CANONSBURG, PA, May 8,
2019 /CNW/ - Corsa Coal Corp. (TSXV: CSO) ("Corsa" or the
"Company"), a premium quality metallurgical coal producer, today
reported financial results for the three months ended
March 31, 2019. Corsa has filed its unaudited condensed
interim consolidated financial statements for the three months
ended March 31, 2019 and 2018 and related management's
discussion and analysis under its profile on www.sedar.com.
An updated investor presentation has been added to
www.corsacoal.com.
Unless otherwise noted, all dollar amounts in this news release
are expressed in United States
dollars and all ton amounts are short tons (2,000 pounds per
ton). Pricing and cost per ton information is expressed on a
free-on-board, or FOB, mine site basis, unless otherwise noted.
First Quarter Highlights
- Corsa reported net and comprehensive income from continuing
operations of $3.0 million, or
$0.02 per share attributable to
shareholders, for the first quarter 2019, compared to $2.0 million, or $0.01 per share attributable to shareholders, for
the first quarter 2018.
- Corsa's adjusted EBITDA(1) was $9.2 million for the first quarter 2019 compared
to $10.9 million for the first
quarter 2018. Corsa's EBITDA(1) was $9.5 million for the first quarter 2019 compared
to $9.1 million for the first quarter
2018.
- Cash production cost per ton sold(1) was
$83.21 for the first quarter 2019, a
decrease of $8.25 per ton, or 9%, as
compared to the first quarter 2018.
- Operating cash flows provided by continuing operations for the
first quarter 2019 were $5.7 million
compared to $7.8 million for the
first quarter 2018. Operating cash flows for the first quarter 2019
included a payment of $2.7 million to
settle the previously disclosed $52
million claim made by Lucchini S.p.A. against PBS Coals,
Inc. related to shipments made prior to Corsa's ownership of PBS
Coals, Inc.
- In March 2019, Corsa reduced the
principal balance on the loan payable to Sprott Resource Lending
Corp. ("SRLC") under the secured term loan (the "Facility") by
$3.0 million.
- Low volatile metallurgical coal sales tons, comprised of
"Company Produced" tons and "Value Added Services" purchased coal
tons, were 358,854 in the first quarter 2019 compared to 388,367 in
the first quarter 2018. In the first quarter 2019, Corsa sold a
total of 49,982 "Sales & Trading" tons, which are treated as
pass-through from a profitability perspective, compared to 169,354
tons in the first quarter 2018.
- Corsa achieved an average realized price per ton of
metallurgical coal sold(1) of $116.47 for all metallurgical qualities in the
first quarter 2019 compared to $118.46 in the first quarter 2018. This average
realized price is the approximate equivalent of $167 to $172 on an
FOB vessel basis.(2) For low volatile metallurgical coal
sold, Corsa achieved the approximate equivalent of $170 to $176 on an
FOB vessel basis. For the first quarter 2019, Corsa's sales mix
included 31% of sales to domestic customers and 69% of sales to
international customers.
|
(1)
|
This is a non-GAAP
financial measure. See "Non-GAAP Financial Measures"
below.
|
|
(2)
|
Similar to most U.S.
metallurgical coal producers, Corsa reports sales and costs per ton
on an FOB mine site basis and denominated in short tons. Many
international metallurgical coal producers report prices and costs
on a delivered-to-the-port basis (or "FOB vessel basis"), thereby
including freight costs between the mine and the port.
Additionally, Corsa reports sales and costs per short ton, which is
approximately 10% lower than a metric ton. For the purposes
of this figure, we have used an illustrative freight rate of
$35-$40 per short ton. Historically, freight rates rise and
fall as market prices rise and fall. The low volatile
metallurgical coal sales price is approximated at 3-4% above the
equivalent metallurgical coal price on an FOB vessel basis.
