Coronado flags asset sales after crashing to record loss

Coronado Global Resources is bunkering down for prolonged tough times after slumping to a record loss linked to weak demand and depressed coal prices in the fallout from COVID-19.

The coking coal exporter is reviewing costs at all mining operations and has flagged the sale of non-core assets to boost liquidity.

Managing director Gerry Spindler said the past six months had been among the most difficult the industry had had in the last 50 years.

The company recorded a net loss of $US123.2 million ($172.2 million) for the six months to June 30 after a profit of $US214.3 million the year before.

Revenue fell more than 42 per cent to $US713.7 million. The company received an average of $US97.30 a tonne for its metallurgical coal, down almost 30 per cent.

Sales volumes fell 20 per cent and adjusted earnings before interest, tax, depreciation and amortisation plunged 91 per cent to $US34.9 million.

We anticipate a rapid recovery in steel demand, and a return of production over time, however, the timing of the recovery is uncertain at present.
— Gerry Spindler, managing director

Coronado’s problems started in January with the shutdown of its Curragh mine after a workshop fatality that has led to the company putting a greater focus on safety.

The problems continued as it was hit by wet weather in Queensland and the idling of its US operations from April through May as the global pandemic sent coal prices plummeting.

Severe and far-reaching

Mr Spindler said the effects of the pandemic had been “severe and far-reaching, and come at a great economic cost”.

“Looking ahead, Coronado’s overall objective is to position the company to weather the current market conditions while ensuring the business is positioned to take advantage of a recovery in the metallurgical coal market, as and when that recovery inevitably occurs.

“Given the overall importance of government-backed economic stimulus post-COVID-19, we anticipate a rapid recovery in steel demand, and a return of production over time, however, the timing of the recovery is uncertain at present.”

Coronado has already shelved expansion plans at Curragh after slashing planned full-year capital expenditure by 40 per cent and agreeing with lenders to waive compliance with financial covenants until February 2021.

It is in talks with lenders about extending that waiver as it considers non-core assets sales.

The options being considered include the sale and lease back of coal reserves, major mining equipment and infrastructure.

Coronado is also looking to a V-shaped recovery in steel-making in India, where coal prices have shown signs of improvement, to help restore its balance sheet.

Mr Spindler said global coking coal markets had been in disarray but the worst appeared to be over and India had even started exporting steel into China.

"Indian steel production should increase throughout the rest of this year and throughout next year, and they are our largest single customer," he said.

"The coal quality we sell them is widely recognised and highly valued by those customers that rely on it."

Mr Spindler said the company remained well placed to bounce back as prices recovered, predicting every $US10 increase in the benchmark hard coking coal prices would result in a $US100 million improvement in EBITDA.