Friedens, PA, May 6, 2020 /CNW/ - Corsa Coal Corp. (TSXV: CSO;
OTCQX: CRSXF) ("Corsa" or the "Company"), a premium quality
metallurgical coal producer, today reported financial results for
the three months ended March 31, 2020. Corsa has filed
its unaudited condensed interim consolidated financial statements
for the three months ended March 31, 2020 and 2019 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 2020 Highlights
- Corsa reported net and comprehensive loss of $5.8 million, or $0.06 per share attributable to shareholders, for
the first quarter 2020, compared to income of $3.0 million, or $0.02 per share attributable to shareholders, for
the first quarter 2019.
- Corsa's net and comprehensive loss includes a non-cash
adjustment of $4.1 million related to
market value declines in the restricted cash investments of the
Company's water treatment trusts which was primarily the result of
market losses related to the coronavirus (COVID-19) pandemic.
- Corsa's adjusted EBITDA(1) was $6.4 million for the three months ended
March 31, 2020 compared to
$9.2 million for the three months
ended March 31, 2019. Corsa's
EBITDA(1) was $1.3 million
for the three months ended March 31,
2020 compared to $9.5 million
for the three months ended March 31,
2019.
- Cash production cost per ton sold(1) was
$71.12 for the first quarter 2020, a
decrease of $12.09 per ton, or 15%,
as compared to the first quarter 2019.
- Cash flows provided by operating activities for the three
months ended March 31, 2020 were
$8.3 million compared to $5.7 million for the three months ended
March 31, 2019.
- Total revenues for the three months ended March 31, 2020 were $46.7
million compared to $57.3
million for the three months ended March 31, 2019.
- Low volatile metallurgical coal sales tons, comprised of
"Company Produced" tons and "Value Added Services" purchased coal
tons, were 414,326 in the first quarter 2020 compared to 358,854 in
the first quarter 2019. In the first quarter 2020, Corsa sold a
total of 34,587 "Sales and Trading" purchased coal tons, which are
treated as pass-through from a profitability perspective, compared
to 49,982 tons in the first quarter 2019.
- Corsa achieved an average realized price per ton of
metallurgical coal sold(1) of $90.49 for all metallurgical qualities in the
first quarter 2020 compared to $116.47 in the first quarter 2019. This average
realized price for the first quarter 2020 is the approximate
equivalent of $133 to $138 on an FOB vessel basis.(2) For
the first quarter 2020, Corsa's sales mix included 34% of sales to
domestic customers and 66% of sales to international
customers.
- In April 2020, certain
wholly-owned subsidiaries of Corsa, as borrowers, entered into loan
agreements with KeyBank National Association for an aggregate
amount of approximately $8.4 million
under the Paycheck Protection Program, which amounts are guaranteed
by the U.S. Small Business Administration Paycheck Protection
Program and are expected to be fully or substantially forgiven
under the terms of the Paycheck Protection Program.
|
(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
$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.
|
Peter Merritts, Chief Executive
Officer of Corsa, commented, "The health and safety of our
employees is one of our Company's core values and during the first
quarter, we implemented a number of additional safeguards and
measures to continuously monitor the health of our team members and
to contain the spread of COVID-19 and minimize its impact on our
employees and on our operations.
Despite the impact and operational disruptions caused by
COVID-19, our mines and plants continued to produce at a high
level. The quarterly production record that was set in the
first quarter of 2019 was broken successively in the second and
third quarters of 2019 and again in the first quarter of
2020. Our first quarter cash production costs per ton sold
decreased by 15% compared to the first quarter of 2019 and 4%
compared to the fourth quarter of 2019. The additional
production allowed us to take advantage of higher priced spot
market opportunities during the first quarter of 2020 which
complemented our contractual domestic orders. Overall, we
achieved a cash margin per ton sold for the first quarter of 2020
of nearly $19 a ton, compared to
$30/ton for the first quarter 2019,
despite the downward pressure on metallurgical coal spot
prices.
Our positive operational results were further supported by the
full run-rate of our general and administrative cost reduction
activities that were implemented in the second half of 2019.
However, first quarter 2020 financial results were negatively
impacted by significant non-cash market value declines in the
restricted cash investments of the Company's water treatment trusts
as a result of the market reaction to the COVID-19 pandemic.
The non-cash gains or losses for these trusts are recognized at the
end of each quarter in accordance with accounting guidelines.
Metallurgical coal spot market prices and demand declined during
the first quarter, and continued to decline into the second
quarter, in response to the COVID-19 pandemic which created
uncertainty in the global markets. We will continuously
monitor the demand for our product and will practice the
operational discipline that allows us to continue meeting our
customers' needs for our high-quality metallurgical coal while
creating value for our shareholders. We know that our team of
dedicated and high-performing miners and professionals has and will
continue to respond to the challenges and opportunities of the
market."
