CSO:CC - Corsa Coal Announces Financial Results for First Quarter 2024
(TheNewswire)
May 29, 2024 – TheNewswire - Friedens,Pennsylvania - Corsa Coal Corp. (TSXV:CSO ) ; ( OTCQX: CRSXF) (“Corsa” or the“Company”), a premium quality metallurgical coal producer, todayreported financial results for the three months ended March 31, 2024 . Corsa has filed itsunaudited condensed interim consolidated financial statements for thethree months ended March 31, 2024 and 2023 and related management’s discussion and analysisunder its profile on www.sedarplus.com .
Unless otherwise noted, all dollar amounts in this newsrelease are expressed in United States dollars and all ton amounts areshort tons (2,000 pounds per ton). Pricing and cost per toninformation is expressed on a free-on-board (“FOB”), mine sitebasis, unless otherwise noted.
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Key financial results and operational statistics areshown below:
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Corsa’s average realized price for the first quarter2024 is the approximate equivalent of between $270 to $282 per metricton on an FOB vessel basis (2) For the first quarter 2024, Corsa’s salesmix included 80% of sales to domestic customers and 20% of sales tointernational customers.
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(1) This is a non-GAAP financialmeasure. See “Non-GAAP Financial Measures” below.
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(2) Similar to most U.S.metallurgical coal producers, Corsa reports sales and costs per ton onan FOB mine site basis and denominated in short tons. Manyinternational metallurgical coal producers report prices and costs ona delivered-to-the-port basis (or “FOB vessel basis”), therebyincluding freight costs between the mine and the port. Additionally,Corsa reports sales and costs per short ton, which is approximately10% lower than a metric ton. For the purposes of this figure, wehave used an illustrative freight rate of $45-$55 per short ton. Historically, freight rates are attached to the coal market indicesand will adjust as market prices rise and fall. Further adjustmentsinclude a vessel freight differential and quality adjustmentsnecessary to evaluate Corsa’s price compared to Australian premiumlow volatile metallurgical coal. As a note, most published indicesfor metallurgical coal report prices on a delivered-to-the-port basisdenominated in metric tons.
Kevin M. Harrigan, President and Chief Executive Officer ofCorsa, commented, “Corsa’s coal production in the first quarter of2024 improved slightly over the fourth quarter of 2023 but was stillnegatively impacted for the first two months of the quarter bychallenging mining conditions with production costs per ton soldreflecting the conditions and lower productivity. Althoughoperations started to improve in March, it will likely take the betterpart of the second quarter to reach our expected operating levels ateach of our mining sites.”
“I am pleased to report that the Company completedsignificant power enhancements at the Casselman mine in April and isnow able to simultaneously operate three mining units. Currently, weare running at five unit shifts per day and will be able to increaseto six unit shifts per day with additional personnel. Acosta mineproductivity is expected to improve as we move one unit into alonger-lived portion of the mine during the second quarter and isexpected to have both units mining in areas that are projected to haveconsistent conditions with increased coal seam heights. The SchrockRun Extension surface mine will be utilizing both traditional surfacemining and highwall mining methods which is expected to increaseoutput and lower unit costs although unusually high rainfall in thefirst part of the second quarter temporarily reduced operations. Theimpact of these changes are expected to be fully realized starting inthe third quarter of 2024 with production in line with our projectedoperating levels.”
“The Company’s focus is to continue productivityimprovements and identify cost controls thereby improving our marginsand our financial results. We amended certain financial covenants inour Main Street Loan credit facility effective on April 1, 2024 with aview to allowing the Company to manage through this transition asmanagement focuses on refinancing such facility and improving our debtmaturity timeline.”
Financial and OperationsSummary
(1) This isa non-GAAP financial measure. See “Non-GAAP Financial Measures”below.
(2) Cost ofsales consists of the following:
(1) This isa non-GAAP financial measure. See “Non-GAAP Financial Measures”below.
