FRIEDENS, Pa., May 5, 2021 /CNW/ - Corsa Coal Corp. (TSXV:
CSO) (OTC: CRSXF) ("Corsa" or the "Company"), a premium quality
metallurgical coal producer, today reported financial results for
the three months ended March 31, 2021. Corsa has filed its
unaudited condensed interim consolidated financial statements for
the three months ended March 31, 2021 and 2020 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 2021 Highlights
- Corsa reported net and comprehensive loss of $4.4 million, or $(0.05) per share attributable to shareholders,
for the three months ended March 31,
2021 compared to a loss of $5.8
million, or $(0.06) per share
attributable to shareholders, for the three months ended
March 31, 2020.
- Corsa's adjusted EBITDA(1) was $0.1 million for the three months ended
March 31, 2021 compared to
$6.4 million for the three months
ended March 31, 2020. Corsa's
EBITDA(1) was $0.1 million
for the three months ended March 31,
2021 compared to $1.3 million
for the three months ended March 31,
2020.
- Cash production cost per ton sold(1) was
$79.15 for the three months ended
March 31, 2021, an increase of
$8.03 per ton, or 11%, as compared to
the three months ended March 31,
2020.
- Cash flow provided by operating activities was $1.5 million for the three months ended
March 31, 2021 compared to
$8.3 million for the three months
ended March 31, 2020.
- Total revenues were $24.6 million
for the three months ended March 31,
2021 compared to $46.8 million
for the three months ended March 31,
2020.
- Low volatile metallurgical coal sales tons, comprised of
"Company Produced" tons and "Value Added Services" purchased coal
tons, were 251,465 and 6,495, respectively, in the three months
ended March 31, 2021 compared to
384,750 and 29,576, respectively, in the three months ended
March 31, 2020. In the three months
ended March 31, 2021, Corsa did not
sell any "Sales and Trading" purchased coal tons, which are treated
as pass-through from a profitability perspective, compared to
34,587 tons in the three months ended March
31, 2020.
- Corsa's average realized price per ton of metallurgical coal
sold(1) was $86.62 per
short ton for all metallurgical qualities in the three months ended
March 31, 2021 compared to
$90.49 in the three months ended
March 31, 2020. This average realized
price for the first quarter 2021 is the approximate equivalent of
between $112 to $117 per metric ton on an FOB vessel
basis(2). For the first quarter 2021, Corsa's sales
mix included 68% of sales to domestic customers and 32% of sales to
international customers.
- Following the end of the quarter, QKGI Legacy Holdings, LP
delivered a notice of redemption in respect of their 170,316,639
Redeemable Units of Wilson Creek Energy, LLC specifying a
May 31, 2021 redemption date. The
Company will elect to satisfy the redemption by issuing 8,515,831
Common Shares.
(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
$25-$30 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, "I am pleased to announce that the
Company achieved its first positive quarterly Adjusted EBITDA since
the second quarter of 2020, posted its highest revenues since the
second quarter of 2020 and increased its revenue and sales volumes
by 46% and 33%, respectively, over the previous quarter. Due
to the pandemic and depressed coal markets last year, each
successive quarter of 2020 resulted in lower production and higher
costs per ton produced. That trend was reversed in the first
quarter of 2021 with a 42% increase in metallurgical coal
production and a 6% decrease in cash costs per ton produced
compared to the fourth quarter of 2020. Our first quarter
cash production costs per ton sold, which were higher than expected
and higher than those reported in recent quarters, were impacted by
adverse geological conditions encountered at one of our underground
mines. The cash production costs per ton sold from our other
mines were in line with those experienced in 2020 and we anticipate
that our overall cash production costs per ton sold will be at
lower levels in the second quarter of 2021.
Although improved from recent quarters, our financial results
reflect the continued unique challenges of the global metallurgical
coal market with robust domestic demand and volatility in the
export spot market. While spot market prices rose only
slightly over the course of the quarter, instances of significantly
increased pricing due to limited supply support our outlook that
the export market will stabilize and improve through the course of
the year.
In response, we began to increase staffing levels during the
quarter to raise production levels to meet existing sales contracts
and be better positioned to act on spot sales opportunities in the
export market. We will continue to use a measured,
disciplined approach to return to a pre-COVID-19 production level
that delivers acceptable results in the export metallurgical coal
market and improves profitability for our shareholders."
2021 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,
2021, Corsa's sales were broken down into the following
categories.
