UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________________
FORM 10-Q
___________________________________________________
(Mark One)
x☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JuneSeptember 30, 20192021
OR
OR
o☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File NumberNumber: 1-16247
___________________________________________________
Coronado Global Resources Inc.
(Exact name of registrant as specified in its charter)
___________________________________________________
Delaware | 83-1780608 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Level 33, Central Plaza One, 345 Queen Street
100 Bill Baker WayBrisbane, Queensland, Australia 4000
Beckley, West Virginia 25801
(Address of principal executive offices) (Zip Code)
(61) 7 3031 7777
(681) 207-7263
(Registrant’s telephone number, including area code)
N/A
N/A
(Former name, former address and former fiscal year, if changed since last report)
___________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading | Name of each exchange on which registered | ||
None | None | None |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes o☒ No x☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes x☒ No o☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
| Accelerated filer |
|
Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
|
|
|
|
Emerging growth company |
|
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o☐ Nox☒
The registrant’s common stock is publicly traded on the Australian Securities Exchange in the form of CHESS Depositary Interests, or CDIs, convertible at the option of the holders into shares of the registrant’s common stock on a 10-for-1 basis. The total number of shares of the registrant’sregistrant's common stock, par value $0.01 per share, outstanding on JulyOctober 31, 2019,2021, including shares of common stock underlying CDIs, was 96,651,692.was167,645,373 .
i
PART I —– FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets
(In US$ thousands, except share data)
Assets |
| Note |
| (Unaudited) |
| December 31, |
|
| Note |
| (Unaudited) September 30, 2021 |
| December 31, 2020 | ||||
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Cash and restricted cash |
|
|
| $ | 46,251 |
| $ | 124,881 |
|
|
|
| $ | 195,979 |
| $ | 45,736 |
Trade receivables |
|
|
| 204,248 |
| 206,127 |
|
| 6 |
|
| 245,427 |
|
| 175,206 | ||
Related party receivables |
| 18 |
| 59,665 |
| 36,716 |
| ||||||||||
Related party trade receivables |
| 6 |
|
| 0 |
|
| 81,970 | |||||||||
Income tax receivable |
|
|
| — |
| 12,017 |
|
|
|
|
| 7,327 |
|
| 20,325 | ||
Inventories |
| 6 |
| 129,424 |
| 95,103 |
|
| 8 |
|
| 120,149 |
|
| 110,135 | ||
Other current assets |
|
|
| 40,722 |
| 40,914 |
|
|
|
|
| 39,307 |
|
| 44,006 | ||
Assets held for sale |
|
|
|
| 49,929 |
|
| 52,524 | |||||||||
Total current assets |
|
|
| 480,310 |
| 515,758 |
|
|
|
|
| 658,118 |
|
| 529,902 | ||
Non-current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Property, plant and equipment, net |
| 7 |
| 1,603,087 |
| 1,618,558 |
|
| 9 |
|
| 1,409,886 |
|
| 1,521,508 | ||
Right of use asset — operating leases, net |
| 10 |
| 64,343 |
| — |
| ||||||||||
Right of use asset – operating leases, net |
|
|
|
| 15,475 |
|
| 19,498 | |||||||||
Goodwill |
| 8 |
| 28,008 |
| 28,008 |
|
|
|
|
| 28,008 |
|
| 28,008 | ||
Intangible assets, net |
| 8 |
| 5,221 |
| 5,402 |
|
|
|
|
| 4,064 |
|
| 4,217 | ||
Deposits and reclamation bonds |
|
|
| 12,541 |
| 11,635 |
| ||||||||||
Restricted deposits |
|
|
|
| 77,182 |
|
| 8,425 | |||||||||
Deferred income tax assets |
|
|
| 7,779 |
| 11,848 |
|
|
|
|
| 0 |
|
| 24,654 | ||
Other non-current assets |
|
|
| 17,194 |
| 18,355 |
|
|
|
|
| 9,173 |
|
| 12,264 | ||
Total assets |
|
|
| $ | 2,218,483 |
| $ | 2,209,564 |
|
|
|
| $ | 2,201,906 |
| $ | 2,148,476 |
Liabilities and Stockholders’ Equity/Members’ Capital |
|
|
|
|
|
|
| ||||||||||
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
| |||||||||
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Accounts payable |
|
|
| $ | 41,084 |
| $ | 42,962 |
|
|
|
| $ | 88,190 |
| $ | 74,651 |
Accrued expenses and other current liabilities |
| 9 |
| 252,351 |
| 243,496 |
|
| 10 |
|
| 238,344 |
|
| 234,526 | ||
Income tax payable |
|
|
| 33,024 |
| 9,241 |
| ||||||||||
Asset retirement obligations |
|
|
| 7,719 |
| 7,719 |
|
|
|
|
| 6,785 |
|
| 6,012 | ||
Contingent royalty consideration |
| 16 |
| 7,293 |
| 26,832 |
| ||||||||||
Contract obligations |
| 13 |
| 35,066 |
| 39,116 |
|
|
|
|
| 39,185 |
|
| 40,295 | ||
Lease liabilities |
| 10 |
| 28,128 |
| 1,308 |
|
|
|
|
| 8,738 |
|
| 8,414 | ||
Other current financial liabilities |
|
|
| 13,126 |
| 7,727 |
|
|
|
|
| 13,031 |
|
| 7,129 | ||
Liabilities held for sale |
|
|
|
| 16,036 |
|
| 16,719 | |||||||||
Total current liabilities |
|
|
| 417,791 |
| 378,401 |
|
|
|
|
| 410,309 |
|
| 387,746 | ||
Non-current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Asset retirement obligations |
|
|
| 122,864 |
| 118,072 |
|
|
|
|
| 115,434 |
|
| 116,132 | ||
Contract obligations |
| 13 |
| 224,433 |
| 253,578 |
|
|
|
|
| 149,296 |
|
| 185,823 | ||
Deferred consideration liability |
| 14 |
| 164,148 |
| 155,332 |
|
|
|
|
| 221,960 |
|
| 216,513 | ||
Interest bearing liabilities |
| 11 |
|
| 332,817 |
|
| 327,625 | |||||||||
Other financial liabilities |
|
|
| 2,697 |
| 4,073 |
|
|
|
|
| 14,741 |
|
| 0 | ||
Lease liabilities |
| 10 |
| 52,902 |
| 2,481 |
|
|
|
|
| 14,972 |
|
| 20,582 | ||
Contingent royalty consideration |
| 16 |
| 3,131 |
| 3,371 |
| ||||||||||
Deferred income tax liabilities |
|
|
| 54,885 |
| 38,838 |
|
|
|
|
| 36,495 |
|
| 64,366 | ||
Other non-current liabilities |
|
|
| 1,680 |
| 1,610 |
|
|
|
|
| 28,613 |
|
| 22,826 | ||
Total liabilities |
|
|
| 1,044,531 |
| 955,756 |
|
|
|
|
| 1,324,637 |
|
| 1,341,613 | ||
Common stock $0.01 par value; 1,000,000,000 shares authorized, 96,651,692 shares are issued and outstanding as of June 30, 2019 and December 31, 2018 |
|
|
| 967 |
| 967 |
| ||||||||||
Series A Preferred stock $0.01 par value; 100,000,000 shares authorized, 1 Share issued and outstanding as of June 30, 2019 and December 31, 2018 |
|
|
| — |
| — |
| ||||||||||
Common stock $0.01 par value; 1,000,000,000 shares authorized, 167,645,373 shares issued and outstanding as of September 30, 2021 and 138,387,890 shares issued and outstanding as of December 31, 2020 |
|
|
|
| 1,677 |
|
| 1,384 | |||||||||
Series A Preferred stock $0.01 par value; 100,000,000 shares authorized, 1 Share issued and outstanding as of September 30, 2021 and December 31, 2020 |
|
|
|
| 0 |
|
| 0 | |||||||||
Additional paid-in capital |
|
|
| 1,108,041 |
| 1,107,948 |
|
|
|
|
| 1,090,135 |
|
| 993,052 | ||
Accumulated other comprehensive loss |
|
|
| (44,202 | ) | (49,609 | ) | ||||||||||
Retained earnings |
|
|
| 108,868 |
| 194,220 |
| ||||||||||
Accumulated other comprehensive losses |
| 16 |
|
| (41,557) |
|
| (28,806) | |||||||||
Accumulated losses |
|
|
|
| (172,986) |
|
| (158,919) | |||||||||
Coronado Global Resources Inc. stockholders’ equity |
|
|
|
| 877,269 |
|
| 806,711 | |||||||||
Noncontrolling interest |
|
|
| 278 |
| 282 |
|
|
|
|
| 0 |
|
| 152 | ||
Total stockholders’ equity |
|
|
| 1,173,952 |
| 1,253,808 |
|
|
|
|
| 877,269 |
|
| 806,863 | ||
Total liabilities and stockholders’ equity |
|
|
| $ | 2,218,483 |
| $ | 2,209,564 |
|
|
|
| $ | 2,201,906 |
| $ | 2,148,476 |
See accompanying notes to unaudited condensed consolidated financial statements. | See accompanying notes to unaudited condensed consolidated financial statements. |
Coronado Global Resources Inc. Form 10-Q September 30, 20212
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income
(In US$ thousands, except share data)
|
|
|
| Three Months Ended |
| Six Months Ended |
|
|
|
| Three months ended September 30, |
| Nine months ended September 30, | ||||||||||||||||
|
| Note |
| 2019 |
| 2018 |
| 2019 |
| 2018 |
|
| Note |
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Coal revenues |
| 4 |
| $ | 495,385 |
| $ | 479,021 |
| $ | 919,329 |
| $ | 571,343 |
|
| 3 |
| $ | 563,287 |
| $ | 349,686 |
| $ | 1,246,918 |
| $ | 955,385 |
Coal revenues from related parties |
| 4, 18 |
| 135,305 |
| 98,489 |
| 293,158 |
| 213,003 |
|
| 3, 6 |
|
| 0 |
|
| 17,051 |
|
| 97,335 |
|
| 106,169 | ||||
Other revenues |
| 4 |
| 11,767 |
| 14,020 |
| 21,848 |
| 15,337 |
|
| 3 |
|
| 10,304 |
|
| 9,648 |
|
| 29,705 |
|
| 28,497 | ||||
Total revenues |
|
|
| 642,457 |
| 591,530 |
| 1,234,335 |
| 799,683 |
|
|
|
|
| 573,591 |
|
| 376,385 |
|
| 1,373,958 |
|
| 1,090,051 | ||||
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cost of coal revenues (exclusive of items shown separately below) |
|
|
| 264,137 |
| 305,309 |
| 533,696 |
| 424,620 |
|
|
|
|
| 309,513 |
|
| 263,858 |
|
| 889,771 |
|
| 745,203 | ||||
Depreciation, depletion and amortization |
|
|
| 45,508 |
| 42,594 |
| 85,279 |
| 64,402 |
|
|
|
|
| 38,461 |
|
| 48,693 |
|
| 132,754 |
|
| 135,542 | ||||
Freight expenses |
|
|
| 52,035 |
| 40,912 |
| 89,362 |
| 45,155 |
|
|
|
|
| 58,043 |
|
| 50,590 |
|
| 166,090 |
|
| 133,475 | ||||
Stanwell rebate |
|
|
| 45,847 |
| 32,812 |
| 94,674 |
| 32,812 |
|
|
|
|
| 12,274 |
|
| 25,157 |
|
| 43,169 |
|
| 82,571 | ||||
Other royalties |
|
|
| 49,073 |
| 67,695 |
| 93,422 |
| 82,987 |
|
|
|
|
| 39,099 |
|
| 21,697 |
|
| 83,219 |
|
| 65,151 | ||||
Selling, general, and administrative expenses |
|
|
| 9,242 |
| 8,513 |
| 18,311 |
| 52,283 |
|
|
|
|
| 8,044 |
|
| 6,785 |
|
| 21,250 |
|
| 20,138 | ||||
Restructuring costs |
|
|
|
| 0 |
|
| 0 |
|
| 2,300 |
|
| 0 | |||||||||||||||
Total costs and expenses |
|
|
| 465,842 |
| 497,835 |
| 914,744 |
| 702,259 |
|
|
|
|
| 465,434 |
|
| 416,780 |
|
| 1,338,553 |
|
| 1,182,080 | ||||
Operating income |
|
|
| 176,615 |
| 93,695 |
| 319,591 |
| 97,424 |
| ||||||||||||||||||
Other income (expenses): |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Operating income (loss) |
|
|
|
| 108,157 |
|
| (40,395) |
|
| 35,405 |
|
| (92,029) | |||||||||||||||
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Interest expense, net |
|
|
| (9,087 | ) | (18,987 | ) | (17,264 | ) | (25,488 | ) |
|
|
|
| (18,251) |
|
| (12,207) |
|
| (49,982) |
|
| (36,528) | ||||
Loss on debt extinguishment |
|
|
| — |
| — |
| — |
| (3,905 | ) |
|
|
|
| 0 |
|
| 0 |
|
| (5,744) |
|
| 0 | ||||
Impairment of assets |
|
|
|
| 0 |
|
| 0 |
|
| 0 |
|
| (63,111) | |||||||||||||||
Decrease in provision for discounting and credit losses |
|
|
|
| 2,430 |
|
| 0 |
|
| 8,074 |
|
| 0 | |||||||||||||||
Other, net |
| 5 |
| (2,989 | ) | (2,391 | ) | 1,042 |
| (26,846 | ) |
| 4 |
|
| (1,252) |
|
| (361) |
|
| (3,610) |
|
| (4,846) | ||||
Total other income (expense), net |
|
|
| (12,076 | ) | (21,378 | ) | (16,222 | ) | (56,239 | ) | ||||||||||||||||||
Income before tax |
|
|
| 164,539 |
| 72,317 |
| 303,369 |
| 41,185 |
| ||||||||||||||||||
Income tax expense |
| 11 |
| (47,033 | ) | (12,995 | ) | (89,043 | ) | (5,534 | ) | ||||||||||||||||||
Net income |
|
|
| 117,506 |
| 59,322 |
| 214,326 |
| 35,651 |
| ||||||||||||||||||
Total other expense, net |
|
|
|
| (17,073) |
|
| (12,568) |
|
| (51,262) |
|
| (104,485) | |||||||||||||||
Income (loss) before tax |
|
|
|
| 91,084 |
|
| (52,963) |
|
| (15,857) |
|
| (196,514) | |||||||||||||||
Income tax (expense) benefit |
| 13 |
|
| (9,096) |
|
| 11,169 |
|
| 1,788 |
|
| 31,525 | |||||||||||||||
Net income (loss) |
|
|
|
| 81,988 |
|
| (41,794) |
|
| (14,069) |
|
| (164,989) | |||||||||||||||
Less: Net loss attributable to noncontrolling interest |
|
|
| (4 | ) | (2 | ) | (4 | ) | (4 | ) |
|
|
|
| 0 |
|
| (2) |
|
| (2) |
|
| (6) | ||||
Net income attributable to Coronado Global Resources Inc. |
|
|
| $ | 117,510 |
| 59,324 |
| $ | 214,330 |
| $ | 35,655 |
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Net income (loss) attributable to Coronado Global Resources Inc. |
|
|
| $ | 81,988 |
| $ | (41,792) |
| $ | (14,067) |
| $ | (164,983) | |||||||||||||||
Other comprehensive income, net of income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign currency translation adjustment |
|
|
| (508 | ) | (18,695 | ) | (1,066 | ) | (18,695 | ) |
| 16 |
|
| (7,966) |
|
| 14,867 |
|
| (16,796) |
|
| 461 | ||||
Net gain on cash flow hedges, net of tax |
|
|
| 894 |
| — |
| 6,473 |
| — |
| ||||||||||||||||||
Total comprehensive income |
|
|
| $ | 117,892 |
| 40,627 |
| 219,733 |
| $ | 16,956 |
| ||||||||||||||||
Net (loss) gain on cash flow hedges, net of tax |
| 16 |
|
| (2,204) |
|
| 3,027 |
|
| 4,045 |
|
| (11,619) | |||||||||||||||
Total other comprehensive income (loss) |
|
|
|
| (10,170) |
|
| 17,894 |
|
| (12,751) |
|
| (11,158) | |||||||||||||||
Total comprehensive income (loss) |
|
|
|
| 71,818 |
|
| (23,900) |
|
| (26,820) |
|
| (176,147) | |||||||||||||||
Less: Net loss attributable to noncontrolling interest |
|
|
| (4 | ) | (2 | ) | (4 | ) | (4 | ) |
|
|
|
| 0 |
|
| (2) |
|
| (2) |
|
| (6) | ||||
Total comprehensive income attributable to Coronado Global Resources Inc. |
|
|
| $ | 117,896 |
| $ | 40,629 |
| $ | 219,737 |
| $ | 16,960 |
| ||||||||||||||
Total comprehensive income (loss) attributable to Coronado Global Resources Inc. |
|
|
| $ | 71,818 |
| $ | (23,898) |
| $ | (26,818) |
| $ | (176,141) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Earnings per share of common stock |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Earnings (loss) per share of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Basic |
| 15 |
| 1.22 |
|
|
| 2.22 |
|
|
|
| 14 |
|
| 0.49 |
|
| (0.37) |
|
| (0.09) |
|
| (1.62) | ||||
Diluted |
| 15 |
| 1.22 |
|
|
| 2.22 |
|
|
|
| 14 |
|
| 0.49 |
|
| (0.37) |
|
| (0.09) |
|
| (1.62) | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements. | See accompanying notes to unaudited condensed consolidated financial statements. |
Coronado Global Resources Inc. Form 10-Q September 30, 20213
Unaudited Condensed Consolidated Statements of Stockholders’ Equity/Members’ CapitalEquity
(In US$ thousands, except share data)
|
|
| Common stock |
| Preferred stock |
| Additional |
| Accumulated other |
|
|
|
|
| Total | ||||
|
|
|
|
|
|
|
|
|
|
| paid in |
| comprehensive |
| (Accumulated |
| Noncontrolling |
| stockholders |
|
|
| Shares |
| Amount |
| Series A |
| Amount |
| capital |
| losses |
| losses) |
| interest |
| equity |
Balance December 31, 2020 |
|
| 138,387,890 | $ | 1,384 |
| 1 | $ | — | $ | 993,052 | $ | (28,806) | $ | (158,919) | $ | 152 | $ | 806,863 |
Net loss |
|
| — |
| — |
| — |
| — |
| — |
| — |
| (40,970) |
| (2) |
| (40,972) |
Other comprehensive income (net of $2,111 tax) |
|
| — |
| — |
| — |
| — |
| — |
| 317 |
| — |
| — |
| 317 |
Total comprehensive income (loss) |
|
| — |
| — |
| — |
| — |
| — |
| 317 |
| (40,970) |
| (2) |
| (40,655) |
Share-based compensation for equity classified awards |
|
| — |
| — |
| — |
| — |
| (538) |
| — |
| — |
| — |
| (538) |
Acquisition of noncontrolling interest |
|
| — |
| — |
| — |
| — |
| (703) |
| — |
| — |
| (150) |
| (853) |
Balance March 31, 2021 |
|
| 138,387,890 | $ | 1,384 |
| 1 | $ | — | $ | 991,811 | $ | (28,489) | $ | (199,889) | $ | 0 | $ | 764,817 |
Net loss |
|
| — |
| — |
| — |
| — |
| — |
| — |
| (55,085) |
| — |
| (55,085) |
Other comprehensive loss (net of $24 tax) |
|
| — |
| — |
| — |
| — |
| — |
| (2,898) |
| — |
| — |
| (2,898) |
Total comprehensive loss |
|
| — |
| — |
| — |
| — |
| — |
| (2,898) |
| (55,085) |
| — |
| (57,983) |
Issuance of common stock, net |
|
| 29,257,483 |
| 293 |
| — |
| — |
| 97,448 |
| — |
| — |
| — |
| 97,741 |
Share-based compensation for equity classified awards |
|
| — |
| — |
| — |
| — |
| 737 |
| — |
| — |
| — |
| 737 |
Balance June 30, 2021 |
|
| 167,645,373 | $ | 1,677 |
| 1 | $ | — | $ | 1,089,996 | $ | (31,387) | $ | (254,974) | $ | 0 | $ | 805,312 |
Net income |
|
| — |
| — |
| — |
| — |
| — |
| — |
| 81,988 |
| — |
| 81,988 |
Other comprehensive loss (net of tax) |
|
| — |
| — |
| — |
| — |
| — |
| (10,170) |
| — |
| — |
| (10,170) |
Total comprehensive (loss) income |
|
| — |
| — |
| — |
| — |
| — |
| (10,170) |
| 81,988 |
| — |
| 71,818 |
Share-based compensation for equity classified awards |
|
| — |
| — |
| — |
| — |
| 139 |
| — |
| — |
| — |
| 139 |
Balance September 30, 2021 |
|
| 167,645,373 | $ | 1,677 |
| 1 | $ | — | $ | 1,090,135 | $ | (41,557) | $ | (172,986) | $ | — | $ | 877,269 |
Coronado Global Resources Inc. Form 10-Q September 30, 20214
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
| Additional |
| Other |
|
|
| Non- |
| Total |
| |||||
|
| Members’ |
| Common Stock |
| Preferred Stock |
| Paid in |
| Comprehensive |
| Retained |
| controlling |
| Stockholders’ |
| |||||
|
| Capital |
| Shares |
| Amount |
| Series A |
| Amount |
| Capital |
| Income / (Loss) |
| Earnings |
| Interest |
| Equity |
| |
Balance December 31, 2018 |
| $ | — |
| 96,651,692 |
| 967 |
| 1 |
| — |
| 1,107,948 |
| (49,609 | ) | 194,220 |
| 282 |
| 1,253,808 |
|
Net income |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 96,820 |
| — |
| 96,820 |
| |
Other comprehensive income (net of $ 2,391 tax) |
| — |
| — |
| — |
| — |
| — |
| — |
| 5,021 |
| — |
| — |
| 5,021 |
| |
Total comprehensive income |
| $ | — |
| — |
| — |
| — |
| — |
| — |
| 5,021 |
| 96,820 |
| — |
| 101,841 |
|
Dividends paid |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| (299,682 | ) | — |
| (299,682 | ) | |
Balance March 31, 2019 |
| $ | — |
| 96,651,692 |
| 967 |
| 1 |
| — |
| 1,107,948 |
| (44,588 | ) | (8,642 | ) | 282 |
| 1,055,967 |
|
Net income |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 117,510 |
| (4 | ) | 117,506 |
| |
Other comprehensive income (net of $ 383 tax) |
| — |
| — |
| — |
| — |
| — |
| — |
| 386 |
| — |
| — |
| 386 |
| |
Total comprehensive income |
| $ | — |
| — |
| — |
| — |
| — |
| — |
| 386 |
| 117,510 |
| (4 | ) | 117,892 |
|
Share-based compensation for equity classified awards |
| — |
| — |
| — |
| — |
| — |
| 93 |
| — |
| — |
| — |
| 93 |
| |
Dividends paid |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| |
Balance June 30, 2019 |
| $ | — |
| 96,651,692 |
| 967 |
| 1 |
| — |
| 1,108,041 |
| (44,202 | ) | 108,868 |
| 278 |
| 1,173,952 |
|
|
|
| Common stock |
| Preferred stock |
| Additional |
| Accumulated other |
| (Accumulated losses) |
|
|
| Total | ||||
|
|
|
|
|
|
|
|
|
|
| paid in |
| comprehensive |
| Retained |
| Noncontrolling |
| stockholders |
|
|
| Shares |
| Amount |
| Series A |
| Amount |
| capital |
| losses |
| earnings |
| interest |
| equity |
Balance December 31, 2019 |
|
| 96,651,692 | $ | 967 |
| 1 | $ | — | $ | 820,247 | $ | (45,206) | $ | 91,712 | $ | 221 | $ | 867,941 |
Net loss |
|
| — |
| — |
| — |
| — |
| — |
| — |
| (8,863) |
| (2) |
| (8,865) |
Other comprehensive loss (net of $13,781 tax) |
|
| — |
| — |
| — |
| — |
| — |
| (87,759) |
| — |
| — |
| (87,759) |
Total comprehensive loss |
|
| — |
| — |
| — |
| — |
| — |
| (87,759) |
| (8,863) |
| (2) |
| (96,624) |
Share-based compensation for equity classified awards |
|
| — |
| — |
| — |
| — |
| 148 |
| — |
| — |
| — |
| 148 |
Dividends paid |
|
| — |
| — |
| — |
| — |
| — |
| — |
| (24,163) |
| — |
| (24,163) |
Balance March 31, 2020 |
|
| 96,651,692 | $ | 967 |
| 1 | $ | — | $ | 820,395 | $ | (132,965) | $ | 58,686 | $ | 219 | $ | 747,302 |
Net loss |
|
| — |
| — |
| — |
| — |
| — |
| — |
| (114,328) |
| (2) |
| (114,330) |
Other comprehensive income (net of $6,534 tax) |
|
| — |
| — |
| — |
| — |
| — |
| 58,707 |
| — |
| — |
| 58,707 |
Total comprehensive income (loss) |
|
| — |
| — |
| — |
| — |
| — |
| 58,707 |
| (114,328) |
| (2) |
| (55,623) |
Share-based compensation for equity classified awards |
|
| — |
| — |
| — |
| — |
| 248 |
| — |
| — |
| — |
| 248 |
Balance June 30, 2020 |
|
| 96,651,692 | $ | 967 |
| 1 | $ | — | $ | 820,643 | $ | (74,258) | $ | (55,642) | $ | 217 | $ | 691,927 |
Net loss |
|
| — |
| — |
| — |
| — |
| — |
| — |
| (41,792) |
| (2) |
| (41,794) |
Other comprehensive income (net of $1,107 tax) |
|
| — |
| — |
| — |
| — |
| — |
| 17,894 |
| — |
| — |
| 17,894 |
Total comprehensive income (loss) |
|
| — |
| — |
| — |
| — |
| — |
| 17,894 |
| (41,792) |
| (2) |
| (23,900) |
Issuance of common stock, net |
|
| 41,736,198 |
| 417 |
| — |
| — |
| 171,168 |
| — |
| — |
| — |
| 171,585 |
Share-based compensation for equity classified awards |
|
| — |
| — |
| — |
| — |
| 264 |
| — |
| — |
| — |
| 264 |
Balance September 30, 2020 |
|
| 138,387,890 | $ | 1,384 |
| 1 | $ | — | $ | 992,075 | $ | (56,364) | $ | (97,434) | $ | 215 | $ | 839,876 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited condensed consolidated financial statements. |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| Additional |
| Other |
|
|
| Non- |
| Total |
| |
|
| Members’ |
| Common Stock |
| Preferred Stock |
| Paid in |
| Comprehensive |
| Retained |
| controlling |
| Members’ |
| |||||
|
| Capital |
| Shares |
| Amount |
| Series A |
| Amount |
| Capital |
| Income / (Loss) |
| Earnings |
| Interest |
| Capital |
| |
Balance December 31, 2017 |
| $ | 553,524 |
| — |
| — |
| — |
| — |
| — |
| — |
| 79,539 |
| 237 |
| 633,300 |
|
Net (loss) |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| (23,669 | ) | (2 | ) | (23,671 | ) | |
Other comprehensive income |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| |
Total comprehensive income |
| $ | — |
| — |
| — |
| — |
| — |
| — |
| — |
| (23,669 | ) | (2 | ) | (23,671 | ) |
Members’ contributions |
| 181,610 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 62 |
| 181,672 |
| |
Balance March 31, 2018 |
| 735,134 |
| — |
| — |
| — |
| — |
| — |
| — |
| 55,870 |
| 297 |
| 791,301 |
| |
Net income |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 59,324 |
| (2 | ) | 59,322 |
| |
Other comprehensive income |
| — |
| — |
| — |
| — |
| — |
| — |
| (18,695 | ) | — |
| — |
| (18,695 | ) | |
Total comprehensive income |
| $ | — |
| — |
| — |
| — |
| — |
| — |
| (18,695 | ) | 59,324 |
| (2 | ) | 40,627 |
|
Members’ distributions |
| (30,274 | ) | — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| (30,274 | ) | |
Balance June 30, 2018 |
| 704,860 |
| — |
| — |
| — |
| — |
| — |
| (18,695 | ) | 115,194 |
| 295 |
| 801,654 |
|
Coronado Global Resources Inc. Form 10-Q September 30, 20215
Unaudited Condensed Consolidated Statements of Cash Flows
(In US$ thousands)
|
| Nine months ended | ||||
|
| September 30, | ||||
|
| 2021 |
| 2020 | ||
Cash flows from operating activities: |
|
|
|
|
|
|
Net loss |
| $ | (14,069) |
| $ | (164,989) |
Adjustments to reconcile net income to cash and restricted cash provided by operating activities: |
|
|
|
|
|
|
Depreciation, depletion and amortization |
|
| 132,754 |
|
| 135,542 |
Impairment of assets |
|
| 0 |
|
| 63,111 |
Amortization of right of use asset - operating leases |
|
| 6,694 |
|
| 11,092 |
Amortization of deferred financing costs |
|
| 2,649 |
|
| 4,134 |
Loss on debt extinguishment |
|
| 5,744 |
|
| — |
Non-cash interest expense |
|
| 21,431 |
|
| 16,180 |
Amortization of contract obligations |
|
| (25,612) |
|
| (23,575) |
Loss on disposal of property, plant and equipment |
|
| 835 |
|
| 62 |
Decrease in contingent royalty consideration |
|
| 0 |
|
| (1,543) |
Gain on operating lease derecognition |
|
| 0 |
|
| (1,180) |
Equity-based compensation expense |
|
| 338 |
|
| 660 |
Deferred income taxes |
|
| 2,189 |
|
| (13,554) |
Reclamation of asset retirement obligations |
|
| (2,393) |
|
| (2,324) |
Decrease in provision for discounting and credit losses |
|
| (8,074) |
|
| 0 |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
Accounts receivable - including related party receivables |
|
| 9,783 |
|
| (63,645) |
Inventories |
|
| (12,889) |
|
| 35,719 |
Other current assets |
|
| 12,187 |
|
| (2,912) |
Accounts payable |
|
| 22,899 |
|
| (24,541) |
Accrued expenses and other current liabilities |
|
| 16,363 |
|
| 8,859 |
Operating lease liabilities |
|
| (7,875) |
|
| (12,607) |
Change in other liabilities |
|
| 8,161 |
|
| (2,584) |
Net cash provided by (used in) operating activities |
|
| 171,115 |
|
| (38,095) |
Cash flows from investing activities: |
|
|
|
|
|
|
Capital expenditures |
|
| (75,897) |
|
| (85,237) |
Purchase of restricted deposits |
|
| (100,166) |
|
| (52) |
Redemption of restricted deposits |
|
| 30,281 |
|
| 6,026 |
Net cash used in investing activities |
|
| (145,782) |
|
| (79,263) |
Cash flows from financing activities: |
|
|
|
|
|
|
Proceeds from interest bearing liabilities and other financial liabilities |
|
| 411,524 |
|
| 176,953 |
Debt issuance costs and other financing costs |
|
| (15,263) |
|
| (2,955) |
Principal payments on interest bearing liabilities and other financial liabilities |
|
| (371,379) |
|
| (216,828) |
Principal payments on finance lease obligations |
|
| 0 |
|
| (2,387) |
Dividends paid |
|
| 0 |
|
| (24,162) |
Proceeds from stock issuance, net |
|
| 97,741 |
|
| 171,585 |
Net cash provided by financing activities |
|
| 122,623 |
|
| 102,206 |
Net increase (decrease) in cash and restricted cash |
| �� | 147,956 |
|
| (15,152) |
Effect of exchange rate changes on cash and restricted cash |
|
| 2,287 |
|
| 3,258 |
Cash and restricted cash at beginning of period |
|
| 45,736 |
|
| 26,553 |
Cash and restricted cash at end of period |
| $ | 195,979 |
| $ | 14,659 |
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
Cash payments for interest |
| $ | 13,681 |
| $ | 17,246 |
Cash refund for taxes |
| $ | (16,130) |
| $ | (6,431) |
Restricted cash |
| $ | 251 |
| $ | 251 |
See accompanying notes to unaudited condensed consolidated financial statements. |
Coronado Global Resources Inc. Form 10-Q September 30, 20216
|
| Six Months Ended |
| ||
|
| 2019 |
| 2018 |
|
Cash Flows From Operating Activities: |
|
|
|
|
|
Net income |
| 214,326 |
| 35,651 |
|
Adjustments to reconcile net income to cash and restricted cash provided by operating activities: |
|
|
|
|
|
Depreciation, depletion and amortization |
| 85,404 |
| 64,354 |
|
Amortization of right of use asset - operating leases |
| 10,394 |
| — |
|
Amortization of deferred financing costs |
| 2,060 |
| 2,406 |
|
Non-cash interest expense |
| 9,711 |
| 1,886 |
|
Amortization of contract obligations |
| (17,550 | ) | (14,390 | ) |
Loss on disposal of property, plant and equipment |
| 39 |
| — |
|
Increase (decrease) in contingent royalty consideration |
| (7,143 | ) | 10,973 |
|
Loss on interest rate swap |
| — |
| 4,871 |
|
Equity-based compensation expense |
| 93 |
| — |
|
Deferred income taxes |
| 17,026 |
| 5,448 |
|
Reclamation of asset retirement obligations |
| (2,552 | ) | (1,415 | ) |
Change in estimate of asset retirement obligation |
| (125 | ) | 48 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
Accounts receivable - including related party receivables |
| (23,105 | ) | (32,097 | ) |
Inventories |
| (34,562 | ) | 1,287 |
|
Other current assets |
| (2,287 | ) | (8,154 | ) |
Accounts payable |
| (1,832 | ) | 10,736 |
|
Accrued expenses and other current liabilities |
| 15,585 |
| 60,106 |
|
Operating lease liabilities |
| (11,073 | ) | — |
|
Change in other liabilities |
| 46,807 |
| (98 | ) |
Net cash provided by operating activities |
| 301,216 |
| 141,612 |
|
Cash Flows From Investing Activities: |
|
|
|
|
|
Capital expenditures |
| (66,430 | ) | (46,776 | ) |
Purchase of deposits and reclamation bonds |
| (906 | ) | (523 | ) |
Redemption of deposits and reclamation bonds |
| — |
| 171 |
|
Acquisition of Curragh, net of cash acquired |
| — |
| (537,207 | ) |
Net cash used in investing activities |
| (67,336 | ) | (584,335 | ) |
Cash Flows From Financing Activities: |
|
|
|
|
|
Proceeds from interest bearing liabilities and other financial liabilities, net of debt discount |
| 109,008 |
| 720,083 |
|
Proceeds from interest rate swap |
| — |
| 28,251 |
|
Debt issuance costs and other financing costs |
| — |
| (41,951 | ) |
Principal payments on interest bearing liabilities and other financial liabilities |
| (108,073 | ) | (155,636 | ) |
Principal payments on finance and capital lease obligations |
| (686 | ) | (1,052 | ) |
Payment of contingent purchase consideration |
| (12,712 | ) | — |
|
Dividends paid |
| (299,682 | ) | — |
|
Members’ contributions (distributions), net |
| — |
| 151,336 |
|
NCI member’s contributions |
| — |
| 62 |
|
Net cash provided by (used in) financing activities |
| (312,145 | ) | 701,093 |
|
Net increase (decrease) in cash and restricted cash |
| (78,265 | ) | 258,370 |
|
Effect of exchange rate changes on cash and restricted cash |
| (365 | ) | (2,384 | ) |
Cash and restricted cash at beginning of period |
| 124,881 |
| 28,069 |
|
Cash and restricted cash at end of period |
| 46,251 |
| 284,055 |
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
Cash payments for interest |
| 1,148 |
| 38,665 |
|
Cash paid for taxes |
| 35,873 |
| 4,417 |
|
See accompanying notes to unaudited condensed consolidated financial statements
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.Description of Business, Basis of Presentation
(a)Description of the Business
Coronado Global Resources Inc. (together with its subsidiaries, the “Company” or “Coronado”) is a global producer, marketer, and exporter of a full range of metallurgical coals, an essential element in the production of steel. The Company has a portfolio of operating mines and development projects in Queensland, Australia, and in the states of Pennsylvania, Virginia and West Virginia in the USA.United States, or U.S.
