CANONSBURG, PA, Nov. 11, 2015 /CNW/ - Corsa Coal Corp. (TSXV:
CSO) ("Corsa"), a premium quality metallurgical and thermal coal
producer, today reported financial results for the three and nine
months ended September 30,
2015. Corsa has filed its unaudited Condensed Interim
Financial Statements for the three and nine months ended
September 30, 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.
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).
Three and Nine Months ending September
30, 2015 Highlights
- Despite a very challenging coal pricing environment, Corsa
achieved positive adjusted EBITDA(1) at its Northern
Appalachia ("NAPP") and Central Appalachia ("CAPP") divisions, as
well as on a consolidated basis for the three and nine months ended
September 30, 2015.
- NAPP productivity improvements and cost containment efforts
have been successful with the cash production cost per ton
sold(1) for metallurgical coal decreasing 11.2% from the
third quarter 2014.
- The Casselman Mine successfully completed a challenging
geologic transition under the Casselman River.
- Corsa's operations continue to achieve industry leading safety
performance, with violation per inspection day rates that are 45%
lower than the national average.
- The Quecreek Mine was restarted in May
2015 as a result of securing a long-term thermal coal sales
contract that allowed Corsa to economically mine the metallurgical
and thermal coal reserve base.
- NAPP continues to aggressively manage its cost structure. The
mines idled during the first quarter 2015, as well as other
inactive deep mining operations, were sealed, except the Horning
Mine, in an effort to significantly reduce idle mine costs. NAPP
incurred idle mine costs of $2,358,000 during the first nine months of 2015,
which is expected to dramatically decline over the balance of the
year as a result of these mines being sealed. Additionally, Corsa
successfully consolidated its coal processing plants in the second
quarter 2015, resulting in significant operating cost savings.
Efforts are being undertaken to reduce general and administrative
expenses and water treatment expenses at NAPP, and to manage
reclamation efforts more efficiently.
- CAPP improved upon its first half 2015 performance by
generating adjusted EBITDA(1) of approximately
$2,190,000 during the third quarter
2015, driven by excellent cost performance. CAPP also has
substantially completed the face up for the Cooper Ridge Deep Mine.
This mine has recently commenced production in the October 2015 and will strategically reposition
CAPP into the specialty coal and industrial coal markets which
typically generate premium pricing.
- In February 2015, Corsa
restructured its senior management team by appointing Peter Merritts to the role of President - NAPP
and in June 2015, Kevin Harrigan was appointed to the role of
Chief Financial Officer and Corporate Secretary.
- In October 2015, Corsa raised
$7.25 million from its three
significant institutional investors by way of private placement to
fund working capital and for general corporate purposes.
- Key Operating Metrics for the three months ended September 30, 2015:
- NAPP metallurgical coal sales of 145,000 tons.
- NAPP realized price per ton sold(1) for
metallurgical coal of $73.32.
- NAPP cash production cost per ton sold(1) for
metallurgical coal of $66.90, an
improvement of 11% over the prior year comparable quarter.
- CAPP thermal coal sales of 222,000 tons.
- CAPP realized price per ton sold(1) for thermal coal
of $67.29.
- CAPP cash production cost per ton sold(1) for
thermal coal of $53.74.
George Dethlefsen, Chief
Executive Officer, commented, "As the coal markets have continued
to weaken over the course of 2015, Corsa's strong operational
performance and cost reduction initiatives have enabled the company
to achieve positive adjusted EBITDA overall and at both the NAPP
and CAPP divisions. We continue to strategically position
both divisions to achieve the highest possible realized pricing for
our coals, and our coal qualities, infrastructure and logistics
enable us flexibility in serving several markets. Our cost
cutting initiatives and asset rationalization programs have proven
to be successful over the course of this year, and we expect
further benefits from these programs into 2016.
