Corsa Files Second Quarter 2012 Financial Results
July 11, 2012 Toronto, Ontario - Corsa Coal Corp. (TSXV: CSO) (“Corsa” or the “Company”) announces that it has filed its Condensed Interim Consolidated Financial Statements and Management’s Discussion and Analysis for the three months and six months ended May 31, 2012 on SEDAR and has posted these documents to its website www.corsacoal.com.
Second Quarter highlights included:
- Metallurgical coal sales of 72,000 tons at an average realized price of $152 per ton in Q2
- $25 million debt refinancing
- Casselman Mine upgraded to proven reserve
Refer to the Condensed Interim Consolidated Financial Statements and Management’s Discussion and Analysis filed for the details of the financial performance of the Company and the matters referred to in this release including the technical reports and independent qualified person.
Don Charter, President and Chief Executive Officer, stated “It is a challenging time in the coal industry and while the industry slowdown has affected us like everyone else, we were able to ship approximately 72,000 tons of met coal in the second quarter at an average realized price of $152 a ton, exceeding our guidance and we have been able to provide guidance for Q3 of approximately 140,000 tons.”
Production and Sales
Three months ended May 31, 2012
The Company sold 72,000 clean tons of metallurgical coal at an average realized price of $152 per ton FOB its Coal Preparation Plant during Q2 2012.
The Company produced 74,000 raw tons of metallurgical coal during Q2 2012 with 38,000 tons from surface mines and 36,000 from its underground mine. The cash mining costs of metallurgical coal produced (not including royalties) were $62 per raw ton. The costs continue to be impacted by mining conditions at the Casselman Mine (see “Casselman Mine”). The Company purchased 26,000 raw tons and 1,000 clean tons of metallurgical coal in Q2 2012.
The Coal Preparation Plant processed 114,000 raw tons of metallurgical coal and produced 66,000 clean tons during Q2 2012 at cash processing costs of $23 per clean ton. Cash costs were impacted by lower production levels resulting from lower than expected sales, double handling of raw coal while the raw coal storage area was expanded, now completed and operational. As well start-up costs of the Company’s refuse site, which is now operational eliminating third party refuse handling, and lower recovery levels as a result of high dilution experienced from the Casselman Mine and floatation column performance also contributed to higher costs.
The Company sold 38,000 raw tons of thermal coal at an average realized price of $33 per ton during the three months ended May 31, 2012. The Company produced 38,000 raw tons of thermal coal from its surface mines in the Q2 2012. The cash mining costs of thermal coal produced (not including royalties) were $38 per raw ton. The thermal coal mined is ancillary to the mining of metallurgical coal.
Six months ended May 31, 2012
The Company sold 137,000 clean tons of metallurgical coal at an average realized price of $155 per ton FOB the Coal Preparation Plant during the six months ended May 31, 2012.
The Company produced 155,000 raw tons of metallurgical coal during the six months ended May 31, 2012 with 77,000 tons from surface mines and 78,000 from its underground mine. The cash mining costs of metallurgical coal produced (not including royalties) were $61 per raw ton. The costs were impacted by mining conditions at the Casselman Mine (see “Mine Production”). The Company purchased 82,000 raw tons and 8,000 clean tons of metallurgical coal during the period.
The Coal Preparation Plant processed 229,000 raw tons of metallurgical coal and produced 124,000 clean tons during the six months ended May 31, 2012 at cash processing costs of $24 per clean ton. Cash cost were impacted by lower production levels resulting from lower than expected sales, double handling of raw coal while the raw coal storage area was expanded, now completed and operational. As well start-up costs of the Company’s refuse site, which is now operational eliminating third party refuse handling, and lower recovery levels as a result of high dilution experienced from the Casselman Mine and flotation column performance also contributed to higher costs.
The Company sold 59,000 raw tons of thermal coal at an average realized price of $36 per ton during the six months ended May 31, 2012. The Company produced 66,000 raw tons of thermal coal from its surface mines in the period. The cash mining costs of thermal coal produced (not including royalties) were $45 per raw ton. The thermal coal mined is ancillary to the mining of metallurgical coal.
