Production at Corsa Coal’s Casselman underground mine in Maryland ramped up very well in the third fiscal quarter of 2012 (which ended Aug. 31) with the planned addition of a second continuous mining unit, Corsa reported in an Oct. 10 financial filing.
A disturbed low seam area which the company ran into at the Casselman mine entrance resulted in slower than expected development in the first and second quarters of 2012. This area has been mined through and mining is currently in 44-to-46-inch seam heights with good mining conditions. In addition, the company has utilized a contract miner who has provided needed staffing to expand. The mine is currently operating with two continuous miners operating as a super section and production has ramped up successfully from about 11,000 run of mine (ROM) tons in June to 42,000 ROM tons in August with in plant recoveries exceeding 63% on unscreened ROM coal.
Corsa continued to operate the Casselman mine to meet fourth quarter 2012 expected sales and to ensure an appropriate operating inventory. However, it said it will be temporarily idling this mine and keeping it in readiness for an immediate restart pending an increase in sales. The company has deferred its plans to further expand this mine with a third continuous mining unit until there is an improvement in the coal markets resulting in greater sales levels.
The Acosta surface mine produced 80,000 raw tons of met coal and 40,000 tons of thermal coal in the first nine months of fiscal 2012 (through Aug. 31). The Hemminger surface mine produced 28,000 raw tons of met coal and 24,000 tons of thermal coal in the nine months. Based on current sales levels, these mines were temporarily idled in September.
In addition, the company has two surface projects which have received permit approval; a portion of the anticipated production of the Hastings mine has been permitted and Ankeny has been permitted. The company expects to add production from Hastings and Ankeny in fiscal 2013 if markets dictate. In the latest nine-month period, the Cramer, Quarry and Plant mines ceased operations. Reclamation is complete at Cramer and continues at Quarry and Plant.
Company reports three-month and nine-month results
In the third fiscal quarter ended Aug. 31, the company’s met coal sales were 138,000 clean tons at an average realized price of $152/ton FOB the new Wilson Creek prep plant in Somerset County, Pa. Production of met coal was 134,000 raw tons with 74,000 from the Casselman deep mine (increased from 36,000 tons in the second quarter 2012) and 60,000 tons from surface mines. The cash mining costs of met coal produced (exclusive of royalties) were $47 per raw ton. Costs at the Casselman mine showed significant improvement, decreasing to $51/ton in third quarter 2012 from $80/ton in the second quarter 2012. This improvement is a result of increased production levels resulting from improved mining conditions and operations.
The company purchased 122,000 raw tons of met coal during third quarter 2012. The Wilson Creek prep plant processed 244,000 raw tons of met coal and produced 149,000 clean tons during third quarter 2012 at cash processing costs of $13 per clean ton, a 43% reduction from second quarter 2012 costs of $23/ton. The improvement in cash costs were the result of increased production due to higher sales levels, the cost savings associated with a completed raw coal storage area and a fully operational refuse site as well as the reduced dilution from the Casselman mine and improved recoveries in the flotation column.
Production of thermal coal in the third quarter was 23,000 raw tons from surface mines and sales were 37,000 tons at an average realized price of $32/ton. Cash mining costs of thermal coal produced (not including royalties) were $42 per raw ton; however, thermal coal production is ancillary to met coal production.
In the nine months ended Aug. 31, met coal sales were 275,000 clean tons at an average realized price of $153/ton FOB the prep plant. Production of met coal was 289,000 raw tons with 152,000 from Casselman and 137,000 tons from surface mines. The cash mining costs of met coal produced (not including royalties) were $55 per raw ton. The costs for first quarter 2012 and second quarter 2012 were impacted by mining conditions at Casselman, which significantly improved in third quarter 2012.
Corsa purchased 204,000 raw tons and 8,000 clean tons of met coal during the first nine months of fiscal 2012. The prep plant processed 473,000 raw tons of met coal and produced 273,000 clean tons during the nine-month period at cash processing costs of $18 per clean ton. Cash costs in the first and second quarters of 2012 were impacted by lower production levels resulting from lower than expected sales, double handling of raw coal, start-up costs of the company’s refuse site and lower recovery levels due to high dilution experienced from initial stages of the Casselman mine. However, in third quarter 2012, production was close to double second quarter 2012 production and the raw coal handling facility and refuse site were fully operational which combined with much lower dilution from the Casselman mine resulted in significantly lower costs in third quarter 2012.
Production of thermal coal was 89,000 raw tons from surface mines and sales were 96,000 raw tons at an average realized price of $34/ton during the nine-month period. Cash mining costs of thermal coal produced (not including royalties) were $44 per raw ton.
Corsa sees a continued tough market for coal
The global demand for steel is down and the demand for met coal is in a continuing slowdown that began in the fall of 2011, resulting in declining prices. The U.S. coal industry continues to be challenged and a number of producers have announced reductions in production, Corsa noted. Nonetheless, the company’s second quarter 2012 production met guidance and it was able to double second quarter 2012 sales in third quarter 2012 shipping 138,000 tons.
With the continued decline in the market, based on purchase orders and expected trains the company expects to ship at least 32,000 clean tons of met coal in fourth quarter 2012. While the company continues to actively market its high quality low-vol met coal, which it believes is well suited to domestic users as well as the seaborne market, presently the company is not in a position to provide production, sales and cost guidance beyond the sales it has currently under contract until sales levels can be more accurately forecast.
For the remainder of the fiscal year, the company said it will continue to adjust its production to match actual demand and sales orders. It has temporarily idled its surface mines and does not have large unsold inventories. Operations have continued, prior to the planned idling, at the Casselman mine to meet fourth quarter 2012 expected sales and to ensure an appropriate operating inventory.
Two deep mines in works, two others are terminated
Corsa outlined two deep mine projects it has in the works.
- The Acosta underground property is 20 miles by road from the Wilson Creek plant. It is a 940-acre property with proven recoverable reserves of low-vol met coal of 5.7 million tons in the Middle and Lower Kittanning seams. The Alumbaugh property extension immediately adjacent has an indicated resource of 29.5 million tons of in-place, low-vol coking coal within the Lower, Middle and Upper Kittanning seams. The company is preparing an updated technical report on the Acosta deep (including Alumbaugh) property. Corsa has permit approval for surface mining at the proposed face up location. The full deep mine permit application has also been filed. Production is dependent on the receipt of mining permits and normal mining related risks.
- At the Keyser property, the company has purchased the rights to mine the Lower Kittanning seam under about 2,300 acres in Somerset County, Pa., located 25 miles by road from the prep plant. Preliminary calculations for the Keyser property indicate the presence of a total of 11 million tons of in-place, low-vol coking coal within the Lower Kittanning seam. The Lower Kittanning seam is 100 to 600 feet below the surface, with an average seam thickness of 3.45 feet. The company has identified and acquired the surface access for this property and is preparing permit applications. Production from this property is subject to completion of a mine plan and obtaining the required permits and there can be no assurance that such permits will be obtained.
On the other hand, two projects have been dropped.
- The Garrett property was an underground Upper Freeport seam and Lower Kittanning seam deposit in Somerset County, Pa. The company completed its analysis of this property and decided not to proceed with development. The company wrote off the costs of this property in third quarter of 2012.
- Westland Run was an underground coal property in Washington County, Pa., which the company had the right to purchase. Since the large majority of this property is comprised of thermal coal, and with the current depressed state of the U.S. domestic thermal coal market, the company did not exercise its option to purchase this property. Corsa wrote off the costs of this property in the third quarter of 2012.