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Corsa Coal Corp (2)
Symbol CSO
Shares Issued 94,591,245
Close 2017-12-14 C$ 1.38
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Corsa estimates 2018 met coal sales of 2.1 million tons

2017-12-14 17:58 ET - News Release

Mr. George Dethlefsen reports

CORSA COAL ANNOUNCES 2018 OPERATIONAL AND SALES GUIDANCE

Corsa Coal Corp. has provided its guidance for 2018.

"Two thousand seventeen has been a year of tremendous growth and record profitability for Corsa, driven by strong volume growth across all of our metallurgical segments, as well as a healthy pricing environment," said George Dethlefsen, chief executive officer of Corsa. "We plan to continue growing rapidly in 2018 as our Acosta mine reaches full production and as we begin production at the Horning mine. In 2018, we are guiding towards metallurgical coal production growth of over 60 per cent and an overall increase in premium low volatile metallurgical coal sales of over 50 per cent as compared to 2017 forecasted levels.

"Our priorities for allocating free cash flow include metallurgical coal production growth and investing in our mining equipment to position the company for the future. Our 2018 capital expenditure program is focused on growing production from existing mines, new mine development, maintenance capital at existing operations and maintaining our preparation plants to support the company's goal of doubling low volatile metallurgical coal production over the next two years.

"The global supply and demand fundamentals for metallurgical coal remain very positive. The steel industry is enjoying high levels of production growth and profitability, and on the supply side, premium quality metallurgical coal remains in a supply deficit. We have built a diversified sales order book with exposure to Pacific basin prices, U.S. east coast pricing and fixed prices domestically. With metallurgical coal prices at profitable levels and our growth story continuing to move forward, Corsa is well positioned for another outstanding year ahead," said Mr. Dethlefsen.

Full-year 2018 (all dollar amounts in U.S. dollars and tonnage in short tons)

Metallurgical coal sales tons (1)

Company produced:  1.2 million to 1.4 million short tons

Purchased -- value-added services:  300,000 to 400,000 short tons

Purchased -- sales and trading:  600,000 to 1.0 million short tons

Total metallurgical coal sales tons:  2.1 million to 2.8 million short tons

Share of metallurgical coal sales tons

Percentage of domestic sales at the midpoint:  19 per cent

Percentage of export sales at the midpoint:  81 per cent

Metallurgical coal sales tons commitments (3)

Committed at the midpoint:  57 per cent

Committed and priced at the midpoint:  27 per cent

Cash production cost per ton sold (FOB mine)

NAPP division metallurgical coal (2) (3):  $70 to $74 per short ton

CAPP division metallurgical and thermal coal (2):  $58 to $62 per short ton

General and administrative expenses (4)

NAPP division:  $8.0-million to $10.0-million

CAPP division:  $1.0-million

Corporate division:  $5.0-million to $7.0-million

Total Corsa:  $14.0-million to $18.0-million

Note: Selling expenses are forecasted to be covered by margins from sales and trading tons sold.

Maintenance capital expenditures per ton sold (5)

2018 full year:  $7 per short ton sold

2018 to 2020 forecasted average:  $3 to $4 per short ton sold

(1) Corsa's metallurgical coal sales figures are composed of three types of sales: (i) selling coal that Corsa produces (company produced); (ii) selling coal that Corsa purchases and provides value-added services (storing, washing, blending and loading) to make the coal saleable (value-added services); and (iii) selling coal that Corsa purchases on a clean or finished basis from suppliers outside the Northern Appalachia region (sales and trading).

(2) This is a non-generally accepted accounting principle financial measure.

(3) Cash production cost per ton sold excludes purchased coal.

(4) Exclusive of stock-based compensation and selling-related commissions, bank fees and finance charges.

(5) Tons sold excludes purchased coal used in the sales and trading platform.

Company produced tons

The 2018 budget is focused on mine development, preparing the company's operations for higher volumes, and upgrading equipment to help lower operating costs in 2018 and beyond. Production growth is expected to assist in Corsa achieving the benefits of scale, which, in turn, will help lower the company's all-in sustaining cost structure through fixed-cost absorption.

Company produced tons is historically the company's highest margin segment, and in 2018, the company plans to increase metallurgical coal production volumes by 60 per cent over expected 2017 levels. The company expects to benefit from increased production from a full run rate at the Acosta mine, contribution from two new surface mines and production from the Horning mine beginning in the first quarter.

Value-added services -- purchased coal

Growing into its infrastructure is a priority for the company in 2018 and part of its long-term growth plans. The company's processing plant facilities have the capacity to double throughput with increased volumes from the company produced tons and value-added services tons. Planned growth from these two segments is expected to drive higher volumes at the company's processing plant facilities and increase utilization rates. Corsa has four million tons of annual processing capacity at its Northern Appalachia, or NAPP, division connected to rail sidings on both the CSX and Norfolk Southern railways. Purchasing coal locally and then storing, washing, blending and loading the coal generate margin, as Corsa uses its customer relationships, infrastructure and logistics capabilities to enable regional producers to assess the export market.

In addition to income from Corsa's value-added services' purchased coal segment, Corsa also expects to generate $4.0-million to $6.0-million of additional income in 2018 through toll washing, the sale of mining and coal processing byproducts, and from mineral royalties.

Sales and trading

In 2017, Corsa launched its sales and trading platform. Corsa's metallurgical coal sales have tripled in 2017, and sales revenues are up 247 per cent year to date through Sept. 30, 2017. The sales and trading segment provides significant intangible benefits that help the company drive volume growth and increase 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 realizations

Corsa expects to sell approximately 30 per cent of its low-volatile metallurgical coal on contracts linked to the Platts premium low-volume Australian price index, and Corsa typically takes an approximately 15-per-cent discount on the index for these sales. The company expects to sell approximately 50 per cent of its low-volatile metallurgical coal on contracts linked or influenced by the Platts U.S. east coast premium low-volume HCC price. To convert from a price that is in metric tonnes at a port (the commonly quoted published prices), a metric-to-short conversion must take place (10-per-cent reduction), as well as the removal of rail freight, which historically has averaged between 15 to 17 per cent of FOB terminal U.S. east coast low-volume HCC price per metric tonne.

Sensitivity to changes in price

As a guideline, for 2018, adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) changes by approximately $7.0-million as average realized seaborne prices change by $10 per metric tonne. Current prices for premium low-volatile metallurgical coal on the east coast of the United States are $197 per metric tonne (the index that represents the majority of Corsa's export sales) and on the east coast of Australia are $236.50 per metric tonne.

Qualified person

All scientific and technical information contained in this news release has been reviewed and approved by Peter V. Merritts, professional engineer and the company's president -- NAPP division, who is a qualified person within the meaning of National Instrument 43-101 (Standards of Disclosure for Mineral Projects).

We seek Safe Harbor.

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