We believe that our advantaged position on the delivered cost
curve, premium coal qualities, and financial sponsorship will
position Corsa to capitalize on opportunities in this distressed
coal market. We see continued supply rationalization in the
domestic metallurgical space in the coming months, which over time,
should serve as a catalyst for improved pricing."
(1)This is a non-GAAP
financial measure. See "Non-GAAP Financial Measures"
below.
Financial and Operations Summary
|
For the three
months ended
|
|
For the nine
months ended
|
|
September
30,
|
|
September
30,
|
|
|
|
|
|
Increase
(Decrease)
|
|
|
|
|
|
Increase
(Decrease)
|
|
2015
|
|
2014(1)
|
|
|
2015
|
|
2014(1)
|
|
Revenues
(000's)
|
$
|
31,742
|
|
|
$
|
45,150
|
|
|
$
|
(13,408)
|
|
|
$
|
102,778
|
|
|
$
|
89,312
|
|
|
$
|
13,466
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales(3) (000's)
|
$
|
33,606
|
|
|
$
|
38,613
|
|
|
$
|
(5,007)
|
|
|
$
|
132,923
|
|
|
$
|
85,915
|
|
|
$
|
47,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and
administrative expense (000's)
|
$
|
3,864
|
|
|
$
|
3,837
|
|
|
$
|
27
|
|
|
$
|
12,515
|
|
|
$
|
7,785
|
|
|
$
|
4,730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net and comprehensive
income (loss) for the period (000's)
|
$
|
(9,288)
|
|
|
$
|
(21,066)
|
|
|
$
|
11,778
|
|
|
$
|
(46,635)
|
|
|
$
|
(20,947)
|
|
|
$
|
(25,688)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA(2) (000's)
|
$
|
1,955
|
|
|
$
|
10,447
|
|
|
$
|
(8,492)
|
|
|
$
|
1,653
|
|
|
$
|
12,748
|
|
|
$
|
(11,095)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by
(used in) operating activities (000's)
|
$
|
4,680
|
|
|
$
|
(20,744)
|
|
|
$
|
25,424
|
|
|
$
|
11,498
|
|
|
$
|
(23,990)
|
|
|
$
|
35,488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coal sold - tons
(000's)
|
|
|
|
|
|
|
|
|
|
|
|
|
NAPP – metallurgical
coal
|
145
|
|
|
263
|
|
|
(118)
|
|
|
569
|
|
|
401
|
|
|
168
|
|
|
CAPP
|
222
|
|
|
247
|
|
|
(25)
|
|
|
612
|
|
|
691
|
|
|
(79)
|
|
|
Total
|
367
|
|
|
510
|
|
|
(143)
|
|
|
1,181
|
|
|
1,092
|
|
|
89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized price per
ton sold(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
NAPP – metallurgical
coal
|
$
|
73.32
|
|
|
$
|
97.10
|
|
|
$
|
(23.78)
|
|
|
$
|
79.50
|
|
|
$
|
95.25
|
|
|
$
|
(15.75)
|
|
|
CAPP
|
$
|
67.29
|
|
|
$
|
67.72
|
|
|
$
|
(0.43)
|
|
|
$
|
66.86
|
|
|
$
|
67.63
|
|
|
$
|
(0.77)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash production cost
per ton sold(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
NAPP – metallurgical
coal
|
$
|
66.90
|
|
|
$
|
75.30
|
|
|
$
|
(8.40)
|
|
|
$
|
69.36
|
|
|
$
|
77.48
|
|
|
$
|
(8.12)
|
|
|
CAPP
|
$
|
53.74
|
|
|
$
|
58.02
|
|
|
$
|
(4.28)
|
|
|
$
|
57.86
|
|
|
$
|
57.11
|
|
|
$
|
0.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash margin per ton
sold(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
NAPP – metallurgical
coal
|
$
|
6.42
|
|
|
$
|
21.80
|
|
|
$
|
(15.38)
|
|
|
$
|
10.14
|
|
|
$
|
17.77
|
|
|
$
|
(7.63)
|
|
|
CAPP
|
$
|
13.55
