Corsa Announces Closing of the Casselman Mine Acquisition and the US$25 million credit facility
May 19, 2011 Toronto, Ontario – Corsa Coal Corp. (TSXV: CSO) (“Corsa” or the “Corporation”) is pleased to announce that it has completed the purchase of the Casselman mine, previously announced March 22, 2011, through the acquisition of Maryland Energy Resources, LLC, the owner of the Casselman mine. The purchase price was US $15,000,000 and the assumption of approximately US $1.2 million of debt. In addition, production from the Casselman Mine is subject to a 1.25 percent royalty in favour of the vendors.
Don Charter, the President and Chief Executive Officer of Corsa, stated ‘We are very pleased with this acquisition as the Casselman Mine provides us with a permitted long life mine that is an immediate new source of metallurgical quality coal for our plant and an increase in our expected production.’
The Mine
The Casselman mine will be a long life underground metallurgical coal mine located in Garrett County, approximately two miles south of Grantsville, Maryland, USA. All the necessary permits for this mine are in place and the face up for mining the coal has been completed so that mining operations can commence immediately. This project is approximately 31 miles by truck from Corsa’s Wilson Creek coal preparation plant in Somerset County Pennsylvania.
The Casselman Mine is planned to be developed in the Upper Freeport Coal seam. The Casselman Report referred to below indicates the presence of 16.2 million tons of in-place, low volatile, coking coal.
This deposit meets the definition of an indicated coal resource as per National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”). A technical report (the “Casselman Report”) to satisfy the requirements of NI-43-101 entitled “Technical Report for Wilson Creek Energy, LLC, Coal Resources for the Casselman Mine Site in Garrett County, Maryland, USA, Dennis A. Noll, P.G., C.P.G., Earthtech, Inc., May 5, 2011” has been prepared and filed on www.sedar.com in respect of the Casselman mine. The estimate of mineral resources reflects known environmental, permitting, title and other relevant matters. The footprint will require further definition in the following areas in order to achieve the classification of a coal reserve: surface and mineral control, mineability related to geologic conditions, and economic viability. The mineral resources referred to have not been classified as a mineral reserves and a feasibility study has not been completed. Accordingly the economic viability of the proposed Casselman Mine operations has not yet been demonstrated.
Corsa’s initial estimates are that it should be able to commence mining operations at the Casselman mine in July of this year. Management is currently arranging the necessary equipment purchases and staffing in order to begin mining operations immediately.
The Credit Facility
In connection with the Casselman Mine purchase, Corsa has completed the previously announced U.S. $25 million senior credit facility (the “Facility”). The Facility consists of two separate loans, of which both have been fully drawn. The first loan is for U.S. $5.5 million with a term of 13 months. The second loan is for U.S. $19.5 million with an initial term of 6 months, subject to an extension at the option of Corsa for a further 6 month term. The loans are evidenced by two separate debentures secured by a pledge by Corsa of the shares of its principal subsidiary Wilson Creek Holdings, Inc. Corsa will use the proceeds of the Facility to fund the Casselman Mine purchase, related capital requirements and working capital purposes.
No interest is payable for the initial terms of the loans (including the second six month term). Should the loans remain outstanding after maturity (or in the event of a default), the loans will bear interest at a rate of 5% per annum payable semi-annually, which interest may be satisfied by the issuance of common shares of Corsa at a price equal to 95% of the market price (as determined in accordance with the policies of the TSX Venture Exchange) determined at the date of payment.
In connection with the Facility, Corsa has issued 3 million warrants (the “Warrants”) to purchase common shares in the capital of Corsa, and 1.6 million common shares. An additional 1.4 million common shares will be issuable on the date of the extension of the 6 month loan. The Warrants will be exercisable for a period of two years from the date of issue at an exercise price of $1.15 per share. There were no standby or commitment fees payable by Corsa in respect of the Facility. The lenders (each as to 50% of the aggregate principal amount of the Facility) are Zebra Holdings and Investments S.a.r.l. and Lorito Holdings S.a.r.l. Zebra Holdings and Investments S.a.r.l. and Lorito Holdings S.a.r.l. are two companies wholly owned by a Lundin family trust. They each currently hold 20,689,000 common shares of Corsa, for an aggregate of 41,378,000 common shares (representing 17.5 % of the issued and outstanding shares of the Corsa). Assuming the issuance of an additional 1,400,000 common shares and the issuance of an additional 3,000,000 common shares on exercise of the Warrants, they will hold an aggregate of 45,778,000 common shares of Corsa, representing 19.0% of the issued and outstanding shares of Corsa.
Alumbaugh
A technical report (the “Alumbaugh Report”) to satisfy the requirements of NI-43-101 has been prepared and filed on www.sedar.com with respect to the Alumbaugh Extension of the Acosta Deep Project and is entitled the “Technical Report for Wilson Creek Energy, LLC, Coal Resources for the Alumbaugh Property in Somerset County, Pennsylvania, USA, Dennis A. Noll, P.G., C.P.G., Earthtech, Inc., May 5, 2011”.
Qualified Person
The mineral resource estimates referred to in this press release have been prepared under the supervision of Dennis Noll of Earthtech Inc., a qualified person, as such term is defined in NI 43-101 – Standards of Disclosure for Mineral Projects. Dennis Noll is independent of Wilson Creek. Reference is made to the Casselman Report and the Alumbaugh Report.
Information about Corsa
Corsa’s main operating subsidiary is Wilson Creek Energy LLC based in Somerset County, Pennsylvania. Its primary business is the mining, processing and selling of metallurgical coal, as well as actively exploring, acquiring and developing resource properties consistent with its coal business.
For further information please contact:
Corsa Coal Corp.:
Contact: Don Charter,
President and Chief Executive Officer
416-214-9800
communication@corsacoal.com
www.corsacoal.com
Forward-Looking Statements
Certain information set forth in this press release contains “forward-looking statements” and “forward-looking information” under applicable securities laws. Except for statements of historical fact, certain information contained herein constitutes forward-looking statements which include management’s assessment of future plans and operations and are based on current internal expectations, estimates, projections, assumptions and beliefs, which may prove to be incorrect. Some of the forward-looking statements may be identified by words such as “estimates”, “expects” “anticipates”, “believes”, “projects”, “plans”, and similar expressions. These statements are not guarantees of future performance and undue reliance should not be placed on them. Such forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause Corsa’s actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to: risks that the transaction referred to in this press release will not be completed; liabilities inherent in coal mine development and production; geological, mining and processing technical problems; inability to obtain required mine licenses, mine permits and regulatory approvals required in connection with the mining and processing of coal; dependence on third party coal transportation systems; competition for, among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel; incorrect assessments of the value of acquisitions; changes in commodity prices and exchange rates; changes in the regulations in respect to the use of coal; the effects of competition and pricing pressures in the coal market; the oversupply of, or lack of demand for, coal; currency and interest rate fluctuations; various events which could disrupt operations and/or the transportation of coal products, including labor stoppages and severe weather conditions; the demand for and availability of rail, port and other transportation services; and management’s ability to anticipate and manage the foregoing factors and risks. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. The reader is cautioned not to place undue reliance on forward-looking statements.
The TSX Venture Exchange has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release. Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.