Coronado cuts production forecast as two mines hit setbacks

Coal producer Coronado Global Resources will try to recover as much as possible of the tonnes lost to operational setbacks at two mines.

Coal producer Coronado Global Resources has cut its annual production guidance and flagged higher mining costs after temporary setbacks at two of its coal mines.

Coronado shares slumped on the news that its Buchanan mine in the US was hit by adverse operating conditions while the Curragh mining complex in Queensland experienced unexpected downtime for repairs.

The company said it hoped to recover as much of the lost tonnes as possible, as it lowered its production and capital expenditure guidance for the 2023 year while hiking up its average mining costs forecast.

Coronado said mining activities at the Buchanan mine in Virginia were temporarily affected by geological conditions in the coal seam that slowed production rates and reduced yield in the September quarter.

The adverse conditions were related to a rock intrusion, which was “not uncommon”, and operations were returning to normal.

“With geological conditions returning to normal, every effort is now being made to recover these lost tonnes in Q4 2023 and Q1 2024,” Coronado said.

Production was also hit at its Curragh mine in the Bowen Basin, after one of the draglines at the complex experienced a mechanical failure in mid-September.

The repairs were expected to be completed no later than the end of October, the company said.

“Production from Curragh in FY23 will be impacted due to the resulting delayed ability to move waste,” it said.

“Coronado is revising its plans for the balance of 2023 and full year 2024 to mitigate as much as possible the impact from these dragline repairs.”

On the back of the geological and operational issues, the metallurgical coal producer cut its 2023 saleable production forecast to 16.2-16.4 million tonnes, compared to its original guidance of 16.8-17.2Mt.

“Coronado has identified, and is aggressively pursuing, actions to recover as much of the impacted tonnes as possible in the next six months,” it said.

Coronado also lifted its average mining costs per tonne sold forecast to $US97-102, from $US84-87 previously.

Coronado said that was due to the combined impact of the lower production guidance, and subsequent impact on full-year sales volumes, and the elevated inflation levels experienced across the industry, which it added was partly mitigated by the current lower Australian dollar exchange rate.

Coronado said capital expenditure efficiencies so far this year had resulted in its total annual capex forecast being below its previous guidance.

The capex forecast now stood at $US220m to $US240m, down from the original $US260-290m guidance.

Coronado executive chairman Gerry Spindler said the company did not expect a material cash impact for 2023 as a result of the guidance changes.

“Notwithstanding these two short-term, non-recurring operational challenges, net of the efficiency gains in capital expenditures, we expect this to have a minimal impact on year-end cash on the balance sheet of a maximum $US10m reduction assuming none of the lost production can be recovered,” he said.

Coronado also expected to be able to increase its price for metallurgical coal, noting the index free-on-board price for premium low-vol coal in Australia was $US333 per metric tonne on Friday.

“Based on the upward index trends, the company expects to see further support for increasing its pricing for metallurgical coal for the remainder of 2023 and into 2024.”

Coronado shares lost 4.4 per cent to $1.86, making it the biggest loser among ASX 200 stocks.

Last week Czech company Sev.en Global Investments bought a majority, 51 per cent stake in Coronado from US private equity firm The Energy & Minerals Group.

In August, Coronado declared only a minimal dividend of US0.5c a share despite beating analyst expectations with its $US199m ($305m) net profit for the first half of the year. Its net income was down 65 per cent from the previous year‘s record result.

Coronado‘s $US1.45bn in revenue was down 25 per cent from the previous first half’s record, on lower coking coal prices.