As a note, most published indices for metallurgical coal report
prices on a delivered-to-the-port basis and denominated in metric
tons.
|
George Dethlefsen, Chief
Executive Officer of Corsa, commented, "Over the past two and a
half years, Corsa's operations have been in growth mode, as the
Acosta, Horning, and Schrock Run
mines have been developed, and as the Northeastern reserve base at
Casselman has been
developed. As the Schrock Run mine is expected to achieve
full development status later in the second quarter, we will reach
the point where all our active mining operations will be operating
at their full run-rate capacity. We realized the benefits of
this ramp-up in the first quarter, as production from our mines hit
a five-year high for the company. Additionally, despite being
in an inflationary cost environment in the mining space, we reduced
cash mining costs by 9% from a year ago. We expect to
continue to experience these benefits of increased scale as the
year progresses.
With Corsa's metallurgical coal production forecasted to double
in 2019 from 2016 levels and sales volumes tripling over that
period, we now plan to shift our near-term focus to free cash flow
generation and deleveraging. After investing heavily in
capital expenditures over the past two years, we expect our free
cash flow yield to increase in the coming quarters as our capital
expenditure levels decline. Growth remains a strategic
priority for the Company, and we expect to receive the Keyser mine
permit in the near future. Once the permit is received, we
will evaluate market conditions and the progress of our free cash
flow generation prior to commencing this project.
First quarter profitability was driven by strong metallurgical
coal production levels and cost performance. As we entered
the quarter, coal market conditions were temporarily softer than
normal because of global macroeconomic concerns that arose in late
December. These conditions, in combination with managerial
discretion on whether to sell tons or build inventory, resulted in
shifting sales shipments out of the first quarter and into
subsequent quarters of the year. We are now experiencing
robust demand for our low volatile metallurgical coal and expect to
move higher levels of low volatile tons in upcoming quarters,
including in the second quarter. As a result, we are
maintaining our profitability guidance for 2019.
The outlook for metallurgical coal pricing remains very healthy
as global steel production levels remain elevated and coal supply
disruptions continue to impact the market. While the spot
price of metallurgical coal has declined slightly since the
beginning of the year, the forward price outlook for the remainder
of 2019, 2020 and 2021 have all increased meaningfully. We
expect that the fundamentals for metallurgical coal pricing will
remain supportive in the coming quarters and years because of
continued global economic growth and limited investment in new coal
production. These market conditions, in combination with our
expectations for the Company's production and sales, give us
confidence in our outlook."
2019 First Quarter Sales Metrics
Corsa's metallurgical coal sales figures are comprised of three
types of sales: (i) selling coal that Corsa produces ("Company
Produced"); (ii) selling coal that Corsa purchases and provides
value added services (storing, washing, blending, loading) to make
the coal saleable ("Valued Added Services"); and (iii) selling coal
that Corsa purchases on a clean or finished basis from suppliers
outside the Northern Appalachia region ("Sales and Trading").
For the three months ended March 31,
2019, Corsa's sales were broken down into the following
categories.
|
Metallurgical Coal
Sales by Category (Tons)
|
|
Q1
2019
|
|
Company
Produced
|
280,657
|
|
Purchased - Value
Added Services
|
78,197
|
|
Purchased - Sales and
Trading
|
49,982
|
|
Total
|
408,836
|
Financial and Operations Summary
|
For the three
months ended
|
|
March
31,
|
|
|
|
|
|
Increase
|
|
(in
thousands)
|
2019
|
|
2018
|
|
(Decrease)
|
|
Revenues
|
$
|
57,334
|
|
$
|
80,448
|
|
$
|
(23,114)
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales(2)
|
$
|
49,902
|
|
$
|
70,729
|
|
$
|
(20,827)
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expense
|
$
|
4,555
|
|
$
|
6,457
|
|
$
|
(1,902)
|
|
|
|
|
|
|
|
|
|
|
Net and comprehensive
income for the period from continuing operations
|
$
|
3,002
|
|
$
|
1,957
|
|
$
|
1,045
|
|
|
|
|
|
|
|
|
|
|
Cash provided by
operating activities from continuing operations
|
$
|
5,718
|
|
$
|
7,771
|
|
$
|
(2,053)
|
|
|
|
|
|
|
|
|
|
|
EBITDA(1)
|
$
|
9,518
|
|
$
|
9,106
|
|
$
|
412
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA(1)
|
$
|
9,184
|
|
$
|
10,861
|
|
$
|
(1,677)
|
|
|
|
|
|
|
|
|
|
|
Coal sold -
tons
|
|
|
|
|
|
|
|
|
|
NAPP – metallurgical
coal
|
|
409
|
|
|
558
|
|
|
(149)
|
|
(1)
|
This is a non-GAAP
financial measure. See "Non-GAAP Financial Measures"
below.