Metallurgical Coal
Sales by Category (Tons)
|
|
|
Q1
2021
|
Company
Produced
|
|
251,465
|
Purchased - Value
Added Services
|
|
6,495
|
Purchased - Sales and
Trading
|
|
-
|
Total
|
|
257,960
|
Financial and Operations Summary
|
For the three
months ended
|
|
March
31,
|
|
|
|
|
|
|
|
|
Increase
|
(in
thousands)
|
|
2021
|
|
|
2020
|
|
|
(Decrease)
|
Revenues
|
$
|
24,619
|
|
$
|
46,841
|
|
$
|
(22,222)
|
|
|
|
|
|
|
|
|
|
Cost of
sales(2)
|
$
|
26,316
|
|
$
|
45,182
|
|
$
|
(18,866)
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expense
|
$
|
2,029
|
|
$
|
2,109
|
|
$
|
(80)
|
|
|
|
|
|
|
|
|
|
Net and comprehensive
loss for the period
|
$
|
(4,433)
|
|
$
|
(5,789)
|
|
$
|
1,356
|
|
|
|
|
|
|
|
|
|
Cash provided by
operating activities
|
$
|
1,501
|
|
$
|
8,307
|
|
$
|
(6,806)
|
|
|
|
|
|
|
|
|
|
EBITDA(1)
|
$
|
85
|
|
$
|
1,321
|
|
$
|
(1,236)
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA(1)
|
$
|
121
|
|
$
|
6,392
|
|
$
|
(6,271)
|
|
|
|
|
|
|
|
|
|
Coal sold -
tons
|
|
|
|
|
|
|
|
|
NAPP –
metallurgical coal
|
|
258
|
|
|
449
|
|
|
(191)
|
(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)
|
|
2021
|
|
|
2020
|
Mining and processing
costs
|
$
|
18,851
|
|
$
|
25,642
|
Purchased coal
costs
|
|
1,058
|
|
|
4,777
|
Royalty
expense
|
|
1,239
|
|
|
1,901
|
Amortization
expense
|
|
3,849
|
|
|
6,504
|
Transportation costs
from preparation plant to customer
|
|
1,310
|
|
|
5,531
|
Idle mine
expense
|
|
152
|
|
|
87
|
Tolling
costs
|
|
19
|
|
|
259
|
Limestone
costs
|
|
168
|
|
|
99
|
Write-off of advance
royalties and other assets
|
|
-
|
|
|
432
|
Other
costs
|
|
(330)
|
|
|
(50)
|
Total cost of
sales
|
$
|
26,316
|
|
$
|
45,182
|
|
For the three
months ended
|
|
March
31,
|
|
|
2021
|
|
|
2020
|
|
|
Variance
|
Realized price per
ton sold(1)
|
|
|
|
|
|
|
|
|
NAPP – metallurgical
coal
|
$
|
86.62
|
|
$
|
90.49
|
|
$
|
(3.87)
|
|
|
|
|
|
|
|
|
|
Cash production cost
per ton sold(1)(2)
|
|
|
|
|
|
|
|
|
NAPP – metallurgical
coal
|
$
|
79.15
|
|
$
|
71.12
|
|
$
|
(8.03)
|
|
|
|
|
|
|
|
|
|
Cash cost per ton
sold(1)(3)
|
|
|
|
|
|
|
|
|
NAPP – metallurgical
coal
|
$
|
79.08
|
|
$
|
71.61
|
|
$
|
(7.47)
|
|
|
|
|
|
|
|
|
|
Cash margin per ton
sold(1)
|
|
|
|
|
|
|
|
|
NAPP – metallurgical
coal
|
$
|
7.54
|
|
$
|
18.88
|
|
$
|
(11.34)
|
|
|
|
|
|
|
|
|
|
EBITDA(1)(000's)
|
|
|
|
|
|
|
|
|
NAPP
|
$
|
1,090
|
|
$
|
2,177
|
|
$
|
(1,087)
|
Corporate
|
|
(1,005)
|
|
|
(856)
|
|
|
(149)
|
Total
|
$
|
85
|
|
$
|
1,321
|
|
$
|
(1,236)
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA(1)(000's)
|
|
|
|
|
|
|
|
|
NAPP
|
$
|
852
|
|
$
|
7,161
|
|
$
|
(6,309)
|
Corporate
|
|
(731)
|
|
|
(769)
|
|
|
38
|
Total
|
$
|
121
|
|
$
|
6,392
|
|
$
|
(6,271)
|
(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.
|
Coal Pricing Trends and Outlook
Price levels opened the first quarter 2021 at $102.50/metric ton ("mt") delivered-to-the-port
("FOBT") for spot deliveries of Australian premium low volatile
metallurgical coal and closed the quarter at $112.50/mt FOBT. The quarterly average
price for the first quarter of 2021 was $127.14/mt FOBT for Australian premium low
volatile metallurgical coal, compared to $108.20/mt FOBT in the fourth quarter of 2020,
and traded in a range from a high of $160.50/mt FOBT to a low of $102.00/mt FOBT. April 2021 spot market pricing opened the month
at $112.50/mt FOBT, and as of
mid-April were $110.00/mt FOBT with
trades in a range from a high of $114.00/mt FOBT to a low of $110.00 /mt FOBT for an average price of
$110.89 /mt FOBT.
