Vale’s first quarter financial results for coal

Adjusted EBITDA for coal was negative US$128 million in 1Q15 compared to a negative US$204 million in 4Q14, despite the lower coal prices and lower volumes mainly as a result of further reductions in expenses. This improvement of US$76 million was partly offset by a decrease in revenues in 1Q15.

Gross sales revenues of metallurgical coal decreased from US$ 181 million in 4Q14 to US$129 million in 1Q15. This was proposed to be due to lower sales volumes (US$50 million) and lower prices (US$ 2 million). Gross sales revenues of thermal coal decreased from US$20 million in 4Q14to US$16 million in 1Q15, mainly as a consequence of lower sales volumes (US$3 million).

The average realised price for metallurgical coal decreased by 1.6% from US$99.72/t in 4Q14 to US$98.17/t in 1Q15. The average realised price for thermal coal declined 3.9% from US$64.52/t in 4Q14 to US$62.02/t in 1Q15.

In 1Q15, sales volumes of metallurgical coal reached 1.3 million t increased by 434 000 t in comparison with 1Q14. However, it decreased by 501 000 t in comparison with 4Q14.

Most of the decrease in sales volumes in 1Q15 is due to Moatize production, when compared with 4Q14. The production in Mozambique was affected by abnormal rains in the beginning of the year and by a lower physical availability of the mining equipment and of the coal processing plant. The placement of Isaac Plains into care and maintenance also reduced production in 1Q15 compared to the previous quarter, but Australian sales were higher because the existing stock from Isaac Plains and Integra was sold.

Sales volumes of thermal coal attained 257 000 t in 1Q15, decreasing 53,000 t compared to last quarter and declined 219 000 t from the same time last year. The lower sales volumes of thermal coal in 1Q15 are in line with the decrease in production, which reached 427 000 t in the quarter, decreasing 93 000 t from 4Q14 and 134 000 t from 1Q14. The stoppages of both the Integra and the Isaac Plains mines are a leading factor in the decline of thermal coal production.

Coal costs totalled to US$186 million in 1Q15. After adjusting for the effects of lower volumes (-US$70 million) and the positive impact of the Australian dollar depreciation (-US$5 million), costs increased by US$11 million. This was largely a result of higher maintenance costs in Moatize, carried out to increase the physical availability of the processing plant and of the mining equipment.

Costs net of depreciation decreased by US$50 million when compared to 1Q14. After adjusting for the effects of higher volumes (US$65 million) and the positive impact of the Australian dollar depreciation (-US$20 million), costs declined by US$95 million.

Coal expenses, excluding depreciation charges, decreased by US$97 million from US$184 million in 4Q14 to US$87 million in 1Q15. The decrease was mainly due to a lower inventory adjustment on thermal coal in Moatize (US$77 million) and a reduction in SG&A expenses (US$17 million) in 1Q15. Coal expenses increased by US$25 million in 1Q15 vs 1Q14, due to a higher inventory adjustment on thermal coal in Moatize.

Adapted from press release by Harleigh Hobbs

Read the article online at: https://www.worldcoal.com/coal/01052015/vale-financial-results-for-coal-1q15-2224/