Coronado to operate US coking coal mines at lower capacity

London — Miner Coronado Global Resources expects to run its US coking coal mines at a lower level in line with weaker demand during the second half of 2020, and reduce inventories further.

Lower revenues followed weaker output, as a fall in coking coal prices took its toll on the industry

Coronado will manage the US business to fulfill annually priced domestic contracts for the remainder of 2020 and 2021, and "right size" the business to minimize inventory build, the company said in an Aug. 11 report.

The underground low-vol Buchanan mine will operate with fewer production shifts and less mine development units, the report said.

"However, production can be quickly increased to meet improvements in profitable market demand," it said.

The next longwall move at Buchanan is currently scheduled for late September or early October with no anticipated problems, it said.

At the Logan mine, the high-vol complex's production schedule will continue to be scaled back to meet demand under domestic contracts, it said.

"Logan is also well positioned to quickly increase production to meet any improvements in profitable market demand," it said.

New sources of production at Logan were reported to increase the metallurgical coal product mix from the mine.

Coronado plans to keep its mid-vol Greenbrier idle on care and maintenance in the second half, depending on market conditions.

The US operations and Curragh mine is Australia, which together produced 8 million mt in the first half, are estimated to produce a total 16.5 million-17 million mt in 2020, with sales at higher levels.

Liquidity

Coronado mines coal in Australia and the US, and is seeking to conserve cash, cut capex and support liquidity after posting a $123.2-million, first-half loss, including debt related adjustments.

The company will a review of non-core assets, and sale and lease back of major mining equipment, coal reserves or infrastructure and other financing initiatives considered, it said.

Coronado said it has agreed a payment plan for outstanding amounts with trader Xcoal Energy & Resources, running through to the end of June 2021, with $95 million owed effective end-July and falling from $105.1 million as of end June 2020, according to an earnings presentation.

While the North American, European and Brazilian economies are important to Coronado, India is the group's biggest market for coking coal and signs are positive for restocking coking coal after the monsoon, it said.

"Indian steel demand is improving, but from a very weak position, and GDP growth in 2020 is expected to be reduced," Coronado said.

"Steel demand for Indian mills is currently being supported by reversal of steel trade flow, becoming a net steel exporter to China. This has been an important factor in some of the early resumption of procurement activity for metallurgical coal. Any sudden change in this flow could have an impact on metallurgical coal demand in the short term," it said.

The miner expects a "V-shaped" recovery to take hold in India by 2021.

Japanese and South Korean mills have been considering restocking during the third quarter in anticipation of greater demand from the automotive sector, the company added.