Amid all the positivity of record revenues, prices and earnings for Coronado Resources in the six months to June 30, the US-Australian coal group also had a reminder about the realities of the marketplace and how climate is now an increasing factor.
The company reported in a filing with the ASX, that revenues jumped 147% to $US1.979 billion ($A2.8 billion) for the six months to June 30 with net profit surging from a loss in the June, 2021 half of $US96.1 million to a record $US562 million this year ($A802 million).
But as solid as those figures were, actual production and shipping volumes fell because of the impact of rain and floods, “geological issues” and maintenance time.
While volumes will be weighted towards the current second half, the company now says its saleable production will be at the “low-end of 18 to 19 million tonnes for the year. That will still top 2021’s production figure of 17.4 million tonnes.
But on top of the lower tonnages now expected the company, like every other resource group, hasn’t been able to avoid the impact of the surge in inflationary cost pressures.
As well there’s the company’s continuing Stanwell rebate in Queensland, as well as higher Queensland government royalties.
They have seen the company revise up its estimated mining costs for the year to between $US78 and $US81 a tonne. That range is up around 14% from the earlier forecast of $US69 to $US71 a tonne.
Capex at $US91.5 million for the half was up 75% and the full year figure is “aligned with market guidance.”
The final months of the half saw coking coal prices ease, though they are still above 2021 levels.
That has seen Coronado (and no doubt rivals like Whitehaven) start looking to switch soft coking coals (and coal suitable for PCI – pulverised coal injection quality for blast furnaces) to the thermal coal market where prices are still higher.
Soft coking and PCI coal sell for a significant discount to the hard coking coal price because of their lower energy content which is similar to that of thermal or steaming coal. That makes them easily fungible when thermal coal prices are higher because there is very little extra cost involved.
The SGX coal futures market was quoting Australian hard coking coal at $US215 a tonne on Monday, up from a low of $US198 a tonne in late July but well down on the $US311 a tonne on June 27 and over $US400 a tonne earlier in the year.
The ICE Newcastle thermal coal price for October coal was just over $US349 a tonne on Monday, down from $US411 a tonne in late July, but still higher than $US317 a tonne in early May.
So, for Coronado, switching lower value soft coking and PICI coals to the thermal market and its higher prices, is a no brainer.
Which Coronado CEO Gerry Spindler confirmed in the company’s ASX filing on Tuesday:
“As we look to the second half of 2022, the prospect of strong financial returns remains despite recent reductions in Metallurgical coal prices.”
“Thermal pricing remains at significantly elevated levels, and we will divert Metallurgical tonnes into Thermal markets to achieve higher realisations where we have the flexibility to do so.
“Coronado’s capital investment in its operations drives the second half weighted production plans, which we anticipate will see us deliver production levels exceeding 2021 levels and lower second half costs.
“I remain extremely confident in our ability to weather the headwinds and continue to provide enhanced value and returns to all Shareholders,” Mr Spindler said.
Coronado shares rose 5.6% to $1.60 as investors ignored the rise in costs guidance for the year.
