Under the new deal, Hillsborough has received about $US3.03 million in cash from Vitol and about $US16 million of the operator’s debt to the company has been cancelled. Vitol will continue to offer Hillsborough a $C6 million line of credit.
In addition to the 68,294 tonnes of coal shipped from the Quinsam complex to Vitol in March, Hillsborough will be delivering 700,000t (+/– 10% at Vitol's option) at a $C80/t base price. Hillsborough has planned two more shipments in 2009, each of approximately 70,000t, and the remaining tonnage will be delivered between January 1 of next year and December 31, 2012, at the tentative rate of three deliveries annually.
"We are very pleased to have finalised the revisions with Vitol, who remains a major shareholder and key strategic partner of Hillsborough Resources," company president and chief executive David Slater said, adding that the deal also allowed quality price adjustments in the producer’s favour.
"The Vitol agreement remains a cornerstone of Hillsborough's business. In addition to the very positive contribution to the corporation's 2009 financials, the agreement ensures a stable market for a large portion of the Quinsam mine's production over the next three years."
In related Hillsborough news, the company has elected Emmet McGrath to its board of directors. McGrath currently sits on the boards of a number of organisations, including Westminster Savings Credit Union, Selkirk Metals, Bard Ventures and Pure Diamonds Exploration.
McGrath replaces Craig Bushell, who recently opted not to stand for reelection.
Late last month, the producer announced operational improvements at Quinsam and amended the mine’s planned production for 2009 to 435,000t at $C72-75/t free on board.
Deliveries for the year are expected to be in the range of 385,000-455,000t at $84-87/t based on current contracts, including 194,000-223,000t of international shipments at an average price of $106-110/t.
Hillsborough also noted there were several cost-reduction initiatives on the cards for Quinsam, including a revision of the mine plan to maximise extraction from thick seams, and that a rise in the proportion of depillared coal this year versus last year was anticipated.
New mining equipment purchased last year is now fully in place at the mine and is leading to increased fleet availability and efficiency, it said. An updated NI 43-101 technical report on the Quinsam North project had been filed after the completion of eight additional holes that were drilled last year.
“The new study verifies the presence of 23.797 million tonnes of measured coal resources, with an additional inferred resource of 1.498Mt,” Hillsborough said at the time.
“The additional drillholes confirmed that the Quinsam North coal resources correlate directly to the Quinsam No. 4 coal seam, which is the subject of detailed mine engineering and permitting at the company's 7 South deposit, an advanced-stage development area within the present Quinsam mining block.
“At this time, management feels that focus should remain on developing the 7 South deposit due to its proximity to existing infrastructure.”
Hillsborough expects the quality of coal at 7 South to “greatly” contribute to the development of Quinsam North.