|
|
(2)
|
Cost of sales
consists of the following:
|
|
For the three
months ended
|
|
March
31,
|
|
(in
thousands)
|
2019
|
|
2018
|
|
Mining and processing
costs
|
$
|
22,050
|
|
$
|
20,340
|
|
Purchased coal
costs
|
12,018
|
|
28,415
|
|
Royalty
expense
|
1,580
|
|
2,083
|
|
Amortization
expense
|
5,493
|
|
6,189
|
|
Transportation costs
from preparation plant to customer
|
7,201
|
|
12,901
|
|
Idle mine
expense
|
472
|
|
109
|
|
Tolling
costs
|
1,069
|
|
435
|
|
Write-off of advance
royalties and other assets
|
—
|
|
5
|
|
Other
costs
|
19
|
|
252
|
|
$
|
49,902
|
|
$
|
70,729
|
|
For the three
months ended
|
|
March
31,
|
|
2019
|
|
2018
|
|
Variance
|
|
Realized price per
ton sold(1)
|
|
|
|
|
|
|
NAPP – metallurgical
coal
|
$
|
116.47
|
|
$
|
118.46
|
|
$
|
(1.99)
|
|
|
|
|
|
|
|
Cash production cost
per ton sold(1)(2)
|
|
|
|
|
|
|
NAPP – metallurgical
coal
|
$
|
83.21
|
|
$
|
91.46
|
|
$
|
8.25
|
|
|
|
|
|
|
|
Cash cost per ton
sold(1)(3)
|
|
|
|
|
|
|
NAPP – metallurgical
coal
|
$
|
86.18
|
|
$
|
90.65
|
|
$
|
4.47
|
|
|
|
|
|
|
|
Cash margin per ton
sold(1)
|
|
|
|
|
|
|
NAPP – metallurgical
coal
|
$
|
30.29
|
|
$
|
27.81
|
|
$
|
2.48
|
|
|
|
|
|
|
|
EBITDA(1)
(000's)
|
|
|
|
|
|
|
NAPP
|
$
|
11,415
|
|
$
|
11,128
|
|
$
|
287
|
|
Corporate
|
(1,897)
|
|
(2,022)
|
|
125
|
|
Total
|
$
|
9,518
|
|
$
|
9,106
|
|
$
|
412
|
|
|
|
|
|
|
|
Adjusted
EBITDA(1) (000's)
|
|
|
|
|
|
|
NAPP
|
$
|
10,460
|
|
$
|
12,219
|
|
$
|
(1,759)
|
|
Corporate
|
(1,276)
|
|
(1,358)
|
|
82
|
|
Total
|
$
|
9,184
|
|
$
|
10,861
|
|
$
|
(1,677)
|
|
(1)
|
This is a non-GAAP
financial measure. See "Non-GAAP Financial Measures"
below.
|
|
(2)
|
Cash production cost
per ton sold excludes purchased coal. This is a non-GAAP
financial measure. See "Non-GAAP Financial Measures"
below.
|
|
(3)
|
Cash cost per ton
sold includes purchased coal. This is a non-GAAP financial
measure. See "Non-GAAP Financial Measures" below.
