PAK June 2012


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PAK June 2012

  1. 1. Becoming Colombia’s Leading Independent Coal Producer June 2012 TSXV: PAK
  2. 2. DisclaimerForward Looking StatementThis presentation contains certain “forward-looking statements” and “forward-looking information” under applicable Canadian securities laws concerning the business, operationsand financial performance and condition of Pacific Coal, S.A. Forward-looking statements and forward-looking information include, but are not limited to, statements with respectto business plans and strategies of Pacific Coal; information with respect to the proposed subscription receipt financing of Pacific Coal; estimated production of the various projectsof Pacific Coal; the benefits of the acquisitions and the development potential of properties of Pacific Coal; the future price of coal; estimates regarding mineralization andexploration results; the ability of Pacific Coal to achieve mining success consistent with management’s expectations; and expected levels of royalty rates, operating costs, and othercosts and expenses. Undue reliance should not be placed on forward-looking statements, which are inherently uncertain, are based on estimates and assumptions, and are subjectto known and unknown risks and uncertainties (both general and specific) that contribute to the possibility that the future events or circumstances contemplated by the forward-looking statements will not occur. There can be no assurance that the plans, intentions or expectations upon which forward-looking statements are based will in fact be realized.Actual results will differ, and the difference may be material and adverse to the Corporation and its shareholders.All statements other than statements of historical fact are forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as“anticipate”, “believe”, “could”, “estimate”, “expect”, “forecast”, “guidance”, “intend”, “may”, “plan”, “predict”, “project”, “should”, “target”, “vision”, “will”, or similar wordssuggesting future outcomes or language suggesting an outlook. Forward looking statements are based on the opinions and estimates of management at the date the statements aremade, as well as a number of assumptions made by, and information currently available to, the Corporation concerning, among other things, Pacific Coal’s ability to successfullycomplete the proposed subscription receipt financing; anticipated geological, operational and financial performance, business prospects, strategies, regulatory developments, futurecommodity prices, future production levels of the Corporation’s assets, the ability to obtain financing on acceptable terms, the timely receipt of any required approvals and thatthere will be no significant events occurring outside of Pacific Coal’s normal course of business. Although management considers these assumptions to be reasonable based oninformation currently available to it, they may prove to be incorrect. Factors that could cause actual results to vary materially from results anticipated by such forward-lookingstatements include changes in market conditions, risks relating to international operations, fluctuating coal prices and currency exchange rates, changes in project parameters, thepossibility of project cost overruns or unanticipated costs and expenses, labour disputes and other risks of the mining industry, failure of equipment or processes to operate asanticipated, and acquisitions not being integrated successfully or such integration proving more difficult, time consuming or costly than expected. Although Pacific Coal hasattempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may beother factors that cause actions, events or results not to be anticipated, estimated or intended. Pacific Coal undertakes no obligation to update forward-looking statements ifcircumstances or management’s estimates or opinions should change except as required by applicable securities laws.This presentation uses the terms “measured”, “indicated”, and/or “inferred” mineral resources. United States investors are advised that while such terms are recognized byCanadian regulations, the United States Securities and Exchange Commission does not recognize them. Unites States investors are cautioned not to assume that all or any part ofmineral resources will ever be converted into mineral reserves. Inferred mineral resources have a great amount of uncertainty as to their existence, and as to their economic andlegal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferredmineral resources may not form the basis of feasibility or other economic studies. United States investors are cautioned not to assume that all or any part of an inferred mineralresource exists, or is economically or legally mineable. 1
