Corsa Coal continues to lose money, sees hope in 2013

Corsa Coal (TSXV: CSO) said Feb. 12 that its fiscal 2012 (ended Nov. 30, 2012) highlights included metallurgical coal sales of 332,000 clean tons at an average realized price of $148 per ton.

Other highlights included that production at the new Casselman deep mine in Maryland ramped up in the third and fourth quarters as mining conditions improved and a second continuous mining unit commenced operations.

The company also completed the purchase of the Keyser low volatile metallurgical coal project. Keyser is in the Lower Kittanning coal seam under approximately 2,300 acres in Jenner and Conemaugh townships in Somerset County, Pa. It had an initial indicated resource of 11 million tons which has subsequently been expanded to 16 million tons of low-vol met coal.

The sales of 332,000 tons of metallurgical coal at an average realized price of $148 per ton in 2012 compared to 252,000 tons at an average realized price of $167 per ton in 2011.

Production of met coal from Corsa’s operations was 372,000 raw tons in 2012, of which 228,000 tons was from the Casselman mine and 144,000 tons was from surface mines in and around Somerset County, Pa. In 2011, the Casselman mine produced 37,000 raw tons and the surface mines produced 164,000 tons. The increase in production at Casselman resulted from the mine being operational for the full year in 2012 compared with five months in 2011 and a significant improvement in mining conditions.

The company purchases raw met coal from third parties for blending and processing at the new (startup in 2011) Wilson Creek prep plant in Somerset County. In 2012, the company purchased 211,000 raw tons of met coal (238,000 raw tons in 2011). The requirement for purchased coal decreased in 2012 as production from the company’s mines was greater in 2012 than 2011. The company also purchased 8,000 clean tons of met coal in 2012.

The prep plant processed 579,000 raw tons of met coal in 2012 compared with 365,000 raw tons in 2011 and produced 339,000 clean tons in 2012 compared with 226,000 tons in 2011. The increase in production resulted from a full year of operations in 2012 compared with six months in 2011. The plant was under construction in early 2011 and began operating in June 2011.

Production of thermal coal from surface mines was 112,000 tons in 2012 compared with 169,000 tons in 2011. The company sold 122,000 tons of thermal coal at an average realized price of $35 per ton in 2012 compared to 142,000 tons at an average realized price of $39 per ton in 2011.

Corsa sees continued weakness in met coal market

“As a result of global economic conditions and demand for steel, the metallurgical coal industry has experienced a slowdown that began in the fall of 2011 and has continued resulting in declining prices,” Corsa noted. “While this weakness in the market has continued into the first quarter of 2013, the Company believes there are signs there may be a modest recovery in the demand and price for metallurgical coal over the course of 2013.”

While the met coal market, as expected, continued to be weak into 2013, Corsa said it has continued to be successful in achieving sales as a result of the quality of its low-vol met coal product. In addition to meeting its fourth quarter guidance, as at Dec. 31, 2012, the company had sales contracts and purchase orders for 170,000 tons of met coal for 2013 of which about 25,000 tons have been shipped. The company said it continues to actively market its high quality low-vol met coal and is in discussions with domestic and international buyers.

Currently, the company is shipping coal and continues to match production to actual sales and does not have unnecessary inventories of unsold coal. While the company said it remains optimistic that further sales will be achieved, it only reports future sales based on currently contracted volumes. For these reasons, the company is not in a position to provide full production, sales and cost guidance for 2013 beyond the sales it has currently under contract until sales levels can be more accurately forecast.

Company gears up new mines for production

The company’s operations are conducted through its wholly owned subsidiaries Wilson Creek Energy LLC and Maryland Energy Resources LLC. The Casselman underground mine is the company’s largest mine. In addition it has two surface mines, Acosta and Hemminger, and two permitted surface mine projects. The company has received permit approvals for the Hastings and Ankeny mines, which will be available for production in 2013. The company also has a number of surface and underground projects at various stages of development, all of which will require various permits before mining operations could commence.

The mines and properties are located in Cambria and Somerset counties in Pennsylvania and Garrett County, Md. The prep plant is located on a CSX Transportation rail line in Somerset County. The Casselman mine in Maryland is a fairly close truck haul to the Wilson Creek plant in Somerset County.

There are multiple surface permits in place with several others in the permitting process. The Acosta mine is a permitted site with a proven reserve of 41,047 tons and additional indicated resources of 366,151 tons of low-vol metallurgical coal. The Ankeny project is a permitted site with a proven reserve of 187,811 tons of low-vol metallurgical. The Ash project is currently in the permitting process and has an indicated resource of 379,686 tons of low-vol metallurgical coal. The Hamer project is also currently in the permitting process and has a proven reserve of 173,290 tons. The Hastings (Semelsberger) project is a permitted site with a proven reserve of 68,055 tons of low-vol metallurgical. The Hemminger mine is a permitted site with a proven reserve of 89,552 tons of low-vol metallurgical coal.

Company continues to lose money, sounds ‘going concern’ warning

The company incurred a net and comprehensive loss of $27,792,000 or $0.10 per share for the 2012 fiscal year (ended Nov. 30) compared with $18,843,000 or $0.08 per share for 2011. The net increase of $8,949,000 in the net and comprehensive loss was due to the increase in expenses of $968,000 and the increase in other expense of $13,990,000 offset by a increase in revenue of $6,009,000. Cash decreased by $4,270,000 in 2012 compared with a cash increase of $9,315,000 in 2011.

“As at November 30, 2012, the Company had a working capital deficit of $22,787,000,” said a financial report the company filed Feb. 11 with Canadian regulators. “The Company expects that the working capital deficit will continue as long as the Credit Facility remains outstanding. The Company has operations generating revenue and its loss from operations decreased in 2012 to $11 million, from $16 million in 2011. The Company has not yet achieved profitable operations and incurred net losses of $28 million and $19 million during the years ended November 30, 2012 and 2011, respectively.”

The filing added: “The Company is expected to require additional financing or an amendment to the terms and conditions of its Credit Facility to maintain its core activities and exploration and development plans for the foreseeable future. The outcome of future profitability expectations, availability of sources of additional financing and future support from lenders is subject to uncertainty. Accordingly, these conditions indicate the existence of a material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.