Outlook
As a result of global economic conditions and demand for steel, the coal industry has experienced a slowdown which began in the fall of 2011 and has continued. A number of producers have announced reductions in planned metallurgical coal production for 2012 as a result of this slowdown and in many cases guidance has been reduced. The Company set Q2 guidance at 65,000 to 70,000 clean tons of metallurgical coal and was able to exceed guidance having shipped 72,000 tons in the quarter. Based on purchase orders, scheduled and expected trains and sales agreements in hand the Company expects to ship approximately 140,000 clean tons of metallurgical coal in the third quarter ending August 31, 2012, doubling its Q2 sales. Meeting this guidance would result in the Company shipping approximately 275,000 clean tons of metallurgical coal in the nine months ended August 31, 2012.
Industry reports indicate that US Low Vol met coal spot pricing FOB (Eastern seaport) have shown some improvement recently. Reports are showing that June quarterly pricing for Australian prime is in the $225 range up from the previous quarterly pricing in the $210 range.
The Company had a one year 500,000 ton sales contract for metallurgical coal which expired March 31, 2012. With the market slowdown discussed, the Company sold less than the expected tonnage under this arrangement, however the customer has been purchasing the “roll over” tons this year, which is expected to be completed by the end of Q3. The Company has sold, and continues to sell, metallurgical coal to other customers on a spot basis in 2012 and the Company has entered into one longer term contract for calendar 2012.
The US coal industry continues to be challenged particularly with respect to US thermal coal demand and with respect to lower quality met coals. Accordingly, at this time the Company is not in a position to provide production, sales and cost guidance beyond Q3 until sales levels can be more accurately forecast. For the remainder of the fiscal year, the Company will continue to adjust its production and third party purchases to match actual demand and sales orders.
Mine Production
Surface Mines
The Company currently has three surface mines operating; the Acosta, Hemminger and Plant mines. In addition, it has two surface projects which have received permit approval. A portion of the anticipated production of the Hastings Mine has been permitted, Ankeny has received permitting and bonding approval and is waiting the issuance of the permit and the balance of the Hastings production will depend on obtaining permits to allow operations there to commence. The Company expects to add production from the Hastings and Ankeny Mines in fiscal 2012 if markets dictate. In April 2012, the Quarry Mine ceased operations and has begun reclamation and the Cramer Mine reclamation has been completed. The Company has significantly advanced the permit application for expansion at the Hemminger Mine in order to commence low cost high wall mining at this project. The pit is being prepared in anticipation of receiving this permit to be in a position to commence high wall mining as quickly as possible. The Plant mine has experienced coal qualities lower than expected and the Company has conducted further drilling. While it is considering potential for highwall mining it expects to stop production at this pit in light of current coal prices.
Coal production in fiscal 2012 will be adjusted to reflect actual customer demand during the year. The Company’s thermal coal production is ancillary to its metallurgical surface coal operations and will be adjusted to reflect customer demand, but is also dependent in part on the level of metallurgical coal production at the surface operations.
Underground Mine
The Company continues the mine expansion at the Casselman mine. The Company’s initial plans were to add a second continuous mining unit in the second quarter of fiscal 2012 and a third unit in the fourth fiscal quarter. The Company continues to review its expansion plan of adding a second unit which has been delayed until the third quarter and a third unit by the end of the year or first quarter of next year based on coal markets. Coal production in fiscal 2012 will be adjusted to reflect actual customer demand during the year.
Purchased Coal
The Company has the capacity to purchase raw metallurgical coal from third parties which increases the amount of raw coal available for blending and processing at the Coal Preparation Plant. The Company’s actual purchases will be adjusted to reflect actual customer demand during the year. The level of purchased coal is also impacted by the coal qualities of the purchased coal and the Company’s coal due to blending requirements. The cost of purchased metallurgical coal is typically, but not always, based on a formula so that the price paid is dependent on the actual sale price realized by the Company.
Processing
The Coal Preparation Plant is operating below designed capacity. The Company expects its average recovery in the plant in fiscal 2012 to be below its long term targets due to the out of seam dilution from the low seam coal area in the initial phase of the Casselman mine and continued lower than expected recovery from fines in the flotation column. The Company’s production in fiscal 2012 will be adjusted to reflect actual customer demand during the year which will also affect the processing cost per ton.