  3. 3. Vision Explore, expand and develop existing producing assets to increase efficiencies, reserves and production, while securing infrastructure capacity to capture all aspects of the value chain Seek opportunities to secure access to markets and ensure commercial flexibility Foster a culture of citizenship and environmentally responsible stewardship Pacific Coal is on track to produce 2.0 Mt of thermal coal in 2012 The Company has a compelling portfolio of high quality producing assets: La Caypa (thermal coal) Cerro Largo (thermal coal) CI Jam (coke) Cerro Largo Mine 2
  4. 4. Strategy Vertical integration to secure market access in value-added product streams RAW MATERIAL • La Caypa – thermal coal • 100% ownership and control • Cerro Largo – thermal coal of La Caypa, Cerro Largo and PRODUCTION La Tigra • CI Jam – hard coking coal • Company owns 92% of CI (UPSTREAM) • La Tigra – asphaltite Jam, and controls 100% CAW/CCW plant • 50% equity interest • Carried interest for • Upgraded coke production 50/50 JV MANUFACTURING/ • Colloidal coal in water (“CCW”)* PROCESSING Pyrolysis plant (MIDSTREAM) • Colloidal asphaltite in water (“CAW”)* • 100% equity interest • Pyrolysis • Not yet constructed • Pyrolysis is a proven procedure 1. Marketing of thermal coal RETAIL/MARKETING 2. Marketing of coke 3. Marketing of colloidal products to: (DOWNSTREAM) • Power generation plants • Heavy oil producing companies and refineries*CAW and CCW are technologies being developed by Blue ACF, a company in which PAK has a 5% equity interest, with the right to increase itsinvestment to 20% pending successful trials. Blue ACF received exclusive US Patent for CCW Technology in May 2012. 3
  5. 5. Asset Summary Diverse Portfolio of High Quality Coal Assets Well-positioned portfolio with diversified current and future production of steam coal, coke and asphaltite Current Asset Type Stage Production* Puerto Brisa Port of Santa Marta 1 1 Open pit steam coal Port Barranquilla 5 185 Kt 1 La Caypa mine with Producing 2 (Coal) underground potential Open pit steam coal 132 Kt 2 Cerro Largo Producing 4 mine (Coal) Medellin Underground coking Producing 10 kt 3 3 CI Jam coal mine upgrading Bogota (ramp-up) (Coke) to coke Cali Exploration/ Start mid- 4 La Tigra Asphaltite Development 2013 Port concession for 5 Barranquilla Port Development - coke exportSource: Management estimates*Q1 2012 numbers 4
  6. 6. Thermal Coal Production Profile Robust production growth from existing assets with additional greenfield and consolidation opportunities 3.4-3.6 Total Production Annual Production (millions of tonnes) Cerro Largo La Caypa 2.7-2.9 2.2 2.0 1.4 1.2 2010A 2011A 2012E 2013E 2014ESource: Management estimates*Includes total production from Cerro Largo Q1/2011, before the acquisition closed 5
  7. 7. La Caypa Mine Significant Thermal Coal Production High quality steam coal production with attractive expansion and underground potential Location: • Guajira Department, Colombia • Adjacent to Carbones del Cerrejón mine, largest coal mine in South America Resource estimate: • 47.0 Mt of measured resource (1) • 17.8 Mt of indicated resource (1) Area: • 300 hectares Average BTU: • 12,264 (1) Average Sulphur: • 0.69% (1) Operations: • One open-pit mine currently operating ₋ South pit expansion in development with expected start-up in 2012 and potential production of additional 1.0 Mtpa • One underground mine in exploration, expected development in 2013 LA CAYPA – COAL CHARACTERISTICS (1) (1) 2011 Production • 1,239,583 t Year Moisture % Ash % Sulphur % CV Btu/lb 2012E Production • Approx. 1,300,000 t (4) 2009 10.11 5.78 0.69 12,264 Projected Costs (2): • US$85/t (4) RESERVES & RESOURCES (1) Avg Contract Price: • US$100/t in long-term contracts for 100% of production to 2013 LA CAYPA - (Inclusive of Additional Resources) Infrastructure: • Secured allocation at Santa Marta (250 km) Surface (Mt) Underground (Mt) • Expected additional capacity at Puerto Brisa, mid-2013, reducing Measured 11.2 35.8 freight costs by 40%-50% Indicated - 17.8 Current strip ratio: • 8.75:1 (Q1 2012)(1) Source: Report titled “NI 43-101 Compliant Technical Report, La Caypa Mine, Department of Guajira, Colombia” prepared by SRK Consulting and dated November 1, 2010(2) Includes transportation, port, and administrative costs(3) Includes South Pit development at La Caypa 6(4) Management Estimate
