CanAm Reports Q3 2014 Coal Sales and Revenue of 170,000 Tons and $16.7 Million Respectively

Calgary, Alberta--(Newsfile Corp. - December 2, 2014) - CanAm Coal Corp. (TSXV: COE) ("CanAm" or the "Company") has filed its condensed interim consolidated financial statements and related MD&A for the period ended September 30, 2014. Definitions of commonly used non-IFRS financial measures (EBITDA from operations and Free Cash Flow) are included at the end of this press release.

The Company announced its third quarter 2014 financial results for the period ending September 30, 2014. Revenue and EBITDA from operations for the quarter were $16.7 million and $2.5 million respectively as compared to $17.9 million and $3.4 million in the prior year. Loss for the quarter was $2.5 million as compared to $0.9 million in the prior year. Sales for the quarter were 170,000 tons as compared to 196,000 tons in Q3 2013. Third quarter EBITDA continues to be impacted from the delay of permit approval for Gooden Creek 2 and the fact that the Company had to purchase some 25,000 tons of coal from third party producers in order to continue to meet its overall customer commitments. The loss for the quarter was impacted by a one-time non-cash loss of $0.9 million resulting from the conversion of the $7.6 million debenture debt to equity.

For the nine month period ended September 30, 2014, revenue and EBITDA from operations were $50.7 million and $7.8 million respectively as compared to $47.3 million and $7.9 million in the prior year. Loss for the first half of the year was $5.7 million as compared to $4.3 million in the prior year. Sales for the nine month period were 524,000 tons as compared to 514,000 tons in 2013. During the first nine months of the year, the Company faced a number of challenges: (1) in Q1, the Company was faced with some of the most difficult operating conditions in the Company's history as a result of one of the coldest winters in the State of Alabama, (2) production and sales were impacted to the tune of 50,000 tons as a result of the delay in securing the Gooden Creek 2 permit and (3) operational challenges at some of its mines as a result of geological inconsistencies in the coal seams. Despite these challenges, for the nine month period, the Company achieved higher sales volumes and higher revenue and delivered EBITDA from operations on par with 2013.

Note: Refer to the definition of EBITDA from operations and Free Cash Flow on the last page of this press release.

Company CEO, Jos De Smedt commented: "The third quarter was a challenging one for the Company as all aspects of the operations were impacted by the fact that we were unable to secure the Gooden Creek 2 permit during the quarter. This resulted in us being short on tonnage to meet some of our customer commitments and required us to purchase some 25,000 tons of coal from third party coal producers. Despite these challenges, sales volumes, revenue and EBITDA continued at a healthy pace during the quarter and, on a year to date basis, we outperformed 2013 on most accounts. Specifically, cash flow improved both on a quarterly basis and on a year to date basis with free cash flow for the nine month period coming in at $4.2 million as compared to $1.3 million in the previous year. As to our financial position and capital structure, we completed our debt to equity conversion in the third quarter which reduced our net debt by $7.6 million and, as a result, significantly improved our debt to equity ratio to 8:1 at the end of Q3 as compared to 76:1 at June 30, 2014. Subsequent to the quarter, we made progress on a number of fronts: moved forward on our diversification strategy and announced the acquisition of a frac sand property, obtained additional short term financing and received the Gooden Creek 2 permit which started production towards the end of November."

Diversification Strategy & Frac Sand Acquisition

In October, following a strategic review, the Board of Directors concluded that given the current depressed coal markets and the challenging junior mining financing environment and the poor public market perception of the coal industry, the Company's strategic goal of achieving annual coal production in excess of 2 million tons in the foreseeable future would be very difficult to accomplish. Therefore, the Board mandated Management to explore other growth initiatives within the mining industry in order to enhance and improve shareholder value.

On October 29, 2014, the Company signed a binding Letter of Intent ("LOI") to acquire a 100% interest in an Alberta Metallic and Industrial Minerals Permit covering approximately 1,200 acres (567 ha) of land containing high quality silica sand (or Frac Sand) in Western Canada (the "Property").

