Coronado Coal is optimistic about the future of the coking coal sector despite forecasting lower-than-expected financial returns due to a falling commodity price.
The company has revised its earnings before interest, tax, depreciation and amortisation (EBITDA) projections from between $US737 million ($1.068 billion)–$807 million downwards to $US687 to $737 million.
Coronado’s expected decrease is due to a predicted coal spot price of approximately $140 per tonne for the remainder of the year, down from $160 during the company’s half-year result announcement.
In the United States, higher than normal coal inventory levels are held to generate higher margins in the event there is a recovery in prices in the short term.
Coronado’s exposure to fuel price is fully hedged, and therefore, the recent spike in oil prices will not affect the earnings guidance.
Managing director and chief executive officer Gerry Spindler said the company was subject to global market pricing for metallurgical coal.
“The recent fall in spot prices, if sustained, is likely to adversely impact EBITDA. In the short term we see the possibility of prices remaining at lower levels, with the potential for further deterioration in light of the uncertainties and weakness in the global macro-economic environment,” Spindler said.
Coronado has reduced operating costs efficiencies at its Curragh mine since its acquisition in March 2018. The company’s Buchanan mine also is also one of the lowest cost metallurgical mines in the United States.
The company remains optimistic for its long-term growth prospects due to its low-cost operating structure, low gearing and suite of highly sought-after, quality metallurgical coal products.
“Given our low-cost operating structure and balance sheet capacity, we are better positioned than most of our peers to weather a softer price environment without the need to reduce critical investment in our assets,” Spindler said.
“While the US trade negotiations and the weakness in global macro-economic factors are having material impacts on near term prices, we believe the fundamental factors that support continued growth in demand for high quality metallurgical coal in the long term remains unchanged.”