  8. 8. La Caypa Mine Operations Increasing production and improving strip ratios 2012 La Caypa production forecasted to La Caypa 2012 Estimated Coal Production (kt) rise from 1.23 Mt to approx. 1.3 Mt 250 200 Coal Production 150 Organic growth in 2012 and 2013 driven by: (Thousand Tonnes) - 100 2012 Actual & Forecast  Expansion of South Pit (2012) 50 (Total: 1.389 Mt)  Underground mining (2013) 0 Oct Aug Dec Nov Jan May Feb Sep Apr Jul Jun Mar La Caypa 2012 Estimated Stripping Ratio* Stripping Ratio: waste : production (1) 15 10 La Caypa 2012 Estimated Operational Stripping 5 Ratio (Total Year: 7.1:1) 0 Feb Sep Oct Apr Jul Jun Aug Mar Dec Nov Jan MaySource: Management estimates* Does not include South Pit – total waste (tonnes) estimated for 2012: 2,516,505 7
  9. 9. La Caypa Mine South Pit Expansion to Extend Mine Life in 2012 Potential incremental production of 1.0 Mt per annum  Extension of existing open pit to south of highwall with same premium coal characteristics as the primary pit with a similar CV Btu/lb  Straightforward integration into existing mining operations  Expected production start-up in 2012 with all permits in hand  South pit measured and indicated resources of 7.7 Mt(1)  South pit development to be concurrent with existing mining operations SECTOR +400(1) Report titled “NI 43-101 Compliant Technical Report, La Caypa Mine, Department of Guajira, Colombia” prepared by SRK Consulting and dated November 1, 2010 8
  10. 10. La Caypa Mine Underground Production to Drive Growth in 2013 Underground potential to drive resource expansion and continued growth in production(1)  Mine planning underway based on 16 coal seams showing consistent thicknesses suitable for underground mining (average thickness ranging from 2.3 metres to 6.8 metres)  Measured and indicated resource of 53.6 Mt (1)  Potential thermal coal production to increase 0.8 – 1.0 Mtpa expected to commence in 2013  Existing pit provides underground access point with three contemplated levels to depth of 240 metres from pit bottom  Studies underway to determine optimum mining method and design; potential to become the largest underground coal operation in Colombia EXISTING OPEN PIT ELEVATION: 0 Level 1 Cradle ELEVATION: -150 Level 1 ELEVATION: -300 Level 2(1) Source: Report titled “NI 43-101 Compliant Technical Report, La Caypa Mine, Department of Guajira, Colombia” prepared by SRK Consulting and dated November 1, 2010 and management projections 9
  11. 11. Cerro Largo – La Divisa Acquisition of Significant Coal Production Contains high volatile bituminous type B coal with high calorific values and low sulphur Location: • Cesar Department, Colombia in the La Jagua de Ibirico coalfield • Adjacent to licences owned by Drummond and Vale. Glencore is currently operating an open-pit mine on the adjacent La Jagua sector Resource estimate: • 11.6 Mt – 21.2 Mt inferred (1) Area: • 488 hectares Average BTU: • 12,000 (1) Average Sulphur: • 0.78% (1) Operations: • One open-pit mine currently operating Projected Costs (2): • US$90/t, expected to lower US$2/year with improved efficiencies and strip ratio (3) Q1 2012 Production • 131,895 t* 2012E Production • 700,000 t (3) Infrastructure: • Secured allocation at Santa Marta (250 km) • Expected additional capacity at Puerto Brisa in mid-2013, reducing freight costs by 30%-40% Current strip ratio: • 16.19:1 (Q1 2012) (during ramp up) • Long-term mine plan has been implemented(1) Source: Report titled “Independent Technical Report, Cerro Largo Mine” prepared by SRK Consulting and dated February 2011(2) Includes transportation, port, and administrative costs * Q1/2011 production of Cerro Largo was prior to Pacific Coal acquisition 10(3) Management Estimate
