2,877,872) (5,844,175) (5,541,821) --------------------------------------------------------Income from mining operations 492,114 (217,982) 311,787 (345,450)General & administrative (857,849) (727,153) (1,675,618) (1,409,843)Other expenses (excluding G&A) (1,785,805) (1,035,946) (3,343,873) (1,927,835) --------------------------------------------------------Loss before tax (2,151,540) (1,981,081) (4,707,704) (3,683,128)Income tax recovery 603,898 379,691 1,328,109 907,591 --------------------------------------------------------Loss for the period (1,547,642) (1,601,390) (3,379,595) (2,775,537)Loss attributable to owners of the parent (1,527,512) (1,506,210) (3,263,415) (2,687,090)Loss attributable to non- controlling interest (20,130) (95,180) (116,180) (88,447) -------------------------------------------------------- (1,547,642) (1,601,390) (3,379,595) (2,775,537)EBITDA from operations $ 2,612,595 $ 1,932,737 $ 4,480,344 $ 3,786,528--------------------------------------------------------------------------Note: Please refer to the definition of EBITDA on the last page of thispress release.



Loss for the Period

In Q2 2013, the Company recorded a loss of $1.5 million compared to a loss of $1.6 million in the previous year. For the six months ended, the Company recorded a loss of $3.4 million compared to a loss of $2.8 million in 2012.

In addition to the operational factors described in the previous sections, a number of other factors contributed to the increased six month 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.

Other Key Financial Metrics

Capital Expenditures

Q2 2013 net capital expenditures on equipment, capital repairs and mineral property development totalled $2.4 million, compared to $3.9 million in Q2 2012 and $2.5 million in the previous quarter. During Q2, the Company invested $0.5 million in new mine development (including engineering, permitting, pond building, road construction and general site preparation) primarily at Posey Mill 2 and additional incremental infrastructure at Old Union 2. The Company capitalized major repairs to existing equipment in the amount of $1.3 million. The Company also financed a $1.2 million purchase of two tractors whose rental agreements had expired. Offsetting these expenditures were asset sales of $0.7 million. The Company does not anticipate any significant new equipment purchases for the remainder of the year.

Through June 2013, capital expenditures were $4.9 million or almost half of the $9.3 million expenditures incurred in the prior year. 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

As at June 30, 2013, the Company had a working capital deficit of $19.4 million. The substantial majority of this deficit relates to debt repayments due in 2014 including unsecured debentures due in May 2014.

With production at steady state levels at all of our mines since late June, monthly sales in excess of 60,000 tons and significantly reduced capital expenditures, the Company expects to generate free cash flow in order to manage its working capital obligations and to start accumulating cash. In addition, at June 30, 2013, the Company had undrawn credit facilities of $1.4 million. Also, liquidity indicators started to improve in Q2 as evidenced by an improvement in operating cash flow by 67% as compared to Q1 and positive free cash flow as compared to a deficit in Q1.

Respecting the Company's $1.1 million debenture due August 31, 2013, the Company expects to repay a portion of the principal and refinance the remainder until May 2014, at an interest rate of 10%.

Outlook for the remainder of 2013

The Company has now opened all of its new mines each of which is close to operating at or near planned efficiency. In July 2013, the Company booked sales of 67,500 tons, far and away the best month in the Company's history. The Company believes that it can sustain production and contracted sales above 60,000 tons a month for the foreseeable future.

In addition to the improved sales profile, the Company believes its existing equipment fleet is sufficient for the foreseeable future with its existing mine plan. On this basis, no significant new equipment purchases are planned for the rest of 2013 and well into 2014. As well, expenditures on new mine development will be significantly lower.

On the basis of the forgoing and the fact that all of 2013 production and the majority of 2014 production has been sold into off-take contracts with its customers, the Company expects to consistently generate free cash flow for the remainder of 2013 and 2014.

Restatement of 2012 Comparative Financial Information

The comparative financial information included in the unaudited condensed interim financial statements for the three month period ended June 30, 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 from operations and Free Cash Flow

Statements throughout this MD&A make reference to EBITDA from operations 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 from operations 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 from operations and Free Cash Flow, the terms used herein are not necessarily comparable to similarly titled measures of other companies. The items excluded from EBITDA from operations and Free Cash Flow are significant in assessing the Company's operating results and liquidity. EBITDA from operations and Free Cash Flow have limitations as an analytical tool and should not be considered in isolation from, or as an alternative to, net income or other data prepared in accordance with IFRS. EBITDA from operations 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 from operations less financed and non-financed capital expenditures. Other financial data has been prepared in accordance with IFRS.

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.

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 August 27, 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.



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