Clarification on Production – Press Release

Drummond LTD would like to clarify statements made at a recent press visit that took place at our port in Santa Marta.

Drummond is currently producing at a rate of approximately 2 million tons per month at the mines in Cesar Department.  The recent lifting of the night restrictions has allowed Drummond to increase rail haulage and thereby reduce coal inventories however we have not increased coal production.

Our additional tonnage that has been shipped through the railroad to the port has been accomplished through the reduction of inventory and not from increased production.  We will continue to reduce inventory in the coming months to the desired level for this operation.

The mines are currently operating on a reduced schedule with a concurrent reduced staffing level.  If market conditions warrant, Drummond anticipates it would increase to a production rate of 2.5 to 2.8 million tons per month next year.

With current market conditions we foresee the 2016 production to only increase slightly over this year’s production of 28 million tons.

Drummond has been at a reduced production rate at its two mines since May of 2014 and the transition to full production would not occur quickly. If market conditions dictate, Drummond could increase production by expanding the work schedule from the current 5 days per week up to 6, or 7 days per week.  In order to make the move to 6 or 7 days per week, we would have to be confident that market conditions have improved and stabilized.

With this operating schedule change and the resulting production increase, we would expect our costs of production to be significantly reduced.