|
GUIDANCE(a)
Corsa's updated guidance for the year ending December 31, 2019 is as follows:
|
(all dollar
amounts in U.S. dollars and
tonnage in short tons)
|
Updated
Guidance
Full Year 2019
|
|
Previous
Guidance
Full Year 2019
|
|
Change to
Previous
Guidance
|
|
|
|
|
|
|
|
Metallurgical Coal
Sales Tons
|
|
|
|
|
|
|
Company
Produced
|
1.25 to 1.40
million
|
|
1.25 to 1.40
million
|
|
—
|
|
Purchased - Value
Added Services
|
0.30 to 0.40
million
|
|
0.30 to 0.40
million
|
|
—
|
|
Purchased - Sales and
Trading
|
0.325 to 0.425
million
|
|
0.45 to 0.60
million
|
|
(0.125) to (0.175)
million
|
|
Total Metallurgical
Coal Sales Tons
|
1.875 to 2.225
million
|
|
2.0 to 2.4
million
|
|
(0.125) to (0.175)
million
|
|
|
|
|
|
|
|
Share of
Metallurgical Coal Sales Tons
|
|
|
|
|
|
|
% Domestic Sales at
the mid-point
|
29%
|
|
29%
|
|
—%
|
|
% Export Sales at the
mid-point
|
71%
|
|
71%
|
|
—%
|
|
|
|
|
|
|
|
Metallurgical Coal
Sales Tons Commitments(e)
|
|
|
|
|
|
|
Committed at the
mid-point
|
79%
|
|
69%
|
|
10%
|
|
Committed and Priced
at the mid-point
|
50%
|
|
46%
|
|
4%
|
|
|
|
|
|
|
|
Cash Production
Cost per ton sold (FOB Mine)(b)(c)
|
|
|
|
|
|
|
NAPP Division
Metallurgical Coal
|
$78 - $82
|
|
$78 - $82
|
|
—
|
|
|
|
|
|
|
|
General and
Administrative Expenses(d)
|
|
|
|
|
|
|
NAPP
Division
|
$8.5 - $9.0
million
|
|
$8.5 - $9.0
million
|
|
—
|
|
Corporate
Division
|
$5.0 - $5.5
million
|
|
$5.0 - $5.5
million
|
|
—
|
|
Total Corsa
|
$13.5 - $14.5
million
|
|
$13.5 - $14.5
million
|
|
—
|
|
|
|
|
|
|
|
Note: Selling
expenses are forecasted to be covered by margins from Sales and Trading tons sold.
|
|
|
|
|
|
|
|
|
Net and
comprehensive income
|
$13 to $15
million
|
|
$13 to $15
million
|
|
—
|
|
Adjusted
EBITDA(e)
|
$42 - $46
million
|
|
$42 - $46
million
|
|
—
|
|
|
|
|
|
|
|
Capital
Expenditures per ton sold(f)
|
|
|
|
|
|
|
Maintenance capital
expenditures
|
$5
|
|
$5
|
|
—
|
|
Total capital
expenditures
|
$5
|
|
$6
|
|
($1)
|
|
(a)
|
Guidance projections
("Guidance") are considered "forward-looking statements" and
"forward looking information" and represent management's good faith
estimates or expectations of future production and sales results as
of the date hereof. Guidance is based upon certain
assumptions, including, but not limited to, future cash production
costs, future sales and production and the availability of coal
from other suppliers that the Company may purchase. Such
assumptions may prove to be incorrect and actual results may differ
materially from those anticipated. Consequently, Guidance
cannot be guaranteed. As such, investors are cautioned not to
place undue reliance upon Guidance, forward-looking statements and
forward-looking information as there can be no assurance that the
plans, assumptions or expectations upon which they are placed will
occur.
|
|
(b)
|
This is a non-GAAP
financial measure. See "Non-GAAP Financial Measures"
below.
|
|
(c)
|
Cash production cost
per ton sold excludes purchased coal.
|
|
(d)
|
Exclusive of
stock-based compensation and selling related commissions, bank fees
and finance charges.
|
|
(e)
|
This is a non-GAAP
financial measure. For a reconciliation, please see the
Company's press release dated December 10, 2018.
|
|
(f)
|
Tons sold excludes
purchased coal used in the Sales and Trading platform.
|
Coal Pricing Trends and Outlook
Overall, the metallurgical coal market remains well supported as
steel production remains at elevated levels and as supply
disruptions continue to arise. Entering the first quarter of
2019, global macroeconomic growth fears, combined with Chinese
import restrictions on Australian coals, put downward pressure on
coal prices. Since then, the spot market stabilized and
remained relatively stable over the quarter. Metallurgical
coal producers, particularly the largest players, have shown supply
discipline over the course of this cycle, which bodes well for
future market balance. We believe a high cost of capital for
coal producers, a growing emphasis to have environmental, social
and governance factors impact production and investment decisions,
and a preference for dividends and share repurchases from major
investors of coal producers will collectively serve to dampen new
production of metallurgical coal going forward. This, in
combination with ongoing mine depletion, should support a rise in
the global cost curve in the year ahead, which historically has led
to higher metallurgical coal prices.