Casselman Mine
The Casselman Mine is an underground metallurgical coal mine located in Garrett County, Maryland. This mine is approximately 31 miles by road from the Coal Preparation Plant.
The mine commenced operations in late July 2011and is currently operating with one continuous mining unit. The initial mine plan was to have a second continuous mining unit in production by second fiscal quarter 2012 which has been delayed until the third quarter and a third unit in production in the fourth fiscal quarter of 2012 or first quarter of next year, however the Company continues to review this mine plan and expansion in the context of the current market. The current recovery is below the expected life of mine recovery due to the low seam section in which the Company is currently operating. The Company has installed a screening plant at the mine site to improve Coal Preparation Plant recoveries and reduce haulage costs
An updated technical report (the “Casselman Report”) to satisfy the requirements of NI-43-101 has been prepared and filed on www.sedar.com with respect to the Casselman Mine and is entitled the “Wilson Creek Energy, LLC Technical Report on Coal Reserves, Casselman Mine Site, Garrett County, Maryland, USA, June 13, 2012”. The Casselman Report upgrades the Casselman Mine indicated resource to a proven reserve of 9,886,000 recoverable short tons which is expected to result in 7,884,000 short tons of clean coal after beneficiation. Reference is made to the Casselman Report for full details.
The indicated resource was originally disclosed on May 5, 2011 in the technical report titled “Wilson Creek Energy, LLC, Technical Report on Coal Resources, Casselman Mine Site, Garrett County, Maryland, USA”. The coal reserve footprint is 2,452 acres, 19 of which have been mined to date to develop egress to the remainder of the reserves. The coal seam is the Upper Freeport, which ranges from 100 to 600 feet deep over the reserve area, exhibiting a gentle inclination, averaging 3.2 degrees. All of the reserve footprint is permitted and controlled for all aspects of mining. The reserve footprint has been calculated, employing Carlson software modeling, utilizing 52 drill holes for a resulting drilling density of 1 hole per 0.07 square mile. Twenty five (25) of the test holes were analyzed for quality, designating the deposit as low volatile, bituminous coking coal.
The Company continues to look to expand this mine and has obtained options to lease a further approximately 1,000 acres adjoining the current permitted area for this mine. These areas will require exploration and assessment before the Company determines if it will exercise these options to lease. These additional areas are not contained in the Casselman Report. (see “Forward-Looking Statements”).
Caution
The estimated coal production, purchases, sales and mining cash costs per ton of coal and processing costs per ton of coal sold disclosed in this press release are considered to be forward looking information. Readers are cautioned that actual results may vary from this forward looking information. Actual production, purchases, total cash costs, sales and processing costs 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. Costs will be impacted by production levels actually achieved.
Technical Report and Qualified Person
The mineral reserve and resource estimates in this press release have been prepared under the supervision of, and the technical information in this press release was verified and approved by, Dennis Noll of Earthtech Inc., a qualified person, as such term is defined in NI 43-101 – Standards of Disclosure for Mineral Projects. Dennis Noll is independent of Corsa and Wilson Creek Energy.
Information about Corsa
Corsa’s main operating subsidiaries are Wilson Creek Energy LLC and Maryland Energy Resources LLC based in Somerset County, Pennsylvania. Its primary business is the mining, processing and selling of metallurgical coal, as well as actively exploring, acquiring and developing resource properties consistent with its coal business.
For further information please contact:
Corsa Coal Corp.:
Don Charter,
President and Chief Executive Officer
416-214-9800
communication@corsacoal.com
www.corsacoal.com
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 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”, “outlook”, “capacity” 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 the Company’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 transactions referred to will not be completed; risks that the actual production or sales for the 2012 fiscal year will be less than projected production or sales for these periods; 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 the Company’s coal preparation plant will not operate at production capacity during the relevant period, unexpected changes in coal quality and specification; variations in the coal mine or coal 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 labour 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, future prices for coal; future currency and exchange rates; the Company’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 the Company conducts business; coal production levels; and the Company’s ability to retain qualified staff and equipment in a cost-efficient manner to meet its demand. 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. The Company does not undertake to update any of the forward-looking statements contained in this press release unless required by law. The statements as to the Company’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 neither approved nor disapproved the contents of this press 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.