|
|
|
$
|
9.70
|
|
|
$
|
3.85
|
|
|
$
|
9.00
|
|
|
$
|
10.52
|
|
|
$
|
(1.52)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA(2) (000's)
|
|
|
|
|
|
|
|
|
|
|
|
|
NAPP
|
$
|
595
|
|
|
$
|
9,347
|
|
|
$
|
(8,752)
|
|
|
$
|
1,800
|
|
|
$
|
9,495
|
|
|
$
|
(7,695)
|
|
|
CAPP
|
2,190
|
|
|
1,878
|
|
|
312
|
|
|
3,483
|
|
|
5,502
|
|
|
(2,019)
|
|
|
Corporate
|
(830)
|
|
|
(778)
|
|
|
(52)
|
|
|
(3,630)
|
|
|
(2,249)
|
|
|
(1,381)
|
|
|
Total
|
$
|
1,955
|
|
|
$
|
10,447
|
|
|
$
|
(8,492)
|
|
|
$
|
1,653
|
|
|
$
|
12,748
|
|
|
$
|
(11,095)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The
results of the assets acquired in Corsa's acquisition of PBS Coals
are included from the August 19, 2014 acquisition date.
|
(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
|
|
For the nine
months ended
|
|
|
September
30,
|
|
September
30,
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Mining and processing
costs
|
|
$
|
19,513
|
|
|
$
|
27,120
|
|
|
$
|
68,072
|
|
|
$
|
56,601
|
|
Purchased coal
costs
|
|
940
|
|
|
2,872
|
|
|
3,145
|
|
|
5,116
|
|
Royalty
expense
|
|
2,232
|
|
|
3,716
|
|
|
7,104
|
|
|
8,395
|
|
Amortization
expense
|
|
6,240
|
|
|
7,273
|
|
|
21,860
|
|
|
14,474
|
|
Transportation costs
from preparation plant to customer
|
|
2,658
|
|
|
2,885
|
|
|
8,116
|
|
|
4,386
|
|
Idle mine
expense
|
|
24
|
|
|
—
|
|
|
3,130
|
|
|
597
|
|
Change in estimate of
reclamation provision for non-operating properties
|
|
(445)
|
|
|
5
|
|
|
791
|
|
|
1,575
|
|
Impairment and
write-off of mineral properties
|
|
285
|
|
|
—
|
|
|
16,531
|
|
|
—
|
|
Write-off of advance
royalties and other assets
|
|
(7)
|
|
|
—
|
|
|
888
|
|
|
—
|
|
Other
costs
|
|
—
|
|
|
(5,258)
|
|
|
438
|
|
|
(5,229)
|
|
Thermal coal mining
costs – Quecreek Deep Mine
|
|
2,166
|
|
|
—
|
|
|
2,848
|
|
|
—
|
|
|
|
$
|
33,606
|
|
|
$
|
38,613
|
|
|
$
|
132,923
|
|
|
$
|
85,915
|
|
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, updated only for CAPP Division
sales, which is as follows:
- Total sales of 1,645,000 to 1,785,000 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 Division" above.
- CAPP Division sales of 750,000 to 800,000 tons of thermal coal.
See "Coal Pricing Trends and Outlook – CAPP Division" above.
- 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 Division
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.
Weak Chinese demand for imported metallurgical coal, in
combination with a strong U.S. dollar and low dry bulk freight
rates, have continued to put downward pressure on seaborne
metallurgical coal pricing. The fourth quarter 2015 coking
coal benchmark pricing decreased to $89.00 per metric ton, representing a decrease of
approximately 4% from the third quarter of calendar 2015 and a
year-over-year decrease of approximately 25%. The fourth quarter
price is the first time the benchmark settlement was below
$90 per metric ton since 2004, on a
nominal basis, and represents a point on the cost curve where
analysts estimate over half of the global seaborne production is
unprofitable.