There is continued speculation that the U.S. and China will soon come to a trade pact which
should benefit the global economy to support stronger global growth
which would in turn lift steel demand. China also imposed import restrictions on
Australian coals which slowed clearing customs from 20 days to a
reported 40-60 days. Both events led to spot prices for Australian
premium low volatile metallurgical coal finished at $205/metric ton ("mt") FOBT from beginning the
quarter at $211/mt while U.S. East
Coast low volatile coal finished at $189/mt from beginning the quarter at
$197/mt. The futures market for
Q2 2019 remains steady with prices currently at $200/mt. Currently, the futures market for
calendar 2020 is $190/mt and for 2021
is at $178.75/mt. These are
profitable levels for almost all of the global cost curve.
The World Steel Association recently issued its short-range
outlook forecasting steel demand to be up by 1.3% in 2019. Growth
in Asia, excluding China, is forecasted to remain robust with
6.5% growth expected in 2019. Through March, Chinese steel
production was up 9.9% due to strong infrastructure spending.
China represented 52% of global
steel production. Global steel production was up 4.9% which was
thirty-fifth straight month of positive annual growth. Preliminary
U.S. metallurgical coal export data shows a 1.5% decline for a
total of 8 million tons year-to-date through February. Steam coal
exports are expected to weaken throughout the year as steam coal
prices have weakened globally. If this trend continues, it should
free up rail and terminal capacity and lessen congestion risks at
the ports for metallurgical coal exports.
Financial Statements and Management's Discussion and
Analysis
Refer to Corsa's unaudited condensed interim consolidated
financial statements for the three months ended March 31, 2019
and 2018 and related management's discussion and analysis, filed
under Corsa's profile on www.sedar.com, for details of the
financial performance of Corsa and the matters referred to in this
news release.
Non-GAAP Financial Measures
Management uses realized price per ton sold, cash production
cost per ton sold, cash cost per ton sold, cash margin per ton
sold, EBITDA and adjusted EBITDA as internal measurements of
financial performance for Corsa's mining and processing
operations. These measures are not recognized under
International Financial Reporting Standards ("GAAP"). Corsa
believes that, in addition to the conventional measures prepared in
accordance with GAAP, certain investors and other stakeholders also
use these non-GAAP financial measures to evaluate Corsa's operating
and financial performance; however, these non-GAAP financial
measures do not have any standardized meaning and therefore may not
be comparable to similar measures presented by other issuers.
Accordingly, these non-GAAP financial measures are intended to
provide additional information and should not be considered in
isolation or as a substitute for measures of performance prepared
in accordance with GAAP. Reference is made to the
management's discussion and analysis for the three months ended
March 31, 2019 for a reconciliation and definitions of
non-GAAP financial measures to GAAP measures.
Corsa defines adjusted EBITDA as EBITDA (earnings before
deductions for interest, taxes, depreciation and amortization)
adjusted for change in estimate of reclamation provision for
non-operating properties, impairment and write-off of mineral
properties and advance royalties, gain (loss) on sale of assets and
other costs, stock-based compensation, non-cash finance expenses
and other non-cash adjustments. Adjusted EBITDA is used as a
supplemental financial measure by management and by external users
of our financial statements to assess our performance as compared
to the performance of other companies in the coal industry, without
regard to financing methods, historical cost basis or capital
structure; the ability of our assets to generate sufficient cash
flow; and our ability to incur and service debt and fund capital
expenditures.
Qualified Person
All scientific and technical information contained in this news
release has been reviewed and approved by Peter V. Merritts, Professional Engineer and the
Company's President - NAPP Division,
who is a qualified person within the meaning of National Instrument
43-101 - Standards of Disclosure for Mineral Projects.
Caution
The estimated coal sales, projected market conditions and
potential development disclosed in this news release are considered
to be forward looking information. Readers are cautioned that
actual results may vary from this forward-looking
information. Actual sales are subject to variation based on a
number of risks and other factors referred to under the heading
"Forward-Looking Statements" below as well as demand and sales
orders received.
