Corsa Coal Announces Financial Results for Fourth Quarter and Full Year 2021
March 1, 2022 – Friedens, Pennsylvania - Corsa Coal Corp. (TSXV: CSO; OTCQX: CRSXF) (“Corsa” or the “Company”), a premium quality metallurgical coal producer, today reported financial results for the three months and full year ended December 31, 2021. Corsa has filed its audited consolidated financial statements for the years ended December 31, 2021 and 2020, related management’s discussion and analysis and its annual information form 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). Pricing and cost per ton information is expressed on a free-on-board (“FOB”), mine site basis, unless otherwise noted.
Fourth Quarter and Full Year 2021 Highlights
- Key financial results and operational statistics are shown below:
- Corsa’s average realized price for the fourth quarter 2021 is the approximate equivalent of between $195 to $200 per metric ton on an FOB vessel basis(2). For the fourth quarter 2021, Corsa’s sales mix included 58% of sales to domestic customers and 42% of sales to international customers.
(1) This is a non-GAAP financial measure. See “Non-GAAP Financial Measures” below.
(2) Similar to most U.S. metallurgical coal producers, Corsa reports sales and costs per ton on an FOB mine site basis and denominated in short tons. Many international metallurgical coal producers report prices and costs on a delivered-to-the-port basis (or “FOB vessel basis”), thereby including freight costs between the mine and the port. Additionally, Corsa reports sales and costs per short ton, which is approximately 10% lower than a metric ton. For the purposes of this figure, we have used an illustrative freight rate of $45-$50 per short ton. Historically, freight rates rise and fall as market prices rise and fall. As a note, most published indices for metallurgical coal report prices on a delivered-to-the-port basis and denominated in metric tons.
Kevin M. Harrigan, Interim President and Chief Executive Officer of Corsa, commented, “Our fourth quarter 2021 results reflect the continuation of the challenging mining conditions and labor-related productivity issues that we experienced in the second and third quarters of the year. The second half of 2021 was one of the most challenging periods in the history of our company for production and costs, but I know that our talented team is committed to overcoming these issues and is focused on the actions needed to return to normal production levels and costs in 2022.”
“Our results do reflect the impacts of significant issues that are common across the coal mining and manufacturing industries. The shortage of experienced and skilled labor and increased COVID-19 related absenteeism have and continue to limit our production capabilities. Our cash production costs were driven higher by increased prices for purchased goods and services as well as limited availability of outside labor, parts, and supplies. The logistical performance issues that are common across our industry alter or delay deliveries of coal to our customers and impact our commercial results.”
“Fortunately, in the fourth quarter of 2021, Corsa began to realize stronger market prices for coal sales and materially completed our fourth quarter 2021 contract commitments which were made earlier in 2021 before the dramatic increase in metallurgical coal prices. We expect to recognize the full impact of higher priced sales in 2022 as realizations improve significantly over the 2021 contract and spot market prices, and believe that our focus, actions and commitments will generate improved returns for our shareholders.”
Financial and Operations Summary
(1) This is a non-GAAP financial measure. See “Non-GAAP Financial Measures” below.
(2) Cost of sales consists of the following:
(1) This is a non-GAAP financial measure. See “Non-GAAP Financial Measures” below.
(2) Cash production cost per ton sold excludes purchased coal. This is a non-GAAP financial measure. See “Non-GAAP Financial Measures” below.
(3) Cash cost per ton sold includes purchased coal. This is a non-GAAP financial measure. See “Non-GAAP Financial Measures” below.
Coal Pricing Trends and Outlook
Price levels opened the fourth quarter 2021 at $390.00/metric ton (“mt”) delivered-to-the-port (“FOBT”) for spot deliveries of Australian premium low volatile metallurgical coal and closed the quarter at $357.25/mt FOBT. The quarterly average price for the fourth quarter of 2021 was $368.92/mt FOBT for Australian premium low volatile metallurgical coal, compared to $263.66/ mt FOBT in the third quarter of 2021, and traded in a range from a high of $403.00/mt FOBT to a low of $315.50/mt FOBT.
