TORONTO, June 2, 2015 /CNW/ - Corsa Coal Corp. (TSXV:
CSO) ("Corsa"), a premium quality metallurgical and thermal coal
producer, today reports financial results for the three months
ended March 31, 2015. Corsa has filed
its unaudited Condensed Interim Consolidated Financial Statements
for the three months ended March 31,
2015 and 2014 and related Management's Discussion and
Analysis on www.sedar.com under Corsa's profile and has posted
these documents to its website www.corsacoal.com.
The reference in this news release to "First Quarter 2015" means
the three months ended March 31,
2015. Unless otherwise noted, all dollar amounts in this new
release are expressed in United
States dollars and all ton amounts are short tons (2,000
pounds per ton).
First Quarter 2015 Highlights
- Despite a very challenging coal pricing environment, Corsa
achieved positive Adjusted EBITDA(1) at its Northern
Appalachia and Central Appalachia Divisions.
- NAPP productivity improvement initiatives and cost containment
efforts have been successful with the cash production cost per ton
sold(1) for metallurgical coal decreasing 32% from the
three months ended December 31,
2014(2).
- Corsa's operations continue to achieve industry leading safety
performance, with violation per inspection day (VPID) rates that
are 40% lower than the national average, as well as a significant
reduction in the total number of reportable accidents versus
previous quarters.
- In February 2015, Corsa
restructured its senior management team by appointing Peter Merritts to the role of President –
NAPP.
- Key Operating Metrics
- NAPP metallurgical coal sales of 159,000 tons.
- NAPP realized price per ton sold(1) for
metallurgical coal of $87.
- NAPP cash production cost per ton sold(1) for
metallurgical coal of $65.
- CAPP thermal coal sales of 200,000 tons.
- CAPP realized price per ton sold(1) for thermal coal
of $67.
- CAPP cash production cost per ton sold(1) for
thermal coal of $62.
George Dethlefsen, Chief
Executive Officer, commented, "Corsa made great strides in the
first quarter to lower the overall cost profile and drive
productivity improvement across the operating locations. At NAPP,
targets for production and cost performance were exceeded, in
particular at the Casselman Mine, as the cash production costs
declined $30 per ton from the fourth
quarter. Corsa continued to integrate the assets acquired in the
PBS transaction and the results of those integration efforts have
put us in a highly favorable position on the domestic metallurgical
coal delivered cost curve. Corsa's cost control and
productivity improvement efforts at NAPP resulted in an increase in
cash margins of $21 per ton from the
prior quarter despite a decrease of $5 per ton in realized pricing. Despite the cost
improvements, Corsa's statement of operations was negatively
impacted by declining coal spot prices, higher surface mining costs
at the CAPP Division due to difficult winter weather, the impact of
idle mine expenses at the NAPP Division, and approximately
$14 million of impairment and
write-off charges."
Dethlefsen continued, "North American metallurgical coal
producers are enduring a time of extreme financial distress, and we
expect this situation to lead to a rationalization of supply in the
coming months and quarters. Corsa is uniquely positioned from
a mining cost, coal quality, and infrastructure standpoint to grow
both organically and through acquisitions during this trough in the
market."
Financial and Operations Summary
|
|
For the three
months ended
|
|
|
|
|
March
31,
|
|
Increase
(decrease)
|
|
|
2015
|
|
2014(1)
|
|
$ or
Tons
|
|
%
|
|
|
|
|
|
|
|
|
|
Revenue
(000's)
|
$
|
31,366
|
$
|
19,844
|
$
|
11,522
|
|
58%
|
|
|
|
|
|
|
|
|
|
Cost of sales (000's)
(3)
|
$
|
52,651
|
$
|
20,905
|
$
|
31,746
|
|
152%
|
|
|
|
|
|
|
|
|
|
Corporate and
administrative expense (000's)
|
$
|
4,139
|
$
|
1,926
|
$
|
2,213
|
|
115%
|
|
|
|
|
|
|
|
|
|
Net and comprehensive
loss for the period (000's)
|
$
|
26,233
|
$
|
573
|
$
|
25,660
|
|
4,478%
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA(2) (000's)
|
$
|
(299)
|
$
|
756
|
$
|
(1,055)
|
|
(140%)
|
|
|
