Fording announces first quarter distribution and 2006 coal year prices
20 Marzo 2006 - 1:00PM
PR Newswire (US)
2006 Coal Market and Sales Volumes Update CALGARY, March 20
/PRNewswire-FirstCall/ -- Fording Canadian Coal Trust (TSX: FDG.UN,
NYSE: FDG) today announced a first quarter cash distribution of
C$1.40 per unit. This distribution reflects a continuation of 2005
coal year prices into the first quarter of 2006, as well as
forecast coal sales volumes of approximately 5 million tonnes in
the quarter. In addition, the Trust announced that Elk Valley Coal
has completed approximately 80% of its annual price negotiations
with its coal customers. If the remainder of the contracts are
settled on similar terms, the average coal price for the 2006 coal
year beginning April 1, 2006 is forecast to be approximately
U.S.$109 per tonne. The weighted average price of 2006 calendar
year coal sales is expected to be approximately U.S.$113 per tonne,
up from U.S.$99 per tonne in 2005. "We're pleased with the 2006
coal year prices, which remain at near record levels," said Jim
Popowich, President of Fording Canadian Coal Trust. "On a less
positive note, our first quarter sales volumes will be lower than
forecast because of high inventory levels at our customers' plants
and some substitution of hard coking coal with lower-priced coals
due to widening price differentials. However, steel prices in many
regions appear to be rising, which may be a positive development
for metallurgical coal demand later in the year. Overall, 2006
sales are expected to be between 22 and 25 million tonnes,
depending on the global demand for steel." Coal Market and Sales
Volumes Update A number of factors, both positive and negative, are
influencing the seaborne hard coking coal market. In late 2005 and
early 2006, high inventory levels of coal at steel mills and
reduced steel production as a result of higher steel inventories,
has led to the deferral of shipments by some customers. Elk Valley
Coal is working with these customers to achieve contract sales
levels. Average coal prices in the 2006 coal year declined
approximately 10% from the $122 per tonne level in the 2005 coal
year. However, price differentials between hard coking coal and
lower-quality metallurgical coals have widened significantly
compared to historical levels, resulting in substitution by steel
mills of lower-quality coals for hard coking coal. These factors
contributed to lower-than-expected sales for Elk Valley Coal in the
second half of 2005 and into the first quarter of 2006. As a
result, Elk Valley Coal expects sales volumes of approximately 5
million tonnes in the first quarter of 2006. Current market
conditions, along with normal variations in sales and operations,
led to a great deal of variability in Elk Valley Coal's sales
volume estimates for the 2006 calendar year. On the positive side,
rising steel prices and demand, or coal production or shipment
interruptions in the global supply chain, could result in sales in
the range of 25 million tonnes. On the negative side, a global
oversupply of steel could result in a reduction of up to ten
percent in coal shipments that could lead to sales in the 22
million tonne range. This would reflect Elk Valley Coal's existing
customer base taking lower than expected volumes in the 2006
calendar year and deferring shipments into 2007. Where in this
range sales volumes for 2006 will end up cannot be determined until
the latter part of 2006. Coal Costs Update The higher operating
costs experienced in the fourth quarter of 2005 are expected to
continue throughout 2006. Elk Valley Coal's production levels will
be dependent on sales due to the current high inventory levels of
coal. Should sales volumes be at the low end of the range, Elk
Valley Coal would have to take steps to reduce coal production,
which would impact unit cost of product sold, as fixed costs would
be spread over the lower volumes. Rail rates for transportation of
coal to west-coast ports will decline slightly for the 2006 coal
year, while the average rail cost on a calendar year basis for 2006
will increase as a result of lower rail prices in the first quarter
of 2005. First Quarter Cash Distribution The Trust announced a
first quarter 2006 cash distribution of C$1.40 per unit, which
reflects estimated first quarter sales volumes and higher 2005 coal
year prices. Future cash distributions will be dependent on sales
volumes and will reflect the lower 2006 coal year prices. The
distribution will be paid on April 13, 2006 to unitholders of
record on March 31, 2006. The ex-distribution date is March 29,
2006. This distribution is for the period from January 1, 2006 to
March 31, 2006. Tax Information for Cash Distributions The
information below is provided to assist unitholders in
understanding the tax treatment of distributions paid by the Trust.