2020 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,
2020, Corsa's sales were broken down into the following
categories.
|
Metallurgical Coal
Sales by Category (Tons)
|
|
Q1
2020
|
|
Company
Produced
|
384,750
|
|
Purchased - Value
Added Services
|
29,576
|
|
Purchased - Sales and
Trading
|
34,587
|
|
Total
|
448,913
|
Financial and Operations Summary
|
For the three
months ended
|
|
March
31,
|
|
|
|
|
|
Increase
|
|
(in
thousands)
|
2020
|
|
2019
|
|
(Decrease)
|
|
Revenues
|
$
|
46,725
|
|
$
|
57,334
|
|
$
|
(10,609)
|
|
|
|
|
|
|
|
Cost of
sales(2)
|
$
|
45,083
|
|
$
|
49,902
|
|
$
|
(4,819)
|
|
|
|
|
|
|
|
Selling, general and
administrative expense
|
$
|
2,109
|
|
$
|
4,555
|
|
$
|
(2,446)
|
|
|
|
|
|
|
|
Net and comprehensive
(loss) income for the period
|
$
|
(5,789)
|
|
$
|
3,002
|
|
$
|
(8,791)
|
|
|
|
|
|
|
|
Cash provided by
operating activities
|
$
|
8,307
|
|
$
|
5,718
|
|
$
|
2,589
|
|
|
|
|
|
|
|
EBITDA(1)
|
$
|
1,321
|
|
$
|
9,518
|
|
$
|
(8,197)
|
|
|
|
|
|
|
|
Adjusted
EBITDA(1)
|
$
|
6,392
|
|
$
|
9,184
|
|
$
|
(2,792)
|
|
|
|
|
|
|
|
Coal sold -
tons
|
|
|
|
|
|
|
NAPP – metallurgical
coal
|
449
|
|
409
|
|
40
|
|
(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)
|
2020
|
|
2019
|
|
Mining and processing
costs
|
$
|
25,642
|
|
$
|
22,050
|
|
Purchased coal
costs
|
4,777
|
|
12,018
|
|
Royalty
expense
|
1,901
|
|
1,580
|
|
Amortization
expense
|
6,504
|
|
5,493
|
|
Transportation costs
from preparation plant to customer
|
5,531
|
|
7,201
|
|
Idle mine
expense
|
87
|
|
472
|
|
Tolling
costs
|
259
|
|
1,069
|
|
Write-off of advance
royalties and other assets
|
432
|
|
—
|
|
Other
costs
|
(50)
|
|
19
|
|
$
|
45,083
|
|
$
|
49,902
|
|
For the three
months ended
|
|
March
31,
|
|
2020
|
|
2019
|
|
Variance
|
|
Realized price per
ton sold(1)
|
|
|
|
|
|
|
NAPP – metallurgical
coal
|
$
|
90.49
|
|
$
|
116.47
|
|
$
|
(25.98)
|
|
|
|
|
|
|
|
Cash production cost
per ton sold(1)(2)
|
|
|
|
|
|
NAPP – metallurgical
coal
|
$
|
71.12
|
|
$
|
83.21
|
|
$
|
12.09
|
|
|
|
|
|
|
Cash cost per ton
sold(1)(3)
|
|
|
|
|
|
NAPP – metallurgical
coal
|
$
|
71.61
|
|
$
|
86.18
|
|
$
|
14.57
|
|
|
|
|
|
|
Cash margin per ton
sold(1)
|
|
|
|
|
|
NAPP – metallurgical
coal
|
$
|
18.88
|
|
$
|
30.29
|
|
$
|
(11.41)
|
|
|
|
|
|
|
EBITDA(1)
(000's)
|
|
|
|
|
|
NAPP
|
$
|
2,177
|
|
$
|
11,415
|
|
$
|
(9,238)
|
|
Corporate
|
(856)
|
|
(1,897)
|
|
1,041
|
|
Total
|
$
|
1,321
|
|
$
|
9,518
|
|
$
|
(8,197)
|
|
|
|
|
|
|
Adjusted
EBITDA(1) (000's)
|
|
|
|
|
|
NAPP
|
$
|
7,161
|
|
$
|
10,460
|
|
$
|
(3,299)
|
|
Corporate
|
(769)
|
|
(1,276)
|
|
507
|
|
Total
|
$
|
6,392
|
|
$
|
9,184
|
|
$
|
(2,792)
|
|
|
|
(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
On January 30, 2020, the World
Health Organization declared the COVID-19 outbreak a "Public Health
Emergency of International Concern" and on March 11, 2020, declared COVID-19 a pandemic. The
current COVID-19 pandemic is significantly impacting the global
economy and commodity and financial markets. The full extent and
impact of the COVID-19 pandemic is unknown, and rapidly evolving.
