CANONSBURG, PA, March 30,
2016 /CNW/ - Corsa Coal Corp. (TSXV: CSO) ("Corsa"), a premium
quality metallurgical, thermal and industrial coal producer, today
reported financial results for the three months and full year ended
December 31, 2015. Corsa has
filed its audited Consolidated Financial Statements for the years
ended December 31, 2015 and 2014 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).
Fourth Quarter 2015 and Full Year 2015 Highlights
- Despite a challenging coal pricing environment, Corsa achieved
positive adjusted EBITDA(1) of $222,000 and $2,022,000 at its Northern Appalachia Division
("NAPP") for the three and twelve months ended December 31, 2015, respectively, $575,000 and $4,058,000 at its Central Appalachia ("CAPP")
Division for the three and twelve months ended December 31, 2015, respectively, and $14,000 and $1,667,000 on a consolidated basis for the three
and twelve months ended December 31,
2015.
- NAPP productivity improvements and cost reduction efforts have
been successful in outpacing the decline in average realized coal
prices, with the cash production cost per ton sold(1)
for metallurgical coal decreasing over 20% [from $84.87 to $67.68] in 2015 compared to 2014 versus
a 17% decline in average realized sales price per ton sold [from
$92.39 to $77.11] year over year.
These efforts led to cash operating margin and adjusted EBITDA
rising in 2015 versus 2014 levels.
- Corsa's operations continue to achieve industry leading safety
performance, with violation per inspection day rates that are 50%
lower than the U.S. national average.
- NAPP continues to aggressively manage its cost structure. With
the exception of the Horning Mine, the mines idled during the first
quarter 2015, as well as other inactive deep mining operations,
were sealed in an effort to significantly reduce idle mine costs.
NAPP incurred idle mine costs of $2,939,000 during 2015, which is expected to
dramatically decline in 2016 as a result of these mines being
sealed. Additionally, Corsa successfully consolidated its coal
processing plants in the second quarter 2015 and again during the
fourth quarter 2015, resulting in significant operating cost
savings. Successful efforts have been undertaken to reduce general
and administrative expenses, reclamation and water treatment
expenses at NAPP, and general and administrative expenses at
Corsa's Corporate Division.
- CAPP has also substantially completed the mine development for
the Cooper Ridge Deep Mine which is expected to enter full
production during the second quarter of 2016. This mine is expected
to strategically reposition CAPP into the specialty coal and
industrial coal markets which typically generate premium
pricing.
- Over the course of 2015, Corsa restructured its senior
management team by appointing Peter
Merritts to the role of President - NAPP and appointing
Kevin Harrigan 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.
- In March 2016, Corsa raised
$8 million from its largest three
investors as well as its senior lender by way of a non-brokered
private placement of common shares to fund working capital and for
general corporate purposes.
- Key Operating Metrics for the three months ended December 31, 2015:
- NAPP metallurgical coal sales of 171,000 tons.
- NAPP realized price per ton sold(1) for
metallurgical coal of $69.15.
- NAPP cash production cost per ton sold(1) for
metallurgical coal of $62.11, an
improvement of 34% over the prior year comparable quarter.
- CAPP thermal coal sales of 149,000 tons.
- CAPP realized price per ton sold(1) for thermal coal
of $65.18.
- CAPP cash production cost per ton sold(1) for
thermal coal of $56.19.
George Dethlefsen, Chief
Executive Officer, commented, "The Corsa team showed tremendous
resilience in 2015 in dealing with unprecedented challenges across
the industry. We are extremely proud of our financial and
operating performance for the year, as our reductions in cash
mining costs have outpaced the decline in average realized coal
prices. We have taken steps to reduce every major cost driver
and have ambitious targets to dramatically reduce our fixed and
variable cost structure further in 2016.
We are beginning to see signs of improvement in the
metallurgical coal and steel markets, with domestic steel prices
recovering and spot seaborne metallurgical coal prices rising in
early 2016. We believe that supply cuts will serve as a
catalyst for improved metallurgical coal pricing in 2016 and expect
to see the domestic market recover faster than the seaborne market,
given the extreme financial distress of metallurgical coal
producers and the potential for significant supply disruption.
Both of Corsa's operating divisions are well positioned to grow
in the years ahead, with the mines, mining permits, coal processing
infrastructure, and mining equipment in place to expand production
once market conditions recover. Our advantaged position on
the delivered cost curve, premium coal qualities, and financial
sponsorship will enable Corsa to capitalize on future
opportunities. In addition to our pipeline of organic growth
projects, we will continue to pursue acquisitions to grow the
company at a time when coal asset values remain at historically low
levels."
(1)This is a non-GAAP financial measure. See
"Non-GAAP Financial Measures" below.