For unitholders resident in Canada, income distributed by the Trust
will generally be treated as ordinary income from property except
where the income is sourced from capital gains realized by the
Trust or from dividends received by the Trust. In these cases, the
Trust intends to make appropriate designations in its tax returns
so that the capital gains or dividends will retain their character
when distributed to unitholders and will be subject to income tax
accordingly. Distributions to unitholders made in a year that are
greater than the net income of the Trust for the year will not be
included in unitholders' income but will be considered a return of
capital and a reduction of the cost base of the units. Income
distributed by the Trust to non-residents of Canada will be subject
to Canadian withholding tax of 25% subject to reduction under the
provisions of any applicable tax treaty or conventions. Canadian
withholding tax is generally 15% for U.S. holders. The Trust is
taxed as a corporation for U.S. tax purposes. Accordingly,
distributions by the Trust will be considered foreign-source
dividend income to the extent paid out of current or accumulated
earnings and profits of the Trust, determined under U.S. income tax
principles. Assuming that applicable unitholder-level requirements
are met, these distributions are "qualified dividends," eligible
for taxation at reduced rates under recent U.S. federal income tax
legislation. Payments in excess of current or accumulated earnings
and profits will be applied first to reduce the cost base of the
units and then as a capital gain should the cost base of the units
be reduced to zero. The Trust will issue a statement after the
close of its fiscal year (December 31) that will provide
information for Canadian and U.S. resident investors about the
final characterization of the 2005 Trust distributions for income
tax purposes. Unitholders should consult their own tax advisors for
advice with respect to the income tax consequences based on their
particular circumstances. About Fording Fording Canadian Coal Trust
is an open-ended mutual fund trust. Through investments in
metallurgical coal and industrial minerals mining and processing
operations, the Trust makes quarterly cash distributions to
unitholders. The Trust, through its wholly owned subsidiaries,
holds a 60% interest in the Elk Valley Coal Partnership and a 100%
interest in NYCO, a leading producer of the industrial mineral
wollastonite. Elk Valley Coal, comprised of Canada's senior
metallurgical coal mining properties, is the world's second largest
exporter of metallurgical coal, supplying high-quality coal
products to the international steel industry. The Trust's shares
are traded on the Toronto Stock Exchange under the ticker symbol
FDG.UN and on the New York Stock Exchange under the symbol FDG.
Caution Regarding Forward-looking Information This news release
contains forward-looking information within the meaning of the
United States Private Securities Litigation Reform Act of 1995
relating, but not limited to, the Trust's expectations, intentions,
plans and beliefs. Forward-looking information can often be
identified by forward- looking words such as "anticipate",
"believe", "expect", "goal", "plan", "intend", "estimate", "may",
and "will" or similar words suggesting future outcomes, or other
expectations, beliefs, plans, objectives, assumptions, intentions
or statements about future events or performance. Unitholders and
prospective investors are cautioned not to place undue reliance on
forward-looking information. By its nature, forward-looking
information involves numerous assumptions, known and unknown risks
and uncertainties, of both a general and specific nature, that
could cause actual results to differ materially from those
suggested by the forward-looking information or contribute to the
possibility that predictions, forecasts, or projections will prove
to be materially inaccurate. For a further discussion of the
assumptions, risks and uncertainties that could affect
forward-looking information, please refer to "Forward-Looking
Information" contained in the section of the Trust's website titled
"Legal Terms and Conditions" at http://www.fording.ca/ as well as
the discussion of the risks to which the Trust is exposed that is
contained elsewhere in its publicly available disclosure documents.
The forward-looking statements contained in this news release are
based, in part, upon certain assumptions made by the Trust,
including, but not limited to, the following: no material
disruption in production; no material variation in anticipated coal
sales volumes, coals prices or cost of product sold; no material
variation in the forecasted yields, strip ratios, haul distances
and productivity for each mine in which the Trust has an interest;
no material increases in the global supply of hard coking coal
other than what is currently projected by management; weaker coking
coals will not be substituted for hard coking coal; continued
strength in global steel markets; no material disruption in
construction or operations at minesites; no variation in
availability or allocation of haul truck tires to Elk Valley Coal
until late 2007; settlement of current collective bargaining
disputes on terms acceptable to management and an absence of labour
disputes in the forecast period; no material increase in the cost
of labour; no material variations in markets and pricing of
metallurgical coal other than anticipated variations; no material
variation in anticipated mining, energy or transportation costs;
continued availability of and no material disruption in rail
service and port facilities; no material delays in the current
timing for completion of ongoing projects; financing will be
available on terms favourable to the Trust and Elk Valley Coal; no
material variation in the operations of Elk Valley Coal customers
which could impact coal purchases; no material variation in
historical coal purchasing practises of customers; coal sales
contracts will be entered into with new customers; delayed coal
shipments in 2005 will not materially impact customer demand in
2006; existing inventories will not result in decreased sales
volumes; no further moratoriums on advance tax rulings for the
Canada Revenue Agency; parties execute and deliver contracts
currently under negotiation; and no material variations in the
current tax regulatory environment. The Trust cautions that the
list of risks and assumptions set forth above is not exhaustive.
Some of the risks, uncertainties and other factors which negatively
affect the reliability of forward-looking information are discussed
in the Trust's public filings with the Canadian and United States
securities regulatory authorities, including its most recent
management information circular, annual information form, quarterly
reports, material change reports and news releases. Copies of the
Trust's Canadian public filings are available on SEDAR at
http://www.sedar.com/. The Trust's U.S. public filings, including
the Trust's most recent annual report of form 40-F as supplemented
by its filings on form 6-K, are available at http://www.sec.gov/.
The Trust further cautions that information contained on, or
accessible through, these websites is current only as of the date
of such information and may by superseded by subsequent events or
filings. The Trust undertakes no obligation to update publicly or
otherwise revise any information, including and forward-looking
information, whether as a result of new information, future events
or other such factors that affect this information except as
required by law. DATASOURCE: Fording Canadian Coal Trust; Elk
Valley Coal Partnership CONTACT: Susan J. Soprovich, Director,
Investor Relations, Fording Canadian Coal Trust, (403) 260-9834;
Catherine Hart, Investor Relations Analyst, Fording Canadian Coal
Trust, (403) 260-9817; Email: , Website: http://www.fording.ca/
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