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Corsa Coal announces guidance for 2019

Published by
World Coal,

Corsa Coal Corp., a premium quality metallurgical coal producer, has announced its guidance for 2019 and the extension of the maturity date of the term credit facility with Sprott Resource Lending Corp. from 19 August 2019 to 19 August 2020.

"In 2018, Corsa advanced several strategic priorities that position the business well for future success in 2019 and beyond," said George Dethlefsen, Chief Executive Officer of Corsa.

"We completed the ramp-up of the Acosta deep mine, made significant progress on the development of the Horning mine, developed the northeastern reserve base at the Casselman mine and completed a face mining equipment upgrade cycle – a move that will reduce capital expenditures in the coming years while also reducing repair and maintenance expenses and improving productivity. Additionally, we divested the thermal coal-producing Central Appalachia division to become a pure play metallurgical coal producer. While accomplishing these objectives, we also expect to have increased company produced metallurgical coal sales levels by 23% and will have grown overall metallurgical coal sales 29% by the end of 2018.

“In 2019, we are forecasting company produced metallurgical coal sales to increase by 33%, as the Casselman and Acosta mines are producing at full capacity and as we ramp up our Horning and Schrock Run mines. We are guiding to cash production costs per short tonne sold of $78 to US$82 in 2019, reflecting reduced costs per short tonne sold at both Casselman and Acosta and benefiting from the lower cost profile of our Schrock Run opencast mine. In 2019, we expect to begin development work at our Keyser mine in Somerset County.

“We have grown the company at a rapid pace since 2016, increasing metallurgical coal sales by nearly 190% and increasing company produced metallurgical coal sales by 49%. Even after this progress, we believe we are only in the fifth inning of our growth story. Finishing the Horning mine development, beginning the Keyser mine and beginning the North mine are all key pieces to our long-term strategy of lowering unit costs by increasing capacity utilisation at our preparation plants and achieving the financial benefits of scale.

“The market for metallurgical coal remains very well-supported largely due to limited production growth globally over the past several years and healthy demand from steel producers. Supply of low volatile metallurgical coal is particularly tight in the marketplace, given recent supply events. The forward curve for 2019 currently projects an average price for premium low volatile metallurgical coal of US$190.25/t FOB vessel. Using a US$190/t FOB vessel price outlook, we expect to generate between US$13 million and US$15 million of net and comprehensive income and US$42 million and US$46 million of Adjusted EBITDA in 2019. We are looking forward to capitalising on the opportunity ahead of us in 2019."

Company produced short tonnes

The ocmpany’s 2019 budget is focused on producing coal at its three underground mines and is benefited by a full year run rate at the Acosta mine and more favourable mining conditions at the Casselman mine. The Horning mine is expected to exit the development phase and is expected to produce a low ash, premium quality metallurgical coal. In early 2019, the company expects to begin production at the Schrock Run opencast mine, which is expected to be the company's lowest cost mine.

Value added services – purchased coal

Increasing capacity utilisation rates at its infrastructure remains a strategic priority for the company in 2019 and part of the long-term growth plans. The company's processing plant facilities have the capacity to double throughput with increased volumes from our company produced tons and value added services short tonnes. Corsa has 4 million short t of annual processing capacity connected to rail sidings on both the CSX and Norfolk Southern railroads. Purchasing coal locally and then storing, washing, blending and loading the coal generates margin, as Corsa uses its customer relationships, infrastructure and logistics capabilities to enable regional producers to access the export market.

Sales and trading – purchased coal

The sales and trading business line provides significant intangible benefits that help the company drive volume growth and increases its presence in the seaborne market, as well as in the domestic purchased coal market. This helps the company offer its customers a wide range of coal qualities and creates a margin stream that Corsa believes will be available in any pricing environment.

Export price realisations

At present, the company has priced 39% of its 2019 low volatile metallurgical coal order book, including 650 000 short t of domestic business that is priced at an average of US$112/short t FOB mine. Currently, 59% of 2019 forecasted low volatile volumes are committed. Corsa expects its sales order book to have good diversification, with roughly equal shares of volumes being fixed, priced off the Australian index and priced off of the Platts U.S. East Coast index. The company forecast approximately 71% of 2019 volumes to be exported and 29% to be sold domestically.

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