CANONSBURG, PA, May 9,
2018 /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, 2018. Corsa has filed its unaudited condensed
interim consolidated financial statements for the three months
ended March 31, 2018 and 2017 and related management's
discussion and analysis under its profile on www.sedar.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 $2.0 million, or
$0.01 per share, for the first
quarter 2018, compared $11.9 million,
or $0.08 per share, for the first
quarter 2017.
- Operating cash flows from continuing operations for the first
quarter 2018 were $7.8 million
compared to $14.9 million for the
first quarter 2017.
- Total revenue from continuing operations was $80.4 million for the first quarter 2018, an
improvement of 54% as compared to the first quarter 2017.
- Corsa's adjusted EBITDA(1) was $12.2 million and $10.9
million at its Northern Appalachia ("NAPP") Division and on
a consolidated basis, respectively, for the first quarter 2018.
Corsa's EBITDA(1) was $11.1
million and $9.1 million at
its NAPP Division and on a consolidated basis, respectively.
- Corsa sold a total of 557,721 tons of metallurgical coal in the
first quarter 2018, up 89% compared to the first quarter 2017.
- Corsa achieved an average realized price per ton of
metallurgical coal sold(1) at its NAPP Division of
$118.46 for all metallurgical
qualities in the first quarter 2018, this average realized price is
the approximate equivalent of $164 to
$169 on a free-on-board vessel
basis(2) and is comprised of a mix of 22% sales to
domestic customers and 78% sales to international customers.
- Corsa achieved an average realized price per ton of low
volatile metallurgical coal sold(1) (totaling 388,367
tons) at its NAPP Division of $133.92
in the first quarter 2018, this average realized price is the
approximate equivalent of $181 to
$186 on a free-on-board vessel
basis(2).
- Corsa divested its thermal and industrial coal division in
March 2018, becoming a pure-play
metallurgical coal producer.
|
(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, 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 $30-$35 per short ton.
Historically, freight rates rise and fall as market prices rise and
fall. 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, "In the first quarter, Corsa
made significant progress on its aggressive growth strategy.
The first quarter was an outstanding quarter for export shipments
and price realizations, as we grew our sales market share in both
the international and domestic markets. Before adjusting for
the sale of the Central Appalachia division, Corsa achieved record
metallurgical coal sales volume levels in the quarter. We
experienced strong growth in the quarter as compared to the first
quarter of 2017 in each of our three business lines. Year
over year, Company produced tons increased by 23%, value added
services purchased coal tons increased 128% and sales and trading
tons increased 390% from its launch in the first quarter of
2017.
During the quarter, Corsa executed against an operational
milestone by achieving first production at the Horning mine in
Somerset County,
Pennsylvania. Horning will provide Corsa with a high quality,
low volatile coal, which will be used across many blends, and will
help move the Company closer to its stated goal of doubling
metallurgical coal production from 2017 levels by 2019.
Additionally, in the quarter, Corsa was successful in the sale of
its thermal and industrial coal Central Appalachia division,
turning the Company into a pure play metallurgical producer and
shedding the associated environmental and end-of-mine closure
liabilities.
There were several items that had the effect of negatively
impacting profitability in the first quarter of 2018. First,
Corsa encountered challenging geology at both the Casselman and Acosta mines. This led to reduced
production and higher mining costs per ton for the quarter.
At Casselman, we are finalizing the development of a main travel
way to the northern part of the reserve base, and expect to be
through this geologically difficult zone in late May. This
area is a vital part of the mine which will provide access to
several years of economic reserves. We are incurring
additional roof support costs in order to ensure the long-term
integrity of this important access point. At Acosta, we
expect production to increase as we receive the final regulatory
approvals for our depth of cuts and as the coal seam regains its
average thickness. We view these conditions as temporary in
nature and expect the mining costs per ton at these mines to return
to forecasted levels in the second half of the year, if not
earlier. Finally, in the quarter, Corsa incurred over
$1.7 million of demurrage-related
expenses with export shipments. We are optimistic that the
port congestion on the U.S. East Coast will be worked through in
the months ahead.
We continue to experience strong customer demand from our
international customers, which has driven Corsa's sales volume
growth and profits from our purchased coal and blending
activity. Domestically, steel prices are at seven year highs
and the market for low volatile metallurgical coal is very tight
owing to elevated demand from our customers. Metallurgical
coal prices remain at healthy levels, and the forward curve remains
well supported through 2020. While the spot price gets the
most attention, calendar 2019 and 2020 forward prices have risen by
14% and 18% respectively since the beginning of this year.
This supports the view that the seaborne market for metallurgical
coal is expected to remain at profitable levels for a sustained
period of time.
First Quarter 2017 Sales Metrics
Metallurgical Coal Sales Volume
Corsa's metallurgical coal sales in first quarter 2018 were
557,721 tons, an increase of 89% from first quarter 2017
levels. A fifteen month history of Corsa's metallurgical coal
sales volumes, adjusted for discontinued operations, is presented
below.