The Property has a number of compelling attributes:

• Based on an historical resource calculation, the property may contain at least 10 million cubic yards of sand. This estimate however is non NI 43-101 compliant and therefore cannot, and should not be relied upon.
• Initial tests, performed by Loring Laboratories (Alberta) Ltd., indicated that the sand meets the criteria of Tier 1/Tier 2 quality for sphericity and roundness which would make this a highly desirable product for the fracking industry. The Company has initiated further tests to confirm these initial results.
• The Property's strategic location in Western Canada provides it with a significant logistics cost advantage due to its relative proximity to major Western Canadian shale plays such as the Duvernay and Montney. Industry experts estimate that logistics (transportation and handling/transloading) can account for 60%+ of the delivered cost to the end consumer and such costs could be as high as $150/ton for sand imported from the US. Currently, the majority of the sand used in the Canadian market is imported from the US and can travel up to 3,000 km from the frac sand producing States of Wisconsin, Nebraska and Minnesota.

The Company anticipates closing this acquisition in early December at which time it will aggressively move forward with an exploration and development program with the objective of issuing a NI 43-101 resource report in Q2 of 2015.

Liquidity and Financial Position Highlights

As at September 30, 2014, the Company had a working capital deficit of $7.1 million as compared to $7.9 million at June 30, 2014 and $22.8 million at December 31, 2013. The significant improvement of the working capital is the result of a number of initiatives taken by the Company including the refinancing of the May 2014 debentures with a new $14 million secured non-convertible debenture and the additional US$3 million financing by a major US financial institution. Also, on July 25, 2014, the Company completed its debt to equity conversion of $7.6 million.

The impact of the additional equipment financing, the extension of the equipment financing loan term, the successful refinancing of the May debentures, the debt to equity conversion and other measures taken by the Company have significantly improved the financial position and capital structure of the Company:

• Working capital improvement of approximately $15.7 million as compared to December 31, 2013;
• Net debt decrease of $7.6 million; and
• Debt to equity ratio improvement of 76:1 at June 30, 2014 to 8:1 at September 30, 2014.

Also, over the remaining term of the August 2016 debentures, the debt to equity conversion will reduce the Company's interest cost by approximately $1.4 million, including approximately $0.3 million in 2014.

Subsequent to quarter end, the Company renewed its US $4 million Operating Line Facility with a US based financial institution which provides for operational needs and letters of credit for reclamation bonding purposes. The facility bears interest at the LIBOR rate + 3% and matures on October 31, 2015.

Also, in November 2014, the Company obtained additional short term financing from a US based financial institution in the amount of US $1.5 million and approximately $1.6 million of short term loans from insiders of the Company. These short term loans mature on May 31, 2015 and will be used to fund the cash purchase price of the frac sand acquisition and certain other related expenses and for general working capital purposes.

The Company continues to focus on improving its working capital position and capital structure and evaluates on an ongoing basis a number of potential measures including maximizing customer coal shipments, improving operating efficiencies and implementing cost reduction opportunities, accelerating the sale of current coal inventories, selling excess equipment and identifying additional sources of funding.

Nine Month 2014 Financial Results

Key statistics are as follows:

Note: Operating cash flow is before changes in non-cash working capital

• Sales for the quarter were 170,000 tons as compared to 196,000 in Q3 2013. Sales were down mainly as a result of the lack of production from GC2 and were also impacted by a plant shutdown and a delay in the restart of shipments to one of the Company's industrial customers. Q3 2013 sales of 196,000 tons were mainly driven by record production in that quarter. Sales for the nine month period were up 2% as compared to the prior year.
• Long term off-take contracts continue to enable the Company to achieve better than market pricing for our high quality coals. Average realized sales price per ton was $98 (US$90/ton) compared to $91 (US$89/ton) in Q3 2013 as a result of the appreciation of the US$ vs. the Cdn$. In US dollar terms, pricing was slightly higher mainly as a result of the mix of our coal shipments. Average pricing for the nine month period was $97 (US$89/ton) compared to $92 (US$90/ton).
• Average production cost per ton was $61 per ton (US$56/ton) compared to $51 per ton (US$50/ton) in Q3 of 2013. Higher production costs were mainly the result of lower overall production due to the lack of production from GC2, geological issues at Old Union and the cost of purchasing third party coal. For the nine month period ended September 30, 2014, cost of production was $60 per ton (US$ 55/ton) compared to $54 per ton (US$ 53/ton) in 2013.
• Operating cash flow for the quarter and the nine month period was better than the prior year. For the nine month period ended September 30, 2014, the Company generated $5.4 million of operating cash flow as compared to $5.1 million in the prior year.
• Investment in equipment and mine development was $0.1 million as compared to $1.7 million in the prior year. In Q3 2014, the Company invested $0.3 million ($0.3 million in Q3 2013) in mine development in conjunction with moving to a new mine increment at the Knight mine and expanding its footprint at the Old Union 2 mine complex. Equipment capital repairs were $1.1 million ($1.4 million in Q3 2013) in the quarter offset by equipment sales of $1.3 million (nil in Q3 2013). For the nine month period of 2014, capex (net of equipment sales), was $3.6 million as compared to $6.6 million in 2013.
• Free cash flow at $2.4 million for the quarter is up from $1.7 million in Q3 2013. On a YTD basis, free cash flow was $4.2 million, significantly up from $1.3 million in the prior year.
• Repayment of equipment financing obligations continues at a healthy pace and in Q3 the Company repaid $2.5 million of these obligations. On a YTD basis, the Company has repaid $6.7 million.

Outlook for balance of 2014 and 2015

With the issuance of the Gooden Creek 2 permit in late November, the Company is now better positioned to execute on its production and sales plan. Demand from our customers remains strong, additional sales opportunities are becoming available and some supply has been taken out of the local market.

The main focus of the Company for the remainder of the year and into 2015 will be:

• to accelerate production at the Gooden Creek 2 mine;
• to optimize and tailor production at all mines in order to meet our ongoing customer requirements;
• to continue to improve the working capital position of the Company and evaluate on an ongoing basis a number of potential measures including maximizing customer coal shipments, improving operating efficiencies and implementing cost reduction opportunities, accelerating the sale of current coal inventories and selling excess equipment; and
• to continue to improve the capital structure of the Company by identifying and attracting additional sources of funding.

For 2015, our production is currently 75% contracted which puts us in a favorable position to deliver on our business plan.

With respect to our recently announced frac sand acquisition, we are looking to close that transaction in the short term and raise the necessary funds in order to bring the property into production as soon as possible. Initial financial modeling of a 500,000 ton per annum frac sand operation indicates that annual EBITDA contribution to the Company would be significant and would exceed EBITDA contribution from the current coal operations by a ratio of 1 to 3.

For Further Information:

CanAm Corporate Office:
Jos De Smedt, Chief Executive Officer
Tel: 403.262.3797
Toll Free: 1.877.262.5888
Email: jdesmedt@canamcoal.com

EBITDA from operations and Free Cash Flow

Statements throughout this MD&A make reference to EBITDA from operations and Free Cash Flow which are non-IFRS financial measures commonly used by financial analysts in evaluating financial performance of companies, including companies in the mining industry. Accordingly, management believes EBITDA from operations and Free Cash Flow may be a useful metric for evaluating the Company's performance as it is a measure management uses internally to assess performance, in addition to IFRS measures. As there is no generally accepted method of calculating EBITDA from operations and Free Cash Flow, the terms used herein are not necessarily comparable to similarly titled measures of other companies. The items excluded from EBITDA from operations and Free Cash Flow are significant in assessing the Company's operating results and liquidity. EBITDA from operations and Free Cash Flow have limitations as an analytical tool and should not be considered in isolation from, or as an alternative to, net income or other data prepared in accordance with IFRS. EBITDA from operations is calculated as income from mining operations plus depreciation, depletion, accretion and amortization less general and administrative costs. Free Cash Flow is calculated as EBITDA from operations less financed and non-financed capital expenditures. Other financial data has been prepared in accordance with IFRS.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Forward Looking Information and Statements