  12. 12. Cerro Largo – La Divisa Increasing production and improving strip ratio Cerro Largo 2012 Estimated Coal Production (kt) 150 Coal Production 100 (Thousand Tonnes) - 2012 Actual & Forecast 50 (Total: 0.7 Mt) 0 Feb Sep Oct Apr Jul Jun Aug Mar Dec Nov Jan May 2012 Cerro Largo production expected Cerro Largo 2012 Estimated Stripping Ratio to rise from 298kt to approx. 700kt Stripping Ratio: waste : production 40 30 Production increase and lower strip ratios Cerro Largo 2012 Estimated Operational due to: 20 Stripping Ratio (Total 10 Year: 13.5:1)  New integrated mine plan 0  Commissioning additional mining equipment Feb Sep Oct Apr Jul Jun Aug Mar Dec Nov Jan MaySource: Management estimates 11
  13. 13. Coke Production Profile High value coke operation with long mine life and coal to coke conversion of ~70% Operational adjustments during the 90,000- 90,000- first year of operations resulted in 120,000 120,000 reduced production for 2011 (7,256 t CI Jam Annual Production in tonnes of coke produced in Q4 2011) These adjustments also allowed for infrastructure and capacity to be built 60,000- up, resulting in longer-term production 72,000 targets being achieved sooner Ramp-up in progress  10,547 t of coke produced during Q1 2012 7,256  Expected coke production in 2012: 60,000 – 72,000 t 2010A 2011A 2012E 2013E 2014ESource: Management estimates 12
  14. 14. CI Jam Coking Coal and Upgraded Coke Production Underground coking coal operation selling premium coke into high price environment Location: • Samaca Municipality, in Department of Boyaca • 3,000 small HCC producers in the area Resource estimate: • 2.8 Mt in situ (1) Area: • 52 hectares Average BTU: • 13,800 with coking properties (1) Average Sulphur: • 0.92% (1) Operations: • Underground coking coal • Upgrading coking coal to coke Projected Costs (2) : • US$210/t (3) 2011 Production: • 7,000 tonnes of coke 2012E Production • 60,000 – 72,000 tonnes of coke (3) 2012E Avg Budget Price: • US$270/t (3) Infrastructure: • Well maintained roads to truck coke to domestic markets and to port terminals (800 km to Barranquilla) Status: • Completed refurbishment of 160 beehive coking ovens • Completed refurbishment of coker infrastructure(1) Source: Report titled “SRK Technical Report Written To Be Compliant With NI 43-101 On Contract 7241, Boyaca, Colombia” prepared by SRK Consulting and dated August 2010(2) Includes transportation, port, and administrative costs(3) Management Estimate 13
  15. 15. Regional InfrastructureProximity to Infrastructure Supporting Growth Significant port and road infrastructure in place to support existing regional coal production Puerto Bolivar  Secured a minimum of 1.8 Mtpa of stockpiling and shipping capacity at the Port of Santa Marta until 2013 Port of Santa Marta Puerto Brisa Barranquilla  Production trucked 250 km by paved Port La Caypa highway to Santa Marta at a cost of Barranquilla approximately US$20-$23 per tonne from La Caypa and 280 km from Cerro Cartagena Cartagena Port Largo at a cost of approximately US$23-US$24 Cerro Largo  Expected capacity at Puerto Brisa provides alternative port location closer Panama to both La Caypa and Cerro Largo with potential to reduce freight costs by 40%- 50% and by 30%-40%, respectively Venezuela  Puerto Brisa construction Colombia La Tigra expected to be completed by Q1/2013, providing additional 35 Mt of specialized coal CI Jam shipping capacity Legend River Transport Coal Mine Coal/Asphaltite Project Road Ports 14
  16. 16. Port of BarranquillaInvesting in Long-Term Port Access for Coke Pacific Coal acquired a port concession situated on the Magdelena River near the Port of Barranquilla (approximately 5km from the Caribbean Sea) to be used to export coke, specialized coals, and bulk commodity products. Excess capacity at the port can be monetized by selling to other exporters Pacific Coal plans to tender for engineering, construction and procurement by Q2/2012, expecting to have an early start on coal loading operations with a provisional set-up for Q3/2012 Main features of the final proposed scheme:  Two portable shiploaders  A pile supported concrete berth with 12 m water depth  Portable Stacker  Coal/Coke piles BARRANQUILLA CONCESSION  Reclaim conveyor alongside the open stockpiles  Office/Maintenance building  FEL receiving hopper (rail mounted)  Overall average loading capacity of approximately 10,000 tonnes per day BARRANQUILLA CONCESSION 15
