Major Financial Breakout...Very Strong outlook
Corsa Coal loses $2.97-million (U.S.) in Q2
2022-08-03 19:10 ET - News Release
Mr. Kevin Harrigan reports
CORSA COAL ANNOUNCES FINANCIAL RESULTS FOR SECOND QUARTER 2022
Corsa Coal Corp. has released its financial results for the three and six months ended June 30, 2022. Corsa has filed its unaudited condensed interim consolidated financial statements for the three and six months ended June 30, 2022, and June 30, 2021, and related management's discussion and analysis under its profile on SEDAR.
Unless otherwise noted, all dollar amounts in this news release are expressed in U.S. dollars and all ton amounts are short tons (2,000 pounds per ton). Pricing information and cost per ton information are expressed on a free-on-board (FOB), mine site basis, unless otherwise noted.
Second quarter highlights:
- Key financial results and operational statistics are shown in the attached table.
- Corsa's average realized price for the second quarter 2022 is the approximate equivalent of between $210 and $215 per metric ton on an FOB vessel basis*. For the second quarter 2022, Corsa's sales mix included 52 per cent of sales to domestic customers and 48 per cent of sales to international customers.
* 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 per cent lower than a metric ton. For the purposes of this figure, Corsa has used an illustrative freight rate of $45 to $50 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.
Kevin M. Harrigan, interim president and chief executive officer of Corsa, commented: "The results of the second quarter of 2022 demonstrated a significant improvement over the prior quarter, with adjusted EBITDA increasing by 64 per cent, cash margin per metallurgical coal tons sold increasing by 41 per cent and cash provided by operating activities increasing by nearly 600 per cent. Net and comprehensive loss in the second quarter of 2022 was significantly impacted by mark-to-market losses on the water treatment trust funds of $2.8-million. Additionally, the second quarter of 2022 saw our best adjusted EBITDA and highest quarterly revenues from metallurgical coal sales since the first quarter of 2020, and the highest cash margin per metallurgical coal tons sold since 2017. Although the results of the second quarter reflect a significant improvement, the mining geology, labour availability, productivity and logistical issues experienced in the first quarter of 2022 continued to negatively affect our results. Operationally, we completed a section move at the Casselman mine and commenced high-wall mining operations at our Schrock Run Extension surface mine during the quarter. These actions led to improved operational performance in June, 2022, and we expect the benefits of these changes to continue through the third quarter of 2022. We ended the second quarter with higher-than-anticipated inventory levels as the timing of our shipments were delayed into the third quarter due to transportation constraints.
"We continue to focus on the hiring, training and retention of our work force, and our labour efficiency is increasing, aided by improved conditions at our underground mines. Our commitment to returning to historical production levels remains and we continue to work to secure the additional workforce required at our operations."
EBITDA is earnings before interest, taxes, depreciation and amortization.
Coal pricing trends and outlook
Price levels opened the second quarter of 2022 at $480 per metric ton (mt) delivered to the port (FOBT) for spot deliveries of Australian premium low volatile metallurgical coal and closed the quarter at $302.00 per mt FOBT. The quarterly average price for the second quarter of 2022 was $449.75 per mt FOBT for Australian premium low-volatile metallurgical coal, compared with $486.57 per mt FOBT in the first quarter of 2022, and traded in a range from a high of $530.25 per mt FOBT to a low of $302 per mt FOBT.
The forward curve for the balance of the third quarter of 2022 according to the SGX TSI index is trading at $236.39 per mt FOBT, with July at $246.33 per mt FOBT, August at $230 per mt FOBT and September at $240 per mt FOBT. Forward curve pricing for fourth quarter of 2022 is at $272.97 per mt FOBT, bringing the balance of the year to $257.16 per mt FOBT. The forward curve for 2023 is indicating pricing at an average of $277.29 per mt FOBT. Limited supply-side response, constrained logistics and inflationary mining cost pressures continue to support higher metallurgical coal prices in the near future.
See risk factors in the company's annual information form, dated March 1, 2022, for the year ended Dec. 31, 2021, for an additional discussion regarding certain factors that could impact coal pricing trends and outlook, as well as the company's continuing operations.
Third quarter 2022 update
The company's third quarter 2022 sales volumes are expected to increase, as compared with the second quarter of 2022, and metallurgical coal selling prices are expected to be similar to the second quarter, as the company continues to service previously committed fixed price contract orders.
Cash cost of sales are expected to be lower than the previous quarter, continuing their downward trend for the year, but will remain higher than historical levels, and selling, general and administrative expenses will be similar to the second quarter of 2022.
The main priorities of the company continue to be maximizing production, increasing participation in the metallurgical coal spot market and reducing costs while we maintain a focus on improving the balance sheet with minimized downside financial risk. The company's capital allocation and deployment strategy will be aligned with these priorities and the company's financial position.
Third quarter 2022 earnings release
The company tentatively expects to release third quarter 2022 financial results after the close of markets on Wednesday, Nov. 2, 2022.
Financial statements and management's discussion and analysis
Refer to Corsa's unaudited condensed interim consolidated financial statements for the three and six months ended June 30, 2022, and June 30, 2021, and related management's discussion and analysis, filed under Corsa's profile on SEDAR, for details of the financial performance of Corsa and the matters referred to in this news release.
Non-GAAP (generally accepted accounting principles) financial measures
Corsa uses certain non-GAAP financial measures to measure its performance internally, and to assist in business decision-making as well as providing key performance information to senior management. These measures are not recognized under IFRS (international financial reporting standards). 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 with 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.
Qualified person
All scientific and technical information contained in this news release has been reviewed and approved by David E. Yingling, professional engineer and the company's mining engineer, who is a qualified person within the meaning of National Instrument 43-101, Standards of Disclosure for Mineral Projects.
Corsa is a coal mining company focused on the production and sales of metallurgical coal, an essential ingredient in the production of steel. The company's core business is producing and selling metallurgical coal to domestic and international steel and coke producers in the Atlantic and Pacific basin markets.
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