This press release contains certain forward looking statements and forward looking information (collectively referred to herein as "forward looking statements") within the meaning of applicable Canadian securities laws. All statements other than statements of present or historical fact are forward looking statements. Forward looking statements are often, but not always, identified by the use of words such as "could", "should", "can", "anticipate", "estimate", "expect", "believe", "will", "may", "project", "budget", "plan", "sustain", "continues", "strategy", "forecast", "potential", "projects", "grow", "take advantage", "well positioned" or similar words suggesting future outcomes. In particular, this press release contains forward looking statements relating to the future production of the RAC and BCC mines. This forward looking information is based on management's estimates considering typical strip mining operations, equipment requirements and availability and typical permitting timelines.

In addition, forward looking statements regarding the Company are based on certain key expectations and assumptions of the Company concerning anticipated financial performance, business prospects, strategies, the sufficiency of budgeted capital expenditures in carrying out planned activities, the availability and cost of services, the ability to obtain financing on acceptable terms, the actual results of exploration projects being equivalent to or better than estimated results in technical reports or prior exploration results, and future costs and expenses being based on historical costs and expenses, adjusted for inflation, all of which are subject to change based on market conditions and potential timing delays. Although management of the Company consider these assumptions to be reasonable based on information currently available to them, these assumptions may prove to be incorrect.

By their very nature, forward looking statements involve inherent risks and uncertainties (both general and specific) and risks that forward looking statements will not be achieved. Undue reliance should not be placed on forward looking statements, as a number of important factors could cause the actual results to differ materially from the Company's beliefs, plans, objectives and expectations, including, among other things: general economic and market factors, including business competition, world and local coal markets, changes in government regulations or in tax laws; changes in market conditions, variations in coal recovery rates, risks relating to international operations, fluctuating coal prices and currency exchange rates, changes in project parameters, the possibility of project cost overruns or unanticipated costs and expenses, labour disputes and other risks of the mining industry, failure of plant, equipment or processes to operate as anticipated, the business of the companies not being integrated successfully or such integration proving more difficult, time consuming or more costly than expected, the early stage development of the Company and its projects; general political and social uncertainties; commodity prices; the actual results of current exploration and development or operational activities; changes in project parameters as plans continue to be refined; accidents and other risks inherent in the mining industry; lack of insurance; delay or failure to receive board or regulatory approvals; changes in legislation, including environmental legislation, affecting the Company; timing and availability of external financing on acceptable terms; conclusions of economic evaluations; and lack of qualified, skilled labour or loss of key individuals. These factors should not be considered exhaustive. Many of these risk factors are beyond the Company's control and each contributes to the possibility that the forward-looking statements will not occur or that actual results, performance or achievements may differ materially from those expressed or implied by such statements. The impact of any one risk, uncertainty or factor on a particular forward-looking statement is not determinable with certainty as these risks, uncertainties and factors are interdependent and management's future course of action depends upon the Company's assessment of all information available at that time.

Forward -looking statements in respect of the future production of the RAC and BCC mines may be considered a financial outlook. These forward-looking statements were approved by management of the Company on November 29, 2014. The purpose of this information is to provide an operational update on the company's activities and strategies and this information may not be appropriate for other purposes. The forward looking statements contained herein are expressly qualified in their entirety by this cautionary statement. The forward looking statements included in this press release are made as of the date of this press release and the Company does not undertake and is not obligated to publicly update such forward looking statements to reflect new information, subsequent events or otherwise unless so required by applicable securities laws.