(b)Basis of Presentation
The interim unaudited condensed consolidated financial statements have been prepared in accordance with the requirements of the U.S. Generally Accepted Accounting Principles,generally accepted accounting principles, or U.S. GAAP, and with the instructions to Form 10-Q and Article 10 of Regulation S-X related to interim financial reporting issued by the Securities and Exchange Commission, or the SEC. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s registration statementAnnual Report on Form 10, as amended,10-K filed with the SEC and the Australian Securities Exchange, or the ASX, on June 28, 2019.February 25, 2021.
During the year ended December 31, 2018, Coronado Group LLC and Coronado Global Resources Inc. completed a common control reorganization, or the Reorganization Transaction, of their legal entity structure. Prior to the Reorganization Transaction in August 2018, Coronado Group HoldCo LLC, the holding company of our operations in Australia, or the Australian Operations, was a wholly-owned subsidiary of Coronado Group LLC. In connection with the Reorganization Transaction, (i) Coronado Group HoldCo LLC was converted into Coronado Global Resources Inc. in August 2018 and (ii) Coronado Group LLC contributed all of the equity ownership in our operations in the United States, or the U.S. Operations, to Coronado Coal Corporation, a wholly-owned subsidiary of Coronado Global Resources Inc. Immediately following the Reorganization Transaction, Coronado Global Resources Inc. remained a wholly-owned subsidiary of Coronado Group LLC, which is currently owned by The Energy & Minerals Group, or EMG Group, and certain members of our management.
The Reorganization Transaction was treated as a combination of entities under common control in line with Accounting Standards Codification, or ASC, 805, Business Combinations, whereby the receiving entity (the Company) recorded the contributed assets and liabilities at the carrying value of Coronado Group LLC. Prior to the Reorganization Transaction, the consolidated financial statements of the Company reflect the net assets and operations of Coronado Group LLC. The financial statements presented following the Reorganization Transaction are those of the receiving entity (the Company) and are retrospectively adjusted to present that entity as if it always held the net assets or equity interests previously held by the seller, Coronado Group LLC. As such, financial information (including comparatives) of the Company has been presented as a continuation of the pre-existing accounting values of assets and liabilities in Coronado Group LLC’s financial statements.
The interim unaudited condensed consolidated financial statements are presented in U.S. dollars, unless otherwise stated. They include the accounts of Coronado Global Resources Inc., its wholly-owned subsidiaries and its affiliates.subsidiaries in which it has a controlling interest. References to “US$” or “USD” are references to U.S. dollars. References to “A$” or “AUD” are references to Australian dollars, the lawful currency of the Commonwealth of Australia. The Company, or Coronado,“Company” and “Coronado” are used interchangeably to refer to Coronado Global Resources Inc. and its subsidiaries, collectively, or to Coronado Group LLC,Global Resources Inc., as appropriate to the context. Interests in subsidiaries controlled by the Company are consolidated with any outside stockholder interests reflected as noncontrolling interests. All intercompany balances and transactions have been eliminated inupon consolidation.
In the opinion of management, these interim financial statements reflect all normal, recurring adjustments necessary for the fair presentation of the Company’s financial position, results of operations, comprehensive income, cash flows and changes in equity for the periods presented. Balance sheet information presented herein as of December 31, 20182020 has been derived from the Company’s audited consolidated balance sheet at that date. The Company’s results of operations for the three and sixnine months ended JuneSeptember 30, 20192021 are not necessarily indicative of the results that may be expected for future quarters or for the year ending December 31, 2019.2021.
2.Summary of Significant Accounting Policies
Please see Note 2 “Summary of Significant Accounting Policies” contained in the audited consolidated financial statements for the year ended December 31, 20182020 included in Coronado Global Resources Inc.’s registration statementAnnual Report on Form 10, as amended,10-K filed with the SEC and ASX on June 28, 2019.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)February 25, 2021.
(a)Newly Adopted Accounting Standards
Leases.“Income Taxes - Simplifying the Accounting for Income Taxes” - In February 2016,December 2019, the Financial Accounting Standards Board or FASB, established Topic 842, Leases, by issuingissued Accounting Standards Update, or ASU, No. 2016-02,2019-12, which requires lesseessimplified various aspects related to recognize leases on the balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended byaccounting for income taxes. ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements. The new standard establishes a right-of-use, or ROU, model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.
On January 1, 2019, the Company adopted ASU No. 2016-02 using the modified retrospective transition approach and elected the package of practical expedients that allows it to forgo reassessment of lease classification for leases that have already commenced. The Company also elected the practical expedients2019-12 removed certain exceptions to the new standard without restating comparative prior period financial information,general principles in Accounting Standards Codification, or ASC, Topic 740 – Income Taxes, and clarified and amended existing guidance to not recognize ROU assets and liabilities for operating leases with shorter than 12-month terms and to include both lease and non-lease components with lease payments.improve consistent application.
In addition to existing finance leases and other financing obligations, the adoption of the new standard resulted in the recognition of ROU assets of $66.8 million and lease liabilities of $81.1 million related to operating leases. On adoption, the lease liability included reclassification of a terminal services contract liability of $14.3 million, which is classified as a lease under the newly adopted standard. There was no material impact to the Consolidated Statements of Operations and Comprehensive Income, the Consolidated Statements of Cash Flows, or the Company’s debt covenant calculations as a result of theThe adoption of ASU 2016-02.
ASU No. 2016-02 also requires entities to disclose certain qualitative and quantitative information regarding the amount, timing, and uncertainty of cash flows arising from leases. Such disclosures are included in Note 10 “Leases”.
(b)Accounting Standards Not Yet Implemented
Financial Instruments - Credit Losses. In June 2016, the FASB issued ASU 2016-13 related to the measurement of credit losses on financial instruments. The pronouncement replaces the incurred loss methodology to record credit losses with a methodology that reflects the expected credit losses for financial assets not accounted for at fair value with gains and losses recognized through net income. This standard is effective for fiscal years beginning after December 15, 2019 (January 1, 2020 for the Company) and interim periods therein. The Company expects to adopt ASU 2016-13 as of January 1, 2020 and is in the process of evaluating the impacts of adoption.
Fair Value Measurement. In August 2018, the FASB issued ASU 2018-13, which amended the fair value measurement guidance by removing and modifying certain disclosure requirements, while also adding new disclosure requirements. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The amendments are effective for all companies for fiscal years, and interim periods within those years, beginning after December 15, 2019. The Company plans to adopt all disclosure requirements effective January 1, 2020.
(c)Reclassification
Certain amounts in the prior period Condensed Consolidated Balance Sheet have been reclassified to conform to the presentation of the current period financial statements. These related to the reclassification of capital lease liabilities included within “other financial liabilities and capital leases” and “other financial liabilities, excluding current instalments” as at December 31, 2018 to “Lease liabilities” current and non-current, respectively. These reclassifications had no effect on the previously reported net income.
3.Acquisition of Curragh Complex
On December 22, 2017, a Membership Interest and Asset Purchase Agreement, or the Agreement, was entered by Coronado Australia Holdings Pty Ltd and Coronado Group LLC in order to acquire Wesfarmers Curragh Pty Ltd from Wesfarmers Limited (since renamed Coronado Curragh Pty Ltd), which we refer to as the Curragh acquisition. The Agreement was executed on March 29, 2018.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The aggregate base purchase price for the Membership Interest in Curragh was A$700 million and was subject to adjustments pursuant to the terms of the Agreement. The Company acquired 100% of the Membership Interest. The operating results related to the Curragh acquisition have been included in the consolidated financial statements since March 29, 2018.
The aggregate consideration on the date of the Curragh acquisition totaled $563.8 million.
Contingent consideration recognized on the date of the Curragh acquisition, specifically the Value Share Mechanism, or VSM, of $26.6 million associated with the Curragh acquisition represents the fair value of a two-year, 25% royalty on sales from metallurgical coal mined at Curragh. The royalty only applies to the realized price on metallurgical coal sales above $145 per metric ton. The VSM liability is marked-to-market at each reporting date, with any fluctuations included as an operating expense in the Consolidated Statement of Operations. The payout structure of the royalty can be replicated through a probability weighted discounted cash flow approach using a Monte Carlo simulation over a 24-month period from acquisition date. As such, the Company developed a fair value of the royalty using a Monte Carlo simulation.
In connection with the acquisition, Coronado Australia Holdings Pty Ltd incurred acquisition related costs for the six months ended June 30, 2018 of $53.8 million, $38.5 million of which is recorded in selling, general, and administrative expenses. The remainder, relating to foreign currency swap losses, is recorded in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income under “Other, net”.
The Curragh acquisition has been accounted for using the acquisition method of accounting which requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The following table summarizes total consideration transferred and the allocation of the purchase price to the acquired assets and liabilities:
|
| Amount |
| |
|
| (US$ thousands) |
| |
Fair value of total consideration transferred: |
|
|
| |
Cash consideration |
| $ | 537,207 |
|
Contingent consideration (Value Share Mechanism) |
| 26,552 |
| |
Total consideration transferred |
| 563,759 |
| |
|
|
|
| |
Recognized amounts of identifiable assets acquired, and liabilities assumed: |
|
|
| |
Current assets |
| $ | 240,966 |
|
Property, plant and equipment |
| 851,981 |
| |
Deferred income tax assets |
| 24,432 |
| |
Other long-term assets |
| 1,831 |
| |
Current liabilities |
| (141,611 | ) | |
Contract obligations |
| (306,960 | ) | |
Asset retirement obligations |
| (104,305 | ) | |
Other long-term liabilities |
| (2,575 | ) | |
Total identifiable net assets acquired |
| $ | 563,759 |
|
No goodwill has been recorded in connection with this acquisition as the purchase consideration equaled the fair value of the net assets acquired.
The following pro forma summary reflects consolidated results of operation as if the Curragh acquisition had occurred2019-12 on January 1, 2018 (unaudited).
| |||
| |||
|
| ||
|
|
The pro forma financial information was prepared based on historical financial information and has been adjusted to give effect to pro forma adjustments that are (i) directly attributable to the Curragh acquisition, (ii) factually supportable and (iii) expected to2021 did not have a continuingmaterial impact on the combined results.
These pro forma results are based on estimates and assumptions, which the Company believes are reasonable. They are not the results that would have been realized had the acquisition actually occurred on January 1, 2018 and are not necessarily indicative of the Company’s consolidated results of operations in future periods. The pro forma results include adjustments related to purchase accounting, depreciation of property and equipment, and do not include any anticipated synergies or other expected benefits that may be realized from the Curragh acquisition.financial statements.
The pro forma results for the six months ended June 30, 2018 exclude non-recurring adjustments of $53.8 million of transaction costs.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4.3.Segment Information
The Company has a portfolio of operating mines and development projects in Queensland, Australia, and in the states of Pennsylvania, Virginia and West Virginia in the USA. U.S. The operations in Australia, or Australian Operations, comprise the 100%-owned Curragh producing mine complex. The operations in the United States, or U.S. Operations, comprise 2 100%-owned producing mine complexes (Buchanan and Logan), 1 100%-owned idled mine complex (Greenbrier), 2 development properties (Pangburn-Shaner-Fallowfield and Russell County) and 1 idle property (Amonate).
The Company operates its business along fourtwo reportable segments: Curragh, Buchanan, Logan and Greenbrier. These segments are grouped based on geography. Factors affecting and differentiating the financial performance of each of these four reportable segments generally include coal quality, geology, and coal marketing opportunities, mining and transportation methods and regulatory issues. The Company believes this method of segment reporting reflects both the way its business segments are currently managedAustralia and the way the performance of each segment is evaluated. The four segments consist of similar operating activities as each segment produces similar products.
United States. The organization of the fourtwo reportable segments reflects how Coronado’sthe Company’s chief operating decision maker, or CODM, manages and allocates resources to the various components. components of the Company’s business.
Coronado Global Resources Inc. Form 10-Q September 30, 20217
The CODM uses Adjusted EBITDA as the primary metric to measure each segment’s operating performance.
Adjusted EBITDA is not a measure of financial performance in accordance with U.S. GAAP. Investors should be aware that the Company’s presentation of Adjusted EBITDA may not be comparable to similarly titled financial measures used by other companies.
Adjusted EBITDA is defined as earnings before interest, tax,taxes, depreciation, depletion and amortization and other foreign exchange losses and loss on debt extinguishment.losses. Adjusted EBITDA is also adjusted for certain discrete items that management exclude in analyzing each of the Company’s segments’ operating performance. “Other and corporate” relates to additional financial information for the corporate function such as accounting, treasury, legal, human resources, compliance, and tax. As such, the corporate function is not determined to be a reportable segment but is discretely disclosed for purposes of reconciliation to the Company’s condensed consolidated financials.financial statements.
Reportable segment results as of and for the three and sixnine months ended JuneSeptember 30, 20192021 and 20182020 are presented below.below:
|
|
| Australia |
|
| United States |
|
| Other and Corporate |
|
| Total |
|
|
| (in US$ thousands) | |||||||||
Three months ended September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
| $ | 342,372 |
| $ | 231,219 |
| $ | — |
| $ | 573,591 |
Adjusted EBITDA |
|
| 67,383 |
|
| 88,441 |
|
| (8,084) |
|
| 147,740 |
Net income (loss) |
|
| 39,868 |
|
| 54,444 |
|
| (12,324) |
|
| 81,988 |
Total assets |
|
| 1,155,082 |
|
| 862,961 |
|
| 183,863 |
|
| 2,201,906 |
Capital expenditures |
|
| 7,972 |
|
| 9,436 |
|
| 182 |
|
| 17,590 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
| $ | 271,413 |
| $ | 104,972 |
| $ | — |
| $ | 376,385 |
Adjusted EBITDA |
|
| 2,144 |
|
| 14,413 |
|
| (7,006) |
|
| 9,551 |
Net loss |
|
| (28,582) |
|
| (12,016) |
|
| (1,196) |
|
| (41,794) |
Total assets |
|
| 1,106,518 |
|
| 952,167 |
|
| 51,648 |
|
| 2,110,333 |
Capital expenditures |
|
| 14,574 |
|
| 8,644 |
|
| 92 |
|
| 23,310 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
| $ | 832,098 |
| $ | 541,860 |
| $ | — |
| $ | 1,373,958 |
Adjusted EBITDA |
|
| 30,445 |
|
| 164,404 |
|
| (21,408) |
|
| 173,441 |
Net (loss) income |
|
| (65,970) |
|
| 83,157 |
|
| (31,256) |
|
| (14,069) |
Total assets |
|
| 1,155,082 |
|
| 862,961 |
|
| 183,863 |
|
| 2,201,906 |
Capital expenditures |
|
| 28,186 |
|
| 40,061 |
|
| 1,650 |
|
| 69,897 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
| $ | 744,968 |
| $ | 345,083 |
| $ | — |
| $ | 1,090,051 |
Adjusted EBITDA |
|
| 8,406 |
|
| 56,153 |
|
| (20,063) |
|
| 44,496 |
Net loss |
|
| (51,483) |
|
| (76,889) |
|
| (36,617) |
|
| (164,989) |
Total assets |
|
| 1,106,518 |
|
| 952,167 |
|
| 51,648 |
|
| 2,110,333 |
Capital expenditures |
|
| 33,378 |
|
| 50,561 |
|
| 1,298 |
|
| 85,237 |
Coronado Global Resources Inc. Form 10-Q September 30, 20218
|
| Curragh (1) |
| Buchanan |
| Logan |
| Greenbrier |
| Other and |
| Total |
|
|
| ($ thousands) |
| ||||||||||
Three months ended June 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
| 412,810 |
| 128,713 |
| 81,610 |
| 19,324 |
| — |
| 642,457 |
|
Adjusted EBITDA |
| 151,561 |
| 60,289 |
| 18,126 |
| 1,227 |
| (8,912 | ) | 222,291 |
|
Net income/(loss) |
| 91,024 |
| 34,600 |
| 7,968 |
| (1,959 | ) | (14,127 | ) | 117,506 |
|
Total assets |
| 1,182,652 |
| 511,095 |
| 315,252 |
| 145,846 |
| 63,638 |
| 2,218,483 |
|
Capital expenditures (2) |
| 9,341 |
| 13,476 |
| 12,671 |
| 1,279 |
| — |
| 36,767 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
| 387,379 |
| 126,292 |
| 59,230 |
| 18,294 |
| 335 |
| 591,530 |
|
Adjusted EBITDA |
| 99,979 |
| 35,257 |
| 10,710 |
| (188 | ) | (6,570 | ) | 139,188 |
|
Net income/(loss) |
| 54,217 |
| 24,755 |
| 3,989 |
| 3,845 |
| (27,484 | ) | 59,322 |
|
Total assets |
| 1,287,848 |
| 500,502 |
| 259,963 |
| 145,454 |
| 115,076 |
| 2,308,843 |
|
Capital expenditures (2) |
| 17,838 |
| 7,973 |
| 4,623 |
| 381 |
| 160 |
| 30,975 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
| 794,182 |
| 251,437 |
| 155,919 |
| 32,797 |
| — |
| 1,234,335 |
|
Adjusted EBITDA |
| 271,709 |
| 116,401 |
| 35,291 |
| (81 | ) | (17,965 | ) | 405,355 |
|
Net income/(loss) |
| 159,758 |
| 66,919 |
| 15,523 |
| (5,033 | ) | (22,841 | ) | 214,326 |
|
Total assets |
| 1,182,652 |
| 511,095 |
| 315,252 |
| 145,846 |
| 63,638 |
| 2,218,483 |
|
Capital expenditures (2) |
| 15,431 |
| 28,200 |
| 20,318 |
| 2,478 |
| 3 |
| 66,430 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
| 387,379 |
| 260,501 |
| 112,655 |
| 38,188 |
| 960 |
| 799,683 |
|
Adjusted EBITDA |
| 99,979 |
| 99,701 |
| 15,501 |
| 983 |
| (74,336 | ) | 141,828 |
|
Net income/(loss) |
| 54,217 |
| 76,843 |
| 2,748 |
| (6,176 | ) | (91,981 | ) | 35,651 |
|
Total assets |
| 1,287,848 |
| 500,502 |
| 259,963 |
| 145,454 |
| 115,076 |
| 2,308,843 |
|
Capital expenditures (2) |
| 17,838 |
| 15,628 |
| 13,191 |
| 559 |
| 430 |
| 47,646 |
|
(1) On March 29, 2018, Coronado acquired the Curragh Mining business from Wesfarmers Limited. Curragh is a separate reportable segment due to having separate management, location, assets, and operations. Curragh is located in central Queensland, Australia and the reportable segment produces a wide variety of metallurgical coal.
(2) Capital expenditures includes financing fees incurred through other financial liabilities for the purchase of certain equipment.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The reconciliationreconciliations of Adjusted EBITDA to net income attributable to the Company for the three and sixnine months ended JuneSeptember 30, 20192021 and 20182020 are as follows:
|
| Three months ended |
| Nine months ended | ||||||||
|
| September 30, |
| September 30, | ||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
|
| (in US$ thousands) |
| (in US$ thousands) | ||||||||
Net income (loss) |
| $ | 81,988 |
| $ | (41,794) |
| $ | (14,069) |
| $ | (164,989) |
Depreciation, depletion and amortization |
|
| 38,461 |
|
| 48,693 |
|
| 132,754 |
|
| 135,542 |
Interest expense (net of income) |
|
| 18,251 |
|
| 12,207 |
|
| 49,982 |
|
| 36,528 |
Other foreign exchange losses |
|
| 2,487 |
|
| 1,614 |
|
| 4,376 |
|
| 5,829 |
Loss on extinguishment of debt |
|
| 0 |
|
| — |
|
| 5,744 |
|
| — |
Income tax expense (benefit) |
|
| 9,096 |
|
| (11,169) |
|
| (1,788) |
|
| (31,525) |
Impairment of assets |
|
| — |
|
| 0 |
|
| — |
|
| 63,111 |
Restructuring costs(1) |
|
| 0 |
|
| — |
|
| 2,300 |
|
| 0 |
Losses on idled assets held for sale(2) |
|
| (113) |
|
| 0 |
|
| 2,216 |
|
| 0 |
Decrease in provision for discounting and credit losses |
|
| (2,430) |
|
| 0 |
|
| (8,074) |
|
| 0 |
Consolidated Adjusted EBITDA |
| $ | 147,740 |
| $ | 9,551 |
| $ | 173,441 |
| $ | 44,496 |
|
| Three months ended |
| Six months ended |
| ||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||
|
| (US$ thousands) |
| (US$ thousands) |
| ||||||
Net income |
| $ | 117,506 |
| 59,322 |
| $ | 214,326 |
| 35,651 |
|
Depreciation, depletion and amortization |
| 45,508 |
| 42,594 |
| 85,279 |
| 64,402 |
| ||
Interest expense (net of income) |
| 9,087 |
| 18,987 |
| 17,264 |
| 25,488 |
| ||
Other foreign exchange (gains) losses |
| 3,157 |
| 5,290 |
| (557 | ) | 6,848 |
| ||
Loss on retirement of debt |
| — |
| — |
| — |
| 3,905 |
| ||
Income tax expense |
| 47,033 |
| 12,995 |
| 89,043 |
| 5,534 |
| ||
Consolidated Adjusted EBITDA |
| $ | 222,291 |
| 139,188 |
| $ | 405,355 |
| 141,828 |
|
(1) During the nine months ended September 30, 2021, a restructuring and cost transformation initiative commenced at the Australian Operations to focus on repositioning the Company’s efforts to align its cost structures and optimize its coal production relative to the prevailing global coal market conditions. Costs associated with this initiative include non-recurring voluntary and involuntary workforce reduction, external consulting services and other related activities.
(2) These losses relate to idled non-core assets that the Company has classified as held for sale with the view that these will be sold within the next twelve months.
The reconciliations of capital expenditures per the Company’s segment information to capital expenditures disclosed on the unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 are as follows:
|
|
| Nine months ended September 30, | |||
|
|
| 2021 |
|
| 2020 |
|
|
| (in US$ thousands) | |||
Capital expenditures per Condensed Consolidated Statements of Cash Flows |
| $ | 75,897 |
| $ | 85,237 |
Payment for capital acquired in prior periods |
|
| (6,000) |
|
| 0 |
Capital expenditures per segment detail |
| $ | 69,897 |
| $ | 85,237 |
Disaggregation of Revenue
The Company disaggregates the revenue from contracts with customers by major product group for each of the Company’s reportable segments, as the companyCompany believes it best depicts the nature, amount, timing and uncertainty of revenues and cash flows. All revenue is recognized at a point in time.
|
|
| Three months ended September 30, 2021 | ||||||
|
|
| Australia |
|
| United States |
|
| Total |
|
|
| (in US$ thousands) | ||||||
Product Groups: |
|
|
|
|
|
|
|
|
|
Metallurgical coal |
| $ | 306,033 |
| $ | 228,561 |
| $ | 534,594 |
Thermal coal |
|
| 26,525 |
|
| 2,168 |
|
| 28,693 |
Total coal revenue |
|
| 332,558 |
|
| 230,729 |
|
| 563,287 |
Other(1) |
|
| 9,814 |
|
| 490 |
|
| 10,304 |
Total |
| $ | 342,372 |
| $ | 231,219 |
| $ | 573,591 |
Coronado Global Resources Inc. Form 10-Q September 30, 20219
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
| Three months ended June 30, 2019 |
| |||||||||||
|
| Curragh |
| Buchanan |
| Logan |
| Greenbrier |
| Other and |
| Total |
| |
|
| (US $ thousands) |
| |||||||||||
Product Groups |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Metallurgical coal |
| $ | 377,016 |
| 125,837 |
| 68,053 |
| 17,766 |
| — |
| 588,672 |
|
Thermal coal |
| 26,687 |
| 2,827 |
| 12,058 |
| 446 |
| — |
| 42,018 |
| |
Total coal revenue |
| 403,703 |
| 128,664 |
| 80,111 |
| 18,212 |
| — |
| 630,690 |
| |
Other(1) |
| 9,107 |
| 49 |
| 1,499 |
| 1,112 |
| — |
| 11,767 |
| |
Total |
| $ | 412,810 |
| 128,713 |
| 81,610 |
| 19,324 |
| — |
| 642,457 |
|
|
| Three months ended June 30, 2018 |
| |||||||||||
|
| Curragh |
| Buchanan |
| Logan |
| Greenbrier |
| Other and |
| Total |
| |
|
| (US$ thousands) |
| |||||||||||
Product Groups |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Metallurgical coal |
| $ | 349,486 |
| 122,771 |
| 47,443 |
| 17,427 |
| — |
| 537,127 |
|
Thermal coal |
| 25,048 |
| 3,521 |
| 11,787 |
| 27 |
| — |
| 40,383 |
| |
Total coal revenue |
| 374,534 |
| 126,292 |
| 59,230 |
| 17,454 |
| — |
| 577,510 |
| |
Other(1) |
| 12,845 |
| — |
| — |
| 840 |
| 335 |
| 14,020 |
| |
Total |
| $ | 387,379 |
| 126,292 |
| 59,230 |
| 18,294 |
| 335 |
| 591,530 |
|
|
|
| Three months ended September 30, 2020 | ||||||
|
|
| Australia |
|
| United States |
|
| Total |
|
|
| (in US$ thousands) | ||||||
Product Groups: |
|
|
|
|
|
|
|
|
|
Metallurgical coal |
| $ | 233,063 |
| $ | 103,401 |
| $ | 336,464 |
Thermal coal |
|
| 29,428 |
|
| 845 |
|
| 30,273 |
Total coal revenue |
|
| 262,491 |
|
| 104,246 |
|
| 366,737 |
Other(1) |
|
| 8,922 |
|
| 726 |
|
| 9,648 |
Total |
| $ | 271,413 |
| $ | 104,972 |
| $ | 376,385 |
|
| Six months ended June 30, 2019 |
|
|
| Nine months ended September 30, 2021 | |||||||||||||||||
|
| Curragh |
| Buchanan |
| Logan |
| Greenbrier |
| Other and |
| Total |
|
|
| Australia |
|
| United States |
|
| Total | |
|
| (US $ thousands) |
|
|
| (in US$ thousands) | |||||||||||||||||
Product Groups |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Metallurgical coal |
| $ | 727,964 |
| 245,047 |
| 131,421 |
| 31,067 |
| — |
| 1,135,499 |
|
| $ | 734,143 |
| $ | 534,017 |
| $ | 1,268,160 |
Thermal coal |
| 47,978 |
| 6,306 |
| 22,208 |
| 496 |
| — |
| 76,988 |
|
|
| 70,614 |
|
| 5,479 |
|
| 76,093 | |
Total coal revenue |
| 775,942 |
| 251,353 |
| 153,629 |
| 31,563 |
| — |
| 1,212,487 |
|
|
| 804,757 |
|
| 539,496 |
|
| 1,344,253 | |
Other(1) |
| 18,240 |
| 84 |
| 2,290 |
| 1,234 |
| — |
| 21,848 |
| ||||||||||
Other(1) |
|
| 27,341 |
|
| 2,364 |
|
| 29,705 | ||||||||||||||
Total |
| $ | 794,182 |
| 251,437 |
| 155,919 |
| 32,797 |
| — |
| 1,234,335 |
|
| $ | 832,098 |
| $ | 541,860 |
| $ | 1,373,958 |
|
| Six months ended June 30, 2018 |
|
|
| Nine months ended September 30, 2020 | |||||||||||||||||
|
| Curragh |
| Buchanan |
| Logan |
| Greenbrier |
| Other and |
| Total |
|
|
| Australia |
|
| United States |
|
| Total | |
|
| (US$ thousands) |
|
|
| (in US$ thousands) | |||||||||||||||||
Product Groups |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Metallurgical coal |
| $ | 349,486 |
| 253,335 |
| 93,201 |
| 35,982 |
| — |
| 732,004 |
|
| $ | 640,893 |
| $ | 337,599 |
| $ | 978,492 |
Thermal coal |
| 25,048 |
| 7,127 |
| 19,454 |
| 713 |
| — |
| 52,342 |
|
|
| 80,079 |
|
| 2,983 |
|
| 83,062 | |
Total coal revenue |
| 374,534 |
| 260,462 |
| 112,655 |
| 36,695 |
| — |
| 784,346 |
|
|
| 720,972 |
|
| 340,582 |
|
| 1,061,554 | |
Other(1) |
| 12,845 |
| 39 |
| — |
| 1,493 |
| 960 |
| 15,337 |
| ||||||||||
Other(1) |
|
| 23,996 |
|
| 4,501 |
|
| 28,497 | ||||||||||||||
Total |
| $ | 387,379 |
| 260,501 |
| 112,655 |
| 38,188 |
| 960 |
| 799,683 |
|
| $ | 744,968 |
| $ | 345,083 |
| $ | 1,090,051 |
(1) Other revenue for Curraghthe Australian segment includes the amortization of the Stanwell non-market coal supply contract obligation liability.