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 first quarter of 2018, Corsa's sales were broken down into
the following categories.
|
Metallurgical Coal
Sales by Category (Tons)
|
|
|
Q1
2018
|
|
Company
Produced
|
|
242,511
|
|
|
Purchased - Value
Added Services
|
|
145,856
|
|
|
Purchased - Sales and
Trading
|
|
169,354
|
|
|
Total
|
|
557,721
|
|
Financial and Operations Summary
|
|
For the three
months ended
|
|
|
March
31,
|
|
|
|
|
|
|
Increase
|
|
(in
thousands)
|
|
2018
|
|
2017
|
|
(Decrease)
|
|
Revenues
|
|
$
|
80,448
|
|
$
|
52,379
|
|
$
|
28,069
|
|
|
|
|
|
|
|
|
Cost of
sales(2)
|
|
$
|
70,729
|
|
$
|
36,879
|
|
$
|
33,850
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expense
|
|
$
|
6,457
|
|
$
|
3,716
|
|
$
|
2,741
|
|
|
|
|
|
|
|
|
Net and comprehensive
income for the period from continuing operations
|
|
$
|
1,957
|
|
$
|
11,869
|
|
$
|
(9,912)
|
|
|
|
|
|
|
|
|
Cash provided by
(used in) operating activities from continuing
operations
|
|
$
|
7,771
|
|
$
|
14,894
|
|
$
|
(7,123)
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA(1)
|
|
10,861
|
|
16,154
|
|
(5,293)
|
|
|
|
|
|
|
|
|
Coal sold -
tons
|
|
|
|
|
|
|
|
NAPP – metallurgical
coal
|
|
558
|
|
295
|
|
263
|
|
NAPP – thermal
coal
|
|
4
|
|
77
|
|
(73)
|
|
Total
|
|
562
|
|
372
|
|
190
|
|
|
|
(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)
|
|
2018
|
|
2017
|
|
Mining and processing
costs
|
|
$
|
20,340
|
|
$
|
13,010
|
|
Purchased coal
costs
|
|
28,415
|
|
14,177
|
|
Royalty
expense
|
|
2,083
|
|
1,869
|
|
Amortization
expense
|
|
6,189
|
|
3,248
|
|
Transportation costs
from preparation plant to customer
|
|
12,901
|
|
2,995
|
|
Idle mine
expense
|
|
109
|
|
315
|
|
Tolling
costs
|
|
435
|
|
—
|
|
Write-off of advance
royalties and other assets
|
|
5
|
|
58
|
|
Other
costs
|
|
252
|
|
1,207
|
|
|
$
|
70,729
|
|
$
|
36,879
|
|
|
For the three
months ended
|
|
|
March
31,
|
|
|
2018
|
|
2017
|
|
Variance
|
|
Realized price per
ton sold(1)
|
|
|
|
|
|
|
|
NAPP – metallurgical
coal
|
|
$
|
118.46
|
|
$
|
156.12
|
|
$
|
(37.66)
|
|
NAPP – thermal
coal
|
|
$
|
63.75
|
|
$
|
43.23
|
|
$
|
20.52
|
|
|
|
|
|
|
|
|
Cash production cost
per ton sold(1)(2)
|
|
|
|
|
|
|
|
NAPP – metallurgical
coal
|
|
$
|
91.72
|
|
$
|
74.67
|
|
$
|
(17.05)
|
|
NAPP – thermal
coal
|
|
$
|
39.00
|
|
$
|
38.49
|
|
$
|
(0.51)
|
|
|
|
|
|
|
|
|
Cash cost per ton
sold(1)(3)
|
|
|
|
|
|
|
|
NAPP – metallurgical
coal
|
|
$
|
90.83
|
|
$
|
88.45
|
|
$
|
(2.38)
|
|
NAPP – thermal
coal
|
|
$
|
39.00
|
|
$
|
38.49
|
|
$
|
(0.51)
|
|
|
|
|
|
|
|
|
Cash margin per ton
sold(1)
|
|
|
|
|
|
|
|
NAPP – metallurgical
coal
|
|
$
|
27.63
|
|
$
|
67.67
|
|
$
|
(40.04)
|
|
NAPP – thermal
coal
|
|
$
|
24.75
|
|
$
|
4.74
|
|
$
|
20.01
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA(1) (000's)
|
|
|
|
|
|
|
|
NAPP
|
|
$
|
12,219
|
|
$
|
17,204
|
|
$
|
(4,985)
|
|
Corporate
|
|
(1,358)
|
|
(1,050)
|
|
(308)
|
|
Total
|
|
$
|
10,861
|
|
$
|
16,154
|
|
$
|
(5,293)
|
|
(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(1)
Corsa's updated guidance for the year ending December 31, 2018 is as follows:
|
(all dollar
amounts in U.S. dollars and tonnage in short tons)
|
|
Updated
Guidance
Full Year 2018
|
|
Previous
Guidance(2)
Full Year 2018
|
|
Change to
Previous
Guidance
|
|
|
|
|
|
|
|
|
Metallurgical Coal
Sales Tons(3)
|
|
|
|
|
|
|
|
Company
Produced
|
|
1.0 - 1.2
million
|
|
1.1 - 1.3
million
|
|
(0.1)
million
|
|
Purchased - Value
Added Services
|
|
0.4 - 0.5
million
|
|
0.3 - 0.4
million
|
|
0.1
million
|
|
Purchased - Sales and
Trading
|
|
0.7 - 1.1
million
|
|
0.7 - 1.1
million
|
|
—
|
|
Total Metallurgical
Coal Sales Tons
|
|
2.1 - 2.8
million
|
|
2.1 - 2.8
million
|
|
—
|
|
|
|
|
|
|
|
|
Share of
Metallurgical Coal Sales Tons
|
|
|
|
|
|
|
|
% Domestic Sales at
the mid-point
|
|
21%
|
|
19%
|
|
2%
|
|
% Export Sales at the
mid-point
|
|
79%
|
|
81%
|
|
(2)%
|
|
|
|
|
|
|
|
|
Metallurgical Coal
Sales Tons Commitments(7)
|
|
|
|
|
|
|
|
Committed at the
mid-point
|
|
80%
|
|
73%
|
|
7%
|
|
Committed and Priced
at the mid-point
|
|
61%
|
|
42%
|
|
19%
|
|
|
|
|
|
|
|
|
Cash Production