  17. 17. La Tigra – Asphaltite ProfileAsphaltites are species of bitumen, dark-colored, comparatively hardand non-volatile solids, composed principally of hydrocarbons. GilsoniteAs of today in the La Tigra area, there is evidence for the presence oftwo different types of asphaltite: Grahamite and Gilsonite.Management expects a significant resource at La Tigra to be confirmedwith a National Instrument 43-101 compliant report – physicalevidence on outcrops, oil seeps and 3 mines already in production inthe area lead to optimistic forecasts on the existence of importantasphaltite reserves. GrahamiteLocation of La Tigra: • 80 km from BarrancabermejaArea: • 5,700 hectaresOperations: • Geophysical, metalotelluric, and gravimetric studies are in progress; results expected Q3 2012 La Tigra outcrop • Production start planned for mid-2013Infrastructure: • 70 km from Bucaramanga with paved roads between Bucaramanga and San Alberto • 80 km from Barrancabermeja, the centre for petroleum refining and a port on the Magdalena River 16
  18. 18. La Tigra’s Asphaltite Applications Proven Applications Applications in Evaluation PhaseAsphalt modifiers Colloidal Asphaltite in Water (“CAW”)• Oil drilling and mud additive • Crushed asphaltite, suspended in water forming a colloid, can• Metal casings be used as fuel by power generators• Paving/roofing asphalts • PAK and Blue ACF are in the process of developing a pilot• Paint resins plant test for CAW at Babcock & Wilcox facilities in USAPyrolysis • Significant marketing opportunities as CAW can be sold as a• High margin application, potential for substantial volumes fuel oil substitute• Converts asphaltite to valuable liquid and gas products, and • Management foresees strong market demand for CAW in pet coke Central America and the Caribbean• Pet coke is a by-product produced through pyrolysis Colloidal Coal in Water (“CCW”)• Prefeasibility study indicates excellent economics based on • Similar to CAW, but using coal instead of asphaltite lab tests conducted with Colombia grahamite and gilsonite • Blue ACF CCW trials at Babcock & Wilcox ongoing• Feasibility study in progress in order to select the specific technology and to conduct pilot plant tests (100% PAK) • In May 2012 Blue ACF received exclusive rights to the patent for “nano-dispersions of coal in water as the basis of fuel related technologies and methods of making same” • Blue ACF has a 36-month exclusivity period related to any vehicle developed by Blue ACF for applications of the patent using coal and asphaltite • PAK has 50% investment option in the development of CCW and CAW plants Experimental Pyrolysis Products CCW Trial 17
  19. 19. Pacific Coal Health, Safety, Environment, and Community• La Caypa mine named as an example of environmental best practice by SGS at the 8th Annual International Mining Congress Health and Safety Mission: Achieve Health and Safety goals through stewardship, integrity, and empowermentThe Company seeks to continuously reduce the number of workplace and operational safety incidents, with the ultimategoal of achieving the lowest accident frequency rates in the industry• The Company strives for eco-friendly operations wherever possible, by forming strategic alliances with environmental corporations• The Company seeks to work with partners with high health and safety policies and standards• The Company encourages its employees to participate actively in safety initiatives and prevention programs• All of our employees take part in our community health programs as both volunteers and patients• The Company maintains weekly updates of its safety performance indicators Community Mission: Maximize shareholder value while fostering a corporate environment of responsible citizenship and respecting the interests of our stakeholders and members of the communities in which we operate • The Company aligns its initiatives with the needs and activities of local governments, to contribute to the nation’s progress • The Company works closely with non-profit organizations to maximize its community efforts • The Company ensures responsible operations by minimizing wherever possible its impact on the environment 18