Financial and Operations Summary
|
|
For the three
months ended
December
31,
|
|
For the year
ended
December
31,
|
|
|
|
|
|
2015
|
|
2014
|
|
Increase
(Decrease)
|
|
2015
|
|
2014(1)
|
|
Increase
(Decrease)
|
Revenues
(000's)
|
|
$
|
26,564
|
|
|
$
|
51,235
|
|
|
$
|
(24,671)
|
|
|
$
|
129,342
|
|
|
$
|
140,547
|
|
|
$
|
(11,205)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales(3) (000's)
|
|
$
|
129,650
|
|
|
$
|
70,020
|
|
|
$
|
59,630
|
|
|
$
|
262,573
|
|
|
$
|
155,935
|
|
|
$
|
106,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and
administrative expense (000's)
|
|
$
|
2,999
|
|
|
$
|
3,307
|
|
|
$
|
(308)
|
|
|
$
|
15,514
|
|
|
$
|
11,092
|
|
|
$
|
4,422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net and comprehensive
income (loss) for the period (000's)
|
|
$
|
(106,354)
|
|
|
$
|
(22,205)
|
|
|
$
|
(84,149)
|
|
|
$
|
(152,989)
|
|
|
$
|
(43,152)
|
|
|
$
|
(109,837)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA(2) (000's)
|
|
$
|
14
|
|
|
$
|
(7,453)
|
|
|
$
|
7,467
|
|
|
$
|
1,667
|
|
|
$
|
5,295
|
|
|
$
|
(3,628)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by
(used in) operating activities (000's)
|
|
$
|
(2,517)
|
|
|
$
|
9,796
|
|
|
$
|
(12,313)
|
|
|
$
|
8,981
|
|
|
$
|
(14,194)
|
|
|
$
|
23,175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coal sold - tons
(000's)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NAPP – metallurgical
coal
|
|
171
|
|
|
317
|
|
|
(146)
|
|
|
740
|
|
|
718
|
|
|
22
|
|
|
CAPP
|
|
149
|
|
|
233
|
|
|
(84)
|
|
|
761
|
|
|
924
|
|
|
(163)
|
|
|
Total
|
|
320
|
|
|
550
|
|
|
(230)
|
|
|
1,501
|
|
|
1,642
|
|
|
(141)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized price per
ton sold(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NAPP – metallurgical
coal
|
|
$
|
69.15
|
|
|
$
|
88.76
|
|
|
$
|
(19.61)
|
|
|
$
|
77.11
|
|
|
$
|
92.39
|
|
|
$
|
(15.28)
|
|
|
CAPP
|
|
$
|
65.18
|
|
|
$
|
68.89
|
|
|
$
|
(3.71)
|
|
|
$
|
66.53
|
|
|
$
|
67.95
|
|
|
$
|
(1.42)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash production cost
per ton sold(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NAPP – metallurgical
coal
|
|
$
|
62.11
|
|
|
$
|
94.21
|
|
|
$
|
(32.10)
|
|
|
$
|
67.68
|
|
|
$
|
84.87
|
|
|
$
|
(17.19)
|
|
|
CAPP
|
|
$
|
56.19
|
|
|
$
|
57.95
|
|
|
$
|
(1.76)
|
|
|
$
|
57.53
|
|
|
$
|
57.33
|
|
|
$
|
0.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash margin per ton
sold(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NAPP – metallurgical
coal
|
|
$
|
7.04
|
|
|
$
|
(5.45)
|
|
|
$
|
12.49
|
|
|
$
|
9.43
|
|
|
$
|
7.52
|
|
|
$
|
1.91
|
|
|
CAPP
|
|
$
|
8.99
|
|
|
$
|
10.94
|
|
|
$
|
(1.95)
|
|
|
$
|
9.00
|
|
|
$
|
10.62
|
|
|
$
|
(1.62)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA(2) (000's)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NAPP
|
|
$
|
222
|
|
|
$
|
(8,578)
|
|
|
$
|
8,800
|
|
|
$
|
2,022
|
|
|
$
|
917
|
|
|
$
|
1,105
|
|
|
CAPP
|
|
575
|
|
|
2,244
|
|
|
(1,669)
|
|
|
4,058
|
|
|
7,746
|
|
|
(3,688)
|
|
|
Corporate
|
|
(783)
|
|
|
(1,119)
|
|
|
336
|
|
|
(4,413)
|
|
|
(3,368)
|
|
|
(1,045)
|
|
|
Total
|
|
$
|
14
|
|
|
$
|
(7,453)
|
|
|
$
|
7,467
|
|
|
$
|
1,667
|
|
|
$
|
5,295
|
|
|
$
|
(3,628)
|
|
(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
December
31,
|
|
For the year
ended
December
31,
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Mining and processing
costs
|
|
$
|
16,953
|
|
|
$
|
38,766
|
|
|
$
|
85,025
|
|
|
$
|
95,367
|
|
Purchased coal
costs
|
|
548
|
|
|
4,439
|
|
|
3,693
|
|
|
9,555
|
|
Royalty
expense
|
|
1,662
|
|
|
4,144
|
|
|
8,766
|
|
|
12,539
|
|
Amortization
expense
|
|
13,590
|
|
|
10,964
|
|
|
35,450
|
|
|
25,438
|
|
Transportation costs
from preparation plant to customer
|
|
2,476
|
|
|
3,488
|
|
|
10,592
|
|
|
7,874
|
|
Idle mine
expense
|
|
947
|
|
|
—
|
|
|
4,077
|
|
|
597
|
|
Change in estimate of
reclamation provision for non-operating properties
|
|
(23,776)
|
|
|
3,970
|
|
|
(22,985)
|
|
|
5,545
|
|
Impairment and
write-off of mineral properties
|
|
115,241
|
|
|
5,151
|
|
|
131,772
|
|
|
5,151
|
|
Write-off of advance
