Continental Coal's (ASX: CCC) ongoing initiatives and focus to reduce costs and optimise its business activities have resulted in significant reduction including a 54% reduction in administration costs to $9.5 million for the 2013 financial year.
As part of its restructuring, James Leahy has agreed to step down as a non-executive Director with immediate effect.
Besides the reduction in administration costs, which is down for the third year in a row, the company also slashed finance costs by 44% to $11.4 million from the $20.1 million in the 2012 financial year.
Marketing and other costs were down 70% and 78% respectively to $3 million.
The company has also restructured its Perth office and optimised its administration and finance departments while its non-executive directors have agreed to an immediate 25% reduction in fees and subject to shareholder approval, having up to 100% of their fees paid in equity instead of cash.
"The company continues to look at ways that it can optimize its business activities, particularly in the wake of the current market environment and the impact that the fall in export thermal coal prices has had on our business," chief executive officer Don Turvey said.
"We have reduced corporate administration costs for 3 consecutive years, marketing and other costs are at their lowest level in 4 years and finance costs are also at levels last seen in FY2011."
He added that these reductions were delivered over the past 12 months amidst extremely volatile market conditions and the initiatives would continue in order to deliver further reductions in the coming year.
"I believe that the cost reductions will ensure the Company is well positioned for the future," Turvey noted.
"We already have a robust and profitable domestic coal mining business in South Africa that is supplying Eskom.
"In FY2014, our new Penumbra Coal Mine will be increasing sales into the export market, and despite export prices having fallen by over 30% over the past 12 months, its low cost of production and coal hedging program - with approx. 25% of sales over the next 6 years locked in at approximately US$118/t- will, with the continuation of these costs reduction initiatives assist the Company in its transition towards being a profitable and successful coal mining company."
As part of the cost reduction and business optimisation initiatives, the company has over the past quarter restructured its Perth office.
Costs for the head office have been reduced by about 70% over the 2013 financial year, with a number of the administration and finance functions now managed and administered by the existing finance and administrative personnel in South Africa.
As part of this restructure to the Perth office, DW Corporate were appointed to manage the company's company secretarial function in May 2013 with a number of costs savings achieved.
In addition to the above, the proposal to replace all or part of the director's fees with equity on a quarterly basis based upon the prevailing share price is expected to further reduce cash outflows and allow a greater proportion of the company's cash reserves to be allocated to its South African coal projects.
The company's Vlakvarkfontein and Ferreira Coal Mines both achieved ROM production in excess of budgeted levels.
Vlakvarkfontein produced 377,957t ROM, 8% lower than the 412,764t ROM achieved in the previous quarter and 15% higher that its budgeted 328,948t.
Notably, the project has fully repaid all its capital development costs.
Underground development at its Penumbra Coal Mine focused on providing access to the main ventilation shaft, with additional geotechnical work completed to allow ROM production to increase further to the planned 63,000 tonnes per month steady state production levels in the current quarter.
It also settled a strategic financing agreements with Village Main Reef with proceeds from the A$8 million to advance discussions on a strategic partnership and off-take funding agreement for its proposed 4th mine development, the De Wittekrans Coal project.
Continental had $5.4 million in cash and cash equivalents as of 30 June 2013.
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