|
|
|
|
|
|
|
Cash provided by
(used in) operating activities (000's)
|
$
|
3,651
|
$
|
(7,489)
|
$
|
11,140
|
$
|
149%
|
|
|
|
|
|
|
|
|
|
Coal sold -
tons
|
|
|
|
|
|
|
|
|
|
NAPP
|
|
159,000
|
|
45,000
|
|
114,000
|
|
253%
|
|
CAPP
|
|
200,000
|
|
222,000
|
|
(22,000)
|
|
(10%)
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
359,000
|
|
267,000
|
|
92,000
|
|
34%
|
|
|
|
|
|
|
|
|
|
Realized price per
ton sold(2)
|
|
|
|
|
|
|
|
|
|
NAPP
|
$
|
87
|
$
|
87
|
$
|
-
|
|
-
|
|
CAPP
|
$
|
67
|
$
|
68
|
$
|
(1)
|
|
(1%)
|
|
|
|
|
|
|
|
|
|
Cash production cost
per ton sold(2)
|
|
|
|
|
|
|
|
|
|
NAPP
|
$
|
65
|
$
|
85
|
$
|
(20)
|
|
(24%)
|
|
CAPP
|
$
|
62
|
$
|
56
|
$
|
6
|
|
11%
|
|
|
|
|
|
|
|
|
|
Cash margin per ton
sold(2)
|
|
|
|
|
|
|
|
|
|
NAPP
|
$
|
22
|
$
|
2
|
$
|
20
|
|
1,000%
|
|
CAPP
|
$
|
5
|
$
|
12
|
$
|
(7)
|
|
(58%)
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA(2)
|
|
|
|
|
|
|
|
|
|
NAPP
(000's)
|
$
|
339
|
$
|
(553)
|
$
|
892
|
$
|
161%
|
|
CAPP
(000's)
|
|
357
|
|
1,987
|
|
(1,630)
|
|
(82%)
|
|
Corporate
(000's)
|
|
(995)
|
|
(678)
|
|
(317)
|
|
(47%)
|
|
|
|
|
|
|
|
|
|
|
Total
(000's)
|
$
|
(299)
|
$
|
756
|
$
|
(1,055)
|
$
|
(140%)
|
(1)
|
The results of PBS
are not included as it was acquired on August 19, 2014.
|
(2)
|
This is a non-GAAP
financial measure. See "Non-GAAP Financial Measures"
below.
|
(3)
|
Cost of sales
consists of the following:
|
|
|
For the three
months ended
|
|
|
March
31,
|
|
|
2015
|
|
2014
|
|
|
(000's)
|
|
(000's)
|
Mining and processing
costs
|
$
|
21,602
|
$
|
13,395
|
Purchased coal
costs
|
|
1,088
|
|
980
|
Royalties
expense
|
|
2,409
|
|
1,913
|
Amortization
expense
|
|
8,547
|
|
3,032
|
Transportation costs
from preparation plant to customer
|
|
1,752
|
|
796
|
Idle mine
expense
|
|
1,566
|
|
371
|
Change in estimate of
reclamation provision for non-operating properties
|
|
1,624
|
|
372
|
Impairment of mineral
properties
|
|
12,685
|
|
5
|
Write-off of advance
royalties and other assets
|
|
1,290
|
|
-
|
Other
costs
|
|
88
|
|
41
|
|
$
|
52,651
|
$
|
20,905
|
Guidance
Corsa is maintaining guidance for the year ended December 31, 2015, as per Corsa's Management's
Discussion and Analysis for the year ended December 31, 2014, which is as follows:
- Total sales of 1,670,000 to 1,810,000 tons.
- NAPP Division sales of 895,000 to 985,000 tons, including
metallurgical coal sales guidance of 725,000 to 775,000 tons and
thermal coal sales guidance of 170,000 to 210,000 tons. See "Coal
Pricing Trends and Outlook – NAPP" below.
- CAPP Division sales of 775,000 to 825,000 tons of thermal coal.
See "Coal Pricing Trends and Outlook – CAPP" below.
- NAPP Division cash production cost per ton sold(1)
for metallurgical coal of $67 to
$72.
- NAPP Division cash production cost per ton sold(1)
for thermal coal of $30 to $35.
- CAPP Division cash production cost per ton sold(1)
for thermal coal of $57 to $62.
(1) This is a
non-GAAP financial measure. See "Non-GAAP Financial Measures"
below.
Coal Pricing Trends and Outlook
NAPP
Current metallurgical coal prices remain at depressed levels
where a substantial amount of global production is uneconomic. This
situation arose as a result of global producers committing to
multi-billion dollar projects in a significantly higher price
environment. Large scale mines often take three or more years from
final investment decision to first production. New supply came
online over 2013 and 2014, a period where demand growth softened.
This supply growth is expected to mitigate in 2015 as the pipeline
of growth projects is exhausted and prices are insufficient to
incentivize new production. Corsa expects that over time, the
fundamentals of the metallurgical coal market will rebalance as
supply growth ends and production cutbacks are implemented.
Seaborne benchmark contract prices for the highest quality
metallurgical coal decreased to $109.50 per metric ton in the second quarter of
calendar 2015, reflecting a year-over-year decrease of
approximately 9% and a decline of 6% from the first quarter of
calendar 2015. Adjusting for inflation, the second quarter price is
the lowest benchmark settlement since 2004.