The World Steel Association reported that through March, global
crude steel production increased by 10.0% in 2021 versus 2020 with
China up 15.6%, India up 10.4%, Turkey up 9.5%, Brazil up 6.2% and Russia up 4.4%. Steel production
decreases were reported for the U.S. (6.3%) and Japan (1.7%). Regionally, Asia and Oceania, which includes China and India, increased by 13.2%, South America increased by 7.1%, the EU
increased by 3.1% and North
America decreased by (5.2%). Hot-rolled steel coil
prices rose significantly in 2020 and continued to improve through
the first quarter of 2021. Increased vaccinations, government
stimulus programs and the potential impacts from increased
infrastructure spending in the U.S. are driving improved economic
activities and fueling growth both domestically and in various
international countries. From the beginning of 2021 through
mid-April, hot-rolled steel coil prices rose 44%, 42% and 34% in
Northern Europe, the U.S. and
China, respectively.
The World Steel Association Short Range Outlook released in
April 2021 forecasted that steel
demand will increase by 5.8% in 2021 versus 2020 and increase by
2.7% in 2022 over 2021. Global steel demand in 2021 is
expected to exceed 2019 levels by over 6%, driven primarily by
Chinese increases compared to 2019. Chinese steel demand is
expected to increase by 3.0% in 2021 as compared to 2020 and remain
flat in 2022. Excluding China, steel demand from the rest of
the world will increase by 9.3% in 2021 and increase by 4.7% in
2022. Regionally, the collective demand from the United States, Canada and Mexico is forecasted to increase by 7.6% in
2021 and increase by 4.6% in 2022; demand from the European Union
is forecasted to increase by 10.2% in 2021 and increase by 4.8% in
2022; the collective demand from Asia and Oceania (excluding China) is forecasted to increase by 10.2% in
2021 and increase by 5.1% in 2022; and the collective demand from
Central and South America is
forecasted to increase by 10.6% in 2021 and increase by 4.2% in
2022.
After opening the second quarter of 2021 at $112.50/mt FOBT, the forward curve for the second
quarter of 2021 according to the TSI index is trading near
$120/mt FOBT with May and June at
$118.00/mt FOBT and $124.00/mt FOBT, respectively. Forward
curve pricing for 2021 and 2022 is showing pricing the low $130s to
upper $140s/mt FOBT range. Increased global steel demand and
increased global steel production are improving the demand for
metallurgical coal and driving prices up as production resumes and
supply slowly returns. Trade tensions between China and Australia continue to impact the supply and
demand balance of the seaborne metallurgical coal market and
resulted in changing dynamics and trade routes for U.S. east coast
metallurgical coal shipments. Domestic metallurgical coal
consumption remains steady and according to the U.S. Energy
Information Administration (the "EIA"), coking coal consumption is
forecasted to be 15.3 million tons in 2021 as compared to 14.5
million ton in 2020 and 18 million tons in 2019. The EIA also
reported that 2021 metallurgical coal exports are expected to
increase by to 48.5 million tons, or a 15% increase over the 42.1
million tons of metallurgical coal exported in 2020. Due to
the continued uncertainty of the COVID-19 pandemic, the price
volatility experienced in the first quarter of 2021 is expected to
continue in the near term but will give way to improved, stabilized
prices as COVID-19 related restrictions are loosened and economic
recoveries take hold.
See "Risk Factors" in the Company's annual information form
dated March 3, 2021 for the year
ended December 31, 2020 for an
additional discussion regarding certain factors that could impact
coal pricing trends and outlook, as well as the Company's ongoing
operations.
Environmental Matter
In January 2021, the Pennsylvania
Department of Environmental Protection (the "PaDEP") issued a
compliance order ("C.O.") which rescinds a permitted right of PBS
Coals, Inc. ("PBS"), a wholly-owned subsidiary, to inject water
treatment sludge into an adjacent abandoned mine by June 30, 2021. The sludge emanates from a mine
drainage treatment system associated with an active coal refuse
disposal site. The coal refuse disposal site is included
in a water treatment trust. PBS appealed the issuance of the
C.O., but its request for temporary relief to stay the effect of
the C.O. was denied on March 30,
2021. PBS discontinued its appeal on April 27, 2021. PBS is currently evaluating
several alternatives to sludge injection and intends to cease
injection by the June 30, 2021
abatement date in the C.O. Due to the preliminary nature of
the evaluation process, it is difficult to estimate the cost of
alternative disposal methods, but the cost to treat, handle and
dispose of the sludge will increase above historical costs.
Additionally, the anticipated increase in such costs is expected to
increase the total amount required in the trust fund which
previously had been fully funded. The exposure for the
alternative disposal methods, the anticipated increased
contribution to the trust fund, and the scheduling thereof is
difficult to estimate, and a reliable range of potential exposure
is not presently determinable.
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, 2021
and 2020 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, 2021 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
including, but not limited to, statements relating to the expected
price volatility of the metallurgical coal market, the future
demand for steel and its production, the availability of its
supply, and the finalization of domestic metallurgical coal market
contract negotiations in 2021, 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.