The World Steel Association reported that through December, global crude steel production increased by 3.6% in 2021 versus 2020 with the U.S. up 18.3%, India up 17.8%, Japan up 14.9%, Brazil up 14.7%, Turkey up 12.7%, Germany up 12.3%, Russia up 6.1%, South Korea up 5.2%, and China down 3.0%. The largest regional increases were recognized in Africa at 26.7%, South America at 17.8%, North America at 19.2%, and European Union at 15.4%. All other regions recorded year-over-year increases. According to the U.S. Energy Information Administration (the “EIA”), U.S. metallurgical coal exports in 2021 totaled 47.2 million tons as compared to 42.1 million tons in 2020, for an increase of 12.1%, and domestic coke plant coal consumption was 17.8 million tons in 2021 as compared to 14.4 million tons in 2020 for an increase of 23.3%. Hot-rolled steel coil prices decreased in the fourth quarter from the highs recorded earlier in the year as production decreased in China due to regulatory controls and market demand for steel products normalized. From the beginning of 2021 through the end of the year, hot-rolled steel coil prices rose 55%, 39% and 13% in the U.S., Northern Europe and China, respectively.
Global steel demand is forecasted to increase by 2.2% in 2022 over 2021 according to the World Steel Association Short Range Outlook released in October 2021. Comparing the expected 2022 global steel demand to the pre-COVID-19 pandemic 2019 steel demand levels indicates an increase of 7.3% with increases in each of the regional areas, driven primarily by growth in China and Turkey. Chinese steel demand in 2022 is expected to remain flat compared to 2021, but will be an increase of 8.6% over 2019. Excluding China, 2022 steel demand from the rest of the world will increase by 4.7% over 2021 and increase by 6.1% over 2019. Regionally, the collective 2022 demand from the United States, Canada and Mexico is forecasted to increase by 5.4% over 2021 and 0.9% over 2019; European Union 2022 demand from the is forecasted to increase by 5.5% over 2021 and 5.7% over 2019; the collective 2022 demand from Asia and Oceania (excluding China) is forecasted to increase by 4.3% over 2021 and 3.7% over 2019; and Central and South America collective 2022 demand is forecasted to increase by 0.9% over 2021 and 4.8% over 2019.
January 2022 spot market pricing for Australian premium low volatile metallurgical coal opened at $357.75/mt FOBT, closed the month at $444.50/mt FOBT and traded in a range from a high of $444.50/mt FOBT to a low of $357.75/mt FOBT for an average price of $408.85/mt FOBT. February 2022 spot market pricing opened the month at $444.50/mt FOBT, at mid-month was $442.50/mt FOBT and traded in a range from a high of $445.00/mt FOBT to a low of $438.75/mt FOBT for an average price of $442.53/mt FOBT. Through January 2022, the World Steel Association reported that global crude steel production decreased by 6.1% versus 2021 with China down 11.2%, Turkey down 7.8%, Brazil down 4.8%, Japan down 2.1%, India up 4.7%, and the United States up 4.2%. Regionally, Asia and Oceania, which includes China and India, was down 8.2 %, the EU was down 6.8%, South America was down 3.3%, and North America was up 2.5%. Through mid- February 2022, hot-rolled steel coil prices have increased China by 5.7% and Northern Europe by 2.9%, while decreasing in the U.S. by 11.3%.
After opening the first quarter of 2022 at $357.75/mt FOBT and trading at $442.50/mt FOBT in mid-February, the forward curve for the balance of the first quarter of 2022 according to the SGX TSI index is trading at $402.38/mt FOBT with February at $432.00/mt FOBT and March at $389.00/mt FOBT. Forward curve pricing for the balance of 2022 is trading at an average of $299.67/mt FOBT with the first quarter at a high of $402.38/mt FOBT and the fourth quarter at a low of $272.00/mt FOBT. The forward curve for 2023 is indicating pricing at an average of $261.84/mt FOBT. Increased global steel demand and high levels of global steel production are driving the demand and supporting higher prices for metallurgical coal. Trade tensions between China and Australia remain and continue to influence the international metallurgical coal market supply routes and metallurgical coal export pricing dynamics. Domestically, coke plant coal consumption is expected to increase year-over-year and according to the EIA and is forecasted to be 17.8 million tons in 2021 and 20.2 million tons in 2022 as compared to 18.0 million tons in 2019. Metallurgical coal exports from the United State are expected to be 47.2 million tons in 2021, a 12% increase over 2021, and domestic coke plant coal consumption is forecasted to be 20.2 million tons, an increase of 23.3% over 2021.