Cost per ton sold (FOB Mine)(4)
|
|
|
|
|
|
|
|
NAPP Division
Metallurgical Coal(5)
|
|
$78 - $82
|
|
$70 - $74
|
|
$8
|
|
CAPP Division
Metallurgical and Thermal Coal
|
|
N/A
|
|
$64 - $70
|
|
N/A
|
|
|
|
|
|
|
|
|
General and
Administrative Expenses(6)
|
|
|
|
|
|
|
|
NAPP
Division
|
|
$8.0 - $10.0
million
|
|
$8.0 - $10.0
million
|
|
—
|
|
CAPP
Division
|
|
N/A
|
|
< $1.0
million
|
|
N/A
|
|
Corporate
Division
|
|
$5.0 - $7.0
million
|
|
$5.0 - $7.0
million
|
|
—
|
|
Total
Corsa
|
|
$13.0 - $17.0
million
|
|
$13.0 - $17.0
million
|
|
—
|
|
|
|
|
|
|
|
|
Note: Selling
expenses are forecasted to be covered by margins from Sales and
Trading tons sold.
|
|
|
|
|
|
|
|
|
|
|
Maintenance
Capital Expenditures per ton sold(7)
|
|
|
|
|
|
|
|
2018 Full
Year
|
|
$9
|
|
$7
|
|
$2
|
|
2018-2020 Forecasted
Average
|
|
$4
|
|
$3-$4
|
|
—
|
|
|
|
(1)
|
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.
|
|
(2)
|
Previous Guidance was
presented in the Company's MD&A for the three months and full
year ended December 31, 2017 dated March 13, 2018.
|
|
(3)
|
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
("Value 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").
|
|
(4)
|
This is a non-GAAP
financial measure. See "Non-GAAP Financial Measures" below
for more information.
|
|
(5)
|
Cash Production Cost
per ton sold excludes purchased coal.
|
|
(6)
|
Exclusive of
stock-based compensation and selling related commissions, bank fees
and finance charges.
|
|
(7)
|
Tons sold excludes
purchased coal used in the Sales and Trading platform.
|
Coal Pricing Trends and Outlook
Strong global steel demand and corresponding high levels of
steel production continue to support metallurgical coal prices in
both domestic and export markets. United States steel trade actions and
continued economic growth have led to higher domestic steel prices,
increased blast furnace production and added demand for
metallurgical coal. These drivers, as well as the limited
availability of high quality, low volatile metallurgical coal,
should support current price levels for 2018.
Export pricing remains favorable for the balance of 2018 with
metallurgical coal prices indicative of a tightly balanced supply
and demand relationship. First quarter seaborne metallurgical
coal prices were lifted by logistical issues and weather
concerns. These supply constraints eased into the beginning
of the second quarter as railroads and ports approached normal
operations, vessel queues were reduced, and mills worked through
inventories on hand. However, most logistics systems have
limited capacity for additional throughput so there will be minimal
opportunity for additional supply to put downward pressure on
prices in the near term. Chinese import restrictions,
production policies and high production costs for metallurgical
coal, along with increased steel production in India, continue to support pricing in the
export market.
The NAPP Division's geographic proximity to over 50% of domestic
coke production capacity and short rail distance and multiple
options to access the Maryland and
Virginia export terminals solidify
Corsa's ability to serve both domestic and international
customers. Our Sales and Trading platform gives us the
ability to market a greater variety of products, access more users
and respond to sales opportunities.
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, 2018
and 2017 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
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, 2018 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. Management also uses adjusted EBITDA for the
purposes of making decisions to allocate resources among segments
or assessing segment performance.
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 10, 2018 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/1668993/C3381C17086805F0FF8C44450513CC6B
Forward-Looking Statements
Certain information set forth in this press release contains
"forward-looking statements" and "forward-looking information"
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 2018 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.