4.Expenses
Other, Net
|
| Three months ended |
| Nine months ended | ||||||||
|
| September 30, |
| September 30, | ||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
|
| (in US$ thousands) |
| (in US$ thousands) | ||||||||
Other foreign exchange losses |
| $ | (2,487) |
| $ | (1,614) |
| $ | (4,376) |
| $ | (5,829) |
Other income |
|
| 1,235 |
|
| 1,253 |
|
| 766 |
|
| 983 |
Total Other, net |
| $ | (1,252) |
| $ | (361) |
| $ | (3,610) |
| $ | (4,846) |
5. Capital Structure
On May 14, 2021, the Company successfully completed the institutional component of a fully underwritten 1-for-4.73 pro-rata accelerated non-renounceable entitlement offer, or the Entitlement Offer. On completion, a total of 253,108,820 fully paid new CDIs (representing a beneficial interest in 25,310,882 shares of common stock) were issued at a price of A$0.45 per CDI, resulting in gross proceeds of $87.7 million (A$113.9 million).
On June 1, 2021, the Company successfully completed the retail component of the Entitlement Offer. On completion, a total of 39,466,010 fully paid new CDIs (representing a beneficial interest in 3,946,601 shares of common stock) were issued on the ASX at a price of A$0.45 per CDI, resulting in gross proceeds of $13.7 million (A$17.8 million).
Coronado Global Resources Inc. Form 10-Q September 30, 202110
Pursuant to the Entitlement Offer, a total of 29,257,483 shares of common stock, with a par value of $0.01, were issued by the Company.
5.ExpensesProceeds from the Entitlement Offer, net of share issuance costs, of $97.7 million were included as part of a refinancing transaction, which involved the (i) repayment of all outstanding obligations under the Company’s Multicurrency Revolving Syndicated Facility Agreement, or SFA, and termination of such agreement; (ii) cash collateralization of credit support facilities, which were used to provide back-to-back support for bank guarantees that had been previously issued under the SFA; and (iii) payment of discounts, fees and expenses related to the refinancing transaction. See Note 11 “Interest Bearing Liabilities”.
Other, netCoronado Group LLC
|
| Three months ended |
| Six months ended |
| ||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||
|
| (US$ thousands) |
| (US$ thousands) |
| ||||||
Loss on foreign exchange swap |
| $ | — |
| — |
| $ | — |
| (15,695 | ) |
Other foreign exchange (losses) gains |
| (3,157 | ) | (5,290 | ) | 557 |
| (6,848 | ) | ||
Other (expenses) income |
| 168 |
| 2,899 |
| 485 |
| (4,303 | ) | ||
Total Other, net |
| $ | (2,989 | ) | (2,391 | ) | $ | 1,042 |
| (26,846 | ) |
6.Inventories
(US$ thousands) |
| June 30, 2019 |
| December 31, |
| ||
Raw coal |
| $ | 54,407 |
| $ | 20,106 |
|
Saleable coal |
| 23,051 |
| 26,374 |
| ||
Total coal inventories |
| 77,458 |
| 46,480 |
| ||
Supplies inventory |
| 51,966 |
| 48,623 |
| ||
Total inventories |
| $ | 129,424 |
| $ | 95,103 |
|
7.Property, Plant and Equipment
(US$ thousands) |
| June 30, 2019 |
| December 31, |
| ||
Land |
| $ | 27,035 |
| $ | 26,845 |
|
Buildings and improvements |
| 83,831 |
| 89,027 |
| ||
Plant, machinery, mining equipment and transportation vehicles |
| 794,619 |
| 765,432 |
| ||
Mineral rights and reserves |
| 464,680 |
| 464,680 |
| ||
Office and computer equipment |
| 3,752 |
| 3,700 |
| ||
Mine development |
| 487,156 |
| 479,152 |
| ||
Asset retirement obligation asset |
| 83,894 |
| 80,993 |
| ||
Construction in process |
| 81,423 |
| 43,691 |
| ||
|
| 2,026,390 |
| 1,953,520 |
| ||
Less accumulated depreciation, depletion and amortization |
| 423,303 |
| 334,962 |
| ||
Net property, plant and equipment |
| $ | 1,603,087 |
| $ | 1,618,558 |
|
8.Goodwill and Other Intangible Assets
(a)Acquired Intangible Assets
|
| June 30, 2019 |
| |||||||
(US$ thousands) |
| Weighted average |
| Gross carrying |
| Accumulated |
| Net carrying |
| |
Intangible assets: |
|
|
|
|
|
|
|
|
| |
Amortizing intangible assets: |
|
|
|
|
|
|
|
|
| |
Mining permits - Greenbrier |
| 14 |
| $ | 1,500 |
| 800 |
| 700 |
|
Mining permits - Logan |
| 15 |
| 1,642 |
| 717 |
| 925 |
| |
Mining permits - Buchanan |
| 28 |
| 4,000 |
| 404 |
| 3,596 |
| |
Total intangible assets |
|
|
| $ | 7,142 |
| 1,921 |
| 5,221 |
|
|
| December 31, 2018 |
| |||||||
(US$ thousands) |
| Weighted average |
| Gross carrying |
| Accumulated |
| Net carrying |
| |
Intangible assets: |
|
|
|
|
|
|
|
|
| |
Amortizing intangible assets: |
|
|
|
|
|
|
|
|
| |
Mining permits - Greenbrier |
| 14 |
| $ | 1,500 |
| 760 |
| 740 |
|
Mining permits - Logan |
| 15 |
| 1,642 |
| 638 |
| 1,004 |
| |
Mining permits - Buchanan |
| 28 |
| 4,000 |
| 342 |
| 3,658 |
| |
Total intangible assets |
|
|
| $ | 7,142 |
| 1,740 |
| 5,402 |
|
Amortization expense is charged usingCoronado Group LLC, the straight-line method overCompany’s controlling stockholder, exercised its right to participate in the useful livesinstitutional component of the respective intangible asset.Entitlement Offer and purchased 71,980,363 CDIs (representing a beneficial interest in 7,198,036 shares of common stock) at a price of A$0.45 per CDI, resulting in gross proceeds of $24.9 million (A$32.4 million).
As of September 30, 2021, Coronado Group LLC beneficially owns 845,061,399 CDIs (representing a beneficial interest in 84,506,140 shares of common stock) representing 50.4% of the total 1,676,453,730 CDIs (representing a beneficial interest in 167,645,373 shares of common stock) outstanding. The aggregate amountremaining 831,392,331 CDIs (representing a beneficial interest in 83,139,233 shares of amortization expensecommon stock) are owned by investors in the form of CDIs publicly traded on the ASX.
As of December 31, 2020, 1,383,878,900 CDIs (representing a beneficial interest in 138,387,890 shares of common stock) were outstanding.
6. Trade and related party receivables
The Company extends trade credit to its customers in the ordinary course of business. Trade receivables and related party receivables are recorded initially at fair value and subsequently at amortized cost, less any Expected Credit Losses, or ECL.
Xcoal
On May 27, 2021, Xcoal Energy and Resources, or Xcoal, ceased to be a related party after Xcoal’s founder, chief executive officer and chief marketing officer, Mr. Ernie Thrasher, retired as a non-executive director of the Company.
During the nine months ended September 30, 2021, Xcoal repaid its past due balance of $85.2 million in full. During the nine months ended September 30, 2021, the Company fully reversed the provision for amortizing intangible assetsdiscounting and credit losses of $9.0 million recorded at December 31, 2020 in respect of past due amounts.
“Coal revenues from related parties” of $97.3 million in the unaudited Condensed Consolidated Statements of Operations and Comprehensive Income for the period up to May 27, 2021, represent revenues from Xcoal while it was a related party. Revenues from coal sales to Xcoal after May 27, 2021 of $82.6 million and $96.9 million, respectively, for the three and nine months ended JuneSeptember 30, 20192021, are included within “Coal revenues” in the unaudited Condensed Consolidated Statements of Operations and 2018 was $0.1Comprehensive Income.
Revenues from Xcoal of $17.1 million and $0.1$106.2 million respectively. The aggregate amountare recorded as “Coal revenues from related parties” in the unaudited Condensed Consolidated Statements of amortization expense for amortizing intangible assetsOperations and Comprehensive Income for the sixthree and nine months ended JuneSeptember 30, 20192020, respectively.
From July 1, 2021, the Company has agreed credit terms with Xcoal. Any sales in excess of the credit amount will be made on prepayment, letter of credit and 2018cash on delivery basis.
At September 30, 2021, amounts outstanding from Xcoal in respect of coal sales was $0.2$46.1 million, all of which is current and $0.2not due, and is included within “Trade receivables” on the unaudited Condensed Consolidated Balance Sheet.
At December 31, 2020, amounts outstanding from Xcoal in respect of coal sales were $91.0 million, respectively.of which $85.2 million was past due and was included in “Related party trade receivables” on the audited Condensed Consolidated Balance Sheet, and $5.8 million was secured by a letter of credit. As of December 31, 2020, the carrying value of related party trade receivables from Xcoal, net of a $9.0 million provision for discounting and credit losses, was $82.0 million.
Coronado Global Resources Inc. Form 10-Q September 30, 202111
7. Provision for Credit Losses
(b)GoodwillThe following table provides the reconciliation of the allowance for credit losses that is deducted from financial assets to present the net amount expected to be collected:
(in US$ thousands) |
|
| Trade and related party trade receivables |
|
| Other Assets |
|
| Total |
As at January 1, 2021 |
| $ | 9,298 |
| $ | 0 |
| $ | 9,298 |
Change in estimates during the current period |
|
| 445 |
|
| 481 |
|
| 926 |
Unwind of provision for expected credit losses |
|
| (9,000) |
|
| 0 |
|
| (9,000) |
As of September 30, 2021 |
| $ | 743 |
| $ | 481 |
| $ | 1,224 |
In connection with the Buchanan acquisition on March 31, 2016, the Company recorded goodwill in the amount of $28.0 million. The balance of goodwill as at both June 30, 20198.Inventories
(in US$ thousands) |
| September 30, 2021 |
| December 31,2020 | ||
Raw coal |
| $ | 21,891 |
| $ | 19,557 |
Saleable coal |
|
| 40,577 |
|
| 26,581 |
Total coal inventories |
|
| 62,468 |
|
| 46,138 |
Supplies inventory |
|
| 57,681 |
|
| 63,997 |
Total inventories |
| $ | 120,149 |
| $ | 110,135 |
9.Property, Plant and December 31, 2018 was $28.0 million.Equipment
(in US$ thousands) |
| September 30, 2021 |
| December 31,2020 | ||
Land |
| $ | 27,451 |
| $ | 27,985 |
Buildings and improvements |
|
| 86,323 |
|
| 89,726 |
Plant, machinery, mining equipment and transportation vehicles |
|
| 941,861 |
|
| 939,521 |
Mineral rights and reserves |
|
| 374,310 |
|
| 374,340 |
Office and computer equipment |
|
| 8,731 |
|
| 4,316 |
Mine development |
|
| 558,121 |
|
| 577,631 |
Asset retirement obligation asset |
|
| 77,494 |
|
| 81,603 |
Construction in process |
|
| 46,570 |
|
| 38,321 |
|
|
| 2,120,861 |
|
| 2,133,443 |
Less accumulated depreciation, depletion and amortization |
|
| 710,975 |
|
| 611,935 |
Net property, plant and equipment |
| $ | 1,409,886 |
| $ | 1,521,508 |
9.10.Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following:
(in US$ thousands) |
| September 30, 2021 |
| December 31,2020 | ||
Wages and employee benefits |
| $ | 43,142 |
| $ | 32,386 |
Taxes other than income taxes |
|
| 11,219 |
|
| 7,024 |
Accrued royalties |
|
| 45,625 |
|
| 36,149 |
Accrued freight costs |
|
| 28,860 |
|
| 29,199 |
Accrued mining fees |
|
| 55,494 |
|
| 76,044 |
Acquisition related accruals |
|
| 30,986 |
|
| 33,119 |
Other liabilities |
|
| 23,018 |
|
| 20,605 |
Total accrued expenses and other current liabilities |
| $ | 238,344 |
| $ | 234,526 |
(US$ thousands) |
| June 30, 2019 |
| December 31, |
| ||
Wages and employee benefits |
| $ | 64,520 |
| $ | 50,819 |
|
Taxes other than income taxes |
| 8,221 |
| 6,512 |
| ||
Accrued royalties |
| 50,648 |
| 49,129 |
| ||
Accrued freight costs |
| 29,118 |
| 26,509 |
| ||
Accrued mining fees |
| 52,187 |
| 45,615 |
| ||
Cash flow hedge derivative liability |
| — |
| 5,311 |
| ||
Acquisition related accruals |
| 30,186 |
| 30,349 |
| ||
Other liabilities |
| 17,471 |
| 29,252 |
| ||
Total accrued expenses and other current liabilities |
| $ | 252,351 |
| $ | 243,496 |
|
Included within acquisition related accruals is an amount outstanding for stamp duty payable on the Curragh acquisition of $30.2 million.$31.0 million (A$43.0 million). This amount was outstanding as at JuneSeptember 30, 20192021 and December 31, 20182020 pending financial assessment to be made by the Office of State Revenue in Queensland, Australia.
Coronado Global Resources Inc. Form 10-Q September 30, 202112
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10.Leases
11.Interest Bearing Liabilities
The following is a summary of interest-bearing liabilities at September 30, 2021: | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |
(in US$ thousands) |
|
| September 30, 2021 |
|
| December 31, 2020 |
| Weighted Average Interest Rate at September 30, 2021 |
| Final Maturity | ||
10.75% Senior Secured Notes |
| $ | 350,000 |
| $ | 0 |
| 12.14% | (2) |
| 2026 | |
ABL Facility |
|
| 0 |
|
| 0 |
|
|
|
| 2024 | |
Multicurrency Revolving Syndicated Facility |
|
| 0 |
|
| 327,625 |
|
|
|
| 2023 | |
Discount and debt issuance costs(1) |
|
| (17,183) |
|
| 0 |
|
|
|
|
| |
Total interest bearing liabilities |
| $ | 332,817 |
| $ | 327,625 |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
(1) Debt issuance costs incurred on the establishment of the ABL Facility has been included within "Other non-current assets" on the unaudited Condensed Consolidated Balance Sheet. | ||||||||||||
(2) Represents the effective interest rate. |
|
|
|
|
|
|
|
|
|
|
|
Syndicated Facility Agreement
On January 1, 2019,May 14, 2021, the Company adopted ASC 842, Leases. Changes torepaid all obligations under the Company’s accounting policy asSFA, including the outstanding balance of $324.1 million, and terminated such agreement using a portion of the net proceeds from the Entitlement Offer along with a portion of proceeds from the offering of the Notes (as defined below). As a result of adoptionthe early termination of the SFA, the Company recorded a loss on debt extinguishment of $5.7 million in its unaudited Condensed Consolidated Statements of Operations and Comprehensive Income for the nine months ended September 30, 2021.
Senior Secured Notes
On May 12, 2021, the Company, entered into an indenture, or the Indenture among Coronado Finance Pty Ltd, an Australian proprietary company and a wholly-owned subsidiary of the Company, which is referred to as the Issuer or the Australian Borrower, the Company, the other guarantors party thereto, which are discussed below.referred to, collectively with the Company, as the Guarantors, and Wilmington Trust, National Association, as trustee, or the Trustee, and as priority lien collateral trustee, relating to the issuance by the Issuer of $350.0 million aggregate principal amount of 10.750% Senior Secured Notes due 2026, or the Notes.
The Notes were issued at a price of 98.112% of their principal amount and bear interest at a rate of 10.75% per annum. Interest on the Notes is payable semi-annually in arrears on May 15 and November 15 of each year, commencing on November 15, 2021, to record holders of the Notes on the immediately preceding May 1 and November 1, as applicable. The Notes mature on May 15, 2026 and are senior secured obligations of the Issuer.
FromThe Notes are guaranteed on a senior secured basis by the Company and its wholly-owned subsidiaries (other than the Issuer) (subject to certain exceptions and permitted liens) and secured by (i) a first-priority lien on substantially all of the Company’s assets and the assets of the other Guarantors (other than accounts receivable and other rights to payment, inventory, intercompany indebtedness, certain general intangibles and commercial tort claims, commodities accounts, deposit accounts, securities accounts and other related assets and proceeds and products of each of the foregoing, or, collectively, the ABL Collateral), or the Notes Collateral, and (ii) a second-priority lien on the ABL Collateral, which is junior to a first-priority lien, for the benefit of the lenders under the Company’s senior secured asset-based revolving credit agreement in an initial aggregate principal amount of $100.0 million, or the ABL Facility.
The terms of the Notes are governed by the Indenture. The Indenture contains customary covenants for high yield bonds, including, but not limited to, limitations on investments, liens, indebtedness, asset sales, transactions with affiliates and restricted payments, including payment of dividends on capital stock.
Upon the occurrence of a “Change of Control,” as defined in the Indenture, the Issuer is required to offer to repurchase the Notes at 101% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the repurchase date. The Issuer also has the right to redeem the Notes at 101% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the repurchase date, following the occurrence of a Change of Control, provided that the Issuer redeems at least 90% of the Notes outstanding prior to such Change of Control. Upon the occurrence of certain changes in tax law (as described in the Indenture), the Issuer may redeem any of the Notes at a redemption price equal to 100% of the principal amount of the Notes to be redeemed plus accrued and unpaid interest, if any, to, but excluding, the redemption date.
Coronado Global Resources Inc. Form 10-Q September 30, 202113
The Issuer may redeem any of the Notes beginning on May 15, 2023. The initial redemption price of the Notes is 108.063% of their principal amount, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. The redemption price will decline each year after May 15, 2023, and will be 100% of the principal amount of the Notes, plus accrued and unpaid interest, beginning on May 15, 2025. The Issuer may also redeem some or all of the Notes at any time and from time to time prior to May 15, 2023 at a price equal to 100% of the principal amount thereof plus a “make-whole” premium, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.
During any twelve-month period ending prior to May 15, 2023, the Issuer may redeem the Notes (including additional Notes, if any) in an aggregate principal amount not to exceed 10% of the aggregate principal amount of the Notes (including additional Notes, if any) originally issued at a redemption price (expressed as a percentage of principal amount) of 103%, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.
At any time and from time to time on or prior to May 15, 2023, the Issuer may redeem in the aggregate up to 40% of the original aggregate principal amount of the Notes (calculated after giving effect to any issuance of additional Notes) with the net cash proceeds of certain equity offerings, at a redemption price of 110.75%, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, so long as at least 60% of the original aggregate principal amount of the Notes (calculated after giving effect to any issuance of additional Notes) issued under the Indenture remains outstanding after each such redemption and each such redemption occurs within 120 days after the date of the closing of such equity offering.
The Indenture contains customary events of default, including failure to make required payments, failure to comply with certain agreements or covenants, failure to pay or acceleration of certain other indebtedness, certain events of bankruptcy and insolvency, and failure to pay certain judgments. An event of default under the Indenture will allow either the Trustee or the holders of at least 25% in aggregate principal amount of the then-outstanding Notes to accelerate, or in certain cases, will automatically cause the acceleration of, the amounts due under the Notes.
Proceeds from the issuance of the Notes, net of discounting and issuance costs, of $331.8 million were included as part of a refinancing transaction which involved the (i) repayment of all outstanding obligations under the SFA and the termination of such agreement; (ii) cash collateralization of credit support facilities, which were used to provide back-to-back support for bank guarantees that had been previously issued under the SFA; and (iii) payment of discounts, fees and expenses related to the refinancing transaction.
In connection with the issuance of the Notes, the Company entersincurred debt issuance costs of $11.6 million and discount on issuance of $6.6 million, recorded as a direct deduction from the face amount of the Notes.
The Energy & Mineral Group
On May 12, 2021, affiliates of The Energy & Minerals Group, or EMG, which is the Company’s controlling stockholder through its ownership of Coronado Group LLC, participated in the Notes Offering and purchased $65.0 million aggregate principal amount of Notes at the closing of the Notes Offering. The principal amount of $65.0 million for Notes held by EMG remain unchanged as at September 30, 2021. At September 30, 2021, interest payable to affiliates of EMG on the Notes was $2.6 million and was recorded within “Accrued expenses and other current liabilities” in the unaudited Condensed Consolidated Balance Sheet. Interest expense to affiliates of EMG were $1.9 million and $2.8 million for the three and nine months ended September 30, 2021, respectively, and recorded in “Interest expense, net” in the unaudited Condensed Consolidated Statements of Operations and Comprehensive Income.
ABL Facility
On May 12, 2021, the Company, Coronado Coal Corporation, a Delaware corporation and wholly-owned subsidiary of the Company, or the U.S. Borrower, the Australian Borrower and the Guarantors entered into mining services contractsthe ABL Facility agreement with Citibank, N.A., as administrative agent and a lender, and various other financial institutions, with an aggregate multi-currency lender commitment of up to $100.0 million, including a $30.0 million sublimit for the issuance of letters of credit and $5.0 million for swingline loans, at any time outstanding, subject to borrowing base availability. The ABL Facility will mature on May 12, 2024 and replaces the SFA.
Revolving loan (and letter of credit) availability under the ABL Facility is subject to a borrowing base, which at any time is equal to the sum of certain eligible accounts receivable, certain eligible inventory and certain eligible supplies inventories and, in each case, subject to specified advance rates. The borrowing base is subject to certain reserves, which may include embedded leases of mining equipment and other contractual agreementsbe established by the agent in its reasonable credit discretion, that could reasonably be expected to lease mining equipment and facilities. Based uponhave an adverse effect on the Company’s assessmentvalue of the terms ofcollateral included in the borrowing base.
Borrowings under the ABL Facility bear interest at a specific lease agreement,rate equal to a BBSY rate plus an applicable margin. In addition to paying interest on the outstanding borrowings under the ABL Facility, the Company classifiesis also required to pay a lease as either financefee in respect of unutilized commitments, on amounts available to be drawn under outstanding letters of credit and certain administrative fees.
Coronado Global Resources Inc. Form 10-Q September 30, 202114
The obligations of the borrowers under the ABL Facility are guaranteed by (a) a first priority-lien in the ABL Collateral, (b) a second priority-lien in the Notes Collateral and (c) solely in the case of the obligations of the Australian Borrower, a featherweight floating security interest over certain accounts released from the security by the Australian Borrower in favor of Stanwell Corporation Limited, or operating.Stanwell.
(a)Finance Leases
ROU assetsThe ABL Facility contains customary covenants for asset-based credit agreement of this type, including, among others: (i) the requirement to deliver financial statements, other reports and notices; (ii) covenants related to finance leasesthe payment of dividends on, or purchase or redemption of, capital stock; (iii) covenants related to the incurrence or prepayment of certain debt; (iv) covenants related to the incurrence of liens or encumbrances; (v) compliance with laws; (vi) restrictions on certain mergers, consolidations and asset dispositions; and (vii) restrictions on certain transactions with affiliates. Subject to customary grace periods and notice requirements, the ABL Facility also contains customary events of default. Additionally, the ABL Facility contains a springing fixed charge coverage ratio of not less than 1.00 to 1.00, which ratio is tested if availability under the ABL Facility is less than a certain amount. As of September 30, 2021, the Company is not subject to this covenant. As at September 30, 2021, the Company met its undertakings under the ABL Facility.
To establish the ABL Facility, the Company incurred debt issuance costs of $5.4 million. The Company has elected an accounting policy to present debt issuance costs incurred before the debt liability is recognized (e.g., before the debt proceeds are presentedreceived) as an asset which will be amortized ratably over the term of the line-of-credit. The costs will not be subsequently reclassified as a direct deduction of the liability. At September 30, 2021, issuance costs incurred to establish the ABL Facility have been classified in “Other non-current assets” in the unaudited Condensed Consolidated Balance Sheet.
As at September 30, 2021, 0 amounts were drawn and 0 letters of credit were outstanding under the ABL Facility.
12. Other Financial Liabilities
On January 6, 2021, the Company entered into an agreement with a third-party financier to sell and leaseback items of property, “Property, plant and equipment net”owned by Curragh, a wholly-owned subsidiary of the Company. The transaction did not satisfy the sale criteria under ASC 606 – Revenues from Contracts with Customers. As a result, the transaction was deemed a financing arrangement and the Company has continued to recognize the underlying property, plant and equipment on its unaudited Condensed Consolidated Balance Sheet. The proceeds received from the transaction of $23.5 million (A$30.2 million) were recognized as “Other financial liabilities” on the unaudited Condensed Consolidated Balance Sheet. Lease liabilities relatedThe term of the financing arrangement ranges up to finance leases are presented in “Lease Liabilities” (current) and “Lease Liabilities” (non-current) on the unaudited Condensed Consolidated Balance Sheet.
Finance lease ROU assets and lease liabilities are recognized at the commencement date based on the presentfive years with an implied interest rate of up to 7.8% per annum. The carrying value of the future lease payments over the lease term. The discount rate used to determine the present valuethis financial liability, net of the lease payments is the rate implicit in the lease unless that rate cannot be readily determined, in which case, the Company utilizes its incremental borrowing rate in determining the present value of the future lease payments. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.
(b)Operating Leases
ROU assets related to operating leases are presentedissuance costs, was $18.6 million as “Right of use asset — operating leases, net”, on the unaudited Condensed Consolidated Balance Sheet. Lease liabilities related to operating leases that are subject to the ASC 842 measurement requirements such as operating leases with lease terms greater than twelve months are presented in “Lease Liabilities” (current) and “Lease Liabilities” (non-current) on the unaudited Condensed Consolidated Balance Sheet.
Operating lease ROU assets and lease liabilities are recognized at the commencement date based on the present value of the future lease payments over the lease term. The discount rate used to determine the present value of the lease payments is the rate implicit in the lease unless that rate cannot be readily determined, in which case, the Company utilizes its incremental borrowing rate in determining the present value of the future lease payments. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Operating lease ROU assets may also include any cumulative prepaid or accrued rent when the lease payments are uneven throughout the lease term. The ROU assets and lease liabilities may also include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The ROU asset includes any lease payments made and lease incentives received prior to the commencement date. The Company has lease arrangements with lease and non-lease components which are accounted for separately. Non-lease components of the lease payments are expensed as incurred and are not included in determining the present value. As at JuneSeptember 30, 2019 the unaudited Condensed Consolidated Balance Sheet included $41.52021, $3.9 million of operating lease liabilities relating to equipment embedded within mining service contracts.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Information related to Company’s right-of use assets and related lease liabilities are as follows:
(US$ thousands) |
| Three month ended |
| Six months ended |
| |
Operating lease costs |
| $ | 6,378 |
| 12,861 |
|
Cash paid for operating lease liabilities |
| 4,049 |
| 11,073 |
| |
|
|
|
|
|
| |
Finance lease costs: |
|
|
|
|
| |
Amortization of right of use assets |
| 628 |
| 1,221 |
| |
Interest on lease liabilities |
| 52 |
| 108 |
| |
Total finance lease costs |
| $ | 680 |
| 1,329 |
|
(US$ thousands) |
| June 30, |
| December 31, 2018 |
| |
Operating leases: |
|
|
|
|
| |
Operating lease right-of-use assets |
| $ | 64,343 |
| — |
|
|
|
|
|
|
| |
Finance leases: |
|
|
|
|
| |
Property and equipment |
| 7,881 |
| 7,074 |
| |
Accumulated depreciation |
| (4,135 | ) | (2,914 | ) | |
Property and equipment, net |
| 3,746 |
| 4,160 |
| |
|
|
|
|
|
| |
Current operating lease obligations |
| 26,863 |
| — |
| |
Operating lease liabilities, less current portion |
| 51,064 |
| — |
| |
Total operating lease liabilities |
| 77,927 |
| — |
| |
|
|
|
|
|
| |
Current finance lease obligations |
| 1,265 |
| 1,308 |
| |
Finance lease liabilities, less current portion |
| 1,838 |
| 2,481 |
| |
Total Finance lease liabilities |
| 3,103 |
| 3,789 |
| |
|
|
|
|
|
| |
Total Lease liability |
| $ | 81,030 |
| 3,789 |
|
| |||
| |||
|
| ||
|
| ||
| |||
|
|
| |
|
|
|
The Company’s operating leases have remaining lease terms of 1 year to 5 years, some of which include options to extend the terms deemed reasonable to exercise. Maturities of lease liabilities are as follows:
(US$ thousands) |
| Operating lease |
| Finance lease |
| |
Year ending December 31, |
|
|
|
|
| |
2019 |
| $ | 16,013 |
| 712 |
|
2020 |
| 30,436 |
| 2,568 |
| |
2021 |
| 22,362 |
| — |
| |
2022 |
| 8,434 |
| — |
| |
2023 |
| 8,427 |
| — |
| |
Thereafter |
| 2,103 |
| — |
| |
Total lease payments |
| 87,775 |
| 3,280 |
| |
Less imputed interest |
| (9,848 | ) | (177 | ) | |
Total lease liability |
| $ | 77,927 |
| 3,103 |
|
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11.Income Taxes
The Company is a corporation for U.S. federal and state income tax purposes. The Company’s accounting predecessor, Coronado Group LLC, was and is treatedclassified as a flow-through entity for U.S. federal income tax purposes and as such, has generally not been subject to U.S. federal income tax at the entity level. Accordingly, unless otherwise specified, the historical results of operations and other financial information set forth in the Company’s registration statement on Form 10, as amended, filed with the SEC and ASX on June 28, 2019, for periods prior to the incorporation of the Company and the Reorganization Transaction do not include any provision for U.S. income taxes.current liability.