See “Risk Factors” in the Company’s annual information form dated March 1, 2022 for the year ended December 31, 2021 for an additional discussion regarding certain factors that could impact coal pricing trends and outlook, as well as the Company’s ongoing operations.
Financial Statements and Management’s Discussion and Analysis
Refer to Corsa’s audited consolidated financial statements for the years ended December 31, 2021 and 2020 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.
Non-GAAP Financial Measures
Corsa uses certain non-GAAP financial measures to measure its performance internally and to assist in business decision-making as well as providing key performance information to senior management. These measures are not recognized under International Financial Reporting Standards (“GAAP”). Corsa believes that, in addition to the conventional measures prepared in accordance with GAAP, certain investors and other stakeholders also use these non-GAAP financial measures to evaluate Corsa’s operating and financial performance; however, these non-GAAP financial measures do not have any standardized meaning and therefore may not be comparable to similar measures presented by other issuers. Accordingly, these non-GAAP financial measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.
Management uses the following non-GAAP financial measures:
- EBITDA - earnings before deductions for interest, taxes, depreciation and amortization;
- Adjusted EBITDA - EBITDA adjusted for change in estimate of reclamation and water treatment provision for non-operating properties, impairment and write-off of mineral properties and advance royalties, gain (loss) on sale of assets and other costs, stock-based compensation, non-cash finance expenses and other non-cash adjustments. Adjusted EBITDA is used as a supplemental financial measure by management and by external users of our financial statements to assess our performance as compared to the performance of other companies in the coal industry, without regard to financing methods, historical cost basis or capital structure; the ability of our assets to generate sufficient cash flow; and our ability to incur and service debt and fund capital expenditures;
- Realized price per ton sold - revenue from coal sales less transportation costs from the mine site to the loading terminal divided by tons of coal sold. Management evaluates our operations based on the volume of coal we can safely produce or purchase and sell in compliance with regulatory standards, and the prices we receive for our coal. Our sales volume and sales prices are largely dependent upon the terms of our contracts, for which prices generally are set based on an index. We evaluate the price we receive for our coal on an average realized price on an FOB mine site per short ton basis;
- Cash production cost per ton sold - cash production costs of sales excluding purchased coal costs, all included within cost of sales, divided by tons of produced coal sold. Cash production cost is based on cost of sales and includes items such as manpower, royalties, fuel, and other similar production related items, pursuant to IFRS, but relate directly to the costs incurred to produce coal and sell it on an FOB mine site basis. Cash production cost per ton sold is used as a supplemental financial measure by management and by external users to assess our operating performance as compared to the operating performance of other companies in the coal industry. Purchased coal is excluded as the purchased coal costs are based on market prices of coal purchased and not the cost to produce the coal;
- Cash cost purchased coal per ton sold - purchased coal costs divided by tons of purchased coal sold. Management uses this measure to assess coal purchases against the market price at which this coal will be sold;
- Cash cost per ton sold - cash production costs of sales, included within cost of sales, divided by total tons sold. Management uses cash cost per ton sold to assess our overall financial performance on a per ton basis to include the Company’s production and purchased coal cost in total; and
- Cash margin per ton sold - calculated difference between realized price per ton sold and cash cost per ton sold. Cash margin per ton sold is used by management and external users to assess the operating performance as compared to the operating performance of other coal companies in the coal industry.
For a reconciliation of non-GAAP financial measures to GAAP measures, see the tabular presentation at the end of this news release.