Information about Corsa
Corsa is a coal mining company focused on the production and
sales of metallurgical coal, an essential ingredient in the
production of steel. Our core business is producing and selling
metallurgical coal to domestic and international steel and coke
producers in the Atlantic and Pacific basin markets.
Earnings Call
Members of management will host a conference call on
Thursday, May 9, 2019 at 10:00 a.m. (Eastern time) to discuss the
Company's results. To access the call from Canada and the U.S., dial 1.888.231.8191
(Toll Free). To access the
call from other locations, dial 1.647.427.7450 (International)
The live webcast will be available at:
https://event.on24.com/wcc/r/1997225/FE517C3D1668BD5B4EDC1FC18E7CFFC1
Forward-Looking Statements
Certain information set
forth in this press release contains "forward-looking statements"
and "forward-looking information" (collectively, "forward-looking
statements") under applicable securities laws. Except for
statements of historical fact, certain information contained herein
relating to projected sales, coal prices, coal production, mine
development, the capacity and recovery of Corsa's preparation
plants, expected cash production costs, geological conditions,
future capital expenditures and expectations of market demand for
coal, constitutes forward-looking statements which include
management's assessment of future plans and operations and are
based on current internal expectations, estimates, projections,
assumptions and beliefs, which may prove to be incorrect. Some of
the forward-looking statements may be identified by words such as
"estimates", "expects" "anticipates", "believes", "projects",
"plans", "capacity", "hope", "forecast", "anticipate", "could" and
similar expressions. These statements are not guarantees of future
performance and undue reliance should not be placed on them. Such
forward-looking statements necessarily involve known and unknown
risks and uncertainties, which may cause Corsa's actual performance
and financial results in future periods to differ materially from
any projections of future performance or results expressed or
implied by such forward-looking statements. These risks and
uncertainties include, but are not limited to: risks that the
actual production or sales for the 2019 fiscal year will be less
than projected production or sales for this period; risks that the
prices for coal sales will be less than projected; liabilities
inherent in coal mine development and production; geological,
mining and processing technical problems; inability to obtain
required mine licenses, mine permits and regulatory approvals or
renewals required in connection with the mining and processing of
coal; risks that Corsa's preparation plants will not operate at
production capacity during the relevant period, unexpected changes
in coal quality and specification; variations in the coal mine or
preparation plant recovery rates; dependence on third party coal
transportation systems; competition for, among other things,
capital, acquisitions of reserves, undeveloped lands and skilled
personnel; incorrect assessments of the value of acquisitions;
changes in commodity prices and exchange rates; changes in the
regulations in respect to the use, mining and processing of coal;
changes in regulations on refuse disposal; the effects of
competition and pricing pressures in the coal market; the
oversupply of, or lack of demand for, coal; inability of management
to secure coal sales or third party purchase contracts; currency
and interest rate fluctuations; various events which could disrupt
operations and/or the transportation of coal products, including
labor stoppages and severe weather conditions; the demand for and
availability of rail, port and other transportation services; the
ability to purchase third party coal for processing and delivery
under purchase agreements; and management's ability to anticipate
and manage the foregoing factors and risks. The forward-looking
statements and information contained in this press release are
based on certain assumptions regarding, among other things, coal
sales being consistent with expectations; future prices for coal;
future currency and exchange rates; Corsa's ability to generate
sufficient cash flow from operations and access capital markets to
meet its future obligations; the regulatory framework representing
royalties, taxes and environmental matters in the countries in
which Corsa conducts business; coal production levels; Corsa's
ability to retain qualified staff and equipment in a cost-efficient
manner to meet its demand; and Corsa being able to execute its
program of operational improvement and initiatives. There can be no
assurance that forward-looking statements will prove to be
accurate, as actual results and future events could differ
materially from those anticipated in such statements. The reader is
cautioned not to place undue reliance on forward-looking
statements. Corsa does not undertake to update any of the
forward-looking statements contained in this press release unless
required by law. The statements as to Corsa's capacity to produce
coal are no assurance that it will achieve these levels of
production or that it will be able to achieve these sales
levels.
The TSX Venture Exchange has in no way passed on the
merits of this news release. 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.
SOURCE Corsa Coal Corp.