13.Income Taxes
For the three and sixnine months ended JuneSeptember 30, 20192021 and 2018,2020, the Company estimated its annual effective tax rate and applied this effective tax rate to its year-to-date pretax income at the end of the interim reporting period. The tax effecteffects of unusual or infrequently occurring items, including effects of changes in tax laws or rates and changes in judgment about the realizability of deferred tax assets, are reported in the interim period in which they occur. The Company’s 20192021 estimated annual effective tax rate, including discrete items, is 29.4%11.28%. The Company had an income tax expensebenefit of $47.0$1.8 million and $89.0based on a loss before tax of $15.9 million for the three and sixnine months ended JuneSeptember 30, 2019 respectively.2021.
Income tax expensebenefit of $13.0$31.5 million for the threenine months ended JuneSeptember 30, 2018 and $5.5 million for the six months ended June 30, 2018 related solely to the Company’s Australian Operations and2020 was calculated based on an estimated annual effective tax rate of 16.0% for the period, before any discrete items,period.
The Company assessed the need for a valuation allowance by evaluating future taxable income, available for tax strategies and the reversal of 13%.temporary tax differences.
As of September 30, 2021, the Australian Operations were in a cumulative loss position and held a valuation allowance of $19.8 million against the full amount of their deferred tax assets. A cumulative loss position constitutes significant negative evidence regarding future taxable income, and is defined as a cumulative pre-tax loss for the current and two preceding years. The Company’s deferred tax liabilities, related to its U.S. entitiesOperations, decreased during the period due to the impact of the valuation allowance recorded in its Australian Operations’ deferred tax assets and the overall tax loss position during the nine months ended September 30, 2021.
The Company utilizes the “more likely than not” standard in recognizing a tax benefit in its financial statements. For the nine months ended September 30, 2021 and the year ended December 31, 2020, the Company had no0 unrecognized tax benefits. If accrual for interest or penalties is required, it is the Company’s policy to include these as a component of income tax expense for the three and six months ended Juneexpense.
Coronado Global Resources Inc. Form 10-Q September 30, 2018 because prior to September 19, 2018 they were treated as partnerships for U.S. income tax purposes.202115
12.Interest Bearing Liabilities
The Company has a Multicurrency Revolving Syndicated Facility Agreement, or SFA, dated September 15, 2018, comprising of Facility A ($350 million loan facility) and Facility B (A$370 million bank guarantee facility). The SFA provides that the Company may borrow funds from Facility A for a period of one, two, three or six months, each referred to as a Term. The interest rate is set at the commencement of each Term. At the end of each Term, the Company may elect to repay the loan or extend any loan amount outstanding for a further period of one, two, three or six months. The Term of the loan cannot extend beyond the termination date of the SFA, being February 15, 2022.
During the period January 1, 2019 to June 30, 2019 the Company borrowed $104.0 million under the SFA to fund the dividend payment made on March 29, 2019 of $299.7 million, and for other working capital purposes. The funds borrowed were fully repaid by June 30, 2019. There were no interest-bearing liabilities outstanding under the SFA at June 30, 2019 and at December 31, 2018.
13.Contract Obligations
The following is a summary of the contract obligations as of June 30, 2019:
(US$ thousands) |
| Short-term |
| Long-term |
| Total |
| |
Coal leases contract liability |
| $ | 843 |
| 21,774 |
| 22,617 |
|
Stanwell below market coal supply agreement |
| 34,223 |
| 202,659 |
| 236,882 |
| |
|
| $ | 35,066 |
| 224,433 |
| 259,499 |
|
The following is a summary of the contract obligations as of December 31, 2018:
(US$ thousands) |
| Short-term |
| Long-term |
| Total |
| |
Terminal services contract liability |
| $ | 2,717 |
| 11,549 |
| 14,266 |
|
Coal leases contract liability |
| 844 |
| 22,354 |
| 23,198 |
| |
Stanwell below market coal supply agreement |
| 35,555 |
| 219,675 |
| 255,230 |
| |
|
| $ | 39,116 |
| 253,578 |
| 292,694 |
|
On adoption of ASC 842 — Leases the Terminal services contract liability was eliminated against the Terminal services Right of Use Asset on the unaudited Condensed Consolidated Balance Sheet.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14.Deferred Consideration Liability
On August 14, 2018The Company is subject to taxation in the Company completedU.S. and its various states, as well as Australia and its various localities. In the purchaseU.S. and Australia, the first tax return was lodged for the year ended December 31, 2018. In the U.S., companies are subject to open tax audits for a period of seven years at the Stanwell Reserved Area, orfederal level and five years at the SRA, adjacentstate level. In Australia, companies are subject to the current Curragh mining tenements. This area was acquired onopen tax audits for a deferred consideration basis and on acquisition the Company recognized a “Right-to-mine-asset” and a corresponding deferred consideration liabilityperiod of $155.2 million, calculated using a pre-tax discount rate of 13% representing fair value of the arrangements andfour years from the date of acquisition.assessment.
On March 27, 2020, the United States Congress enacted the Coronavirus Aid, Relief and Economic Security Act, or CARES Act, to provide certain relief as a result of the COVID-19 outbreak. The deferred consideration liability will reflect passage of time changes by way of an annual accretion at the pre-tax discount rate of 13% while the liability will decrease as domestic coalCompany is supplied to Stanwell from the SRA. The accretion of deferred consideration is recognized in “Interest expense, net”currently evaluating how provisions in the unaudited Condensed Consolidated StatementsCARES Act will impact its consolidated financial statements, but it is not expected to have a material impact.
On April 9, 2021, West Virginia Governor Jim Justice signed into law House Bill 2026, adopting significant changes to the state’s income tax code, including market-based source, single-sales factor apportionment and limitations on temporary or mobile worker withholding. The new law resulted in a tax impact of Operations and Comprehensive Income.approximately $0.9 million.
(US$ thousands) |
| June 30, 2019 |
| December 31, |
| |
Stanwell Reserved Area deferred consideration |
| $ | 164,148 |
| 155,332 |
|
|
| $ | 164,148 |
| 155,332 |
|
15.14.Earnings per Share
Basic earnings per share of common stock is computed by dividing net income attributable to the Company for the period, by the weighted-average number of shares of common stock outstanding during the same period. Diluted earnings per share of common stock is computed by dividing net income attributable to the Company by the weighted-average number of shares of common stock outstanding adjusted to give effect to potentially dilutive securities. There were no traded shares
Basic and diluted earnings per share was calculated as follows (in thousands, except per share data): | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three months ended September 30, |
| Nine months ended September 30, | ||||||||
(in US$ thousands, except per share data) |
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
| $ | 81,988 |
| $ | (41,794) |
| $ | (14,069) |
| $ | (164,989) |
Less: Net loss attributable to Non-controlling interest |
|
| 0 |
|
| (2) |
|
| (2) |
|
| (6) |
Net income (loss) attributable to Company stockholders |
| $ | 81,988 |
| $ | (41,792) |
| $ | (14,067) |
| $ | (164,983) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares of common stock outstanding |
|
| 167,645 |
|
| 112,582 |
|
| 153,078 |
|
| 102,001 |
Effects of dilutive shares |
|
| 171 |
|
| - |
|
| - |
|
| - |
Weighted average diluted shares of common stock outstanding |
|
| 167,816 |
|
| 112,582 |
|
| 153,078 |
|
| 102,001 |
Earnings (Loss) Per Share (US$): |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
| 0.49 |
|
| (0.37) |
|
| (0.09) |
|
| (1.62) |
Dilutive |
|
| 0.49 |
|
| (0.37) |
|
| (0.09) |
|
| (1.62) |
Coronado Global Resources Inc. Form 10-Q September 30, 202116
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Basic and diluted earnings per share was calculated as follows (in thousands, except per share data):
(US$ thousands, except per share data) |
| Three months |
| Six months |
| ||
Numerator: |
|
|
|
|
| ||
Net Income |
| $ | 117,506 |
| $ | 214,326 |
|
Less: Net income attributable to Non-controlling interest |
| (4 | ) | (4 | ) | ||
Net Income attributable to Company stockholders |
| $ | 117,510 |
| $ | 214,330 |
|
Denominator: |
|
|
|
|
| ||
Weighted-average shares of common stock outstanding |
| 96,652 |
| 96,652 |
| ||
Effects of dilutive shares |
| 3 |
| 4 |
| ||
Weighted average diluted shares of common stock outstanding |
| 96,655 |
| 96,656 |
| ||
Earnings Per Share (US$): |
|
|
|
|
| ||
Basic |
| $ | 1.22 |
| $ | 2.22 |
|
Dilutive |
| $ | 1.22 |
| $ | 2.22 |
|
16.15.Derivatives and Fair Value Measurement
(a)Derivatives
(a)Derivatives
The Company may use derivative financial instruments to manage its riskfinancial risks in the normal course of operations, including foreign currency risks, commodity price risk related to forecast purchase of raw materials (such as gas or diesel) and interest rate risk. Derivatives are exclusively used for cashflow hedges purposes and hedging for speculative purposes isare strictly prohibited under the Treasury Risk Management Policy approved by ourthe Board of Directors.
The financing counterparties to the derivative contracts potentially expose the Company to credit-related risk. Credit risk is the risk that a third party might fail to fulfill its performance obligations under the terms of the financial instrument. The Company mitigates such credit risk by entering into derivative contracts with high credit quality counterparties, limiting the amount of exposure to each counterparty and frequently monitoring their financial condition.
Forward fuel contracts
In 2018,2020, the Company entered into forward derivative contracts with an aggregate notional amount of $44.6 million to hedge its exposure to diesel fuel prices for dieselthat was expected to be used at its Australian Operations during 2021. In connection with the repayment and termination of the SFA, the Company closed out all outstanding forward fuel that is used in the operations at Curragh. The aggregated notional amount of these derivative contracts at June 30, 2019 was $24.0and received proceeds, representing hedge gain on settlement, of $5.8 million. DuringThis hedge gain on settlement has been deferred in “Accumulated other comprehensive loss” on the three months ended June 30, 2019 the Company entered into additional derivative contracts, with a notional amount of $59.1 million, to hedge its exposure to diesel fuel prices in relation to Curragh consumption of diesel fuel in 2020. The aggregate notional amount for all outstanding derivative contracts was $83.1 million at June 30, 2019. The forward diesel fuel contracts were designated as cash flow hedges.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The fair value of derivatives reflected in the accompanying unaudited Condensed Consolidated Balance Sheet are set forthuntil the hedge transaction impacts income, at which point the related hedge gain would be reclassified to the “Cost of coal revenues” in the table below:
|
|
|
| June 30, 2019 |
| December 31, 2018 |
| ||||
(US$ thousands) |
| Classification |
| Derivative |
| Derivative |
| Derivative |
| Derivative |
|
|
| Other current liabilities |
| — |
| — |
| — |
| 5,402 |
|
Forward fuel contracts |
| Other current asset |
| 2,317 |
| — |
| — |
| — |
|
|
| Other non-current assets |
| 1,308 |
| — |
| — |
| — |
|
|
|
|
| 3,625 |
| — |
| — |
| 5,402 |
|
The forward fuel contracts were designated as cash flow hedges. The following table presents our details of these outstanding hedge contracts:
|
| June 30, 2019 |
| December 31, 2018 |
| ||||||||
(in thousands) |
| Notional |
| Unit of |
| Varying |
| Notional |
| Unit of |
| Varying |
|
Designated forward fuel contracts |
| 176,342 |
| Liters |
| July 2019 — December 2020 |
| 93,420 |
| Liters |
| January 2019 — December 2019 |
|
Other derivatives
During the six months ended June 30, 2018 the Company entered into a foreign exchange swap contract to hedge against the exposure fluctuations in the Australian Dollar against the U.S. Dollar on the purchase price of Curragh between the Agreement date and the completion date. The Company elected not to formally designate the swaps as cash flow hedges. As such, the Company accounted for the foreign exchange swaps as an economic hedge and recorded at fair value at the end of each reporting period. Pursuant with ASC 815, the foreign exchange swaps were initially recorded at fair value and all subsequent changes were recorded to “Other, net” (see Note 5 — “Other, net”) within the unaudited Condensed Consolidated Statements of Operations. AsOperations and Comprehensive Income.
NaN forward fuel derivative contracts were outstanding at September 30, 2021.
Hedge gains, net of Junetax, recognized in “Accumulated other comprehensive loss” of $2.0million as at September 30, 2019,2021 are expected to be recognized into “Cost of coal revenues” in the Company did not have any foreign exchange swaps outstanding.unaudited Condensed Consolidated Statements of Operations and Comprehensive Income within the next three months when the hedged transaction impacts income. Refer to Note 16 “Accumulated Other Comprehensive Losses” for further disclosure.
(b)Fair Value of Financial Instruments
The fair value of a financial instrument is the amount that will be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair values of financial instruments involve uncertainty and cannot be determined with precision.
The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:
Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.
Level 2 Inputs: Other than quoted prices that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.
Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.
Coronado Global Resources Inc. Form 10-Q September 30, 202117
Financial Instruments Measured on a Recurring Basis
As of JuneSeptember 30, 2019, the Company has the following liabilities that are2021, there were 0 financial instruments required to be measured at fair value on a recurring basis:basis.
· Forward commodity contracts: valued based on a valuation that is corroborated by the use of market-based pricing (Level 2)
· Contingent royalty: fair value is determined using the Black-Scholes option pricing formula (Level 3)
· VSM: fair value is determined using the projected cash flow analysis (Level 3)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following tables set forth the hierarchy of the Company’s net financial liabilities positions for which fair value is measured on a recurring basis as of June 30, 2019:
(US$ thousands) |
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
| |
Forward commodity contracts |
| $ | — |
| 3,625 |
| — |
| 3,625 |
|
Contingent royalty |
| — |
| — |
| 10,073 |
| 10,073 |
| |
VSM |
| — |
| — |
| 351 |
| 351 |
| |
|
| $ | — |
| 3,625 |
| 10,424 |
| 14,049 |
|
The Company’s net financial liability positions for which fair value is measured on a recurring basis as of December 31, 2018 was as follows:
(US$ thousands) |
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
| |
Forward commodity contracts |
| $ | — |
| 5,402 |
| — |
| 5,402 |
|
Contingent royalty |
| — |
| — |
| 17,216 |
| 17,216 |
| |
VSM |
| — |
| — |
| 12,987 |
| 12,987 |
| |
|
| $ | — |
| 5,402 |
| 30,203 |
| 35,605 |
|
Contingent Royalty Consideration
Key assumptions in the valuation include the gross sales price forecast, export volume forecast, volatility, the risk-free rate, and credit-spread of the Company.
|
| Quantitative Information about Level 3 Fair Value Measurements |
| |||||||
(US$ thousands) |
| Fair value at |
| Valuation |
| Unobservable input |
| Range (Weighted |
| |
Contingent Royalty Liability(1) |
| $ | 10,073 |
| Black-Scholes Options model |
| Gross sales price forecast per ton |
| $104.0 to $111.9 ($109.8) |
|
|
|
|
|
|
| Export volume forecast (000’s) |
| 5,221 tons over 21 months |
| |
|
|
|
|
|
| Volatility |
| 15.6% |
| |
|
|
|
|
|
| Risk-free rate |
| 2.11% to 2.37% (2.29)% |
| |
|
|
|
|
|
| Company credit spread |
| 0.072 |
| |
(1) $6.9 million of this amount is classified as a current liability with the remaining $3.1 million classified as a non-current liability.
Value Share Mechanism
Key assumptions in the valuation sales price forecast, expected volume forecast, tax rate and Foreign Exchange, or FX, rate.
|
| Quantitative Information about Level 3 Fair Value Measurements |
| |||||||
(US$ thousands) |
| Fair value at |
| Valuation |
| Unobservable input |
| Range (Weighted |
| |
Value Share Mechanism (VSM) |
| $ | 351 |
| Projected cash flows |
| Gross sales price forecast per ton |
| $131.3 to $146.8 $(137.8) |
|
|
|
|
|
|
| Tax rate |
| 30.00% |
| |
|
|
|
|
|
| FX rate |
| 0.7020 |
| |
Given the remaining period of the VSM obligation is short-term, the valuation technique has been changed from Monte Carlo simulation to a projected cash flow analysis.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following is a summary of all the activity related to the contingent royalty liability and value share mechanism:
|
| Six months ended June 30, 2019 activity |
| |||||||||
(US$ thousands) |
| Account |
| Contingent |
| VSM |
| Incurred |
| Total |
| |
Beginning balance at January 1, 2019: |
|
|
| $ | 17,216 |
| 12,987 |
| 8,295 |
| 38,498 |
|
Statement of Operation activity: |
|
|
|
|
|
|
|
|
|
|
| |
Contingent liability/VSM expense incurred |
| Other royalties |
|
|
|
|
| 15,105 |
| 15,105 |
| |
Decrease in VSM Liability value |
| Other royalties |
|
|
| (12,636 | ) |
|
| (12,636 | ) | |
Decrease in Contingent Royalty Liability value |
| Other royalties |
| (7,143 | ) |
|
|
|
| (7,143 | ) | |
Total Statement of Operations activity: |
|
|
| $ | (7,143 | ) | (12,636 | ) | 15,105 |
| (4,674 | ) |
Cash paid to CONSOL/Wesfarmers |
|
|
|
|
|
|
| (18,384 | ) | (18,384 | ) | |
Balance sheet: |
|
|
|
|
|
|
|
|
|
|
| |
Royalties payable to CONSOL/Wesfarmers |
| Accrued expenses and other liabilities |
|
|
|
|
| 5,016 |
| 5,016 |
| |
VSM Liability |
| Contingent royalty consideration—current |
|
|
| 351 |
|
|
| 351 |
| |
Contingent Royalty Liability |
| Contingent royalty consideration |
| 10,073 |
|
|
|
|
| 10,073 |
| |
Total liabilities |
|
|
| $ | 10,073 |
| 351 |
| 5,016 |
| 15,440 |
|
There are no other fair value measurements of assets and liabilities that are measured at fair value on a nonrecurring basis as of June 30, 2019 and December 31, 2018.
Other Financial Instruments
The following methods and assumptions are used to estimate the fair value of other financial instruments as of JuneSeptember 30, 20192021 and December 31, 2018:2020:
·Cash and restricted cash, accounts receivable, accounts payable, accrued expenses, lease liabilities and other current financial liabilities: The carrying amounts reported in the unaudited Condensed Consolidated Balance Sheets approximate fair value due to the short maturity of these instruments.
· Deposits and reclamation bonds,Restricted deposits, lease liabilities, interest bearing liabilities and other financial liabilities: The fair values approximate the carrying values reported in the unaudited Condensed Consolidated Balance Sheets.
Interest bearing liabilities: The Company’s outstanding interest-bearing liabilities are carried at amortized cost. As of September 30, 2021, there were 0 borrowings outstanding under the ABL Facility. The estimated fair value of the Notes is approximately $381.5 million based upon observable market data (Level 2).
17.Commitments
16.Accumulated Other Comprehensive Losses
Accumulated other comprehensive losses consisted of the following at September 30, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net unrealized gain (loss) |
|
|
|
(in US$ thousands) |
|
| Foreign currency translation adjustments |
|
| Cash flow fuel hedges |
|
| Total |
Balance at December 31, 2020 |
| $ | (26,777) |
| $ | (2,029) |
| $ | (28,806) |
Net current-period other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
Gain in other comprehensive income (loss) before reclassifications |
|
| 10,502 |
|
| 11,310 |
|
| 21,812 |
Loss on long-term intra-entity foreign currency transactions |
|
| (27,298) |
|
| 0 |
|
| (27,298) |
Gains reclassified from accumulated other comprehensive income (loss) |
|
| 0 |
|
| (5,130) |
|
| (5,130) |
Tax effects |
|
| 0 |
|
| (2,135) |
|
| (2,135) |
Total net current-period other comprehensive gain (loss) |
|
| (16,796) |
|
| 4,045 |
|
| (12,751) |
Balance at September 30, 2021 |
| $ | (43,573) |
| $ | 2,016 |
| $ | (41,557) |
Coronado Global Resources Inc. Form 10-Q September 30, 202118
17.Commitments
(a)Mineral Leases
The Company leases mineral interests and surface rights from land owners under various terms and royalty rates. The future minimum royalties under these leases are as follows:
(in US$ thousands) |
|
|
|
| Amount |
Year ending December 31, |
|
|
|
|
|
2021 |
|
|
| $ | 2,159 |
2022 |
|
|
|
| 5,663 |
2023 |
|
|
|
| 4,704 |
2024 |
|
|
|
| 5,464 |
2025 |
|
|
|
| 4,452 |
Thereafter |
|
|
|
| 23,295 |
Total |
|
|
| $ | 45,737 |
|
|
|
|
|
|
Mineral leases are not in scope of ASC 842 and continue to be accounted for under the guidance in ASC 932, Extractive Activities – Mining. | |||||
|
|
|
|
|
|
(US$ thousands) |
| Amount |
|
Year ending December 31, |
|
|
|
2019 |
| 2,624 |
|
2020 |
| 5,313 |
|
2021 |
| 5,175 |
|
2022 |
| 5,010 |
|
2023 |
| 4,935 |
|
Thereafter |
| 25,884 |
|
Total |
| 48,941 |
|
Mineral leases are not in scope of ASC 842 and continue to be accounted for under the guidance in ASC 932, Extractive Activities — Mining.
(b)Other commitments
As of JuneSeptember 30, 2019,2021, purchase commitments for capital expenditures were $23.8$15.0 million, all of which is obligated within the next 12twelve months.
The Company has entered into fixed price contracts to purchase fuel for the U.S. Operations. As of June 30, 2019, the commitment for fuel purchases were $5.6 million, all of which is obligated within the six months to December 31, 2019.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In Australia, the Company has generally secured the ability to transport coal through rail contracts and coal export terminal contracts that are primarily funded through take-or-pay arrangements with terms ranging up to 11 years. In the U.S., the Company typically negotiates its rail and coal terminal access on an annual basis. As of JuneSeptember 30, 2019,2021, these Australian and U.S. commitments under take-or-pay arrangements totaled $1.04$1.3 billion, of which approximately $90.3$98.6 million is obligated within the next year.
18.Contingencies
18.Related-Party Transactions
X-Coal
During the three and six months ended June 30, 2019 the Company sold coal to Xcoal Energy and Resources, or Xcoal, an entity associated with Non-Executive director, Mr. Ernie Thrasher. Revenues from Xcoal of $135.3 million and $98.5 million, respectively, are recorded as coal revenues on the unaudited Condensed Consolidated Statement of Operations for the three months ended June 30, 2019 and 2018. Revenues from Xcoal of $293.2 million and $213.0 million, respectively, are recorded as coal revenues on the unaudited Condensed Consolidated Statement of Operations for the six months ended June 30, 2019 and 2018. At June 30, 2019 amounts due from Xcoal in respect of coal sales were $59.7 million. As of December 31, 2018, amounts due from Xcoal in respect of coal sales were $36.0 million. These balances are included in related party receivables.
19.Contingencies
In the normal course of business, the Company is a party to certain guarantees and financial instruments with off-balance sheet risk, such as letters of credit and performance or surety bonds. No liabilities related to these arrangements are reflected in the Company’s unaudited Condensed Consolidated Balance Sheets. Management does not expect any material losses to result from these guarantees or off-balance sheet financial instruments.
Facility B ofAt September 30, 2021, the SFA provides A$370 million for issuingCompany had outstanding bank guarantees of $45.7 million to secure various obligations and commitments.
Restricted deposits represent cash deposits held at third parties as required by certain agreements entered into by the Company to provide cash collateral. The Company had cash collateral in Australian dollars. At Junethe form of deposits in the amount of $77.2 million and $8.4 million as of September 30, 2019 Facility B of the SFA had been utilized2021 and December 31, 2020, respectively, to issue A$ 268.5 million ofprovide back-to-back support for bank guarantees, on behalf of the Company. In order to satisfy an obligation to provide a U.S. dollar bank guarantee to a third party, on June 12, 2019, the Company entered into a Bank Guarantee Facility Agreement with Westpac Banking Corporation with a limit of $28.6 million. At June 30, 2019, this facility was fully utilized to issue a bank guarantee to a third party for $28.6 million.
Curragh is a co-defendant to proceedingsfinancial payments and other performance obligations and various other operating agreements. These deposits are restricted and classified as long-term assets in the Queensland Supreme Court brought by Aurizon. Aurizon’s claim relates to costs relating to the co-defendants’ use of the Wiggins Island Coal Export Terminal Pty Ltd, or WICET, rail links, in particular, whether the “First Milestone Target Date”, which triggers certain “WIRP Fee” payments under the Wiggins Island Rail Project Deed, or WIRP Deed, has been achieved. On June 27, 2019, the Queensland Supreme Court delivered judgements in favor of Aurizon against Coronado Curragh Pty Ltd and the other co-defendants. The Company intends to continue to strongly contest the matter. The Company, together with the other co-defendants, lodged a notice of appeal of the Queensland Supreme Court judgement on July 25, 2019. It is currently expected that, were Aurizon successful in the ultimate result of the litigation and expert determinations, Coronado Curragh Pty Ltd would be required to pay approximately A$2.3 million per annum for the term of the WIRP Deed (which is 233 months). Resolution of this dispute would also result in the Company’s below rail access to WICET (of 1.5 MMtpa) becoming a firm contractual capacity entitlement (and the subject of a 20 year take-or-pay access agreement) instead of an ad hoc entitlement only. The Company’s unaudited Condensed Consolidated Balance Sheet includes an estimated loss contingency associatedSheets.
In accordance with the terms of the ABL Facility, the Company may be required to cash collateralize the ABL Facility to the extent of outstanding letters of credit after the expiration or termination date of such letter of credit. As of September 30, 2021, 0 letter of credit was outstanding and no cash collateral was required.
For the U.S. Operations in order to provide the required financial assurance, the Company generally uses surety bonds for post-mining reclamation. The Company can also use bank letters of credit to collateralize certain obligations. As of September 30, 2021, the Company had outstanding surety bonds of $29.7 million, to secure various obligations and commitments. Future regulatory changes relating to these proceedings of approximately $4.2 million and $3.5 million as at June 30, 2019 and December 31, 2018, respectively.obligations could result in increased obligations, additional costs or additional collateral requirements.
From time to time, the Company becomes a party to other legal proceedings in the ordinary course of business in Australia, the U.S. and other countries where the Company does business. Based on current information, the Company believes that such other pending or threatened proceedings are likely to be resolved without a material adverse effect on its financial
Coronado Global Resources Inc. Form 10-Q September 30, 202119
condition, results of operations or cash flows.
The liabilities recorded in relation to the above litigations do not include estimated future costs associated with legal representation, which, in accordance with the Company’s policy, are expensed as incurred. In management’s opinion, the Company is not currently involved in any legal proceedings, which individually or in the aggregate could have a material effect on the financial condition, results of operations and/or liquidity of the Company.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
20.19.Subsequent Events
Sale of the Amonate Mining Asset
During the fourth quarter of 2020, the Company committed to a plan to sell its Amonate mining property, or Amonate, which has been idled since its acquisition in 2016, and classified the asset as held for sale. The Amonate mining asset is part of the Company’s U.S. reportable segment and is located in the states of Virginia and West Virginia in the United States.
On August 5, 2019,October 26, 2021, the BoardCompany entered into a definitive agreement to sell Amonate, including related assets and liabilities to Ramaco Resources Inc., a Delaware corporation, for a purchase price of Directors declared$30.0 million, approximately $18.0 million in excess of its carrying value as at September 30, 2021. The net realized gain on completion of this transaction will be included within “Gain on disposal of assets” in the Company’s Consolidated Statement of Operations and Comprehensive Income during the fourth quarter of 2021.
The closing of the transaction is subject to customary closing conditions.
Notes Redemption
On October 29, 2021, the Company announced it elected to authorize its wholly-owned subsidiary Coronado Finance Pty Ltd to exercise its optional redemption rights to redeem $35.0 million aggregate principal amount of its Notes. The Notes will be redeemed on November 15, 2021, or the Redemption Date, at a fully franked interim dividendredemption price equal to 103% of $0.112 per Chess Depository Instrument, or CDI. The dividend will have a record datethe principal amount of August 26, 2019, payable on September 20, 2019. Holders of CDIs tradingthe Notes to be redeemed, plus accrued and unpaid interest on the ASX who electNotes to, receivebut not including, the dividendRedemption Date in Australian currency will be paid basedaccordance with the terms of the Notes and the Indenture. Interest on the exchange rateportion of the Notes selected for redemption will cease to accrue on and after the record date. The ex-dividend date will be August 23, 2019.Redemption Date, unless the Company defaults in making the redemption payment.
Coronado Global Resources Inc. Form 10-Q September 30, 202120
On August 5, 2019, the Board of directors declared a return of capital of $0.298 per CDI. The return of capital will have a record date of August 26, 2019, payable on September 20, 2019. Holders of CDIs trading on the ASX who elect to receive the return of capital in Australian currency will be paid based on the exchange rate on the record date.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors
of Coronado Global Resources Inc.:
Results of Review of Interim Financial InformationStatements
We have reviewed the accompanying condensed consolidated balance sheet of Coronado Global Resources Inc. and subsidiaries (the Company) as of JuneSeptember 30, 2019,2021, the related condensed consolidated statements of operationsoperation and comprehensive income, stockholders’ equity for the three-month and six-monthnine-month periods ended JuneSeptember 30, 20192021 and 2018,2020, the related condensed consolidated statements of changes in stockholders’ equity/members’ capital and cash flows for the six-monthnine-month periods ended JuneSeptember 30, 20192021 and 2018,2020, and the related notes (collectively referred to as the “condensed consolidated interim financial information)statements”). Based on our reviews,review, we are not aware of any material modifications that should be made to the condensed consolidated interim financial informationstatements for itthem to be in conformity with U.S. generally accepted accounting principles.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2018, and2020, the related consolidated statements of operations and comprehensive income, changes in stockholders’stockholders' equity/members’ capital and cash flows for the year then ended, and the related notes (not presented herein);, and in our report dated February 18, 2019,25, 2021, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2018,2020, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
Basis for Review Results
This consolidated interimThese financial information isstatements are the responsibility of the Company’sCompany's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange CommissionSEC and the PCAOB.
