While larger competitors focused on returning cash to shareholders instead of growing volumes, Corsa Coal Corp. opened a new mine in the first quarter, invested significantly in an existing one and increased production by 23%.
The Appalachian mining company, which sold its thermal assets in March to become a pure-play metallurgical coal producer, saw an 89% year-over-year increase in met coal sales in the first quarter of 2018. Sales of value-added services grew 128%, and its sales and trading volume soared 390%.
The new Horning mine in Pennsylvania will add 540,000 tons per year, CEO George Dethlefsen said on a May 10 earnings call, and move Corsa closer to its goal of doubling metallurgical coal production from 2017 levels by 2019.
"Volume growth is our number one strategic priority," Dethlefsen said, and the quarter's record-setting results demonstrated "one of the best growth stories in the industry."
Corsa also added a fourth shift at its Acosta mine and made significant investments to access reserves at the Casselman operation. Dethlefsen said geological problems at Casselman and Acosta, where shale intruded into the coal seam, should be resolved in the coming weeks.
Port congestion on the East Coast also depressed earnings in the quarter, with waits as long as one month at the Lamberts Point facility in Virginia, he said. Corsa incurred $1.7 million in demurrage fees for delayed cargo loading, lowering its average realized price per ton from $156.12 to $118.46, and Dethlefsen said the lack of port capacity is keeping a lid on seaborne supply growth at a time when coal producers are increasingly turning to export markets as domestic demand wanes.
He expects shipping conditions to improve in the second quarter and for metallurgical coal prices to increase in the back half of the year. Corsa raised its guidance for sales committed at the midpoint of the year from 73% to 80%.
The company also expects to receive a permit for its $20 million Kaiser project this summer.
Corsa is evaluating several potential acquisitions, Dethlefsen said, and completing one is a priority. He said he would prefer a company that is already producing mid- to high-vol coal rather than development opportunities.
The company reported net and comprehensive income from continuing operations of $2.0 million, or 1 cent per share, in the first quarter, compared with $11.9 million, or 8 cents per share, in the first quarter the previous year. Revenue was $80.4 million, compared with $52.4 million in the first quarter a year earlier.