Corsa Coal (TSXV: CSO), with coal mines in Pennsylvania and Maryland, said July 31 that it completed a transaction with Quintana Kopper Glo Investment LLC (QKGI) for coal mining operations in Tennessee.
QKGI is a portfolio company of Quintana Energy Partners LP and its affiliated investment funds. Corsa raised a total of US$40m at C$0.17 per share and acquired Kopper Glo, a Tennessee-based coal producer, while Quintana acquired a control position in Corsa.
George Dethlefsen, Managing Director at Quintana Capital Group, stated: “We are pleased to have received the support of the shareholders of Corsa Coal to complete this transaction. We look forward to executing on the Company’s vision to build a leading producer of high quality metallurgical and thermal coal. The combination of the two companies creates a well-capitalized platform with an industry leading operating cost profile and an attractive set of growth opportunities.”
With the completion of the transactions, Corsa is fully funded and well positioned as both a new and expanding US supplier of quality low-vol met coal with a growing customer base of domestic and international steel producers with its Northern Appalachia operations and projects and as an established and reliable supplier of high BTU thermal and industrial coal given its existing sales contracts for 2013 and 2014 from its Tennessee operations.
The combined company has immediate cash flow from the Kopper Glo operations which had cash flow from operating activities of US$14.1m (audited) for the year ended Dec. 31, 2012. Kopper Glo’s existing operations are located in Tennessee and produce a low-cost, high BTU thermal coal product expected to produce over one million tons in 2013 and are positioned to gain regional market share as higher cost Appalachian production is scaled back.
Five nominees of Quintana have been appointed to the board of directors and three nominees of Corsa remain. Corbin Robertson III, Alan De’ath, George Dethlefsen, Daniel Smith and Ronald Stovash were appointed to the Board of Corsa as nominees of Quintana. Robertson, with extensive interests in coal properties, has been appointed Chairman of the Board. Michael Harrison, John Craig and Robert Scott remain on the Board of Corsa. Timothy Phillips, Patrick Connelly and Charles Pitcher have resigned as directors.
Pursuant to the terms of his employment arrangements, this transaction constitutes a termination of Donald Charter’s employment. Having established Corsa as a new U.S. metallurgical coal producer and after leading Corsa to the successful completion of this transformative transaction, Charter has elected to step down as President, CEO and director of Corsa. Keith Dyke, the President of Kopper Glo, has been appointed by the Board as the President of Corsa.
Corsa holds the line on its fiscal 2013 guidance
Corsa reported in a July 29 financial report that in the March-May quarter, it sold 83,000 tons of clean metallurgical coal in bringing its sales for the first six months of fiscal 2013 (December 2012-November 2013) to 119,000 tons. The company also sold 10,000 tons of raw metallurgical coal in the three months ended Feb. 28. The company maintained its 2013 metallurgical coal sales guidance at 300,000 to 320,000 tons.
Corsa’s operations are conducted through its wholly owned subsidiaries Wilson Creek Energy LLC and Maryland Energy Resources LLC, which are based in Somerset, Pa. Casselman is an underground mine and is Corsa’s largest operating mine. Corsa has two other major underground projects, the Acosta Deep Project (which is expected to be permitted in the third quarter of 2013) and the Keyser Project. In addition, Corsa has two operational surface mines, Ankeny and Hemminger, as well as the Hastings surface mine which has been permitted and two additional surface projects which are expected to be permitted in the third quarter of 2013.
The mines and properties are located in Cambria and Somerset counties in Pennsylvania and Garrett County, Md. Wilson Creek owns a coal preparation plant which is located on the CSX Corp. rail line in Somerset County, Pa.
In the December 2012-May 2013 period, the company sold 119,000 tons of clean metallurgical coal at an average realized price of $104 per ton (compared to 6M 2012 – 137,000 tons at an average realized price of $155 per ton), 10,000 tons of raw metallurgical coal at an average realized price of $63 per ton (6M 2013 – 0 tons) and sold 49,000 tons of thermal coal at an average realized price of $35 per ton in 6M 2013 (6M 2012 – 59,000 tons at an average realized price of $36 per ton).
“The metallurgical coal markets have continued to be volatile,” Corsa reported. “The Company has continued to be successful in achieving sales as a result of the quality of its low volatile metallurgical coal product. The Company’s current guidance for fiscal 2013 is clean metallurgical coal sales of between approximately 300,000 and 320,000 clean tons, of which 119,000 tons were sold in 6M 2013 leaving approximately 181,000 to 201,000 tons for the balance of the fiscal year. In addition, the Company currently expects clean metallurgical coal sales of between 45,000 and 60,000 tons in the first fiscal quarter of 2014. This guidance is based on currently contracted sales which are direct to both domestic and international steel producers. The Company continues to actively market its high quality low volatile metallurgical coal and match production to actual sales.”