We conducted our reviewsreview in accordance with the standards of the PCAOB. A review of consolidated interim financial informationstatements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
/s/ KPMG LLPErnst & Young
Richmond, Virginia
Brisbane, Australia
August 5, 2019November 8, 2021.
Coronado Global Resources Inc. Form 10-Q September 30, 202121
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management’s Discussion and Analysis of our Financial Condition and Results of Operations, or MD&A, should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and the related notes to those statements included elsewhere in this Form 10-Q. In addition, this Form 10-Q report should be read in conjunction with the Consolidated Financial Statements for the three-year periodyear ended December 31, 20182020 included in Coronado Global Resources Inc.’s registration statementAnnual Report on Form 10, as amended,10-K for the year ended December 31, 2020, filed with the U.S. Securities and Exchange Commission, or SEC, and the Australian Securities Exchange, or the ASX, on June 28, 2019.February 25, 2021.
Unless otherwise noted, references in this Quarterly Report on Form 10-Q to “we,” “us,” “our,” “Company,” or “Coronado” refer to Coronado Global Resources Inc. and its consolidated subsidiaries and associates, unless the context indicates otherwise.
All production and sales volumes contained in this Quarterly Report on Form 10-Q are expressed in metric tons, or Mt, millions of metric tons, or MMt, or millions of metric tons per annum, or MMtpa, except where otherwise stated. One Mt (1,000 kilograms) is equal to 2,204.62 pounds and is equivalent to 1.10231 short tons. In addition, all dollar amounts contained herein are expressed in United States dollars, or US$, except where otherwise stated. References to “A$” are references to Australian dollars, the lawful currency of the Commonwealth of Australia. Some numerical figures included in this Quarterly Report on Form 10-Q have been subject to rounding adjustments. Accordingly, numerical figures shown as totals in certain tables may not equal the sum of the figures that precede them.
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, concerning our business, operations, financial performance and condition, the coal, steel and other industries, the impact of the COVID-19 pandemic and related governmental and economic responses thereto, as well as our plans, objectives and expectations for our business, operations, financial performance and condition. Forward-looking statements may be identified by words such as “may,” “could,” “believes,” “estimates,” “expects,” “likely,” “intends,” “considers” and other similar words.
Any forward-looking statements involve known and unknown risks, uncertainties, assumptions and other important factors that could cause actual results, performance, events or outcomes to differ materially from the results, performance, events or outcomes expressed or anticipated in these statements, many of which are beyond our control. Such forward-looking statements are based on an assessment of present economic and operating conditions on a number of best estimate assumptions regarding future events and actions. These factors are difficult to accurately predict and may be beyond our control. Factors that could affect our results or an investment in our securities include, but are not limited to:
uncertainty and weaknesses in global economic conditions, including the extent, duration and impact on prices caused by reduced demand. The COVID-19 pandemic led to reduced market demand and risks related to government actions with respect to trade agreements, treaties or policies;
·severe financial hardship, bankruptcy, temporary or permanent shut downs or operational challenges, due to the prices we receive forongoing COVID-19 pandemic or any similar future public health crisis, pandemic or epidemic, of one or more of our coal;
·major customers, including customers in the demand for steel products,industry, key suppliers/contractors, which impacts theamong other adverse effects, could lead to reduced demand for our metallurgical, coal, increased difficulty collecting receivables and customers and/or Met, coals;suppliers asserting force majeure or other reasons for not performing their contractual obligations to us;
our ability to generate sufficient cash to service our indebtedness and other obligations;
· risks inherentour indebtedness and ability to mining;comply with the covenants and other undertakings under the agreements governing such indebtedness;
· the loss of, or significant reduction in, purchases by our largest customers;
·our ability to collect payments from our customers depending on their creditworthiness, contractual performance or otherwise;
the prices we receive for our coal;
·the demand for steel products, which impacts the demand for our metallurgical, or Met, coals;
risks inherent to mining;
the loss of, or significant reduction in, purchases by our largest customers;
Coronado Global Resources Inc. Form 10-Q September 30, 202122
risks unique to international mining and trading operations, including tariffs and other barriers to trade;
unfavorable economic and financial market conditions;
our ability to continue acquiring and developing coal reserves that are economically recoverable;
·uncertainties in estimating our economically recoverable coal reserves;
·transportation for our coal becoming unavailable or uneconomic for our customers;
·the risk that we may be required to pay for unused capacity pursuant to the terms of our take-or-pay arrangements with rail and port operators;
·our ability to retain key personnel and attract qualified personnel;
·any failure to maintain satisfactory labor relations;
·our ability to obtain, renew or maintain permits and consents necessary for our operations;
·potential costs or liability under applicable environmental laws and regulations, including with respect to any exposure to hazardous substances caused by our operations, as well as any environmental contamination our properties may have or our operations may cause;
·extensive regulation of our mining operations and future regulations and developments;
·our ability to provide appropriate financial assurances for our obligations under applicable laws and regulations;
·assumptions underlying our asset retirement obligations for reclamation and mine closures;
·concerns about the environmental impacts of coal combustion, including perceived impacts on global climate issues, which could result in increased regulation of coal combustion in many jurisdictions and divestment efforts affecting the investment community;
·the extensive forms of taxation that our mining operations are subject to, and future tax regulations and developments;
· risks unique to international mining and trading operations;
·any cyber-attacks or other security breaches that disrupt our operations or result in the dissemination of proprietary or confidential information about us, our customers or other third parties;
·a decrease in the availability or increase in costs of key supplies, capital equipment or commodities, such as diesel fuel, steel, explosives and tires;
· unfavorable economic and financial market conditions;
·the risk that we may not recover our investments in our mining, exploration and other assets, which may require us to recognize impairment charges related to those assets;
·risks related to divestitures and acquisitions;
· our indebtedness and ability to comply with the covenants under the agreements governing such indebtedness;
· our ability to generate sufficient cash to service all of our indebtedness or other obligations;
·the risk that diversity in interpretation and application of accounting principles in the mining industry may impact our reported financial results; and
·other risks and uncertainties detailed in this report, including, but not limited to, those discussed in “Risk Factors,” set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q.
We make many of our forward-looking statements based on our operating budgets and forecasts, which are based upon detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results.
See Part I, Item 1A. “Risk Factors” of our registration statementAnnual Report on Form 10, as amended,10-K for the year ended December 31, 2020, filed with the SEC and ASX on June 28, 2019,February 25, 2021, and Part II, Item 1A. “Risk Factors” of our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021, filed with the SEC and ASX on May 10, 2021, for a more complete discussion of the risks and uncertainties mentioned above and for discussion of other risks and uncertainties we face that could cause actual results to differ materially from those expressed or implied by these forward-looking statements.
All forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements, as well as others made in this Quarterly Report on Form 10-Q and hereafter in our other filings with the SEC and public
Coronado Global Resources Inc. Form 10-Q September 30, 202123
communications. You should evaluate all forward-looking statements made by us in the context of these risks and uncertainties.
We caution you that the risks and uncertainties identified by us may not be all of the factors that are important to you. You should not interpret the disclosure of any risk to imply that the risk has not already materialized. Furthermore, the forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events, or otherwise, except as required by applicable law.
Overview
Overview
We are a global producer, marketer and exporter of a full range of Met coals.coal products. We own a portfolio of operating mines and development projects in Queensland, Australia, and in Virginia, West Virginia and Pennsylvania in the United States.
Our operations in Australia, or our Australian Operations comprise the 100%-owned Curragh producing mine complex. Our operations in the United States, or the U.S. Operations comprise threetwo 100%-owned producing mine complexes (Buchanan Logan and Greenbrier)Logan), one 100%-owned idled mine complex (Greenbrier), two development properties (Pangburn-Shaner-Fallowfield and Russell County) and one idle property (Amonate). In addition to Met coal, our Australian Operations sell thermal coal domestically, which is used to generate electricity, to Stanwell.Stanwell and some thermal coal in the export market. Our U.S. Operations primarily focuses on the production of Met coal for the North American domestic and seaborne export markets and also produce and sell some thermal coal that is extracted in the process of mining Met coal.
Our business profile primarily focuses on the production of Met coal for the North American and seaborne export markets. For the sixnine months ended JuneSeptember 30, 2019,2021, we produced and sold 10.413.5 MMt of coal. Met coal and thermal coal sales represented approximately 80.0%82.2% and 20.0%17.8%, respectively, of our total volume of coal sold and 94.3% and 5.7% respectively, of total coal revenues, for the sixnine months ended September 30, 2021.
During the three months ended September 30, 2021, seaborne prices were driven to record highs with both the Australian and U.S. coal price indices exceeding $400 per Mt as a result of the following factors: continued strong global steel demand; tight Met coal export supply availability from Australia and the U.S.; mine closures due to safety and environmental factors and adverse weather limiting China’s domestic supply; and constrained exports from Mongolia due to COVID-19.
Coronado has continued to take advantage of its unique geographical diversification as a Met coal supplier of scale to meet the requirements of steel customers across the globe. As Chinese import restrictions on Australian coal continue, our U.S. Operations have benefited from their ability to export coal to China in a favorable price environment during the nine months ended September 30, 2021.
Our results for the nine months ended September 30, 2021 benefited from higher averaged realized Met coal price, lower capital expenditure across our business and the continued ramp up of production at our U.S. Operations driven by increased demand from China for U.S. sourced metallurgical coals.
Despite these favorable conditions, our results for the nine months ended September 30, 2021 were adversely impacted by (1) seasonal wet weather conditions in Australia, which disrupted certain mining and logistics activities, (2) operational issues at the Australian Operations due to breakdown of certain mining equipment, (3) cost of additional fleets deployed at Curragh to accelerate overburden removal to increase coal availability, (4) labor shortages due to COVID-19 and (5) adverse geological conditions in certain mines of our U.S. Operations.
Coal revenues from our Australian Operations for the nine months ended September 30, 2021 increased 11.6% compared to the same period in, 2020, driven by increased average realized Met coal pricing from $97.5 to $117.0 per Mt sold. Sales volumes were lower for the nine months ended September 30, 2021 compared to the same period in 2020 due to mine sequencing and equipment maintenance, as well as some sales slippage into the fourth quarter of 2021. Operating costs for the nine months ended September 30, 2021 were $64.8 million, or 8.8%, higher compared to the corresponding period in 2020 driven by higher mining costs, which together with lower coal sales volume, resulted in an unfavorable increase in operating costs of $14.1 per Mt sold.
From our U.S. Operations, sales volumes were 0.9 MMt higher for the nine months ended September 30, 2021 compared to the same period in 2020 primarily due to production returning to pre-COVID-19 levels. Higher sales volumes and higher average realized Met coal prices per Mt sold during the nine months ended September 30, 2021 resulted in Coal revenues increasing by $198.9 million, or 58.4%, compared to the same period in 2020. Operating costs for the nine months ended September 30, 2021 were $91.0 million, or 31.5% higher, compared to the corresponding period in 2020 driven by higher mining and freight costs.
Coronado Global Resources Inc. Form 10-Q September 30, 202124
Sale of the Amonate Mining Asset
On October 26, 2021, we entered into a definitive agreement to sell Amonate, including related assets and liabilities to Ramaco Resources Inc., a Delaware corporation, for a purchase price of $30.0 million, approximately $18.0 million in excess of its carrying value as at September 30, 2021. The net realized gain on completion of this transaction will be included within “Gain on disposal of assets” in our Consolidated Statement of Operations and Comprehensive Income during the fourth quarter of 2021
Notes Redemption
On October 29, 2021, the Company announced it elected to authorize its wholly-owned subsidiary Coronado Finance Pty Ltd to exercise its optional redemption rights to redeem $35.0 million aggregate principal amount of its Notes. The Notes will be redeemed on November 15, 2021, or the Redemption Date, at a redemption price equal to 103% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest on the Notes to, but not including, the Redemption Date in accordance with the terms of the Notes and the Indenture. Interest on the portion of the Notes selected for redemption will cease to accrue on and after the Redemption Date, unless the Company defaults in making the redemption payment.
Xcoal
On May 27, 2021, Xcoal Energy and Resources, or Xcoal, ceased to be a related party after Xcoal’s founder, chief executive officer and chief marketing officer, Mr. Ernie Thrasher, retired as a non-executive director of the Company.
During the nine months ended September 30, 2021, Xcoal repaid its past due balance of $85.2 million in full. At September 30, 2021, the Company fully reversed the provision for discounting and credit losses of $9.0 million recorded at December 31, 2020.
“Coal revenues from related parties” of $97.3 million in the unaudited Condensed Consolidated Statements of Operations and Comprehensive Income for the period up to May 27, 2021, represent revenues from Xcoal while it was a related party. Revenues from coal sales to Xcoal after May 27, 2021 of $82.6 million and $96.9 million, respectively, for the three and nine months ended September 30, 2021, are included within “Coal revenues” in the unaudited Condensed Consolidated Statements of Operations and Comprehensive Income.
From July 1, 2021, the Company has agreed credit terms with Xcoal. Any sales in excess of the credit amount will be made on prepayment, letter of credit and cash on delivery basis.
At September 30, 2021, amounts outstanding from Xcoal in respect of coal sales was $46.1 million, all of which is current and not due, and is included within “Trade receivables” on the unaudited Condensed Consolidated Balance Sheet.
Refer to Note 6 “Trade and related party receivables” to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Refinancing transaction
During the nine months ended September 30, 2021, we successfully completed a refinancing initiative which comprised of an ABL Facility with an aggregate principal amount of $100.0 million, a Notes Offering with an aggregate principal amount of $350.0 million and a fully underwritten equity Entitlement Offer of $101.4 million, that resulted in gross proceeds to the Company of $101.4 million. These transactions provide Coronado increased financial flexibility by eliminating the application of the legacy SFA financial covenants and introducing new debt with terms that are more sustainable for our business. Refer to Note 5 “Capital Structure” and Note 11 “Interest Bearing Liabilities” to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Safety
For our Australian Operations, the twelve-month rolling average Total Reportable Injury Frequency Rate, or TRIFR at September 30, 2021 was 4.00 compared to a rate of 5.63 at the end of June 30, 2018.2021 and 9.40 at the end of December 31, 2020. At out U.S. Operations, the twelve-month rolling average Total Reportable Incident Rate, or TRIR, at September 30, 2021 was 2.28 compared to a rate of 2.69 at the end of June 30, 2021 and 1.98 at the end of December 31, 2020. Reportable rates for our Australian and U.S. Operations are below the relevant industry benchmarks.
The safety of our workforce is our number one priority. At our Australian Operations, the continued improvement stems from the successes of the Critical Control Management Project at Curragh. This program is focused on identifying safety risks and controls that prevent incidents from happening, effectively communicating those controls to the workforce, and validating the controls are in place in the field. In addition, the Australian Operations conducted a series of ‘safety resets’ which were attended by all staff during the September 2021 quarter. At out U.S. Operations our Safety Development Groups have implemented a focused program that has reduced the number of roof bolter incidents during the September 2021 quarter which has directly improved the TRIR.
Coronado Global Resources Inc. Form 10-Q September 30, 202125
During the quarter, our Australian Operations achieved 155 days without a Lost Time Injury, or LTI. This represents the most consecutive days without a LTI since March 2017 and the best result for the Australian Operations under Coronado ownership.
COVID-19 response
The COVID-19 Steering Committee has successfully monitored the effect of the pandemic across our Australian Operations and U.S. Operations and continues to implement proactive preventative measures to ensure the safety and well-being of employees and contractors. During the three months ended September 30, 2021, we implemented a Vaccine Incentive Program at our U.S. Operations that provides a cash payment to employees who get vaccinated. Since the program commenced, vaccination rates amongst our U.S. workforce has improved significantly. At our Australian Operations, vaccination rates continue to increase according to the Australian Federal and Queensland state government’s vaccination program. The COVID-19 Steering Committee continues to encourage all workers across all jurisdictions to be vaccinated and provides access to educational materials about vaccine safety and efficacy.
Segment Reporting
In accordance with Accounting Standards Codification, or ASC, 280, Segment Reporting, we have adopted the following reporting segments: Curragh; Buchanan; Logan;Australia and Greenbrier.the United States. In addition, “Corporate“Other and other”Corporate” is not a reporting segment but is disclosed for the purposes of reconciliation to our consolidated financial statements.
Factors Affecting Comparability of our Financial Statements
Due to several factors, our historical results of operations are not comparable from period to period and may not be comparable to our financial results of operations in future periods. Set forth below is a brief description of the key factors impacting the comparability of our results of operations.
Curragh Acquisition
On March 29, 2018, we acquired Curragh from Wesfarmers Ltd, or Wesfarmers, for aggregate consideration, on the date of the transaction, of $563.8 million. We refer to this transaction as the Curragh acquisition. The operating results of Curragh have been included in our consolidated financial statements since March 29, 2018.
Corporate Reorganization Transaction
During the year ended December 31, 2018, Coronado Group LLC and Coronado Global Resources Inc. completed a common control reorganization of their legal entity structure, which we refer to as the Reorganization Transaction. Prior to the Reorganization Transaction in August 2018, Coronado Group HoldCo LLC, the holding company of our Australian Operations, was a wholly-owned subsidiary of Coronado Group LLC.
The Company is a corporation for U.S. federal and state income tax purposes. The Company’s accounting predecessor, Coronado Group LLC, was and is treated as a flow-through entity for U.S. federal income tax purposes and as such, has generally not been subject to U.S. federal income tax at the entity level.
The Reorganization Transaction was treated as a combination of entities under common control in line with ASC 805, Business Combinations, whereby the receiving entity (the Company) recorded the contributed assets and liabilities at the carrying value of Coronado Group LLC. Prior to the Reorganization Transaction, the consolidated financial statements of the Company reflect the net assets and operations of Coronado Group LLC. The financial statements presented following the Reorganization Transaction are those of the receiving entity (the Company) and are retrospectively adjusted to present that entity as if it always held the net assets or equity interests previously held by the seller, Coronado Group LLC. As such, financial information (including comparatives) of the Company has been presented as a continuation of the pre-existing accounting values of assets and liabilities in Coronado Group LLC’s financial statements.
Australian IPO
On October 23, 2018, we completed an initial public offering on the ASX, pursuant to which the Company issued and sold the equivalent of 16,651,692 shares of common stock in the form of CHESS Depositary Interests, or CDIs, and the EMG Group sold the equivalent of 2,691,896.4 shares of common stock in the form of CDIs.
Results of Operations
How We Evaluate Our Operations
We evaluate our operations based on the volume of coal we can safely produce and sell in compliance with regulatory standards, and the prices we receive for our coal. Our sales volume and sales prices are largely dependent upon the terms of our coal sales contracts, for which prices generally are set based on daily index averages, or on a quarterly basis.basis or annual fixed price contracts.
Our management uses a variety of financial and operating metrics to analyze our performance. These metrics are significant factors in assessing our operating results and profitability. These financial and operating metrics include: (i) safety and environmental metrics; (ii) total sales volumes and average realized price per Mt sold, which we define as total coal revenues divided by total sales volume; (iii) Met coal sales volumes and average realized metMet coal price per Mt sold, which we define as metMet coal revenues divided by metMet coal sales volume; (iv) average segment mining costs per Mt sold, which we define as cost of coal revenuesmining costs divided by sales volumes;volumes for the respective segment; and (v) average segment operating costs per Mt sold, which we define as segment operating costs divided by sales volumes.volumes for the respective segment.
Coal revenues are shown on our statement of operations and comprehensive income exclusive of other revenues. Operating expenses are inclusive of cost of coal revenues, freight expense, Stanwell rebate and other royalties and exclude depreciation, depletion and amortization, and selling, general, and administrative expenses. Cost of coal revenues is shown on our statement of operations and comprehensive income exclusive of freight expense, Stanwell rebate, other royalties, depreciation, depletion and amortization and selling, general and administrative expenses. Cost of coal revenues excludes these cost components as our chief operating decision maker, or CODM, does not view these costs as directly attributable to the production of coal. We believe our presentation of cost of coal revenues is useful to investors in providing an accurate view of the costs directly attributable to the production of coal in our mining costs segment. Additionally,Generally, export sale contracts for our international sales contracts, we typicallyAustralian Operations require us to bear the cost of freight from our mines to the applicable outbound shipping port, while freight costs from the port to the end destination are typically borne by the customer. The majority of the export sales from our U.S. Operations are recognized at the mine load out when title to the coal passes to the customer similar to a domestic sale. However, for certain U.S. export sales title passes to the customer when the coal is loaded into the vessel at the port, accordingly we bear the cost of freight from our mines to the applicable outbound shipping port as well as the port costs. For our domestic sales, customers typically bear the cost of freight. As such,freight, therefore there are no freight expenses are excluded fromincluded in the cost of coal revenues to allow for consistency and comparability in evaluating our operating performance.revenues.
Non-GAAP Financial Measures; Other Measures
The following discussion of our results of operations includes references to and analysis of Adjusted EBITDA and mining costs, which is aare financial measuremeasures not recognized in accordance with U.S. Generally Accepted Accounting Principles, or U.S. GAAP. Non-GAAP financial measures, including Adjusted EBITDA, are used by investors to measure our operating performance and lenders to measure our ability to incur and service debt.performance.
Adjusted EBITDA, a non-GAAP measure, is defined as earnings before interest, tax, depreciation, depletion and amortization and other foreign exchange losses and loss on debt extinguishment.losses. Adjusted EBITDA is also adjusted for certain discrete non-recurring items that we exclude in analyzing each of our segments’ operating performance. Adjusted EBITDA is not intended to serve as an alternative to U.S. GAAP measures of performance and may not be comparable to similarly-titledsimilarly titled measures presented by other companies. A reconciliation of Adjusted EBITDA to its most directly comparable measure under U.S. GAAP is included below. In addition, we present Adjusted EBITDA on a supplemental pro forma basis.
Coronado Global Resources Inc. Form 10-Q September 30, 202126
Segment Adjusted EBITDA is defined as Adjusted EBITDA by operating and reporting segment, adjusted for certain transactions, eliminations or adjustments that our CODM does not consider for making decisions to allocate resources among segments or assessing segment performance. Segment Adjusted EBITDA is used as a supplemental financial measure by management and by external users of our financial statements such as investors, industry analysts and lenders to assess the operating performance of the business.
Mining costs, a non-GAAP measure, is based on reported cost of coal revenues, which is shown on our statement of operations and comprehensive income exclusive of freight expense, Stanwell rebate, other royalties, depreciation, depletion and amortization and selling, general and administrative expenses, adjusted for other items that do not relate directly to the costs incurred to produce coal at mine. Mining costs excludes these cost components as our CODM does not view these costs as directly attributable to the production of coal. Mining costs is used as a supplemental financial measure by management, providing an accurate view of the costs directly attributable to the production of coal at our mining segments, and by external users of our financial statements, such as investors, industry analysts and ratings agencies, to assess our mine operating performance in comparison to the mine operating performance of other companies in the coal industry.
Three Months Ended JuneSeptember 30, 20192021 Compared to Three Months Ended JuneSeptember 30, 20182020
Summary
Summary
OurThe financial and operational highlights for the three months ended JuneSeptember 30, 2019:2021 include:
· Tonnage soldSales volume totaled 5.44.6 MMt for the three months ended JuneSeptember 30, 2019, or 0.22021, compared to 4.9 MMt higher thanfor the three months ended JuneSeptember 30, 2018. Significant improvements2020. The lower sales volumes were attributable to rail availability at Curragh duringour Australian Operations due to lower production as a result of changes in mine sequencing and equipment maintenance, and sales slippage into the second quarter of 2019 providedDecember 2021 quarter. Our U.S. Operations continue to experience increased demand from China and has recovered its mining operations to pre-COVID-19 pandemic levels resulting in higher sales volumes in the opportunity to recover delayed sales from the first quarter of 2019.quarter.
·Net income increased by $58.2$123.8 million, from $59.3net loss of $41.8 million for the three months ended JuneSeptember 30, 2018,2020, to a net income of $117.5$82.0 million for the three months ended JuneSeptember 30, 2019, reflecting increases in operating income and lower other expenses, partly2021. This increase was primarily driven by higher coal sales revenues partially offset by higher operating costs, interest charges and income tax expense.
· CoalStrong demand and higher average prices in the seaborne export markets, remained positive duringdue to better than expected post pandemic recovery in global economic and industrial activity, combined with shortages in the coal supply, caused the coal price indices reach record levels in the quarter. This has contributed to higher average realized Met coal pricing of $144.0 per Mt sold, which was 67.4% higher compared to $86.0 per Mt sold for the three months ended JuneSeptember 30, 2019 as2020.
Adjusted EBITDA for the three months ended September 30, 2021 of $147.7 million, an increase of $138.2 million from an Adjusted EBITDA of $9.6 million for the three months ended September 30, 2020, driven by higher coal sales revenues, averaged $5.8partially offset by higher operating costs.
As of September 30, 2021, the Company had total liquidity of $295.7 million, consisting of $195.7 million cash (excluding restricted cash) and $100.0 million of availability under the ABL Facility. The ABL Facility is subject to a springing fixed charge coverage ratio test if availability is less than a certain amount.
Coronado Global Resources Inc. Form 10-Q September 30, 202127
|
| Three months ended September 30, | |||||||||
|
|
| 2021 |
|
| 2020 |
|
| Change |
| % |
|
| (in US$ thousands) | |||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
Coal revenues |
| $ | 563,287 |
| $ | 366,737 |
| $ | 196,550 |
| 53.6% |
Other revenues |
|
| 10,304 |
|
| 9,648 |
|
| 656 |
| 6.8% |
Total revenues |
|
| 573,591 |
|
| 376,385 |
|
| 197,206 |
| 52.4% |
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
Cost of coal revenues (exclusive of items shown separately below) |
|
| 309,513 |
|
| 263,858 |
|
| 45,655 |
| 17.3% |
Depreciation, depletion and amortization |
|
| 38,461 |
|
| 48,693 |
|
| (10,232) |
| (21.0%) |
Freight expenses |
|
| 58,043 |
|
| 50,590 |
|
| 7,453 |
| 14.7% |
Stanwell rebate |
|
| 12,274 |
|
| 25,157 |
|
| (12,883) |
| (51.2%) |
Other royalties |
|
| 39,099 |
|
| 21,697 |
|
| 17,402 |
| 80.2% |
Selling, general, and administrative expenses |
|
| 8,044 |
|
| 6,785 |
|
| 1,259 |
| 18.6% |
Total costs and expenses |
|
| 465,434 |
|
| 416,780 |
|
| 48,654 |
| 11.7% |
Operating income (loss) |
|
| 108,157 |
|
| (40,395) |
|
| 148,552 |
| (367.7%) |
Other income (expenses): |
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
| (18,251) |
|
| (12,207) |
|
| (6,044) |
| 49.5% |
Decrease in provision for discounting and credit losses |
|
| 2,430 |
|
| — |
|
| 2,430 |
| 100.0% |
Other, net |
|
| (1,252) |
|
| (361) |
|
| (891) |
| 246.8% |
Total other expense, net |
|
| (17,073) |
|
| (12,568) |
|
| (4,505) |
| 35.8% |
Net income (loss) before tax |
|
| 91,084 |
|
| (52,963) |
|
| 144,047 |
| (272.0%) |
Income tax (expense) benefit |
|
| (9,096) |
|
| 11,169 |
|
| (20,265) |
| (181.4%) |
Net income (loss) |
|
| 81,988 |
|
| (41,794) |
|
| 123,782 |
| (296.2%) |
Less: Net loss attributable to noncontrolling interest |
|
| — |
|
| (2) |
|
| 2 |
| (100.0%) |
Net income (loss) attributable to Coronado Global Resources, Inc. |
| $ | 81,988 |
| $ | (41,792) |
| $ | 123,780 |
| (296.2%) |
Coal Revenues
Coal revenues were $563.3 million for the three months ended September 30, 2021, an increase of $196.6 million, compared to $366.7 million for the three months ended September 30, 2020. This increase was largely driven by higher average realized Met coal price for the three months ended September 30, 2021, of $144.0 per tonMt sold, an increase of $58.0 per Mt sold compared to $86.0 per Mt sold for the same period in 2020. At our U.S. Operations coal sales volume was 0.5 MMt higher compared to the three months ended JuneSeptember 30, 2018.
· Adjusted EBITDA for the three months ended June 30, 2019 totaled $222.3 million, an increase of $83.1 million, from Adjusted EBITDA of $139.2 million for the three months ended June 30, 2018,2021, driven by very strong revenues and lower operating costs.increased demand from China for U.S. sourced coal.
· As of June 30, 2019, we had cash of $46.0 million (excluding restricted cash) and $350.0 million of availability under the Multicurrency Revolving Syndicated Facility Agreement, dated September 15, 2018, which we refer to as the SFA.
|
| For Three Months Ended June 30, |
| ||||||
|
| ($ in thousands) |
| ||||||
|
| 2019 |
| 2018 |
| Change |
| % |
|
Revenues: |
|
|
|
|
|
|
|
|
|
Coal revenues |
| 630,690 |
| 577,510 |
| 53,180 |
| 9.2 | % |
Other revenues |
| 11,767 |
| 14,020 |
| (2,253 | ) | (16.1 | )% |
Total revenues |
| 642,457 |
| 591,530 |
| 50,927 |
| 8.6 | % |
Costs and expenses: |
|
|
|
|
|
|
|
|
|
Cost of coal revenues (exclusive of items shown separately below) |
| 264,137 |
| 305,309 |
| (41,172 | ) | (13.5 | )% |
Depreciation, depletion and amortization |
| 45,508 |
| 42,594 |
| 2,914 |
| 6.8 | % |
Freight expenses |
| 52,035 |
| 40,912 |
| 11,123 |
| 27.2 | % |
Stanwell rebate |
| 45,847 |
| 32,812 |
| 13,035 |
| 39.7 | % |
Other royalties |
| 49,073 |
| 67,695 |
| (18,622 | ) | (27.5 | )% |
Selling, general, and administrative expenses |
| 9,242 |
| 8,513 |
| 729 |
| 8.6 | % |
Total costs and expenses |
| 465,842 |
| 497,835 |
| (31,993 | ) | (6.4 | )% |
Operating income |
| 176,615 |
| 93,695 |
| 82,920 |
| 88.5 | % |
Other income (expenses): |
|
|
|
|
|
|
|
|
|
Interest expense, net |
| (9,087 | ) | (18,987 | ) | 9,900 |
| (52.1 | )% |
Loss on debt extinguishment |
| — |
| — |
| — |
| — |
|
Other, net |
| (2,989 | ) | (2,391 | ) | (598 | ) | 25.0 | % |
Total other expenses, net |
| (12,076 | ) | (21,378 | ) | 9,302 |
| (43.5 | )% |
Net income before tax |
| 164,539 |
| 72,317 |
| 92,222 |
| 127.5 | % |
Income tax expense |
| (47,033 | ) | (12,995 | ) | (34,038 | ) | 261.9 | % |
Net income |
| 117,506 |
| 59,322 |
| 58,184 |
| 98.1 | % |
Less: Net loss attributable to noncontrolling interest |
| (4 | ) | (2 | ) | (2 | ) | 100.0 | % |
Net income attributable to Coronado Global Resources Inc. |
| 117,510 |
| 59,324 |
| 58,186 |
| 98.1 | % |
Coal Revenues
Coal revenues were $630.7 million for the three months ended June 30, 2019, an increase of $53.2 million, as compared to $577.5 million for the three months ended June 30, 2018. The increase in coal revenues was attributable to higher Met coal sales volumes and higher average realized Met coal price per ton sold during the 2019 period. Improvements in rail conditions at Curragh underpinned the increase in sales volumes whereas higher average realized Met coal pricing was primarily driven by committed (fixed and index priced) high volatile coal sales from the Logan segment, as well as an improved higher yielding Met coal sales mix.
