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Corsa Coal announces 2019 operational and sales guidance

Coal News - Published on Wed, 12 Dec 2018

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Corsa Coal Corp, a premium quality metallurgical coal producer, announced its guidance for 2019 and the extension of the maturity date of the term credit facility with Sprott Resource Lending Corp. from August 19, 2019 to August 19, 2020. 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, or FOB, mine site basis, unless otherwise noted.

Mr George Dethlefsen, Chief Executive Officer of Corsa, said that "In 2018, Corsa advanced several strategic priorities that position the business well for future success in 2019 and beyond. 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(2) 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 ton sold(3) of USD 78 to USD 82 in 2019, reflecting reduced costs per ton sold at both Casselman and Acosta and benefiting from the lower cost profile of our Schrock Run surface 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 utilization 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 $190.25 per metric ton FOB vessel. Using a $190 per metric ton FOB vessel price outlook, we expect to generate between $13 and $15 million of net and comprehensive income and $42 and $46 million of Adjusted EBITDA(3) in 2019. We are looking forward to capitalizing on the opportunity ahead of us in 2019."

1. Guidance projections ("Guidance") are considered "forward-looking statements" and "forward looking information" and represent management's good faith estimates or expectations of future production and sales results as of the date hereof. Guidance is based upon certain assumptions, including, but not limited to, future cash production costs, future sales and production and the availability of coal from other suppliers that the Company may purchase. Such assumptions may prove to be incorrect and actual results may differ materially from those anticipated. Consequently, Guidance cannot be guaranteed. As such, investors are cautioned not to place undue reliance upon Guidance, forward-looking statements and forward-looking information as there can be no assurance that the plans, assumptions or expectations upon which they are placed will occur.

2. Corsa's metallurgical coal sales figures are comprised 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, 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").

3. This is a non-GAAP financial measure. See "Non-GAAP Financial Measures" below for more information.

Company Produced Tons
Our 2019 budget is focused on producing coal at our three underground mines and is benefited by a full year run rate at the Acosta mine and more favorable 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, we expect to begin production at the Schrock Run surface mine which is expected to be the Company's lowest cost mine.

Value Added Services – Purchased Coal
Increasing capacity utilization rates at our 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 tons. Corsa has four million tons 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 Realizations
At present, we have priced 39% of our 2019 low volatile metallurgical coal order book, including 650,000 tons of domestic business that is priced at an average of $112 per ton FOB mine. Currently 59% of 2019 forecasted low volatile volumes are committed. We expect our 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. We forecast approximately 71% of 2019 volumes to be exported and 29% to be sold domestically.

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Posted By : Nanda Koijam on Wed, 12 Dec 2018
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