royalties and other assets
|
|
529
|
|
|
—
|
|
|
1,417
|
|
|
—
|
|
Other
costs
|
|
—
|
|
|
(902)
|
|
|
438
|
|
|
(6,131)
|
|
Thermal coal mining
costs – Quecreek Deep Mine
|
|
1,480
|
|
|
—
|
|
|
4,328
|
|
|
—
|
|
|
|
$
|
129,650
|
|
|
$
|
70,020
|
|
|
$
|
262,573
|
|
|
$
|
155,935
|
|
Guidance
Guidance for the year ended December 31,
2016 is as follows:
- Total sales of 1,525,000 to 1,825,000 tons.
- NAPP Division sales of 850,000 to 1,050,000 tons, including
metallurgical coal sales guidance of 600,000 to 700,000 tons and
thermal coal sales guidance of 250,000 to 350,000 tons. See "Coal
Pricing Trends and Outlook – NAPP Division" below.
- CAPP Division sales of 675,000 to 775,000 tons of thermal and
industrial coal. See "Coal Pricing Trends and Outlook – CAPP
Division" below.
- NAPP Division cash production cost per ton sold(1)
for metallurgical coal of $57 to
$62.
- NAPP Division cash production cost per ton sold(1)
for thermal coal of $32 to $37.
- CAPP Division cash production cost per ton sold(1)
for thermal coal of $56 to $61.
(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 2016 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 put downward pressure on seaborne metallurgical coal
pricing. The first quarter 2016 coking coal benchmark pricing
decreased to $81.00 per metric ton,
representing a decrease of approximately 9% from the fourth quarter
of calendar 2015 and a year-over-year decrease of approximately
31%. The first quarter price is the second 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.
Corsa's metallurgical coal sales in 2016 from its NAPP Division
are expected to be in the range of 600,000 to 700,000 tons.
Approximately 46% 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. Corsa has the ability to produce and sell
significantly more tons of metallurgical coal in 2016, should
market conditions improve.
Corsa's thermal coal sales in 2016 from its NAPP Division are
expected to be in the range of 250,000 to 350,000 tons.
Approximately 50% of these sales are currently committed at the
midpoint of the range. Actual sales will depend on customer
demand and market conditions.
CAPP Division
Current Southeastern U.S. utility market thermal coal spot
pricing declined 25% over the course of 2015. As a result, much of
the Central Appalachia coal production is uneconomic. Corsa expects
utility coal demand for Central Appalachia production to decrease
in 2016. 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 2016. The 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 Division coal sales for 2016 are expected to be in the
range of 675,000 to 775,000 tons. Approximately 55% of these sales
are currently committed at the midpoint of the range. Actual sales
will depend on customer demand and market conditions.
Director Resignation
Corsa also announces that it has received and accepted the
resignation of Daniel D. Smith as a
director of the Corporation with immediate effect. Corsa
wishes to thank Mr. Smith for his contributions to Corsa's Board of
Directors (the "Board") and its audit committee since his initial
appointment in July 2013. Ronald G.
Stovash succeeds Mr. Smith on Corsa's audit committee.
The Board does not expect that a successor for Mr. Smith will be
appointed prior to the next annual general meeting of shareholders
of Corsa.
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
months and full year ended December 31,
2015 for a reconciliation of non-GAAP measures to GAAP
measures.
Financial Statements and Management's Discussion and
Analysis
Refer to Corsa's audited Consolidated Financial Statements for
the years ended December 31, 2015 and
2014 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.
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, the capacity and recovery of Corsa's
preparation plants, expected cash production costs, geological
conditions, future capital expenditures 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 2016 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. 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.