Given the extreme volatility in financial markets and commodity
prices, along with uncertainty regarding the impact thereof on the
performance of the Company, the Company does not believe it is
appropriate to issue full year guidance at this time for fiscal
2020. If the impacts of the COVID-19 outbreak, including the
decrease in economic activity or restrictions on certain business
activities, continue for an extended period of time or worsen, it
could have a negative impact on the demand for metallurgical coal
and/or business activities, which would have a material adverse
effect on our business, financial condition, cash flows and results
of operations. The Company will continue to evaluate events
and circumstances and will provide guidance when appropriate and as
information is available.
Coal Pricing Trends and Outlook
Price levels opened the first quarter at $141/metric ton ("mt") delivered-to-the-port
based ("FOBT") for spot deliveries of Australian premium low
volatile metallurgical coal and closed the quarter at $148/mt FOBT. The quarterly average price
for the first quarter of 2020 was $155/mt FOBT for Australian premium low volatile
metallurgical coal, compared to $140/mt FOBT in the fourth quarter of 2019, and
traded in a range from a high of $164/mt FOBT to a low of $141/mt FOBT.
Average spot market pricing for metallurgical coal in
April 2020 was $130/mt FOBT, with the month opening at a high of
$145/mt FOBT and closing at a low of
$109/mt FOBT. Price volatility
is expected as the metallurgical coal market responds to changes in
both supply and demand across different geographical areas
resulting from the workforce restrictions and economic impacts of
the COVID-19 pandemic. Due to the uncertainty of the global
business impact of COVID-19 on both metallurgical coal supply and
demand, on March 30, 2020, Corsa
suspended the provision of additional commentary regarding
expectations for 2020 metallurgical coal prices.
Metallurgical coal supply, demand and pricing outlook commentary
will be resumed when deemed appropriate by the Company.
The World Steel Association reported that, through March 2020, global crude steel production fell by
1.4% in the first quarter of 2020 versus the first quarter of
2019. However, the report cautioned that the number could be
revised in the next update due to the impact of the COVID-19
pandemic on those reporting production data. For the first
quarter, production was up 1.2% in China and 9.6% in Turkey and was down 1.0% in the U.S., 2.4% in
Japan and 5.3% in India.
Crude steel production from the European Union and Brazil were down 10.0% and 7.0%,
respectively. Regionally, Asia, which includes China and India, decreased by 0.3%, North America decreased by 4.0% and
South America decreased by
7.1%. For the first three months of the year, the World Steel
Association reported that global crude steel production was up in
January by 2.1%, up in February by 2.1% and down in March by 6.0%
when compared to the same months in 2019. When comparing the
month of March 2020 to March 2019, crude steel production was down 20.4%
in the European Union, 9.4% in South
America, 9.4% in North
America and 4.1% in Asia. Individual country
comparisons of March 2020 to
March 2019 show Turkey up 4.1% with India down 13.9%, Japan down 9.7%, Brazil down 8.2%, the U.S. down 6.0% and
China down 1.7%.
The most recent global steel demand forecast for 2020 was
provided by the World Steel Association in October 2019 before the COVID-19 outbreak and
therefore does not reflect its impact on the global steel
market. Due to the COVID-19 pandemic, the World Steel
Association will not publish a Short Range Outlook until June
2020. Future demand for metallurgical coal and the
availability of supply will be impacted by, among other things,
country specific and regional efforts to contain and control the
spread of the COVID-19 virus, the economic stimulus activities of
each country and global organizations and the operating status and
capabilities of our customers and competitors. Additional
information regarding global steel demand and production will be
provided in the future as it becomes available.
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, 2020
and 2019 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 both terms are defined below,
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, 2020 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 Merritts, Professional Engineer and the
Company's Chief Executive Officer, who is a qualified person within
the meaning of National Instrument 43-101 – Standards of
Disclosure for Mineral Projects.
Caution
Potential developments and market conditions discussed in this
news release are considered to be forward looking
information. Readers are cautioned that actual results may
vary from this forward-looking information. See
"Forward-Looking Statements" below.
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.
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 price volatility of the
metallurgical coal market, the future demand for metallurgical coal
and the availability of its supply, and the provision of a revised
statistic by the World Steel Association regarding the fall of
global crude steel production in the first quarter of 2020,
constitutes forward-looking statements which include management's
assessment of future plans and operations and are based on current
internal expectations, assumptions and beliefs, which may prove to
be incorrect. Some of the forward-looking statements may be
identified by words such as "will", "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. These risks and uncertainties include, but are not
limited to: changes in market conditions, governmental or
regulatory developments as a result of the COVID-19 pandemic or
otherwise, the operating status and capabilities of our customers
and competitors; various events which could disrupt operations
and/or the transportation of coal products, including labor
stoppages, the outbreak of disease and severe weather conditions;
and management's ability to anticipate and manage the foregoing
factors and risks. 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.