(2) Cashproduction cost per ton sold excludes purchased coal. This is anon-GAAP financial measure. See “Non-GAAP Financial Measures”below.
(3) Cashcost per ton sold includes purchased coal. This is a non-GAAPfinancial measure. See “Non-GAAP Financial Measures”below.
Coal Pricing Trends and Outlook
Price levels opened the first quarter 2024 at$323.75/metric ton (“mt”) delivered-to-the-port (“FOBT”) forspot deliveries of Australian premium low volatile metallurgical coaland closed the quarter at $244.50/mt FOBT. The quarterly average pricefor the first quarter 2024 was $307.74/mt FOBT compared to $333.26/mtFOBT in the fourth quarter 2023 and traded in a range from a high of$338.10/mt FOBT to a low of $244.50/mt FOBT.
The price for spot deliveries of Australian premium lowvolatile metallurgical coal opened the second quarter of 2024 at$246.50 /mt FOBT and was trading at $234.00/mt FOBT in mid-May, with ahigh price of $253.50/mt FOBT, a low price of $223.50/mt FOBT and anaverage price of $238.67/mt FOBT during the quarter. As of mid-May,forward curve pricing for the balance of the second quarter is tradingat an average of $242.00/mt FOBT. The balance of 2024 is trading at$257.88/mt FOBT with the third quarter at $256.00/mt FOBT and thefourth quarter at $271.00/mt FOBT. Second quarter 2024 hot-rolledsteel coil prices increased by 0.7% in China and decreased in theUnited States and Europe by 7.9% and 4.5%, respectively. According tothe World Steel Association April 2024 Short Range Outlook, finishedsteel demand in 2024 is expected to increase by 1.7% over 2023 levelswith increases expected in all major geographical areas except for a0.5% decrease in South America, and Asia and Oceania accounting fornearly half of the total increase. All of the top 10 steel usingcountries are forecasting finished steel demand increases with theexception of China and Russia, both of which are expected to be flatyear-over-year. Growth will be primarily driven by the European Unionand United Kingdom and Asia and Oceania, excluding China. Increasedavailability of metallurgical coal driven by oversupply and muteddemand as well as summer seasonal impacts continue to impact prices inthe second quarter. However, prices remain above historic levels andare forecasted to rebound as steel production grows and the potentialfor Chinese economic stimulus actions increases.
See “Risk Factors” in the Company’s annualinformation form for the year ended December 31, 2023 for anadditional discussion regarding certain factors that could impact coalpricing trends and outlook, as well as the Company’s ongoingoperations.
Second Quarter 2024 Update
The Company’s second quarter 2024 sales volumes areexpected to be higher than the first quarter of 2024, but still belowhistorical averages. Compared to the first quarter of 2024, the secondquarter of 2024 is forecasted to have higher production from our deepmines and our surface mines and decreased purchases of third-partycoals. Metallurgical coal selling prices are expected to be lower thanthe first quarter of 2024 due to reduced volume and prices of exportsales. Cash cost of sales is expected to be lower than in the previousquarter due to increased operating rates and improved miningconditions at our deep mines and decreased purchased coal costs.Selling, general and administrative expenses are expected to becomparable to the first quarter of 2024. The main priorities of theCompany are reducing costs, increasing efficient production andincreasing our ability to participate in the metallurgical coal spotmarket with exposure to multiple pricing indexes. We are committed toimproving the Company’s balance sheet with minimized downsidefinancial risk but are also focused on organic growth opportunities tocomplement our existing operations. The Company’s capital allocationand deployment strategy will be aligned with these priorities and theCompany’s financial position.
For calendar year 2024, Corsa has, to date, committedsales of over 985,000 tons. Committed and priced sales are nearly805,000 tons at an FOB mine price of nearly $148/ton. The price perton is the equivalent of $264/mt FOBT for Australian premium lowvolatile metallurgical coal.