Unfavorable foreign exchange movements, low dry-bulk chartering
rates, and softening oil prices have added downward pressure on
demand for U.S. metallurgical coal. Corsa estimates that greater
than half of the U.S. production for domestic and export markets is
unprofitable. Since on average, Central Appalachia metallurgical
coal producers have higher cost structures, the great majority of
the at-risk production is weighted towards that region with
Northern Appalachia production making up the smallest portion of
the at-risk production. Recent announcements of U.S. domestic
steel production cutbacks have decreased the overall domestic
metallurgical coal demand. However, this decrease has been
mitigated in part by a corresponding increase in metallurgical coal
demand in the transportation-advantaged region for Northern
Appalachia producers, including Corsa. Many of the steel producers'
strongest coke plants are located in this region.
As metallurgical coal production is rationalized in places like
China, Western Canada, Australia and the
United States, Corsa expects the seaborne metallurgical coal
fundamentals to normalize. Corsa expects that this rebalancing will
occur first in the domestic U.S. market as the combination of
financially distressed producers and high cost mines will create
additional mine closures. Corsa's short rail distance and multiple
options to access the Baltimore
export terminals solidify Corsa's ability to take advantage of any
recoveries in seaborne pricing.
Metallurgical coal sales in 2015 are expected to be in the range
of 725,000 to 775,000 tons. As of the date hereof, approximately
81% of these sales are committed at the midpoint of the range.
Actual sales will depend on customer demand and market conditions.
Vessel nominations for export sales are determined by customers and
concluded on a month-by-month basis.
CAPP
Current Southeastern U.S. utility market thermal coal spot
pricing declined 25% over the course of 2014. As a result, much of
the Central Appalachia coal production is uneconomic. Corsa expects
utility coal demand for Central Appalachia production to decrease
in 2015. Conversely, industrial thermal demand grew 4% year over
year for 2015 and Corsa expects industrial demand to grow in
2015.
The CAPP mineral reserve base exclusively consists of high BTU
and high carbon content coal. These unique qualities, combined with
advantaged logistics, set CAPP apart from other producers and
create a niche in the utility and industrial marketplace. As a
result, despite thermal supply outpacing demand in 2015, CAPP has
been successful in maintaining a high level of contracted sales for
the future.
CAPP will continue to target the industrial market segment as it
transitions from a utility supplier to an industrial supplier
during 2015. The planned opening of the Cooper Ridge mine
will position CAPP to service the industrial specialty coal
markets. These specialty markets are well suited for CAPP's
coal qualities and relatively protected from natural gas prices and
historically reflect higher pricing than the thermal
markets.
The CAPP coal sales for 2015 are expected to be in the range of
775,000 to 825,000 tons. As of the date hereof, approximately 92%
of these sales are committed at the midpoint of the range. Actual
sales will depend on customer demand and market conditions. CAPP
also has sales contracts in place for 500,000 tons in 2016.
Non-GAAP Measures
Management uses realized price per ton sold, cash production
cost per ton sold, adjusted EBITDA and net cash flow from
operations as internal measurements of operating performance for
Corsa's mining and processing operations. Management believes these
non-GAAP measures provide useful information for investors as they
provide information in addition to the GAAP measures to assist in
their evaluation of the operating performance of Corsa. Reference
is made to the Management's Discussion and Analysis for the three
months ended March 31, 2015 for a
reconciliation of non-GAAP measures to GAAP measures.
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, 2015 and 2014 and related Management's
Discussion and Analysis, filed on www.sedar.com under Corsa's
profile and posted to Corsa's website www.corsacoal.com, for the
details of the financial performance of Corsa and the matters
referred to in this news release.
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.
Mailing of Shareholder Meeting Materials
Corsa is also pleased to announce that it has mailed the meeting
materials with respect to Corsa's annual and special meeting of
shareholders (the "Meeting") to be held at 9:00 a.m. (Toronto time) on Tuesday, June 23, 2015, at the offices of
Stikeman Elliott LP (Ottawa Boardroom, 53rd Floor) in Toronto, Ontario. Meeting materials will be
available online through our website at www.corsacoal.com or under
Corsa's profile on SEDAR at www.sedar.com. At the Meeting,
shareholders will be asked to vote in respect of, among other
things, approving a new restricted stock unit plan for Corsa, as
more particularly described in the management information circular
mailed to shareholders in connection with the Meeting.
Information about Corsa
Corsa's primary business is the mining, processing and selling
of thermal and metallurgical coal, as well as actively exploring,
acquiring and developing resource properties consistent with its
coal business.
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 for the year ended December
31, 2015, including price and demand, expected cash
production costs 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", "outlook", "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 2015 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 or
expected; liabilities inherent in coal mine development and
production including restarting idled mines; 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 coal 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
coal 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 with 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
labour 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 where
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 to realize cost synergies
following the completion of Corsa's acquisition of PBS. 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 TSX
Venture Exchange nor its Regulation Services Provider (as that term
is defined in policies of the TSX Venture Exchange) accepts
responsibility for the adequacy or accuracy of this
release.
SOURCE Corsa Coal Corp.