Other Revenues
Other revenues were $11.8 million for the three months ended June 30, 2019, a decrease of $2.3 million, as compared to $14.0 million for the three months ended June 30, 2018. The decrease is predominantly related to Curragh, which recorded $12.6 million in other revenues relating to the amortization of the Stanwell non-market coal supply agreement, or CSA, liability for the three months ended June 30, 2018 compared to $8.5 million recognized for the three months ended June 30, 2019. This decrease was partially offset by an increase in freight revenues with respect to certain arrangements with customers at Logan and Greenbrier.
Cost of Coal Revenues (Exclusive of Items Shown Separately Below)
Cost of coal revenues are comprisedcomprise of costs related to produced tons sold, along with changes in both the volumes and carrying values of coal inventory. Cost of coal revenues include items such as direct operating costs, which includes employee-related costs, materials and supplies, contractor services, coal handling and preparation costs and production taxes. Total cost of coal revenues for the Company were $264.1was $309.5 million for the three months ended JuneSeptember 30, 2019, a decrease2021, an increase of $41.2$45.7 million, asor 17.3%, compared to $305.3$263.9 million for the three months ended JuneSeptember 30, 2018. 2020.
The primary reasonscost of coal revenues for this decrease are: (1)our U.S. Operations increased $35.6 million during the three months ended September 30, 2021, as compared to Junethe three months ended September 30, 2018 included the unwind2020, due to higher sales and production volumes. Cost of a $21.4 million fair value adjustment recognized to coal inventories on the acquisition of Curragh; and (2) favorable average foreign exchange rate on translation of the Curragh operationsrevenues for our Australian Operations for the three months ended JuneSeptember 30, 20192021 were $10.1 million higher compared to the three months ended September 30, 2021, as a result of A$/US$: 0.71 versus 0.76changes in mine sequencing works during the quarter to increase coal availability and planned equipment maintenance.
Coronado Global Resources Inc. Form 10-Q September 30, 202128
Depreciation, Depletion and Amortization
Depreciation, depletion and amortization for the three months ended JuneSeptember 30, 2018. This2021 was partially offset by higher production costs$38.5 million, a decrease of $3.4 million at our U.S. Operations, primarily due21.0% compared to adverse geological mining conditions at certain mine complexes.
Depreciation, Depletion and Amortization
Depreciation, depletion and amortization was $45.5$48.7 million for the three months ended JuneSeptember 30, 2019, an increase2020. The decrease was associated with lower production in our Australian Operations impacting assets depreciated under units of $2.9 million, as compared to $42.6production method. In addition, depreciation on the Greenbrier mining asset at our U.S. Operations ceased since its idling on April 1, 2020.
Freight Expenses
Freight expenses include costs associated with take-or-pay commitments for rail and port providers and demurrage costs. Freight expenses totaled $58.0 million for the three months ended JuneSeptember 30, 2018. The2021, an increase was largely associated with our operating segments in the United States (Buchanan, Logan and Greenbrier) for which depreciation expense increased by $2.1of $7.5 million, predominantly dueas compared to the expiration of a credit that was previously recognized on amortization of sales contracts.
Freight Expenses
The amount of freight expenses was $52.0$50.6 million for the three months ended JuneSeptember 30, 2019, an2020. Our U.S. Operations’ freight cost contributed $11.6 million to the increase, driven by coal sales under certain contracts for which we arrange and pay for transportation to port that did not exist to the same extent in the three months ended September 30, 2020. This increase was partially offset by our Australian Operations where freight costs were lower as a result of $11.1 million, aslower sales volumes during the three months ended September 30, 2021, compared to $40.92020.
Stanwell Rebate
The Stanwell rebate was $12.3 million for the three months ended JuneSeptember 30, 2018. Curragh’s freight costs contributed $4.42021, a decrease of $12.9 million, as compared to this increase driven by higher sales volumes which in turn incurred higher railings and port charges. The remaining $6.7 million increase relates mainly to new sales contracts entered into at Logan and Greenbrier which include the rendering of rail and port services to certain customers.
Stanwell Rebate
The Stanwell rebate was $45.8$25.2 million for the three months ended JuneSeptember 30, 2019,2020. The decrease was largely driven by lower sales volume and lower realized export reference coal pricing for the prior twelve-month period used to calculate the rebate.
Other Royalties
Other royalties were $39.1 million in the three months ended September 30, 2021, an increase of $13.0$17.4 million, as compared to $32.8$21.7 million in the three months ended September 30, 2020. The increase in other royalties were driven by higher coal revenues compared to the same period in 2020.
Interest Expense, net
Interest expense, net of $18.3 million for the three months ended JuneSeptember 30, 2018. The increase is driven primarily from higher export sales volumes in2021, increased $6.0 million, as compared to $12.2 million for the three months ended JuneSeptember 30, 2019 versus2020. The increase in interest expense was due to higher interest rate on the Notes for the three months ended JuneSeptember 30, 2018.2021, compared to average interest rate on the SFA for the same period in 2020.
Decrease in provision for discounting and credit losses
Other Royalties
Other royalties were $49.0We recognized a provision for discounting and credit losses of $9.3 million as at December 31, 2020, largely in respect of past due trade receivables from Xcoal. During the three months ended JuneSeptember 30, 2019,2021, the provision for discounting and credit losses, with respect to Xcoal past due balance, was fully unwound to account for passage of time and repayment in full, resulting in a decreasebenefit of $18.6$3.1 million as compared to $67.7 millionrecorded in the three months ended June 30, 2018. The variance was primarily driven by a significant mark-to-market write up in the Contingent Royalty Consideration (payable to CONSOL) during the 2018 in respectCompany’s results of the Buchanan mine for $19.4 million due to higher forecast Met pricing at the endoperations.
Income tax (expense) benefit
Income tax expense of June 30, 2018.
Interest Expense
Interest expense, net of interest income, was $9.1 million for the three months ended JuneSeptember 30, 2019, a decrease of $9.92021 increased by $20.3 million, as compared to interest expensea tax benefit of $19.0$11.2 million for the three months ended JuneSeptember 30, 2018. This decrease in interest expense was primarily attributable to the repayment of the $700 million term loan on October 24, 2018. 2020.
The interestincome tax expense for the three months ended JuneSeptember 30, 2019 includes2021 is based on an annual effective tax rate of 11.28% applied to the discount rate unwind of the Stanwell Reserved Area, or the SRA, deferred consideration liability of $4.9 million and interest and finance charges on the SFA of $3.3 million.nine months ended September 30, 2021.
Six Months Ended JuneNine months ended September 30, 20192021 Compared to Six Months Ended JuneNine months ended September 30, 20182020
Summary
Summary
OurThe financial and operational highlights for the sixnine months ended JuneSeptember 30, 2019:2021 include:
· Tonnage soldSales volume totaled 10.413.5 MMt for the sixnine months ended JuneSeptember 30, 2019,2021, or 5.10.3 MMt higher than the sixnine months ended JuneSeptember 30, 2018, predominantly due2020. The higher sales volumes were primarily driven by our U.S. Operations resulting from increased demand of U.S. sourced coal into China and recovery in demand for Met coal to pre-COVID 19 pandemic levels compared to the acquisitionsame period in 2020 when our U.S. Operation were idled for two months.
Coronado Global Resources Inc. Form 10-Q September 30, 202129
·Net income increasedloss decreased by $178.7$150.9 million, from $35.7$165.0 million for the sixnine months ended JuneSeptember 30, 2018,2020, to $214.3$14.1 million for the sixnine months ended JuneSeptember 30, 2019, reflecting increases2021. The lower net loss was primarily due to higher coal sales revenues, partially offset by increase in operating income, predominantly due tocosts, higher interest expenses, the acquisitionimpact of Curragh on March 29, 2018, lower interest expense, no loss on debt extinguishment,non-cash impairment charge at Greenbrier recognized during the nine months ended September 30, 2020 and lower other expenses, partly offset by higher income tax expense.
· Coal markets strengthenedImproved coal market prices during the sixnine months ended JuneSeptember 30, 2019 as revenues averaged $116.72021 resulted in average realized Met coal pricing of $114.6 per Mt sold, 6.7%23.1% higher compared $109.4to $93.1 per tonMt sold for the sixnine months ended JuneSeptember 30, 2018.2020.
·Adjusted EBITDA for the sixnine months ended JuneSeptember 30, 2019 totaled $405.42021, was $173.4 million, an increase of $263.5$128.9 million, from Adjusted EBITDA of $141.8$44.5 million for the sixnine months ended JuneSeptember 30, 2018.2020, driven by higher coal revenues partially offset by higher operating costs.
· Net cash of $301.2 millionCash provided by operating activities was $171.1 million for the sixnine months ended JuneSeptember 30, 2019 was partly offset by capital expenditures2021, an increase of $66.4 million.
· During$209.2 million compared to cash used of $38.1 million for the sixnine months ended JuneSeptember 30, 2019, we paid a dividend of $299.7 million, which was funded by available cash and borrowings. The monies borrowed were fully repaid by June 30, 2019.2020.
·As of JuneSeptember 30, 2019, we2021, the Company had available cash of $46.0 million (excluding restricted cash) of $195.7 million and $350.0 million of additional liquidity available underNotes outstanding resulting in net debt of $154.3 million. Net debt reduced by $82.0 million during the Syndicated Facility Agreement.quarter due to positive operating cash flows.
|
| For Six Months Ended June 30, |
|
| Nine months ended September 30, | |||||||||||||||
|
| ($ in thousands) |
|
|
| 2021 |
|
| 2020 |
|
| Change |
| % | ||||||
|
| 2019 |
| 2018 |
| Change |
| % |
|
| (in US$ thousands) | |||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coal revenues |
| 1,212,487 |
| 784,346 |
| 428,141 |
| 54.6 | % |
| $ | 1,344,253 |
| $ | 1,061,554 |
| $ | 282,699 |
| 26.6% |
Other revenues |
| 21,848 |
| 15,337 |
| 6,511 |
| 42.5 | % |
|
| 29,705 |
|
| 28,497 |
|
| 1,208 |
| 4.2% |
Total revenues |
| 1,234,335 |
| 799,683 |
| 434,652 |
| 54.4 | % |
|
| 1,373,958 |
|
| 1,090,051 |
|
| 283,907 |
| 26.0% |
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of coal revenues (exclusive of items shown separately below) |
| 533,696 |
| 424,620 |
| 109,076 |
| 25.7 | % |
|
| 889,771 |
|
| 745,203 |
|
| 144,568 |
| 19.4% |
Depreciation, depletion and amortization |
| 85,279 |
| 64,402 |
| 20,877 |
| 32.4 | % |
|
| 132,754 |
|
| 135,542 |
|
| (2,788) |
| (2.1%) |
Freight expenses |
| 89,362 |
| 45,155 |
| 44,207 |
| 97.9 | % |
|
| 166,090 |
|
| 133,475 |
|
| 32,615 |
| 24.4% |
Stanwell rebate |
| 94,674 |
| 32,812 |
| 61,862 |
| 188.5 | % |
|
| 43,169 |
|
| 82,571 |
|
| (39,402) |
| (47.7%) |
Other royalties |
| 93,422 |
| 82,987 |
| 10,435 |
| 12.6 | % |
|
| 83,219 |
|
| 65,151 |
|
| 18,068 |
| 27.7% |
Selling, general, and administrative expenses |
| 18,311 |
| 52,283 |
| (33,972 | ) | (65.0 | )% |
|
| 21,250 |
|
| 20,138 |
|
| 1,112 |
| 5.5% |
Restructuring costs |
|
| 2,300 |
|
| — |
|
| 2,300 |
| 100.0% | |||||||||
Total costs and expenses |
| 914,744 |
| 702,259 |
| 212,485 |
| 30.3 | % |
|
| 1,338,553 |
|
| 1,182,080 |
|
| 156,473 |
| 13.2% |
Operating income |
| 319,591 |
| 97,424 |
| 222,167 |
| 228.0 | % | |||||||||||
Operating income (loss) |
|
| 35,405 |
|
| (92,029) |
|
| 127,434 |
| (138.5%) | |||||||||
Other income (expenses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
| (17,264 | ) | (25,488 | ) | 8,224 |
| (32.3 | )% |
|
| (49,982) |
|
| (36,528) |
|
| (13,454) |
| 36.8% |
Loss on debt extinguishment |
| — |
| (3,905 | ) | 3,905 |
| (100.0 | )% |
|
| (5,744) |
|
| — |
|
| (5,744) |
| 100.0% |
Decrease in provision for discounting and credit losses |
|
| 8,074 |
|
| — |
|
| 8,074 |
| 100.0% | |||||||||
Impairment of assets |
|
| — |
|
| (63,111) |
|
| 63,111 |
| (100.0%) | |||||||||
Other, net |
| 1,042 |
| (26,846 | ) | 27,888 |
| (103.9 | )% |
|
| (3,610) |
|
| (4,846) |
|
| 1,236 |
| (25.5%) |
Total other expenses, net |
| (16,222 | ) | (56,239 | ) | 40,017 |
| (71.2 | )% | |||||||||||
Net income (loss) before tax |
| 303,369 |
| 41,185 |
| 262,184 |
| 636.6 | % | |||||||||||
Income tax (expense) benefit |
| (89,043 | ) | (5,534 | ) | (83,509 | ) | 1,509.0 | % | |||||||||||
Net income (loss) |
| 214,326 |
| 35,651 |
| 178,675 |
| 501.2 | % | |||||||||||
Total other expense, net |
|
| (51,262) |
|
| (104,485) |
|
| 53,223 |
| (50.9%) | |||||||||
Net (loss) income before tax |
|
| (15,857) |
|
| (196,514) |
|
| 180,657 |
| (91.9%) | |||||||||
Income tax benefit |
|
| 1,788 |
|
| 31,525 |
|
| (29,737) |
| (94.3%) | |||||||||
Net (loss) income |
|
| (14,069) |
|
| (164,989) |
|
| 150,920 |
| (91.5%) | |||||||||
Less: Net loss attributable to noncontrolling interest |
| (4 | ) | (4 | ) | — |
| — |
|
|
| (2) |
|
| (6) |
|
| 4 |
| (66.7%) |
Net income (loss) attributable to Coronado Global Resources Inc. |
| 214,330 |
| 35,655 |
| 178,675 |
| 501.2 | % | |||||||||||
Net (loss) income attributable to Coronado Global Resources, Inc. |
| $ | (14,067) |
| $ | (164,983) |
| $ | 150,916 |
| (91.5%) |
Coal Revenues
Coal revenues were $1,212.5$1,344.3 million for the sixnine months ended JuneSeptember 30, 2019,2021, an increase of $428.1$282.7 million, as compared to $784.3$1,061.6 million for the sixnine months ended JuneSeptember 30, 2018. The addition of Curragh contributed $402.0 million in additional coal revenues for the six months ended June 30, 2019 that were not included within coal revenues for the six months ended June 30, 2018 given Curragh2020. This increase was acquired on March 29, 2018. Coal revenues fordriven by higher sales volumes at our operating segments in the United States (Buchanan, LoganU.S. Operations and Greenbrier) of $436.5 million for the six months ended June 30, 2019 were $26.7 million higher than $409.8 million for the six months ended June 30, 2018 mainly as a result higherincreased average realized Met coal pricing.
Other Revenues
Other revenues were $21.8 millionprice for the sixnine months ended Juneto September 30, 2019,2021 of $114.6 per Mt sold, an increase of $6.5 million, as$21.5 per Mt sold compared to $15.3 million$93.1 per Mt sold for the six months ended June 30, 2018. The increase is predominantly relatedsame period in 2020, , due to the amortization of the Stanwell non-market CSA liability for the six months ended June 30, 2019 of $17.1 million compared to $12.6 million for the period since the acquisition of Curragh on March 29, 2018 includedfavorable market conditions and higher index prices, most significantly in the six months ended Junethird quarter of 2021.
Coronado Global Resources Inc. Form 10-Q September 30, 2018. Other revenues for our operating segments in the United States (Buchanan, Logan and Greenbrier) increased $1.1 million on higher freight revenue.202130
Cost of Coal Revenues (Exclusive of Items Shown Separately Below)
Cost of coal revenues areis comprised of costs related to produced tons sold, along with changes in both the volumes and carrying values of coal inventory. Cost of coal revenues include items such as direct operating costs, which includes employee-related costs, materials and supplies, contractor services, coal handling and preparation costs and production taxes.
Total cost of coal revenues for the Company were $533.7was $889.8 million for the sixnine months ended JuneSeptember 30, 2019,2021, an increase of $109.1$144.6 million, asor 19.4%, compared to $424.6$745.2 million for the sixnine months ended JuneSeptember 30, 2018. $94.5 million2020. Cost of the increase was attributable to a full six-month contribution in the 2019 period from Curragh compared to a partial period from acquisition on March 29, 2018 to June 30, 2018. The remaining $14.6 million increase was primarily driven by higher production costs at the Buchanan and Logan operating segments in the U.S., resulting from adverse mining conditions. In addition, Logan began production at three new coal mines in the first half of 2019.
Depreciation, Depletion and Amortization
Depreciation, depletion and amortization was $85.3 millionrevenues for the six months ended June 30, 2019, an increase of $20.9 million, as compared to $64.4 million for the six months ended June 30, 2018. The increase was primarily a result of the addition of Curragh, which contributed $37.9 million in depreciation, depletion and amortization for the six months ended June 30, 2019 compared to $21.9 from the date of acquisition, March 29, 2018, to June 30, 2018.
Freight Expenses
The amount of freight expenses was $89.4 million for the six months ended June 30, 2019, an increase of $44.2 million, as compared to $45.2 million for the six months ended June 30, 2018. The increase is primarily due to $79.2 million of Curragh related freight expenses for the six months ended June 30, 2019 compared to $38.2 million for the six months ended June 30, 2018 which included Curragh only for a partial period from acquisition date of March 29, 2018 to June 30, 3018. The freight expense for our operating segments in the United States (Buchanan, Logan and Greenbrier), which predominantly sells its coal on an F.O.R basis, were $11.2 million for the six months ended June 30, 2019, an increase of $4.4 million, as compared to $6.8 million for the six months ended June 30, 2018. The increase is primarily driven by new rail and port arrangements with certain customers that did not exist in 2018 period.
Stanwell Rebate
The Stanwell rebate was $94.7 million for the six months ended June 30, 2019, an increase of $61.9 million, as compared to $32.8 million for the six months ended June 30, 2018. Curragh contribution to the Company’s result during the six months ended June 30, 2018 was only for part of the period since March 29, 2018, being the date of acquisition.
Other Royalties
Other royalties were $93.4 million in the six months ended June 30, 2019, an increase of $10.4 million, as compared to $83.0 million in the six months ended June 30, 2018. Curragh contributed approximately $79.1 million in other royalty expense for the six months ended June 30, 2019 compared to $38.2 million for the six months ended June 30, 2019 which only included Curragh for part of the period from March 29, 2018, the date of acquisition. This increase was in part offset by a decrease in other royalties attributable to our U.S. Operations which decreased $28.4 million. The CONSOL Energy contingent royalty increased $16.4$55.9 million due to higher sales volumes and operations returning to pre-COVID-19 pandemic levels, whereas the U.S. Operations were idled for two months during the sixnine months ended JuneSeptember 30, 2018 compared to a $7.1 million decrease for the six months ended June 30, 2019. This $23.5 million benefit is primarily due to average realized pricing for export sales forecast in the mark-to-market adjustment for June 30, 2018 being significantly higher than the December 31, 2017 forecast in the mark-to-market calculation. The benefit also reflects one less year remaining in the contingent royalty period.
Selling, General, and Administrative Expenses
Selling, general and administrative cost was $18.3 million for the six months ended June 30, 2019, a decrease2020. Cost of $34.0 million, as compared to $52.3 million for the six months ended June 30, 2018. The decrease was due to specific one-off, non-recurring costs incurred in relation to the Curragh acquisition during March 2018 relating to stamp duty of $33.0 million and various professional service and legal fees of $4.7 million.
Interest Expense
Interest expense, net of interest income, was $17.3 million for the six months ended June 30, 2019, a decrease of $8.2 million, as compared to interest expense of $25.5 million for the six months ended June 30, 2018. Included within interest expense for the six months ended June 30, 2019 is $9.7 million relating to the accretion of the deferred consideration liability recognized on the purchase of the SRA on August 14, 2018, and $4.7 million finance charges related to commitment and financial guarantee fees incurred in relation to the Syndicated Facility Agreement. This was partially offset by a decrease in interest expense compared to the six months ended June 30, 2018, during which the Company incurred interest on a term loan established for the Curragh acquisition. This loan was repaid in full on October 24, 2018.
Loss on Debt Extinguishment
For the six months ended June 30, 2018, the Company recognized a loss on debt extinguishment of $3.9 million relating to the extinguishment of a term loan that occurred in conjunction with the Curragh acquisition on March 29, 2018. There was no debt extinguishment cost for the six months ended June 30, 2019.
Other, Net
Other, net income was $1.0 million for the six months ended June 30, 2019, a decrease of $27.9 million, as compared to other, net expense $26.8 million for the six months ended June 30, 2018. This favorable variance is primarily comprised of non-recurring costs incurred for the six months ended June 30, 2018 relating to the $15.7 million loss on the settlement of a foreign exchange swaps recognized at the time of the Curragh acquisition and a fair value adjustment of $4.9 million on interest rate swaps that were in place during the six months ended June 30, 2018. The remaining difference mainly relates to foreign exchange gains or losses recognized in the translation of monetary items that were denominated in a currency different to the functional currency of operations of the Company.
Supplemental Segment Financial Data
Three Months Ended June 30, 2019 Compared to Three Months Ended June 30, 2018
Curragh
|
| For Three Months Ended June 30, |
| ||||||
|
| ($ in thousands) |
| ||||||
|
| 2019 |
| 2018 |
| Change |
| % |
|
Sales Volume (MMt) |
| 3.3 |
| 3.1 |
| 0.2 |
| 6.5 | % |
Total revenues ($) |
| 412,810 |
| 386,756 |
| 26,054 |
| 6.7 | % |
Coal revenues ($) |
| 403,703 |
| 374,534 |
| 29,169 |
| 7.8 | % |
Average realized price per Mt sold ($/Mt) |
| 121.3 |
| 121.0 |
| 0.3 |
| 0.2 | % |
Met Sales Volume (MMt) |
| 2.5 |
| 2.2 |
| 0.3 |
| 13.6 | % |
Met coal Revenues ($) |
| 377,016 |
| 348,871 |
| 28,145 |
| 8.1 | % |
Average realized met price per Mt sold ($/Mt) |
| 151.4 |
| 158.3 |
| (6.9 | ) | (4.4 | )% |
Mining costs ($) |
| 133,104 |
| 177,665 |
| (44,561 | ) | (25.1 | )% |
Mining cost per Mt sold ($/Mt) |
| 40.0 |
| 57.5 |
| (17.5 | ) | (30.4 | )% |
Operating costs ($) |
| 260,796 |
| 287,012 |
| (26,216 | ) | (9.1 | )% |
Operating costs per Mt sold ($/Mt) |
| 78.3 |
| 92.9 |
| (14.6 | ) | (15.7 | )% |
Segment Adjusted EBITDA ($) |
| 151,561 |
| 99,979 |
| 51,582 |
| 51.6 | % |
Coalcoal revenues for Curragh forour Australian Operations increased by $88.7 million driven by the three months ended June 30, 2019 were $403.7 million, an increaseimpacts of $29.2 million or 7.8%, comparedseasonal wet weather, equipment breakdown, additional fleet mobilized to $374.5 million for the three months ended June 30, 2018. This increase was driven largely by an increase in the export met sales volumes of 0.3Mt, partially offset by a decrease in average realized met price per Mt sold of $7.0 per ton.
Operating costs decreased by $26.2 million, or 9.1%, for the three months ended June 30, 2019 compared to the three months ended June 30, 2018. This decrease was driven primarily by mining costs which decreased by $44.6 million as a result of: (1) the three months to June 30, 2018 included the unwind of a $21.4 million fair value adjustment recognized to coal inventories on acquisition of Curragh, which was incurred as coal was sold during the period;accelerate overburden removal and (2) favorableunfavorable average foreign exchange rate on translation of the Curragh operationsAustralian Operations for the nine months ended September 30, 2021 of A$/US$: 0.76 compared to 0.68 for the same period in 2020.
Depreciation, Depletion and Amortization
Depreciation, depletion and amortization was $132.8 million for the nine months ended September 30, 2021, a decrease of $2.8 million, as compared to $135.5 million for the nine months ended September 30, 2020. The decrease was associated with lower production in our Australian Operations impacting assets depreciated under units of production method. In addition, depreciation on the Greenbrier mining asset at our U.S. Operations ceased since its idling on April 1, 2020.
Freight Expenses
Freight expenses totaled $166.1 million for the nine months ended September 30, 2021, an increase of $32.6 million, compared to $133.5 million for the nine months ended September 30, 2020. Our U.S. Operations contributed to $24.9 million of the increase due to higher sales volume related to certain contracts for which we arrange and pay for transportation to port that did not exist to the same extent in the nine months ended September 30, 2020. The remaining increase relates to our Australian Operations, primarily driven by unfavorable average foreign exchange rate.
Stanwell Rebate
The Stanwell rebate was $43.2 million for the nine months ended September 30, 2021, a decrease of $39.4 million, as compared to $82.6 million for the nine months ended September 30, 2020. The decrease was largely driven by lower realized export reference coal pricing for the prior twelve-month period, partially offset by unfavorable average foreign exchange rate on translation of the Australian Operations.
Other Royalties
Other royalties were $83.2 million for the nine months ended September 30, 2021, an increase of $18.1 million, as compared to $65.2 million for the nine months ended September 30, 2020. Higher royalties were a product of higher average realized export pricing and higher volumes for the nine months period ended September 30, 2021 compared to the same period in 2020.
Interest Expense, net
Interest expense, net of $50.0 million for the nine months ended September 30, 2021 increased $13.5 million, as compared to $36.5 million for the nine months ended September 30, 2020. The increase in interest expense was due to a higher average interest rate for the nine months ended September 30, 2021, compared to the same period in 2020, partially offset by lower average interest-bearing liabilities period-over-period.
Decrease in provision for discounting and credit losses
We recognized a provision for discounting and credit losses of $9.3 million as at December 31, 2020, largely in respect of past due trade receivables from Xcoal. During the nine months ended September 30, 2021, the provision for discounting and credit losses, with respect to Xcoal past due balance, was fully unwound to account for passage of time and repayment in full, resulting in a benefit of $9.0 million recorded in the Company’s results of operations.
Income tax benefit
Income tax benefit of $1.8 million for the nine months ended September 30, 2021 decreased by $29.7 million, as compared to $31.5 million for the nine months ended September 30, 2020. The decrease includes a valuation allowance of $19.8 million recognized during the period against deferred tax assets of our Australian Operations.
The income tax benefit for the nine months ended September 30, 2021 is based on an annual effective tax rate of 11.28%, a decrease from 16.04% for the nine months ended September 30, 2020.
Coronado Global Resources Inc. Form 10-Q September 30, 202131
Supplemental Segment Financial Data
Three months ended September 30, 2021 compared to three months ended September 30, 2020
Australia
|
| Three months ended September 30, | ||||||
|
| 2021 |
| 2020 |
| Change |
| % |
|
| (in US$ thousands) | ||||||
Sales volume (MMt) |
| 2.8 |
| 3.6 |
| (0.8) |
| (23.4)% |
Total revenues ($) |
| 342,372 |
| 271,413 |
| 70,959 |
| 26.1% |
Coal revenues ($) |
| 332,558 |
| 262,491 |
| 70,067 |
| 26.7% |
Average realized price per Mt sold ($/Mt) |
| 119.7 |
| 72.4 |
| 47.3 |
| 65.3% |
Met sales volume (MMt) |
| 2.0 |
| 2.7 |
| (0.7) |
| (26.3)% |
Met coal revenues ($) |
| 306,033 |
| 233,063 |
| 72,970 |
| 31.3% |
Average realized Met price per Mt sold ($/Mt) |
| 154.9 |
| 86.9 |
| 68.0 |
| 78.3% |
Mining costs ($) |
| 180,837 |
| 176,706 |
| 4,131 |
| 2.3% |
Mining cost per Mt sold ($/Mt) |
| 67.4 |
| 49.9 |
| 17.5 |
| 35.1% |
Operating costs ($) |
| 275,784 |
| 270,430 |
| 5,354 |
| 2.0% |
Operating costs per Mt sold ($/Mt) |
| 99.2 |
| 74.6 |
| 24.6 |
| 33.0% |
Segment Adjusted EBITDA ($) |
| 67,383 |
| 2,144 |
| 65,239 |
| 3,042.9% |
Coal revenues for Australian Operations for the three months ended JuneSeptember 30, 20192021 were $332.6 million, an increase of A$/US$: 0.71 versus 0.76$70.1 million or 26.7%, compared to $262.5 million for the three months ended JuneSeptember 30, 2018. Lower2020. This increase was largely driven by higher average realized Met coal pricing as a result of strong demand from destination markets other than China, which continues to restrict importation of Australian coal, and tight supply in the global market. The average realized Met coal price for the quarter ended September 30, 2021 was $154.9 per Mt sold, $68.0 per Mt sold higher compared to the same quarter last year. Sales volume of 2.8 MMt decreased by 0.8 MMt compared to 3.6 MMt for the three months ended September 30, 2020, driven by lower production and sales slippage into the fourth quarter.
Operating costs increased by $5.4 million, or 2.0%, for the three months ended September 30, 2021, compared to the three months ended September 30, 2020. The increase was driven by higher mining costs and higher sales volumes caused the miningother royalties, partially offset by lower freight and Stanwell rebate (mainly due to lower realized coal pricing on a twelve-month look back). Mining cost per ton of $67.4 per Mt sold for the three months ended JuneSeptember 30, 20192021 was 35.1% higher compared to decreasethe three months ended September 30, 2020, impacted by $17.5 per Mt sold. The decreaselow coal availability primarily from changes in mining costs were partially offset by higher freight costs of $5.5 million, driven by higher railingsmine sequencing during the quarter planned to port and higher export sales volumes, and higher Stanwell rebates which increased by $13.0 million due mainly to higher sales volumes.improve future coal availability.
