May 5, 2023 - Corsa Coal Corp. (TSXV: CSO) (OTCQX: CRSXF) ("Corsa" or the "Company"), a premium quality metallurgical coal producer, has reported financial results for the three months ended March 31, 2023. Corsa has filed its unaudited condensed interim consolidated financial statements for the three months ended March 31, 2023 and 2022 and related management's discussion and analysis 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.
The Board of Directors has appointed Kevin M. Harrigan as President, Chief Executive Officer and a Director of the Company and has appointed Daniel M. Bonacci as Chief Financial Officer and Corporate Secretary of the Company, both appointments with immediate effect. Since February 22, 2022, Mr. Harrigan had served as Interim President and Chief Executive Officer and Mr. Bonacci had served as Interim Chief Financial Officer.
"Both Mr. Harrigan and Mr. Bonacci have successfully navigated Corsa through a challenging period in 2022 with significantly improved profitability and adjusted EBITDA for the first quarter of 2023. The Board of Directors thanks both Mr. Harrigan and Mr. Bonacci for their commitment, dedication and leadership over the past year to improve the financial results of the Company. The Board is confident in their ability to manage Corsa going forward", said Ronald G. Stovash, Chair of the Board of Directors.
First Quarter Highlights
"From an operational standpoint, our cash production cost per ton sold decreased modestly from the first quarter 2022 and was down 9% from the preceding quarter, although it still reflected a number of mining and operational challenges. We consolidated our preparation plant operations early in the quarter and encountered some processing issues and increased idling costs. Our team quickly responded and these issues were resolved in early February with the plant operating as expected for the remainder of the quarter. The Casselman mine completed the development of the access to the North mine reserves midway through the first quarter. We expect that the conditions will remain favorable in this new area of the mine and productivity and costs will continue to improve. The Horning mine plan was successfully altered to mine around the geological issues that hampered 2022 production allowing for the addition of a second production shift midway through the quarter leading to increased availability of Horning's high-quality coal. Our surface operations continued to expose a highwall in preparation for a contract highwall miner to commence mining in the second quarter. This addition is expected to improve surface mine production, support additional spot market sales and lower our cash production costs per ton sold."
"We believe that many of the challenges faced in 2022 are now behind us and look forward to a year with improved contracted fixed prices, lower cash production costs and expanding margins that builds on the positive momentum that started in the first quarter of this year."
Coal Pricing Trends and Outlook
Price levels opened the first quarter 2023 at $294.50/metric ton ("mt") delivered-to-the-port ("FOBT") for spot deliveries of Australian premium low volatile metallurgical coal and closed the quarter at $301.00/mt FOBT. The quarterly average price for the first quarter 2023 was $342.57/mt FOBT compared to $282.39/mt FOBT in the fourth quarter 2022, and traded in a range from a high of $390.00/mt FOBT to a low of $294.50/mt FOBT.
The price for spot deliveries of Australian premium low volatile metallurgical coal opened the second quarter 2023 at $300.00/mt FOBT and was trading at $257.00/mt FOBT in mid-April, with a high price of $300.00/mt FOBT, a low price of $257.00/mt FOBT and an average price of $279.37/mt FOBT during the month. As of mid-April, forward curve pricing for the balance of 2023 is trading at an average of $258.36/mt FOBT with the fourth quarter at a high of $264.00/mt FOBT and the third quarter at a low of $251.00/mt FOBT. The forward curve for 2024 indicates pricing at an average of $278.00/mt FOBT. Second quarter 2023 hot-rolled steel coil prices decreased in China, by 5.8%, decreased in Europe by 1.8%, and decreased in the United States by 0.4%. Increased short-term availability of metallurgical coal, economic uncertainty and anticipated summer seasonal impacts put near-term downward pressure on metallurgical coal prices although prices remain significantly above historic levels and are forecasted to rebound.
See "Risk Factors" in the Company's annual information form dated April 13, 2023 for the year ended December 31, 2022 for an additional discussion regarding certain factors that could impact coal pricing trends and outlook, as well as the Company's ongoing operations.
Second Quarter 2023 Update
The Company's second quarter 2023 sales volumes are expected to be higher than the first quarter of 2023 due to increased production from our surface mines and higher than historical levels. Metallurgical coal selling prices are expected to be slightly higher than the first quarter of 2023 as we fully recognize the higher sales prices of our 2023 fixed price contracts and increase our participation in the metallurgical coal spot market. Cash cost of sales are expected to be lower than in the previous quarter due to increased production from our surface mines and improved mining conditions and efficiencies from our deep mines but will remain elevated compared to historical levels. Selling, general and administrative expenses are expected to be slightly higher than first quarter 2023 due to increased sales volumes. The main priorities of the Company are increasing efficient production, reducing costs, and increasing our ability to participate in the metallurgical coal spot market. We are committed to improving the Company's balance sheet with minimized downside financial risk but are also focused on organic growth opportunities to complement our existing operations. The Company's capital allocation and deployment strategy will be aligned with these priorities and the Company's financial position.
Corsa committed over 930,000 tons at an FOB mine price of nearly $179/ton for the calendar year 2023. The price per ton is the equivalent of $287/mt FOBT for Australian premium low volatile metallurgical coal. The volumes and price per ton were impacted by nearly 153,000 carryover tons which were priced at the 2022 fixed price contract rate.
Financial Statements and Management's Discussion and Analysis
Refer to Corsa's unaudited condensed interim consolidated financial statements for the three months ended March 31, 2023 and 2022 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:
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