  20. 20. Capital Structure  Pacific Coal became a publicly listed company via RTO on March 14, 2011, making the Company the only independent, public coal producer in Colombia  Fully leveraged to rising interest in Colombian coal  Strong sponsorship and institutional investor support  As at April 13, 2012, 11.1 million shares had been purchased for cancellation under the normal course issuer bid Pacific Coal (TSXV: PAK) Shares outstanding: 322.1 million Options (vested & exercisable) 35.8 million Warrants outstanding with weighted avg. exercise price of $2.10(1) 75.1 million Fully diluted: 433.0 million Market cap (basic): $61.2 million (2) Cash (March 31, 2012) $4.2 million Long-term debt (3) (March 31, 2012) $38.9 million Enterprise value $96.0 million(1) Expiry date March 14, 2016(2) Based on closing price of $0.19 on 06/08/2012(3) Includes finance leases 19
  21. 21. Pacific CoalAchievement Scorecard Achieved In Progress Completion of amended NI 43-101 at La Caypa and Cerro Largo O Commencement of development of south pit expansion /  Commencement surface work for underground at La Caypa  Implementation of integrated mine plan at Cerro Largo  Transition from Port of Santa Marta to Puerto Brisa, reducing freight O costs by 30%-50% Completion of refurbishment of 160 beehive coking ovens at CI Jam  Commencement of exploration at La Tigra  Completion of NI 43-101 on La Tigra O Development of Port of Barranquilla O CAW tests and trials  CCW tests and trials O 20
  22. 22. Pacific CoalSummary Strategically located, high-quality projects in a world-class jurisdiction with significant growth potential High-grade material of which global supply is permanently depleting and thus carrying premiums High-quality coal characteristics – high BTU, low moisture, low ash, low sulphur Access to international markets via ports – improving efficiencies and cost reductions Opportunities to develop projects to access growth markets such as coking coal and colloidal fuels 21
  23. 23. Executive Management Strong and Experienced TeamLuis Arturo Carvajales – Chief Executive Officer More than 20 years of experience in the mining industry, holding management positions in marketing, sales, logistics, and serving as legal counsel Most recently President / Legal Representative of Carbones Colombianos del Cerrejon S.A.Miguel Velasquez – Chief Financial Officer Over 25 years experience as Finance & Administrative Manager for companies in Colombia and at Colombian branches of Canadian companiesPeter Volk – General Counsel and Secretary Mr.Volk has acted as General Counsel and Secretary of several Canadian public companies including PetroMagdalena Energy Corp., Pacific Rubiales Energy Corp., Gran Colombia Gold Corp., and Bolivar Gold Corp.Investor Relations Belinda Labatte, Principal Greg DiTomaso, Director, Investor Relations and Special Projects 22
  24. 24. APPENDIX 23
  25. 25. Colombia A World-Class Coal District LA GUAJIRA DEPARTMENT La Tigra Cerrejon (BHP/Xstrata/Anglo) CI Jam  Colombia is the world’s 10th largest producer (76 La Caypa million tonnes in 2009) and 4th largest exporter of coal  Coal represented 25% of total export earnings for Colombia in 2009  Colombia has one of the largest proven coal reserves CESAR DEPARTMENT in the world, with over 7 billion tonnes of recoverable El Descanso Calenturitas (Drummond) (Glencore) reserves and 17 billion tonnes of potential reserves El Hatillo La Francia (Vale)  Colombia’s estimated 2011 coal production is 85 (Goldman Sachs) million to 95 million tonnes Cerro Largo La Jagua (Glencore) Pribbenow (Drummond)Source: Ingeominas Colombian Institute of Geology and Mining; Energy Information Administration; Reuters; Intierra 24
  26. 26. Colombia A World-Class Coal District Colombia is a significant coal mining region with 2012 production forecast to exceed 87 million tonnes* Colombian Coal Production (Mt) DMTU Thermal Coal Price (FOB Puerto Bolivar) 100 $200 90 $180 80 Average contract $160 price in 2012: $100 70 Production in Mt $140 60 $120 50 $100 40 $80 30 $60 20 $40 10 $20 0 $- 2012E* CAPP Coal Futures FOB Puerto BolivarSource: BP Statistical Review of World Energy and Bloomberg*Economist Intelligence Unit 25
  27. 27. Valuation Metrics Opportunity For Re-valuation As at May 16, 2012 $4 $12 $100 11.0x 3.6x $90 86.5x $4 $10 $80 $3 72.1x $70 $8 $3 $60 EV / Tonne Sold EV / ResourceEV / EBITDA $2 1.8x $6 $50 $40 $2 $4 $30 $1 $20 $2 1.4x $1 $10 $0 $0 $0 Pacific Coal Peer* Pacific Coal Peer* Pacific Coal Peer*Source: Management estimates, Fraser Mackenzie research, and Bloomberg* Peers: Corsa Coal Corp., Forbes & Manhattan Coal Corp., Lipari Energy, and Xinergy Ltd.** Production sales as of most recent quarter on an annualized basis 26