Adjusted EBITDA increased by $51.6 million, or 51.6%, to $151.6of $67.4 million for the three months ended JuneSeptember 30, 2019 as2021 increased by $65.2 million compared to $100.0 million for the six months ended June 30, 2018, due to lower operating costs and higher coal revenues.
Buchanan
|
| For Three Months Ended June 30, |
| ||||||
|
| ($ in thousands) |
| ||||||
|
| 2019 |
| 2018 |
| Change |
| % |
|
Sales Volume (MMt) |
| 1.2 |
| 1.2 |
| — |
| — |
|
Total revenues ($) |
| 128,713 |
| 126,292 |
| 2,421 |
| 1.9 | % |
Coal revenues ($) |
| 128,664 |
| 126,292 |
| 2,372 |
| 1.9 | % |
Average realized price per Mt sold ($/Mt) |
| 103.0 |
| 104.9 |
| (1.9 | ) | (1.8 | )% |
Met Sales Volume (MMt) |
| 1.2 |
| 1.1 |
| 0.1 |
| 9.1 | % |
Met coal Revenues ($) |
| 125,837 |
| 122,771 |
| 3,066 |
| 2.5 | % |
Average realized met price per Mt sold ($/Mt) |
| 104.8 |
| 107.3 |
| (2.5 | ) | (2.3 | )% |
Mining costs ($) |
| 64,605 |
| 66,469 |
| (1,864 | ) | (2.8 | )% |
Mining cost per Mt sold ($/Mt) |
| 51.7 |
| 55.2 |
| (3.5 | ) | (6.3 | )% |
Operating costs ($) |
| 68,472 |
| 91,049 |
| (22,577 | ) | (24.8 | )% |
Operating costs per Mt sold ($/Mt) |
| 54.8 |
| 75.7 |
| (20.9 | ) | (27.6 | )% |
Segment Adjusted EBITDA ($) |
| 60,289 |
| 35,257 |
| 25,032 |
| 71.0 | % |
Coal revenue increased by $2.4 million, or 1.9%, to $128.7$2.1 million for the three months ended JuneSeptember 30, 2019 as compared2020, driven by higher coal revenues, partially offset by increase in operating costs.
United States
|
| Three months ended September 30, | ||||||
|
| 2021 |
| 2020 |
| Change |
| % |
|
| (in US$ thousands) | ||||||
Sales volume (MMt) |
| 1.8 |
| 1.3 |
| 0.5 |
| 42.9% |
Total revenues ($) |
| 231,219 |
| 104,972 |
| 126,247 |
| 120.3% |
Coal revenues ($) |
| 230,729 |
| 104,246 |
| 126,483 |
| 121.3% |
Average realized price per Mt sold ($/Mt) |
| 128.7 |
| 83.1 |
| 45.6 |
| 54.9% |
Met sales volume (MMt) |
| 1.7 |
| 1.2 |
| 0.5 |
| 41.0% |
Met coal revenues ($) |
| 228,561 |
| 103,401 |
| 125,160 |
| 121.0% |
Average realized Met price per Mt sold ($/Mt) |
| 131.6 |
| 84.0 |
| 47.6 |
| 56.7% |
Mining costs ($) |
| 109,385 |
| 81,249 |
| 28,136 |
| 34.6% |
Mining cost per Mt sold ($/Mt) |
| 62.7 |
| 64.8 |
| (2.1) |
| (3.2)% |
Operating costs ($) |
| 143,145 |
| 90,872 |
| 52,273 |
| 57.5% |
Operating costs per Mt sold ($/Mt) |
| 79.9 |
| 72.4 |
| 7.5 |
| 10.4% |
Segment Adjusted EBITDA ($) |
| 88,441 |
| 14,413 |
| 74,028 |
| 513.6% |
Coal revenues increased by $126.5 million, or 121.3%, to $126.3$230.7 million for the three months ended JuneSeptember 30, 2018. This increase was driven by higher Met coal sales volumes of 0.1 MMt or 9.1%. This was partially offset by a lower average realized price due to import tariffs on U.S. coal imposed by China during the quarter.
Operating costs decreased by $22.6 million, or 24.8%, for the three months ended June 30, 20192021 compared to the three months ended June 30, 2018. This decrease was primarily driven by the CONSOL Energy contingent royalty of $19.4 million related to the mark-to-market adjustment and one less year remaining in the contingent payment period. Prior year reflects a significant adjustment for higher forecast export pricing related to the mark-to-market calculation. In addition, royalty expense was lower by $1.4 million related to a higher percentage of owned production (no royalty) mined in the second quarter 2019 compared to second quarter 2018. Additionally, mining costs decreased by $1.9 million. The decrease in operating costs resulted in a corresponding decrease of operating cost per ton of $20.9/t for the three months ended June 30, 2019 compared to the three months ended June 30, 2018, as there was no significant change to sales volumes when comparing the two periods.
For the three months ended June 30, 2019 adjusted EBITDA improved $25.0 million, or 71%, compared to the comparative quarter. The improvement was primarily generated by the favorable mark-to-market adjustments related to the CONSOL Energy contingent royalty and lower royalties related to mining a higher percentage of owned coal versus leased coal. In addition, higher Met sales and lower mine costs contributed to the improved performance. This was partially offset by lower average realized pricing related to import tariffs on U.S. coal imposed by China.
Logan
|
| For Three Months Ended June 30, |
| ||||||
|
| ($ in thousands) |
| ||||||
|
| 2019 |
| 2018 |
| Change |
| % |
|
Sales Volume (MMt) |
| 0.7 |
| 0.7 |
| — |
| — |
|
Total revenues ($) |
| 81,610 |
| 59,230 |
| 22,380 |
| 37.8 | % |
Coal revenues ($) |
| 80,111 |
| 59,230 |
| 20,881 |
| 35.3 | % |
Average realized price per Mt sold ($/Mt) |
| 119.7 |
| 84.6 |
| 35.1 |
| 41.5 | % |
Met Sales Volume (MMt) |
| 0.5 |
| 0.4 |
| 0.1 |
| 25.0 | % |
Met coal Revenues ($) |
| 68,053 |
| 47,443 |
| 20,610 |
| 43.4 | % |
Average realized met price per Mt sold ($/Mt) |
| 146.1 |
| 106.8 |
| 39.3 |
| 36.8 | % |
Mining costs ($) |
| 53,714 |
| 44,840 |
| 8,874 |
| 19.8 | % |
Mining cost per Mt sold ($/Mt) |
| 80.3 |
| 64.1 |
| 16.2 |
| 25.3 | % |
Operating costs ($) |
| 63,689 |
| 50,185 |
| 13,504 |
| 26.9 | % |
Operating costs per Mt sold ($/Mt) |
| 95.2 |
| 71.7 |
| 23.5 |
| 32.8 | % |
Segment Adjusted EBITDA ($) |
| 18,126 |
| 10,710 |
| 7,416 |
| 69.2 | % |
Coal revenues increased by $20.9 million, or 35.3%, to $80.1$104.2 million for the three months ended JuneSeptember 30, 2019 as2020. This increase was largely driven by higher Met
Coronado Global Resources Inc. Form 10-Q September 30, 202132
coal sales volumes in the quarter ended September 30, 2021 of 0.5 MMt, driven by strong U.S. sourced coal demand, particularly into China, exceeding pre-COVID-19 pandemic levels. As the import restrictions on Australian coal continue, our U.S. Operations have benefited from their ability to export coal to China in the current elevated price environment resulting in average realized Met coal pricing for the three months ended September 30, 2021 of $131.6 per Mt sold, $47.6 per Mt or 56.7% higher compared to $59.2$84.0 per Mt sold for the same period in 2020.
Operating costs increased by $52.3 million, or 57.5%, to $143.1 million for the three months ended JuneSeptember 30, 2018. This improvement was driven by increased Met coal sales volume and a higher average realized price for high volatile coal, due2021, compared to committed sales contracts and to improved sales mix.
Total operating costs increased $13.5 million, to $63.7of $90.9 million for the three months ended JuneSeptember 30, 2019, compared2020. The increase was due to operatinghigher mining costs of $50.2$28.1 million, as a result of higher sales and production volumes, combined with higher freight expenses.
Adjusted EBITDA of $88.4 million for the three months ended JuneSeptember 30, 2018. The increase was primarily due to higher cost production at existing operations, driven2021 increased by mining conditions, and production set-up costs related to three additional mines coming online in 2019. Additionally, freight expense increased due to new sales contracts, which includes the cost of rail and port services to certain customers. The increase in operating costs resulted in a corresponding increase of operating cost per ton of $19.3/t for the three months ended June 30, 2019 compared to the three months ended June 30, 2018, as there was no significant change to sales volumes when comparing the two periods.
Adjusted EBITDA for the three months ended June 30, 2019 increased $7.4 million, or 69.2%, to $18.1$74.0 million compared to $10.7$14.4 million for the three months ended JuneSeptember 30, 2018. Improved performance relates to increased demand and higher prices for high volatile coal on committed contracts. Partially offsetting this is higher cost production and a change in the production mix, with the addition of the three new operations.
Greenbrier
|
| For Three Months Ended June 30, |
| ||||||
|
| ($ in thousands) |
| ||||||
|
| 2019 |
| 2018 |
| Change |
| % |
|
Sales Volume (MMt) |
| 0.1 |
| 0.2 |
| (0.1 | ) | (50.0 | )% |
Total revenues ($) |
| 19,324 |
| 18,292 |
| 1,032 |
| 5.6 | % |
Coal revenues ($) |
| 18,212 |
| 17,454 |
| 758 |
| 4.3 | % |
Average realized price per Mt sold ($/Mt) |
| 145.6 |
| 99.9 |
| 45.7 |
| 45.7 | % |
Met Sales Volume (MMt) |
| 0.1 |
| 0.2 |
| (0.1 | ) | (50.0 | )% |
Met coal Revenues ($) |
| 17,766 |
| 17,427 |
| 339 |
| 1.9 | % |
Average realized met price per Mt sold ($/Mt) |
| 155.7 |
| 100.0 |
| 55.7 |
| 55.7 | % |
Mining costs ($) |
| 12,714 |
| 16,335 |
| (3,621 | ) | (22.2 | )% |
Mining cost per Mt sold ($/Mt) |
| 101.6 |
| 93.5 |
| 8.1 |
| 8.7 | % |
Operating costs ($) |
| 18,135 |
| 18,482 |
| (347 | ) | (1.9 | )% |
Operating costs per Mt sold ($/Mt) |
| 145.0 |
| 105.8 |
| 39.2 |
| 37.1 | % |
Segment Adjusted EBITDA ($) |
| 1,227 |
| (188 | ) | 1,415 |
| (752.7 | )% |
Coal revenues increased by $0.8 million, or 4.3%, to $18.2 million for the three months ended June 30, 2019 as compared to $17.5 million for the three months ended June 30, 2018. This increase was2020, driven by higher average realized pricing, partly offset by lowerincreased sales volumes. The lower sales volume is primarily related to the exhaustion of the Pollock Knob reserve, lack of purchased coal available for blending, and lower production volume due to adverse geological mining conditions and equipment downtime.
Total operating costs at Greenbrier for the three months ended June 30, 2019, were relatively in line with total operating costs for the three months ended June 30, 2018. However, operating costs per ton increased $39.2 per ton due to lower sales volumes and additional freight expenses driven by new rail and port arrangements with certain customers that did not exist in the comparative period.
Adjusted EBITDA improved $1.4 million, resulting in $1.2 million of EBITDA for the three months ended June 30, 2019, compared to EBITDA of ($0.2) million for the three months ended June 30, 2018. Improved performance was primarily related to increased demand for mid vol coal and higher average realized pricing.Met coal pricing, partially offset by higher operating costs.
Corporate and Other Adjusted EBITDA
The following table presents a summary of the components of Corporate and Other Adjusted EBITDA:
|
| Three months ended September 30, | ||||||||||
|
|
| 2021 |
|
| 2020 |
|
| Change |
|
| % |
|
| (in US$ thousands) | ||||||||||
Selling, general, and administrative expenses |
| $ | 8,042 |
| $ | 6,785 |
| $ | 1,257 |
|
| 18.5% |
Other, net |
|
| 42 |
|
| 221 |
|
| (179) |
|
| n/m |
Total Corporate and Other Adjusted EBITDA |
| $ | 8,084 |
| $ | 7,006 |
| $ | 1,078 |
|
| 15.4% |
n/m – Not meaningful for comparison.
Adjusted EBITDA loss of $8.9Corporate and other costs increased $1.1 million to $8.1 million for the three months ended JuneSeptember 30, 2019 increased $2.3 million2021, as compared to $6.6$7.0 million for the three months ended JuneSeptember 30, 2018.2020. The 2018 period included fair value mark-to-market gains with respect to interest rate swapsincrease in selling, general, and administrative expenses was primarily driven by timing of $3.4 million.certain corporate costs.
Coronado Global Resources Inc. Form 10-Q September 30, 202133
Mining and operating costs for Three Months Ended Junethe three months ended September 30, 2019 Compared2021 compared to Three Months Ended Junethree months ended September 30, 20182020
A reconciliation of segment costs and expenses, segment operating costs, and segment mining costs is shown below:
|
| Three months ended September 30, 2021 | ||||||||||
|
| (in US$ thousands) | ||||||||||
|
|
| Australia |
|
| United States |
|
| Other / Corporate |
|
| Total Consolidated |
Total costs and expenses |
| $ | 294,219 |
| $ | 162,866 |
| $ | 8,349 |
| $ | 465,434 |
Less: Selling, general and administrative expense |
|
| — |
|
| — |
|
| (8,044) |
|
| (8,044) |
Less: Restructuring costs |
|
| — |
|
| — |
|
| — |
|
| — |
Less: Depreciation, depletion and amortization |
|
| (18,435) |
|
| (19,721) |
|
| (305) |
|
| (38,461) |
Total operating costs |
|
| 275,784 |
|
| 143,145 |
|
| — |
|
| 418,929 |
Less: Other royalties |
|
| (30,835) |
|
| (8,264) |
|
| — |
|
| (39,099) |
Less: Stanwell rebate |
|
| (12,274) |
|
| — |
|
| — |
|
| (12,274) |
Less: Freight expenses |
|
| (39,974) |
|
| (18,069) |
|
| — |
|
| (58,043) |
Less: Other non-mining costs |
|
| (11,864) |
|
| (7,427) |
|
| — |
|
| (19,291) |
Total mining costs |
|
| 180,837 |
|
| 109,385 |
|
| — |
|
| 290,222 |
Sales Volume excluding non-produced coal (MMt) |
|
| 2.7 |
|
| 1.7 |
|
| — |
|
| 4.4 |
Mining cost per Mt sold ($/Mt) |
|
| 67.4 |
|
| 62.7 |
|
| — |
|
| 65.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three months ended September 30, 2020 | ||||||||||
|
| (in US$ thousands) | ||||||||||
|
|
| Australia |
|
| United States |
|
| Other / Corporate |
|
| Total Consolidated |
Total costs and expenses |
| $ | 296,737 |
| $ | 113,056 |
| $ | 6,987 |
| $ | 416,780 |
Less: Selling, general and administrative expense |
|
| — |
|
| — |
|
| (6,785) |
|
| (6,785) |
Less: Depreciation, depletion and amortization |
|
| (26,307) |
|
| (22,184) |
|
| (202) |
|
| (48,693) |
Total operating costs |
|
| 270,430 |
|
| 90,872 |
|
| — |
|
| 361,302 |
Less: Other royalties |
|
| (18,496) |
|
| (3,201) |
|
| — |
|
| (21,697) |
Less: Stanwell rebate |
|
| (25,157) |
|
| — |
|
| — |
|
| (25,157) |
Less: Freight expenses |
|
| (44,168) |
|
| (6,422) |
|
| — |
|
| (50,590) |
Less: Other non-mining costs |
|
| (5,903) |
|
| — |
|
| — |
|
| (5,903) |
Total mining costs |
|
| 176,706 |
|
| 81,249 |
|
| — |
|
| 257,955 |
Sales Volume excluding non-produced coal (MMt) |
|
| 3.5 |
|
| 1.3 |
|
| — |
|
| 4.8 |
Mining cost per Mt sold ($/Mt) |
|
| 49.9 |
|
| 64.8 |
|
| — |
|
| 53.8 |
|
| For Three Months Ended June 30, 2019 |
| ||||||||||
|
| ($ in thousands) |
| ||||||||||
|
| Curragh |
| Buchanan |
| Logan |
| Greenbrier |
| Other / |
| Total |
|
Total costs and expenses |
| 283,948 |
| 80,212 |
| 70,626 |
| 22,006 |
| 9,050 |
| 465,842 |
|
Less: Selling, general and administrative expense |
| (282 | ) | — |
| — |
| — |
| (8,960 | ) | (9,242 | ) |
Less: Depreciation, depletion and amortization |
| (22,870 | ) | (11,740 | ) | (6,937 | ) | (3,871 | ) | (90 | ) | (45,508 | ) |
Total operating costs |
| 260,796 |
| 68,472 |
| 63,689 |
| 18,135 |
| — |
| 411,092 |
|
Less: Other royalties |
| (39,209 | ) | (3,506 | ) | (5,302 | ) | (1,056 | ) | — |
| (49,073 | ) |
Less: Stanwell rebate |
| (45,847 | ) | — |
| — |
| — |
| — |
| (45,847 | ) |
Less: Freight expenses |
| (42,636 | ) | (361 | ) | (4,673 | ) | (4,365 | ) | — |
| (52,035 | ) |
Total mining costs |
| 133,104 |
| 64,605 |
| 53,714 |
| 12,714 |
| — |
| 264,137 |
|
|
| For Three Months Ended June 30, 2018 |
| ||||||||||
|
| ($ in thousands) |
| ||||||||||
|
| Curragh |
| Buchanan |
| Logan |
| Greenbrier |
| Other / |
| Total |
|
Total costs and expenses |
| 309,469 |
| 101,559 |
| 56,874 |
| 21,859 |
| 8,074 |
| 497,835 |
|
Less: Selling, general and administrative expense |
| (439 | ) | — |
| — |
| — |
| (8,074 | ) | (8,513 | ) |
Less: Depreciation, depletion and amortization |
| (22,018 | ) | (10,510 | ) | (6,689 | ) | (3,377 | ) | — |
| (42,594 | ) |
Total operating costs |
| 287,012 |
| 91,049 |
| 50,185 |
| 18,482 |
| — |
| 446,728 |
|
Less: Other royalties |
| (38,241 | ) | (24,279 | ) | (3,869 | ) | (1,306 | ) | — |
| (67,695 | ) |
Less: Stanwell rebate |
| (32,812 | ) | — |
| — |
| — |
| — |
| (32,812 | ) |
Less: Freight expenses |
| (38,294 | ) | (301 | ) | (1,476 | ) | (841 | ) | — |
| (40,912 | ) |
Total mining costs |
| 177,665 |
| 66,469 |
| 44,840 |
| 16,335 |
| — |
| 305,309 |
|
Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018
Curragh
The unaudited pro forma supplemental financial data of CurraghAverage realized Met coal revenue for the sixthree months ended JuneSeptember 30, 2018, presented in the table below, has been derived from the unaudited consolidated pro forma statements of operations included in this Form 10-Q and gives effect2021 compared to each of the Curragh acquisition as if it had occurred on January 1, 2018. The commentary below compares Curragh’s result for the sixthree months ended JuneSeptember 30, 2019 to the pro forma results for the six months ended June 30, 2018 to provide more meaningful analysis of the segment performance.2020
|
| For Six Months Ended June 30, |
| ||||||
|
| ($ in thousands) |
| ||||||
|
| 2019 |
| Pro |
| Change |
| % |
|
Sales Volume (MMt) |
| 6.4 |
| 5.8 |
| 0.6 |
| 10.3 | % |
Total revenues ($) |
| 794,182 |
| 703,879 |
| 90,303 |
| 12.8 | % |
Coal revenues ($) |
| 775,942 |
| 688,028 |
| 87,914 |
| 12.8 | % |
Average realized price per Mt sold ($/Mt) |
| 121.5 |
| 118.8 |
| 2.7 |
| 2.3 | % |
Met Sales Volume (MMt) |
| 4.8 |
| 4.1 |
| 0.7 |
| 17.1 | % |
Met coal Revenues ($) |
| 727,964 |
| 638,811 |
| 89,153 |
| 14.0 | % |
Average realized met price per Mt sold ($/Mt) |
| 152.3 |
| 154.7 |
| (2.4 | ) | (1.5 | )% |
Mining costs ($) |
| 272,201 |
| 323,171 |
| (50,970 | ) | (15.8 | )% |
Mining cost per Mt sold ($/Mt) |
| 42.6 |
| 55.8 |
| (13.2 | ) | (23.6 | )% |
Operating costs ($) |
| 522,169 |
| 541,710 |
| (19,541 | ) | (3.6 | )% |
Operating costs per Mt sold ($/Mt) |
| 81.8 |
| 93.6 |
| (11.8 | ) | (12.6 | )% |
Segment Adjusted EBITDA ($) |
| 271,709 |
| 164,764 |
| 106,945 |
| 64.9 | % |
A reconciliation of unaudited pro forma financial datathe Company’s average realized Met coal revenue is shown below:
|
| Historical Curragh |
| Post-Acquisition |
| For six months |
|
($ in thousands) |
| January 1, 2018 - |
| March 30, 2018 - |
| Total Pro forma |
|
Sales Volume (MMt) |
| 2.7 |
| 3.1 |
| 5.8 |
|
Total revenues ($) |
| 316,500 |
| 387,379 |
| 703,879 |
|
Coal revenues ($) |
| 313,494 |
| 374,534 |
| 688,028 |
|
Average realized price per Mt sold ($/Mt) |
| 114.3 |
| 121.2 |
| 118.8 |
|
Met Sales Volume (MMt) |
| 1.9 |
| 2.2 |
| 4.1 |
|
Met coal Revenues ($) |
| 289,325 |
| 349,486 |
| 638,811 |
|
Average realized met price per Mt sold ($/Mt) |
| 150.6 |
| 158.3 |
| 154.7 |
|
Mining costs ($) |
| 145,506 |
| 177,699 |
| 323,205 |
|
Mining cost per Mt sold ($/Mt) |
| 53.1 |
| 57.5 |
| 55.8 |
|
Operating costs ($) |
| 254,698 |
| 286,913 |
| 541,611 |
|
Operating costs per Mt sold ($/Mt) |
| 94.3 |
| 92.9 |
| 93.6 |
|
Segment Adjusted EBITDA ($) |
| 64,785 |
| 99,979 |
| 164,764 |
|
|
| Three months ended September 30, | ||||||
|
| 2021 |
| 2020 |
| Change |
| % |
|
| (in US$ thousands) | ||||||
Met sales volume (MMt) |
| 3.7 |
| 3.9 |
| (0.2) |
| (5.1)% |
Met coal revenues ($) |
| 534,594 |
| 336,464 |
| 198,130 |
| 58.9% |
Average realized Met price per Mt sold ($/Mt) |
| 144.0 |
| 86.0 |
| 58.0 |
| 67.5% |
($ in thousands) |
| Historical Curragh |
| Post-Acquisition |
| For six months |
|
Curragh Segment Pro forma |
| January 1, 2018 - |
| March 30, 2018 - |
| Total Pro forma |
|
Net Income (loss) |
| (308,947 | ) | 54,217 |
| (254,730 | ) |
Add: Income tax expense (benefit) |
| 17,772 |
| 23,867 |
| 41,639 |
|
Add: Interest expense (net of income) |
| 341,703 |
| (124 | ) | 341,579 |
|
Add: Depreciation, depletion and amortization |
| 14,257 |
| 22,019 |
| 36,276 |
|
Adjusted EBITDA |
| 64,785 |
| 99,979 |
| 164,764 |
|
Coronado Global Resources Inc. Form 10-Q September 30, 202134
Pro forma
Nine months ended September 30, 2021 compared to Nine months ended September 30, 2020
Australia
|
| Nine months ended September 30, | ||||||
|
| 2021 |
| 2020 |
| Change |
| % |
|
| (in US$ thousands) | ||||||
Sales volume (MMt) |
| 8.5 |
| 9.2 |
| (0.7) |
| (7.5)% |
Total revenues ($) |
| 832,098 |
| 744,968 |
| 87,130 |
| 11.7% |
Coal revenues ($) |
| 804,757 |
| 720,972 |
| 83,785 |
| 11.6% |
Average realized price per Mt sold ($/Mt) |
| 94.5 |
| 78.3 |
| 16.2 |
| 20.7% |
Met sales volume (MMt) |
| 6.3 |
| 6.6 |
| (0.3) |
| (4.5)% |
Met coal revenues ($) |
| 734,143 |
| 640,893 |
| 93,250 |
| 14.6% |
Average realized Met price per Mt sold ($/Mt) |
| 117.0 |
| 97.5 |
| 19.5 |
| 20.0% |
Mining costs ($) |
| 535,568 |
| 475,547 |
| 60,021 |
| 12.6% |
Mining cost per Mt sold ($/Mt) |
| 65.7 |
| 52.4 |
| 13.3 |
| 25.4% |
Operating costs ($) |
| 801,837 |
| 737,033 |
| 64,804 |
| 8.8% |
Operating costs per Mt sold ($/Mt) |
| 94.1 |
| 80.0 |
| 14.1 |
| 17.6% |
Segment Adjusted EBITDA ($) |
| 30,445 |
| 8,406 |
| 22,039 |
| 262.2% |
Coal revenues for Australian Operations for the nine months ended September 30, 2021 were $804.8 million, an increase of $83.8 million, or 11.6%, compared to $721.0 million for the nine months ended September 30, 2020. This increase was largely driven by higher average realized Met price of $117.0 per Mt, an increase of $19.5 per Mt, as compared to $97.5 per Mt sold during the same period in 2020 benefiting from strong demand and supply shortage in the global seaborne export markets. This increase was partially offset by lower sales volume of 8.5 MMt compared to 9.2 MMt for the nine months ended September 30, 2020 due to lower production combined with sales slippage into the fourth quarter of 2021.
Operating costs increased by $64.8 million, or 8.8%, for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020. The increase was driven by higher mining costs, other royalties and freight costs, partially offset by lower Stanwell rebate (mainly due to lower realized coal pricing on a twelve-month look back period). Mining cost per ton of $65.7 per Mt sold was 25.5% higher compared to the nine months ended September 30, 2020, impacted by higher seasonal wet weather, mine equipment breakdown, planned equipment maintenance, additional fleet mobilized to accelerate overburden removal and unfavorable average foreign exchange rate on translation of the Australian Operations for the nine months ended September 30, 2021 of A$/US$: 0.76 compared to 0.68 for the nine months ended September 30, 2020.
For the nine months ended September 30, 2021, Adjusted EBITDA increased by $22.0 million, or 262.2%, compared to Adjusted EBITDA of $8.4 million for the nine months ended September 30, 2020. This increase was primarily driven by higher coal revenues partially offset by higher operating costs.
United States
|
| Nine months ended September 30, | ||||||
|
| 2021 |
| 2020 |
| Change |
| % |
|
| (in US$ thousands) | ||||||
Sales volume (MMt) |
| 4.9 |
| 4.0 |
| 0.9 |
| 23.2% |
Total revenues ($) |
| 541,860 |
| 345,083 |
| 196,777 |
| 57.0% |
Coal revenues ($) |
| 539,496 |
| 340,582 |
| 198,914 |
| 58.4% |
Average realized price per Mt sold ($/Mt) |
| 109.0 |
| 84.8 |
| 24.2 |
| 28.6% |
Met sales volume (MMt) |
| 4.8 |
| 3.9 |
| 0.9 |
| 21.7% |
Met coal revenues ($) |
| 534,017 |
| 337,599 |
| 196,418 |
| 58.2% |
Average realized Met price per Mt sold ($/Mt) |
| 111.5 |
| 85.8 |
| 25.7 |
| 30.0% |
Mining costs ($) |
| 307,732 |
| 254,794 |
| 52,938 |
| 20.8% |
Mining cost per Mt sold ($/Mt) |
| 63.0 |
| 64.4 |
| (1.4) |
| (2.2)% |
Operating costs ($) |
| 380,412 |
| 289,367 |
| 91,045 |
| 31.5% |
Operating costs per Mt sold ($/Mt) |
| 76.9 |
| 72.1 |
| 4.8 |
| 6.7% |
Segment Adjusted EBITDA ($) |
| 164,404 |
| 56,153 |
| 108,251 |
| 192.8% |
Coal revenues increased by $87.9$198.9 million, or 12.8%58.4%, to $775.9$539.5. million for the sixnine months ended JuneSeptember 30, 20192021, as compared to $688.0$340.6 million for the sixnine months ended JuneSeptember 30, 2018.2020. This increase was mainly driven by higher Met coal sales volumes whichdriven by strong U.S. -sourced coal demand, particularly into China, exceeding pre-COVID-19 pandemic levels, whereas the U.S. Operations were idled for two months during the nine months period ended September 30, 2020.
Coronado Global Resources Inc. Form 10-Q September 30, 202135
Additionally, our U.S. Operations saw an increase in average realized Met coal pricing of $25.7 per Mt sold to $111.5 per Mt sold for the nine months ended September 30, 2021, compared to $85.8 per Mt sold for the 2020 period. The increase reflected a strong U.S.-sourced coal demand into China following Chinese restrictions on imports of Australian-sourced coal.
Operating costs increased 0.7 MMtby $91.0 million, or 17.1%31.5%, to 4.8MMt for the six months ended June 30, 2019 as compared to 4.1 MMt for the six months ended June 30, 2018.
Pro forma operating costs decreased by $19.5 million, or 3.6%, to $522.2$380.4 million for the sixnine months ended JuneSeptember 30, 2019 compared to $541.7 million in the six months ended June 30, 2018 primarily driven by a decrease in mining costs per
Mt sold of $42.6 per ton as compared to $55.8 per ton for the six months ended June 30, 2018. Pro forma mining cost per Mt sold was higher for the six months ended June 30, 2018 due to: (1) the unwind of a $21.4 million fair value adjustment recognized to coal inventories on acquisition of Curragh that was unwound during the three months ended June 30, 2018 as the coal was sold and (2) unplanned outages at the wash plant. The decrease in pro forma operating costs were partially offset by higher Stanwell rebates which increased by $9.0 million due mainly to higher sales volumes.
Adjusted EBITDA for the six months ended June 30, 2019 was $271.7 million, an improvement of $106.9 million (or 64.9%) over the pro forma Adjusted EBITDA for the six months ended June 30, 2018. Lower operating costs and higher coal revenues were two key factors that contributed to the higher Adjusted EBITDA.
