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 and year ended December 31, 2023. Corsa has filed its audited consolidated financial statements for the years ended December 31, 2023 and 2022, related management’s discussion and analysis and its annual information form under its profile on www.sedarplus.ca.
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 2023 Highlights
- Corsa’s average realized price for the fourth quarter 2023 is the approximate equivalent of between $288 to $300 per metric ton on an FOB vessel basis(2). For the fourth quarter 2023, Corsa’s sales mix included 62% of sales to domestic customers and 38% of sales to international customers.
Kevin M. Harrigan, President and Chief Executive Officer of Corsa, commented, “Corsa’s 2023 full year net income of $23.6 million was the highest since 2017 and our 2023 adjusted EBITDA of $28.1 million was the highest since 2019. Although we were disappointed by our coal production and cash production costs in the fourth quarter of 2023, our full year cash production costs per ton sold decreased from 2022 levels and we are committed to further reductions in 2024.”
“The fourth quarter of 2023 proved to be another challenging quarter operationally at two of the Company’s underground mines. As a result of adverse geological conditions at the Horning mine, an unplanned section move was made in order to relocate mining activities to an area of the mine where conditions are more conducive to higher coal production. The section move led to short-term production inefficiencies and also changed the access point to the eastern part of the reserves. The Acosta mine’s main development section encountered low coal heights. Out of seam rock had to be mined in order to create adequate height for access which required additional time and negatively impacted the production of coal while slowing the advance of the section. Equipment availability declined due to the wear and tear that mining of the rock had on the machinery. The above noted factors led to an increase in both production and maintenance costs. Based on current mining plans, the Company recognizes that short-term inefficiencies related to geologic conditions and development activities are expected to occur for a short period of time in 2024, as mining conditions have improved in early March. Our operational and engineering teams are focused on advancing beyond these challenges as safely and quickly as possible to areas where we expect conditions will result in improved operational performance and lower costs.”
“The Company’s surface mining operations achieved their expected results in the fourth quarter and overburden removal is on pace for the return of the highwall mining machine in the first quarter of 2024. The combination of traditional surface and highwall mining should increase our production and lower costs. I am pleased that we are now in a mining sequence at the surface operations that should achieve more repeatable results.”
“The Company’s focus is on productivity improvements and cost control in order to manage metallurgical coal margins in the face of lower expected realized pricing in the 2024 period, as the average price for committed and priced tons to date for 2024 are approximately 13% lower than 2023 realized prices. We continue our efforts to attract, train and retain miners for our underground operations knowing that our productivity and profitability are tied to having fully staffed and experienced teams throughout our operations.”
Coal Pricing Trends and Outlook
Price levels opened the fourth quarter 2023 at $333.00/metric ton (“mt”) delivered-to-the-port (“FOBT”) for spot deliveries of Australian premium low volatile metallurgical coal and closed the quarter at $342.50/mt FOBT. The quarterly average price for the fourth quarter 2023 was $333.26/mt FOBT compared to $263.07/mt FOBT in the third quarter 2023 and traded in a range from a high of $367.00/mt FOBT to a low of $297.50/mt FOBT.
The price for spot deliveries of Australian premium low volatile metallurgical coal opened the first quarter 2024 at $323.75/mt FOBT and was trading at $313.75/mt FOBT in late February, with a high price of $338.10/mt FOBT, a low price of $312.00/mt FOBT and averaged $324.43/mt FOBT since the beginning of the year. Forward curve pricing for the balance of 2024 is trading at an average of $295.82/mt FOBT, with the first quarter of 2024 at a high of $313.00/mt FOBT and the fourth quarter of 2024 at a low of $290.00/mt FOBT. Through late February, first quarter 2024, hot-rolled steel coil prices decreased in the United States by 21.8% and China by 1.7% and increased in Europe 3.6%. The forward curve for 2025 indicates full year pricing at $286.00/mt FOBT. Average metallurgical coal prices remain above historical levels supported by a limited supply-side response, supply chain logistics constraints, and continued worldwide growth in steel production and demand for finished steel products.
See “Risk Factors” in the Company’s annual information form for the year ended December 31, 2023 for an additional discussion regarding certain factors that could impact coal pricing trends and outlook, as well as the Company’s ongoing operations.
First Quarter 2024 Update
The Company’s first quarter 2024 sales volumes are expected to be higher than the fourth quarter of 2023, but lower than historical averages. Compared to the fourth quarter of 2023, the first quarter of 2024 is forecasted to have higher production from our deep mines, lower production from our surface mines and decreased purchases of third-party coals. Metallurgical coal selling prices are expected to be lower than the fourth quarter of 2023 due to contractual price decreases on domestic orders partially offset by higher realizations on export sales. Cash cost of sales is expected to be lower than in the previous quarter due to increased operating rates and improved mining conditions at our deep mines and decreased purchased coal costs. Selling, general and administrative expenses are expected to be lower than the fourth quarter of 2023 and comparable to the average of the first three quarters of 2023. 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.
For calendar year 2024, Corsa has to date committed sales of over 940,000 tons. Committed and priced sales are over 775,000 tons at an FOB mine price of nearly $148/ton. The price per ton is the equivalent of $264/mt FOBT for Australian premium low volatile metallurgical coal.
Financial Statements and Management’s Discussion and Analysis
Refer to Corsa’s audited consolidated financial statements for the years ended December 31, 2023 and 2022 and related management’s discussion and analysis, filed under Corsa’s profile on www.sedarplus.ca, for details of the financial performance of Corsa and the matters referred to in this news release.
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.
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