Financial Statements and Management’sDiscussion and Analysis
Refer to Corsa’s unaudited condensed interimconsolidated financial statements for the three months ended March 31, 2024 and 2023and related management’s discussion and analysis, filed underCorsa’s profile on www.sedarplus.com , for details of the financial performance of Corsa and thematters referred to in this news release.
Corsa uses certain non-GAAP financial measures tomeasure its performance internally and to assist in businessdecision-making as well as providing key performance information tosenior management. These measures are not recognized underInternational Financial Reporting Standards (“GAAP”). Corsabelieves that, in addition to the conventional measures prepared inaccordance with GAAP, certain investors and other stakeholders alsouse these non-GAAP financial measures to evaluate Corsa’s operatingand financial performance; however, these non-GAAP financial measuresdo not have any standardized meaning and therefore may not becomparable to similar measures presented by other issuers. Accordingly, these non-GAAP financial measures are intended toprovide additional information and should not be considered inisolation or as a substitute for measures of performance prepared inaccordance with GAAP.
Management uses the following non-GAAP financialmeasures:
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EBITDA -earnings before deductions for interest, taxes, depreciation andamortization;
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Adjusted EBITDA - EBITDA adjusted for change in estimate of reclamation and watertreatment provision for non-operating properties, impairment andwrite-off of mineral properties and advance royalties, gain (loss) onsale of assets and other costs, stock-based compensation, non-cashfinance expenses and other non-cash adjustments. Adjusted EBITDA isused as a supplemental financial measure by management and by externalusers of our financial statements to assess our performance ascompared to the performance of other companies in the coal industry,without regard to financing methods, historical cost basis or capitalstructure; the ability of our assets to generate sufficient cash flow;and our ability to incur and service debt and fund capitalexpenditures;
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Realized price per tonsold - revenue from coal sales lesstransportation costs from the mine site to the loading terminaldivided by tons of coal sold. Management evaluates our operationsbased on the volume of coal we can safely produce or purchase and sellin compliance with regulatory standards, and the prices we receive forour coal. Our sales volume and sales prices are largely dependentupon the terms of our contracts, for which prices generally are setbased on an index. We evaluate the price we receive for our coal onan average realized price on an FOB mine site per short ton basis;
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Cash production cost per tonsold - cash production costs of sales excludingpurchased coal costs, all included within cost of sales, divided bytons of produced coal sold. Cash production cost is based on cost ofsales and includes items such as manpower, royalties, fuel, and othersimilar production related items, pursuant to IFRS, but relatedirectly to the costs incurred to produce coal and sell it on an FOBmine site basis. Cash production cost per ton sold is used as asupplemental financial measure by management and by external users toassess our operating performance as compared to the operatingperformance of other companies in the coal industry. Purchased coalis excluded as the purchased coal costs are based on market prices ofcoal purchased and not the cost to produce the coal;
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Cash cost purchased coal per tonsold - purchased coal costs divided by tons ofpurchased coal sold. Management uses this measure to assess coalpurchases against the market price at which this coal will besold;
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Cash cost per ton sold - cash production costs of sales, included within cost ofsales, divided by total tons sold. Management uses cash cost per tonsold to assess our overall financial performance on a per ton basis toinclude the Company’s production and purchased coal cost in total;and
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Cash margin per ton sold - calculated difference between realized price per ton soldand cash cost per ton sold. Cash margin per ton sold is used bymanagement and external users to assess the operating performance ascompared to the operating performance of other coal companies in thecoal industry.
For a reconciliation of non-GAAP financial measures toGAAP measures, see the tabular presentation at the end of this newsrelease.
All scientific and technical information contained inthis news release has been reviewed and approved by David E. Yingling,Professional Engineer and the Company’s mining engineer, who is aqualified person within the meaning of National Instrument 43-101– Standards of Disclosurefor Mineral Projects .
