Coalcorp starts strategic alternatives review process

Saturday, 08 Aug 2009

Coalcorp Mining Inc announces that it has commenced a strategic alternatives review process to realize value for the Company and its stakeholders.

The board of directors of the company and management firmly believe that the current market value of the Company does not reflect the value of the Company's assets, as supported by the results of its most recently completed and filed National Instrument 43 to 101 technical reports.

Accordingly, the company has initiated a process to consider various strategic alternatives to maximize the value of Coalcorp's assets including but not limited to, the possible sale of the La Francia mine and associated infrastructure assets and other potential corporate transactions.

The board has established a special committee of directors independent of management and the company's significant shareholder, to oversee the strategic review process and make recommendations to the Board. The directors appointed to the special committee are Mr Dick Lister chairman, Mr Bruce Barraclough and Mr Charles Entrekin.

Pala Investments Holdings Limited which holds approximately 44% of Coalcorp's outstanding shares is supportive of the strategic alternatives review process and is not represented on the Special Committee.

The company is currently in discussions with multiple interested parties and is exploring various possible alternative transactions and proposals with the aim of maximizing the value of Coalcorp's assets. The Special Committee will review and evaluate all possible alternative transactions and make recommendations to the Board.

As previously announced, the Company engaged SRK Consulting to update its current National Instrument 43 to 101 technical report in respect of La Francia I Blocks ABB' to include La Francia II and Blocks CD and to provide an updated life of mine plan. The Company completed and filed the Updated Technical Report on August 4th 2009. The Updated Technical Report provides support as to the underlying value of the La Francia assets.

The key highlights of the Updated Technical Report are set out below:
1. Over 60 million tonnes of total reserves and approximately 145 million tonnes of total resources
2. Annual mine production of approximately 3.0 million tonnes of coal over 20 years
3. Approximate net present value of the La Francia mine of USD 404 million under a self perform mining scenario and USDD 374 million under a contractor mining scenario based on an 8% discount rate and long-term net coal prices of USDD 66.00 per tonne.

Mr Joseph Belan CEO of Coalcorp said "The results in the Updated Technical Report as well as valuation benchmarks established in recent coal mining transactions in Colombia underscore the clear disconnect between the Company's current market value and the fundamental value of its mining and transportation assets. The Company's initiation of a strategic alternatives review process is intended to unlock and maximize value for Coalcorp stakeholders, which is not reflected in the Company's current market value."