All scientific and technical information contained in this news release has been reviewed and approved by David E. Yingling, Professional Engineer and the Company’s mining engineer, who is a qualified person within the meaning of National Instrument 43-101 – Standards of Disclosure for Mineral Projects.
Potential developments and market conditions discussed in this news release are considered to be forward looking information. Readers are cautioned that actual results may vary from this forward-looking information. See “Forward-Looking Statements” below.
Information about Corsa
Corsa is a coal mining company focused on the production and sales of metallurgical coal, an essential ingredient in the production of steel. Our core business is producing and selling metallurgical coal to domestic and international steel and coke producers in the Atlantic and Pacific basin markets.
For further information please contact:
|Kevin M. Harrigan, Interim President and Chief Executive Officer|
|Corsa Coal Corp.|
Certain information set forth in this press release contains “forward-looking statements” and “forward-looking information” (collectively, “forward-looking statements”) under applicable securities laws. Except for statements of historical fact, certain information contained herein including, but not limited to, statements relating to the expected price volatility of the metallurgical coal market, the future demand for steel and its production, and the availability of its supply, changes to sales margins and expected profitability constitutes forward-looking statements which include management’s assessment of future plans and operations and are based on current internal expectations, assumptions and beliefs, which may prove to be incorrect. Some of the forward-looking statements may be identified by words such as “will”, “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. These risks and uncertainties include, but are not limited to: changes in market conditions, governmental or regulatory developments as a result of the COVID-19 pandemic or otherwise, the operating status and capabilities of our customers and competitors; various events which could disrupt operations and/or the transportation of coal products, including labor stoppages, the outbreak of disease and severe weather conditions; and management’s ability to anticipate and manage the foregoing factors and risks. 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 the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Non-GAAP Financial Measures Reconciliation
EBITDA and Adjusted EBITDA for the three months ended December 31, 2021 and 2020
(a) A component of cost of sales and results from changes in the estimated undiscounted cash flows and risk-free discount rate used in calculating the present value of the reclamation and water treatment provision for properties where mining has ceased.
(b) Reflects the non-cash expense related to the vesting of stock options.
(c) Components of finance expense and income excluding interest expense.
(d) Reflects the amounts included in other income related to the disposal of assets not utilized in the Company’s mining operations.
(e) Reflects various adjustments, none of which were individually material, related to adjusting the Company’s workers’ compensation liability, costs incurred for the Company’s internal investigation of the sales agent matter and legal settlements.
EBITDA and Adjusted EBITDA for the years ended December 31, 2021 and 2020
(a) Reflects the non-cash adjustment to reduce the carrying values of mineral properties and plant and equipment.
(b) A component of cost of sales and results from the termination of various lease agreements which the Company does not intend to mine.
(c) A component of cost of sales and results from changes in the estimated undiscounted cash flows and risk-free discount rate used in calculating the present value of the reclamation and water treatment provision for properties where mining has ceased.
(d) Reflects the non-cash expense related to the vesting of stock options.
(e) Components of finance expense and income excluding interest expense.
(f) Reflects the amounts included in other income related to the disposal of assets not utilized in the Company’s mining operations.
(g) A component of other income which reflects the amounts the Company is expected to receive related to a refundable tax credit.
(h) Reflects the amounts forgiven associated with loans received by the Company.
(i) Reflects various adjustments, none of which were individually material, related to adjusting the Company’s workers’ compensation liability, costs incurred for the Company’s internal investigation of the sales agent matter and legal settlements.
Realized price per ton sold for the three months ended December 31, 2021 and 2020
Realized price per ton sold for the years ended December 31, 2021 and 2020
Cash cost per ton sold, cash production cost per ton sold, and cash cost per sales and trading purchased coal per ton sold for the three months ended December 31, 2021 and 2020
Cash cost per ton sold, cash production cost per ton sold, and cash cost per sales and trading purchased coal per ton sold for the years ended December 31, 2021 and 2020
Cash margin per ton sold for the three months ended December 31, 2021 and 2020
Cash margin per ton sold for the years ended December 31, 2021 and 2020