Potential developments and market conditions discussedin this news release are considered to be forward looking information. Readers are cautioned that actual results may vary from thisforward-looking information. See “Forward-Looking Statements”below.
Corsa is a coal mining company focused on theproduction and sales of metallurgical coal, an essential ingredient inthe production of steel. Our core business is producing and sellingmetallurgical coal to domestic and international steel and cokeproducers in the Atlantic and Pacific basin markets.
For further information pleasecontact:
| Daniel M. Bonacci, Chief Financial Officer andCorporate Secretary |
| Corsa Coal Corp. |
| (724)754-0028 |
| communication@corsacoal.com |
| www.corsacoal.com |
Certain information set forth in this press releasecontains “forward-looking statements” and “forward-lookinginformation” (collectively, “forward-looking statements”) underapplicable securities laws. Except for statements of historical fact,certain information contained herein including, but not limited to,statements relating to expected profitability, adjusted EBITDA andfinancial results, the ability to manage the Company going forward,the impact of changes to operations at the Casselman, Acosta andSchrock Run Extension mines, the impact of amendments to certainfinancial covenants in the Company’s Main Street Loan creditfacility, the expected price volatility of the metallurgical coalmarket, the future demand for steel and its production, and theavailability of its supply, changes to sales margins and expectedprofitability, the expected sales volumes and cash costs of sales ofthe Company in the second quarter of 2024 constitute forward-lookingstatements which include management’s assessment of future plans andoperations and are based on current internal expectations, assumptionsand beliefs, which may prove to be incorrect. Some of theforward-looking statements may be identified by words such as“will”, “estimates”, “expects” “anticipates”,“believes”, “projects”, “plans”, “capacity”,“hope”, “forecast”, “anticipate”, “could” and similarexpressions. These statements are not guarantees of future performanceand undue reliance should not be placed on them. Such forward-lookingstatements necessarily involve known and unknown risks anduncertainties. These risks and uncertaintiesinclude, but are not limited to: changes in market conditions,governmental or regulatory developments, the operating status andcapabilities of our customers and competitors; risks that Corsa’spreparation plants will not operate at production capacity during therelevant period; various events which could disrupt operations and/orthe transportation of coal products, including the geologicalconditions at the Company’s mines, global conflicts, including theconflict in Ukraine, labor stoppages, the outbreak of disease andsevere weather conditions; and management’s ability to anticipateand manage the foregoing factors and risks. There can be noassurance that forward-looking statements will prove to be accurate,as actual results and future events could differ materially from thoseanticipated in such statements. The reader is cautioned not to placeundue reliance on forward-looking statements. Corsa does not undertaketo update any of the forward-looking statements contained in thispress release unless required by law. The statements as to Corsa’scapacity to produce coal are no assurance that it will achieve theselevels of production or that it will be able to achieve these saleslevels.
The TSX VentureExchange has in no way passed on the merits of this news release. Neither the TSX Venture Exchange nor its Regulation ServicesProvider (as that term is defined in the policies of the TSX VentureExchange) accepts responsibility for the adequacy or accuracy of thisrelease.
Non-GAAP Financial MeasuresReconciliation
EBITDA and Adjusted EBITDA for thethree months ended March 31, 2024 and 2023
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(a) Reflects the non-cash expenserelated to the vesting of stock options.
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(b) Components of finance expenseand income excluding interest expense.
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(c) Reflects the amounts includedin other income and expense related to the disposal of assets notutilized in the Company’s mining operations.
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(d) Reflects various adjustments,none of which were individually material, related to adjusting theCompany’s workers’ compensation liability, costs incurred for theCompany’s internal investigation of the sales agent matter.
Realized price per ton sold for thethree months ended March 31, 2024 and 2023
Cash cost per ton sold, cashproduction cost per ton sold, and cash cost per purchased coal per tonsold for the three months ended March 31, 2024 and 2023
Cash margin per ton sold for thethree months ended March 31, 2024 and 2023
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