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. Domestically, severe financial distress
has caused high profile bankruptcies in 2015 and may lead to
additional supply cuts in the near future. This situation has also
created an environment where producers are deferring capital
expenditures, not reinvesting in reserves or permitting efforts,
and are highly vulnerable to supply disruptions. For these reasons,
Corsa believes that the domestic market is poised to rebound faster
than the international seaborne market. Corsa's geographic
proximity to over 50% of domestic coke production capacity and
short rail distance and multiple options to access the Baltimore export terminals solidify Corsa's
ability to take advantage of any recoveries in coal pricing.
Metallurgical coal sales in 2015 are expected to be in the range
of 725,000 to 775,000 tons. Approximately 97% of these sales are
currently 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 Division
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
2016.
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
750,000 to 800,000 tons. Approximately 96% of these sales are
currently 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 350,000 tons in 2016.
Stock Options Grant
Corsa also announces that its Board of Directors has granted
stock options to purchase a total of 67,712,500 common shares of
Corsa ("Common Shares") to certain directors, officers and
employees of Corsa, which grant represents approximately 4.9% of
the total outstanding Common Shares. These options were granted in
accordance with Corsa's Amended and Restated Option Plan (the
"Option Plan"), are exercisable for five years at a price of
C$0.05 per Common Share and are
subject to the terms and conditions of the Option Plan and TSX
Venture Exchange approval. Such options will vest one-third on the
first anniversary of the date of grant, one-third on the second
anniversary of the date of grant and one-third on the third
anniversary of the date of grant.
George G. Dethlefsen, Chief
Executive Officer, received 7,000,000 options, Kevin M. Harrigan, Chief Financial Officer and
Corporate Secretary received 3,900,000 options, Peter Merritts, President – NAPP Division
received 4,200,000 options, Keith
Dyke, President – CAPP Division received 3,900,000 options,
Joseph Gallo, Senior Vice President
– NAPP Division received 2,187,500 options, Ray McElhaney, Chief Financial Officer – NAPP
Division received 2,250,000 options, Steve
Meehan, Vice President Sales received 1,950,000 options,
Johnny Gaertner, Chief Financial
Officer – CAPP Division received 1,950,000 options and certain
other employees of Corsa received an aggregate of 22,390,000
options.
Options granted to Corsa's directors were as follows:
John H. Craig received 2,400,000
options, Alan M. De'Ath received
2,865,000 options, Arthur Einav
received 2,650,000 options, Michael
Harrison received 2,400,000 options, Robert Scott received 2,635,000 options,
Daniel D. Smith received 2,400,000
options and Ronald G. Stovash
received 2,635,000 options. Corbin J.
Robertson III, Chairman of Corsa's Board of Directors and a
representative of Corsa's significant shareholder Quintana Energy
Partners L.P. and its affiliated investment funds, elected not to
receive any options.
Non-GAAP Measures
Management uses realized price per ton sold, cash production
cost per ton sold and adjusted EBITDA 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
and nine months ended September 30,
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 and nine months ended
September 30, 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 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.
Information about Corsa
Corsa is one of the leading suppliers of premium quality
metallurgical coal, an essential ingredient in the production of
steel, which is necessary for the secular trends in global
urbanization. Our core business is supplying metallurgical
coal with the highest safety, yield, and strength characteristics
to domestic steel producers while being a strategic source of
supply in the Atlantic and Pacific basin markets. Corsa also
offers high heat content, low delivered cost coal to major
utilities and industrial users in the Southeast region of the
U.S.
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, coal prices, coal production, mine development,
expected cash production costs, geological conditions, future
capital expenditures, reduction in operating 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", "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;
liabilities inherent in coal mine development and production;
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 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 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 in 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 labor 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 in which 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 its acquisition of PBS Coals in
August 2014. 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.