Buchanan
|
| For Six Months Ended June 30, |
| ||||||
|
| ($ in thousands) |
| ||||||
|
| 2019 |
| 2018 |
| Change |
| % |
|
Sales Volume (MMt) |
| 2.4 |
| 2.4 |
| — |
| — |
|
Total revenues ($) |
| 251,437 |
| 260,501 |
| (9,064 | ) | (3.5 | )% |
Coal revenues ($) |
| 251,353 |
| 260,462 |
| (9,109 | ) | (3.5 | )% |
Average realized price per Mt sold ($/Mt) |
| 103.9 |
| 109.3 |
| (5.4 | ) | (5.0 | )% |
Met Sales Volume (MMt) |
| 2.3 |
| 2.3 |
| — |
| — |
|
Met coal Revenues ($) |
| 245,047 |
| 253,335 |
| (8,288 | ) | (3.3 | )% |
Average realized met price per Mt sold ($/Mt) |
| 106.0 |
| 111.8 |
| (5.8 | ) | (5.2 | )% |
Mining costs ($) |
| 130,286 |
| 123,877 |
| 6,409 |
| 5.2 | % |
Mining cost per Mt sold ($/Mt) |
| 53.8 |
| 52.0 |
| 1.8 |
| 3.5 | % |
Operating costs ($) |
| 135,095 |
| 160,814 |
| (25,719 | ) | (16.0 | )% |
Operating costs per Mt sold ($/Mt) |
| 55.8 |
| 67.5 |
| (11.7 | ) | (17.3 | )% |
Segment Adjusted EBITDA ($) |
| 116,401 |
| 99,701 |
| 16,700 |
| 16.8 | % |
Coal revenues decreased by $9.1 million, or 3.5%, to $251.4 million for the six months ended June 30, 2019 as compared to $260.5 million for the six months ended June 30, 2018. This decrease was driven by lower average realized price due to import tariffs on U.S. coal imposed by China and changes to the sales mix, partially offset by stronger pricing on domestic Met sales.
Total operating costs improved $25.7 million to $135.1 million for the six months ended June 30, 2019,2021, compared to operating costs of $160.8$289.4 million for the sixnine months ended JuneSeptember 30, 2018.2020. The improvement was primarily related to the mark-to-market adjustment for the CONSOL Energy contingent royalty and mining a greater percentage of owned coal versus leased coal. This improvement was partially offset by increased mining costs of $6.4 million due to adverse mining conditions. The overall improvement in operating costs resulted in a corresponding improvement in operating costs per ton of $11.7/t for the six months ended June 30, 2019, compared to the six months ended June 30, 2018, as there was no significant change to sales volumes when comparing the two periods.
Adjusted EBITDA for the six months ended June 30, 2019 was $116.4 million, an improvement of $16.7 million (or 16.8%) over the six months ended June 20, 2018. Lower royalties related to the CONSOL Energy contingent royalty and mining a greater percentage of owned coal versus lease coal were partially offset by higher mine costs resulting from adverse mining conditions.
Logan
|
| For Six Months Ended June 30, |
| ||||||
|
| ($ in thousands) |
| ||||||
|
| 2019 |
| 2018 |
| Change |
| % |
|
Sales Volume (MMt) |
| 1.3 |
| 1.3 |
| — |
| — |
|
Total revenues ($) |
| 155,919 |
| 112,655 |
| 41,264 |
| 36.6 | % |
Coal revenues ($) |
| 153,629 |
| 112,655 |
| 40,974 |
| 36.4 | % |
Average realized price per Mt sold ($/Mt) |
| 114.4 |
| 84.8 |
| 29.6 |
| 34.9 | % |
Met Sales Volume (MMt) |
| 0.9 |
| 0.9 |
| — |
| — |
|
Met coal Revenues ($) |
| 131,421 |
| 93,201 |
| 38,220 |
| 41.0 | % |
Average realized met price per Mt sold ($/Mt) |
| 139.0 |
| 103.4 |
| 35.6 |
| 34.5 | % |
Mining costs ($) |
| 104,765 |
| 89,175 |
| 15,590 |
| 17.5 | % |
Mining cost per Mt sold ($/Mt) |
| 78.0 |
| 67.1 |
| 10.9 |
| 16.2 | % |
Operating costs ($) |
| 120,925 |
| 99,444 |
| 21,481 |
| 21.6 | % |
Operating costs per Mt sold ($/Mt) |
| 90.0 |
| 74.8 |
| 15.2 |
| 20.3 | % |
Segment Adjusted EBITDA ($) |
| 35,291 |
| 15,501 |
| 19,790 |
| 127.7 | % |
Coal revenue increased by $41.0 million, or 36.4%, to $153.6 million for the six months ended June 30, 2019 as compared to $112.7 million for the six months ended June 30, 2018. This increase was driven by a higher average realized price for high volatile coal due to higher committed contract prices, as well as improvements to the sales mix.
For the six months ended June 30, 2019 total operating costs at Logan increased $21.5 million, or 21.6%, to $120.9 million compared to $99.4 million for the six months ended June 30, 2018. Mining costs increased $15.6 million, primarily due to higher costmining costs of $52.9 million, an increase of 20.8% compared to the same period in 2020, as a result of production at existing operations,returning to pre-COVID-19 pandemic levels, whereas the U.S. Operations were idled for two months during the nine months ended September 30, 2020, combined with higher freight expenses driven by mining conditions,increase in sales volume and productionfor certain contracts for which we arrange and pay for transportation costs related to three additional mines coming online in 2019. Freight expense increased $2.9 million driven by new rail and port arrangements with certain customers that did not exist to the same extent in the comparative period. Other royaltiesnine months to September 30, 2020.
Adjusted EBITDA increased $3.0by $108.3 million, due to higher revenues. The increase in operating costs resulted in a corresponding increase of operating cost per ton of $15.2/tor 192.8%, for the sixnine months ended JuneSeptember 30, 2019,2021 compared to the six months ended June 30, 2018, as there was no significant change to sales volumes when comparing the two periods.
Adjusted EBITDA improved by $19.8 million to $35.3of $56.2 million for the sixnine months ended JuneSeptember 30, 2019, compared to $15.5 million for the six months ended June 30, 2018, a 127.7%2020. This increase as the $41.0 million increase in coal revenues more than offset the $21.5 million of increased operating costs.
Greenbrier
|
| For Six Months Ended June 30, |
| ||||||
|
| ($ in thousands) |
| ||||||
|
| 2019 |
| 2018 |
| Change |
| % |
|
Sales Volume (MMt) |
| 0.2 |
| 0.4 |
| (0.2 | ) | (50.0 | )% |
Total revenues ($) |
| 32,797 |
| 38,188 |
| (5,391 | ) | (14.1 | )% |
Coal revenues ($) |
| 31,563 |
| 36,695 |
| (5,132 | ) | (14.0 | )% |
Average realized price per Mt sold ($/Mt) |
| 133.6 |
| 101.4 |
| 32.2 |
| 31.8 | % |
Met Sales Volume (MMt) |
| 0.2 |
| 0.3 |
| (0.1 | ) | (33.3 | )% |
Met coal Revenues ($) |
| 31,067 |
| 35,982 |
| (4,915 | ) | (13.7 | )% |
Average realized met price per Mt sold ($/Mt) |
| 138.3 |
| 104.1 |
| 34.2 |
| 32.9 | % |
Mining costs ($) |
| 26,445 |
| 33,905 |
| (7,460 | ) | (22.0 | )% |
Mining cost per Mt sold ($/Mt) |
| 111.9 |
| 93.7 |
| 18.2 |
| 19.4 | % |
Operating costs ($) |
| 32,965 |
| 38,305 |
| (5,340 | ) | (13.9 | )% |
Operating costs per Mt sold ($/Mt) |
| 139.5 |
| 105.9 |
| 33.6 |
| 31.7 | % |
Segment Adjusted EBITDA ($) |
| (81 | ) | 983 |
| (1,064 | ) | (108.2 | )% |
Coal revenue decreased by $5.1 million, or 14.0%, to $31.6 million for the six months ended June 30, 2019, as compared to $36.7 million for the six months ended June 30, 2018. This decrease was primarily driven by lowerdemand and production returning to pre-COVID-19 pandemic levels, higher average realized Met coal price per Mt sold and increased sales volumes, partially offset by higher average realized price. The lower sales volume is primarily related to the exhaustion of the Pollock Knob reserve, lack of purchased coal available for blending, and lower production volume due to adverse geological mining conditions and equipment downtime.operating costs.
For the six months ended June 30, 2019, total operating costs improved by $5.3 million to $33.0 million, compared to costs of $38.3 million for the six months ended June 30, 2018. The improvement was primarily due to lower sales volumes, partially offset by an increase in freight expense driven by new rail and port arrangements with certain customers that did not exist in the comparative period. Operating cost per ton increased by $31.7 to $139.5, of which approximately $18/t was due the increased freight expenses. Additionally, lower production volumes related to the exhaustion of the Pollock Knob reserve and to adverse geological mining conditions and equipment downtime, impacted average cost per ton.
Adjusted EBITDA declined $1.1 million on lower sales volume to ($0.1) million for the six months ended June 30, 2019, compared to adjusted EBITDA of $1.0 million for the six months ended June 30, 2018.
Corporate and Other Adjusted EBITDA
The following table presents a summary of the components of Corporate and Other Adjusted EBITDA:
|
| Nine months ended September 30, | ||||||||||
|
|
| 2021 |
|
| 2020 |
|
| Change |
|
| % |
|
| (in US$ thousands) | ||||||||||
Selling, general, and administrative expenses |
| $ | 21,244 |
| $ | 20,138 |
| $ | 1,106 |
|
| 5.5% |
Other, net |
|
| 164 |
|
| (75) |
|
| 239 |
|
| (318.7)% |
Total Corporate and Other Adjusted EBITDA |
| $ | 21,408 |
| $ | 20,063 |
| $ | 1,345 |
|
| 6.7% |
|
| For Six Months Ended June 30, |
| ||||||
|
| ($ in thousands) |
| ||||||
|
| 2019 |
| 2018 |
| $ |
| % |
|
Salaries |
| 6,344 |
| 4,695 |
| 1,649 |
| 35.1 | % |
Professional and consultancy fees |
| 7,362 |
| 10,182 |
| (2,820 | ) | (27.7 | )% |
Office and operational fees |
| 1,045 |
| 1,191 |
| (146 | ) | (12.3 | )% |
Dues, registration fees and licenses |
| 107 |
| 33,103 |
| (32,996 | ) | (99.7 | )% |
Loss on foreign exchange swap |
| — |
| 15,695 |
| (15,695 | ) | (100.0 | )% |
Other |
| 3,107 |
| 9,470 |
| (6,363 | ) | (67.2 | )% |
Total Corporate and Other Adjusted EBITDA |
| 17,965 |
| 74,336 |
| (56,371 | ) | (75.8 | )% |
Adjusted EBITDA loss of $74.3Corporate and other costs increased $1.3 million to $21.4 million for the sixnine months ended JuneSeptember 30, 2018 includes one-time costs2021, as compared to $20.1 million for the nine months ended September 30, 2020. The increase in relation to professionalselling, general, and consultancy fees and stamp duty of $33.0 million and a loss onadministrative expenses was primarily driven by unfavorable average foreign exchange rate on translation of $15.7 million incurred in relationthe Australian corporate entities for the nine months ended September 30, 2021 compared to the Curragh acquisition, the Reorganization Transaction2020 period, partially offset by improved efficiencies and the Australian IPO.cost savings initiatives to reduce corporate spend in 2021 compared to 2020.
Coronado Global Resources Inc. Form 10-Q September 30, 202136
Mining and operating costs for Six Months Ended Junethe Nine months ended September 30, 2019 Compared2021 compared to Six Months Ended JuneNine months ended September 30, 20182020
A reconciliation of segment costs and expenses, segment operating costs, and segment mining costs is shown below:
|
| Nine months ended September 30, 2021 | ||||||||||
|
| (in US$ thousands) | ||||||||||
|
|
| Australia |
|
| United States |
|
| Other / Corporate |
|
| Total Consolidated |
Total costs and expenses |
| $ | 872,875 |
| $ | 443,696 |
| $ | 21,982 |
| $ | 1,338,553 |
Less: Selling, general and administrative expense |
|
| — |
|
| — |
|
| (21,250) |
|
| (21,250) |
Less: Restructuring costs |
|
| (2,300) |
|
| — |
|
| — |
|
| (2,300) |
Less: Depreciation, depletion and amortization |
|
| (68,738) |
|
| (63,284) |
|
| (732) |
|
| (132,754) |
Total operating costs |
|
| 801,837 |
|
| 380,412 |
|
| — |
|
| 1,182,249 |
Less: Other royalties |
|
| (63,873) |
|
| (19,346) |
|
| — |
|
| (83,219) |
Less: Stanwell rebate |
|
| (43,169) |
|
| — |
|
| — |
|
| (43,169) |
Less: Freight expenses |
|
| (122,061) |
|
| (44,029) |
|
| — |
|
| (166,090) |
Less: Other non-mining costs |
|
| (37,166) |
|
| (9,305) |
|
| — |
|
| (46,471) |
Total mining costs |
|
| 535,568 |
|
| 307,732 |
|
| — |
|
| 843,300 |
Sales Volume excluding non-produced coal (MMt) |
|
| 8.2 |
|
| 4.9 |
|
| — |
|
| 13.1 |
Mining cost per Mt sold ($/Mt) |
|
| 65.7 |
|
| 63.0 |
|
| — |
|
| 64.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine months ended September 30, 2020 | ||||||||||
|
| (in US$ thousands) | ||||||||||
|
|
| Australia |
|
| United States |
|
| Other / Corporate |
|
| Total Consolidated |
Total costs and expenses |
| $ | 803,420 |
| $ | 357,947 |
| $ | 20,713 |
| $ | 1,182,080 |
Less: Selling, general and administrative expense |
|
| — |
|
| — |
|
| (20,138) |
|
| (20,138) |
Less: Depreciation, depletion and amortization |
|
| (66,387) |
|
| (68,580) |
|
| (575) |
|
| (135,542) |
Total operating costs |
|
| 737,033 |
|
| 289,367 |
|
| — |
|
| 1,026,400 |
Less: Other royalties |
|
| (56,003) |
|
| (9,148) |
|
| — |
|
| (65,151) |
Less: Stanwell rebate |
|
| (82,571) |
|
| — |
|
| — |
|
| (82,571) |
Less: Freight expenses |
|
| (114,386) |
|
| (19,089) |
|
| — |
|
| (133,475) |
Less: Other non-mining costs |
|
| (8,526) |
|
| (6,336) |
|
| — |
|
| (14,862) |
Total mining costs |
|
| 475,547 |
|
| 254,794 |
|
| — |
|
| 730,341 |
Sales Volume excluding non-produced coal (MMt) |
|
| 9.1 |
|
| 4.0 |
|
| — |
|
| 13.1 |
Mining cost per Mt sold ($/Mt) |
|
| 52.4 |
|
| 64.4 |
|
| — |
|
| 56.0 |
Average realized Met price for the Nine months ended September 30, 2021 compared to Nine months ended September 30, 2020
|
| For Six Months Ended June 30, 2019 |
| ||||||||||
|
| ($ in thousands) |
| ||||||||||
|
| Curragh |
| Buchanan |
| Logan |
| Greenbrier |
| Other / |
| Total |
|
Total costs and expenses |
| 564,658 |
| 157,770 |
| 134,457 |
| 39,703 |
| 18,156 |
| 914,744 |
|
Less: Selling, general and administrative expense |
| (332 | ) | — |
| — |
| — |
| (17,979 | ) | (18,311 | ) |
Less: Depreciation, depletion and amortization |
| (42,157 | ) | (22,675 | ) | (13,532 | ) | (6,738 | ) | (177 | ) | (85,279 | ) |
Total operating costs |
| 522,169 |
| 135,095 |
| 120,925 |
| 32,965 |
| — |
| 811,154 |
|
Less: Other royalties |
| (77,100 | ) | (4,284 | ) | (9,996 | ) | (2,042 | ) | — |
| (93,422 | ) |
Less: Stanwell rebate |
| (94,674 | ) | — |
| — |
| — |
| — |
| (94,674 | ) |
Less: Freight expenses |
| (78,194 | ) | (526 | ) | (6,164 | ) | (4,478 | ) | — |
| (89,362 | ) |
Total mining costs |
| 272,201 |
| 130,285 |
| 104,765 |
| 26,445 |
| — |
| 533,696 |
|
A reconciliation of the Company’s average realized Met coal price is shown below:
|
| For Six Months Ended June 30, 2018 |
| ||||||||||
|
| ($ in thousands) |
| ||||||||||
|
| Curragh |
| Buchanan |
| Logan |
| Greenbrier |
| Other / |
| Total |
|
Total costs and expenses |
| 309,469 |
| 183,678 |
| 112,148 |
| 45,120 |
| 51,844 |
| 702,259 |
|
Less: Selling, general and administrative expense |
| (439 | ) | — |
| — |
| — |
| (51,844 | ) | (52,283 | ) |
Less: Depreciation, depletion and amortization |
| (22,019 | ) | (22,864 | ) | (12,704 | ) | (6,815 | ) | — |
| (64,402 | ) |
Total operating costs |
| 287,011 |
| 160,814 |
| 99,444 |
| 38,305 |
| — |
| 585,574 |
|
Less: Other royalties |
| (38,242 | ) | (35,132 | ) | (7,000 | ) | (2,613 | ) | — |
| (82,987 | ) |
Less: Stanwell rebate |
| (32,812 | ) | — |
| — |
| — |
| — |
| (32,812 | ) |
Less: Freight expenses |
| (38,294 | ) | (1,805 | ) | (3,269 | ) | (1,787 | ) | — |
| (45,155 | ) |
Total mining costs |
| 177,663 |
| 123,877 |
| 89,175 |
| 33,905 |
| — |
| 424,620 |
|
|
| Nine months ended September 30, | ||||||
|
| 2021 |
| 2020 |
| Change |
| % |
|
| (in US$ thousands) | ||||||
Met sales volume (MMt) |
| 11.1 |
| 10.5 |
| 0.6 |
| 5.3% |
Met coal revenues ($) |
| 1,268,160 |
| 978,492 |
| 289,668 |
| 29.6% |
Average realized Met price per Mt sold ($/Mt) |
| 114.6 |
| 93.1 |
| 21.5 |
| 23.1% |
Coronado Global Resources Inc. Form 10-Q September 30, 202137
Reconciliation of Non-GAAP Financial Measures
Adjusted EBITDA
|
| Three months ended September 30, |
| Nine months ended September 30, | ||||||||
|
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
|
| (in US$ thousands) |
|
| (in US$ thousands) | ||||||
Reconciliation to Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
| $ | 81,988 |
| $ | (41,794) |
| $ | (14,069) |
| $ | (164,989) |
Add: Depreciation, depletion and amortization |
|
| 38,461 |
|
| 48,693 |
|
| 132,754 |
|
| 135,542 |
Add: Interest expense (net of income) |
|
| 18,251 |
|
| 12,207 |
|
| 49,982 |
|
| 36,528 |
Add: Other foreign exchange losses |
|
| 2,487 |
|
| 1,614 |
|
| 4,376 |
|
| 5,829 |
Add: Loss on extinguishment of debt |
|
| — |
|
| — |
|
| 5,744 |
|
| — |
Add: Income tax (benefit) expense |
|
| 9,096 |
|
| (11,169) |
|
| (1,788) |
|
| (31,525) |
Add: Impairment of assets |
|
| — |
|
| — |
|
| — |
|
| 63,111 |
Add: Restructuring costs |
|
| — |
|
| — |
|
| 2,300 |
|
| — |
Add: Losses on idled assets held for sale |
|
| (113) |
|
| — |
|
| 2,216 |
|
| — |
Add: Decrease in provision for discounting and credit losses |
|
| (2,430) |
|
| — |
|
| (8,074) |
|
| — |
Adjusted EBITDA |
| $ | 147,740 |
| $ | 9,551 |
| $ | 173,441 |
| $ | 44,496 |
|
| For Three Months |
| For Six Months |
| ||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
|
|
| ($ in thousands) |
| ||||||
Reconciliation to Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
Net Income |
| 117,506 |
| 59,322 |
| 214,326 |
| 35,651 |
|
Add: Depreciation, depletion and amortization |
| 45,508 |
| 42,594 |
| 85,279 |
| 64,402 |
|
Add: Interest expense (net of income) |
| 9,087 |
| 18,987 |
| 17,264 |
| 25,488 |
|
Add: Other foreign exchange losses (gains) |
| 3,157 |
| 5,290 |
| (557 | ) | 6,848 |
|
Add: Loss on retirement of debt |
| — |
| — |
| — |
| 3,905 |
|
Add: Income tax expense |
| 47,033 |
| 12,995 |
| 89,043 |
| 5,534 |
|
Adjusted EBITDA |
| 222,291 |
| 139,188 |
| 405,355 |
| 141,828 |
|
Liquidity and Capital Resources
Overview
Overview
Our objective is to maintain a prudent capital structure and to ensure that sufficient liquid assets and funding is available to meet both anticipated and unanticipated financial obligations, including unforeseen events that could have an adverse impact on revenues or costs. Our principal sources of funds are cash and cash equivalents, cash flow from operations and borrowingsavailability under the SFA.ABL Facility.
Our main uses of cash have historically been and are expected to continue to be, the funding of our operations, working capital, and capital expenditure, debt service obligations and payment of dividends. Going forward, we will use cash to fund debt service payments on the Notes, the ABL Facility and our other indebtedness, to fund operating activities, working capital, capital expenditures, redemption of Notes and, if declared, payment of dividends. Based on our outlook for the next 12twelve months, which is subject to continued changing demand from our customers, and volatility in coal prices, ongoing interruptions and uncertainties surrounding China’s import restrictions, such as trade barriers imposed by China on Australian-sourced coal and the uncertainty of impacts from the COVID-19 pandemic on the global economy, we expect to generatebelieve expected cash generated from operations together with available borrowing facilities and other strategic and financial initiatives, will be sufficient to meet the needs of our existing operations, capital expenditure and service our debt obligations and fund our dividends.obligations.
Our ability to generate sufficient cash depends on our future performance which may be subject to a number of factors beyond our control, including general economic, financial and competitive conditions and other risks described in this document, Part I, Item 1A. “Risk Factors” of our registration statementAnnual Report on Form 10, as amended,10-K for the year ended December 31, 2020, filed with the SEC and ASX on June 28, 2019. Over time, we may seek additional funding from a rangeFebruary 25, 2021, and Part II, Item 1A. “Risk Factors” of sources to diversify our funding sources.Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021, filed with the SEC and ASX on May 10, 2021.
Liquidity as of JuneSeptember 30, 20192021 and December 31, 20182020 was as follows:
|
|
| September 30, 2021 |
|
| December 31, 2020 |
|
|
| (in US$ thousands) | |||
Cash, excluding restricted cash |
| $ | 195,727 |
| $ | 45,485 |
Availability under ABL Facility (1) |
|
| 100,000 |
|
| — |
Availability under Revolving Syndicate Facility Agreement |
|
| — |
|
| 222,375 |
Total |
| $ | 295,727 |
| $ | 267,860 |
(1)The ABL Facility contains a springing fixed charge coverage ratio of not less than 1.00 to 1.00, which ratio is tested if availability under the ABL facility is less than $17.5 million for five consecutive business days or less than $15.0 million on any business day.
|
| June 30, 2019 |
| December 31, 2018 |
| ||
|
| ($ in thousands) |
| ||||
Cash, excluding restricted cash |
| $ | 46,001 |
| $ | 124,656 |
|
Availability under Revolving Syndicate Facility Agreement |
| 350,000 |
| 350,000 |
| ||
Total |
| $ | 396,001 |
| $ | 474,656 |
|
Coronado Global Resources Inc. Form 10-Q September 30, 202138
Total Indebtedness
Our total indebtedness as of JuneSeptember 30, 20192021 and December 31, 20182020 consisted of the following:
|
|
| September 30, 2021 |
|
| December 31, 2020 |
|
|
| (in US$ thousands) | |||
Current instalments of other financial liabilities and finance lease obligations |
| $ | 13,153 |
| $ | 4,231 |
Interest bearing liabilities, excluding current instalments |
|
| 332,817 |
|
| 327,625 |
Other financial liabilities, excluding current instalments |
|
| 14,980 |
|
| — |
Total |
| $ | 360,950 |
| $ | 331,856 |
|
| June 30, 2019 |
| December 31, 2018 |
| ||
|
| ($ in thousands) |
| ||||
Finance/capital lease liabilities |
| $ | 3,103 |
| $ | 3,789 |
|
Other financial liabilities |
| 15,823 |
| 11,800 |
| ||
Total |
| $ | 18,926 |
| $ | 15,589 |
|
Liquidity
As of JuneSeptember 30, 2019,2021, available liquidity was $396.0$295.7 million, comprising cash and cash equivalents (excluding restricted cash) of $195.7 million and $100.0 million of available under our ABL Facility.
As of December 31, 2020, available liquidity was $267.9 million, comprising cash and cash equivalents of $46.0$45.5 million and $350.0$222.4 million of available borrowing facilities. As
In light of December 31, 2018,the COVID-19 pandemic, the Company has taken steps to strengthen its financial position and maintain financial flexibility.
On January 6, 2021, we raised financing of $23.5 million (A$30.2 million) following the completion of sale and leaseback arrangements with a third-party financier for selected heavy mining equipment assets at our Australian Operations. The proceeds we received from the transaction were used to repay a portion of drawn balances under the extinguished SFA.
During the quarter ended June 30, 2021, we successfully completed a refinancing initiative, which consisted of the ABL Facility of $100.0 million, an offering of $350.0 million aggregate principal amount of the Notes and the fully underwritten equity Entitlement Offer of $101.4 million. A portion of the proceeds from these transactions were used to, among other things (i) repay all outstanding obligations under the SFA, and to terminate such agreement; (ii) cash collateralize and replace bank guarantees previously issued under the SFA; and (iii) pay discounts, fees and expenses related to the refinancing transactions. Refer to Note 5 “Capital Structure” and Note 11 “Interest Bearing Liabilities” to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
The new capital structure provides the Company financial flexibility by eliminating the application of the legacy SFA financial covenants and introducing new debt with terms that are more sustainable for our business. The arrangements also extended the debt maturity profile, provide a diversification of funding sources and strengthens our liquidity position.
The Company continues to actively review plans for reducing operating, corporate and capital expenditures to ensure sufficient available liquidity was $474.7 million comprising cashduring this period of uncertainty and cash equivalents of $124.7 million and $350.0 million of available borrowing facilities.volatility.
Cash
Cash
Cash is held in multicurrency interest bearing bank accounts available to be used to service the working capital needs of the Company. Cash balances surplus to immediate working capital requirements are invested in short-term interest-bearing deposit accounts.accounts or used to repay interest bearing liabilities.
Senior Secured Notes
On May 12, 2021, we issued $350.0 million aggregate principal amount of 10.750% Senior Secured Credit FacilitiesNotes due 2026. The Notes were issued at a price of 98.112% of their principal amount and mature on May 15, 2026. Interest on the Notes is payable semi-annually in arrears on May 15 and November 15 of each year. The Notes are senior secured obligations of the Company.
The terms of the Notes are governed by the Indenture which contains customary covenants for high yield bonds, including, but not limited to, limitation on certain investments, liens, indebtedness, asset sales, transactions with affiliates and restricted payments, including payment of dividends on capital stock.
To assistThe Indenture also contains customary events of default, including failure to make required payments, failure to comply with certain agreements or covenants, failure to pay or acceleration of certain other indebtedness, certain events of bankruptcy and insolvency, and failure to pay certain judgments. An event of default under the Indenture will allow either the Trustee or the holders of at least 25% in managing the potential volatility in economic and operational changes, which may influence the generation of free cash flow, the Company entered into a Syndicated Facility Agreement on September 15, 2018 providing two borrowing facilities:
· Facility A—$350 million multi-currency facility available for general working capital and corporate purposes; and
· Facility B—A$370 million bank guarantee facility.
The right to draw upon these facilities is conditional upon a number of provisions being satisfied at the time that each drawdown request is issued. These conditions include, among other things, that:
· no Event of Default is continuing or would result from the proposed loan;
· the representations, as defined in the Syndicated Facility Agreement, that are made are true in all material respects and not misleading; and
· theaggregate principal amount of the proposed loanthen-outstanding Notes to accelerate, or in certain cases, will notautomatically cause the committedacceleration of, the amounts due under the Notes. Refer to Note 11 “Interest Bearing Liabilities” to our unaudited condensed consolidated financial statements for further information
As of September 30, 2021, we were in compliance with all applicable covenants under the Indenture.
Coronado Global Resources Inc. Form 10-Q September 30, 202139
ABL Facility
On May 12, 2021, we entered into the ABL Facility agreement with an aggregate multi-currency lender commitment of up to $100.0 million, including a $30.0 million sublimit for the issuance of letters of credit and $5.0 million for swingline loans. As of September 30, 2021, no amounts were outstanding, and no outstanding letters of credit issued under the ABL Facility. The ABL Facility will mature on May 12, 2024.
Availability under the ABL Facility is limited to an eligible borrowing base, determined by applying customary advance rates to eligible accounts receivable and inventory and deducting certain reserves, which may be established by the agent in its reasonable credit discretion that could reasonably be expected to have an adverse effect on the value of the collateral included in the borrowing base.
Borrowings under the ABL facility limitbear interest at a rate equal to a BBSY rate plus an applicable margin. In addition to paying interest, we are also required to pay a fee in respect of unutilized commitments, on amounts available to be exceeded.drawn under outstanding letters of credits and certain administrative fees.
The ABL Facility contains customary representations and warranties and affirmative and negative covenants including, among others, a covenant regarding the maintenance of a fixed charge coverage ratio if certain conditions are triggered, covenants relating to financial reporting, covenants relating to the payment of dividends on, or purchase or redemption of, our capital stock, covenants relating to the incurrence or prepayment of certain debt, and covenants relating to the incurrence of liens or encumbrances, compliance with laws, transactions with affiliates, mergers and sales of all or substantially all of the our assets and limitations on changes in the nature of the Company’s business Borrowings under the ABL facility bear interest at a rate equal to a BBSY rate plus an applicable margin. In addition to paying interest, we are also required to pay a fee in respect of unutilized commitments, on amounts available to be drawn under outstanding letters of credits and certain administrative fees.
At JuneAs of September 30, 2019, Facility A had no borrowings outstanding,2021, we were in compliance with $350 million of availability undrawn.all applicable covenants under the ABL Facility.
Bank Guarantees and Surety Bonds
We are required to provide financial assurances and securities to satisfy contractual and other requirements generated in the normal course of business. Some of these assurances are provided to comply with state or other government agencies’ statutes and regulations. Facility B is available for this purpose and asAs of JuneSeptember 30, 2019,2021, we had issued Bank Guarantees totaling A$268.5outstanding bank guarantees of $45.7 million to satisfysecure various obligations and commitments. The Company provided cash, in the form of deposits, as collateral against these requirements, leaving A$101.5 million available under Facility B.bank guarantees.
In addition toFor the above, to satisfy an obligationU.S. Operations, in order to provide a U.S. dollarthe required financial assurance, we generally use surety bonds for post-mining reclamation. We can also use bank guaranteeletters of credit to a third party, on June 12, 2019collateralize certain obligations. As of September 30, 2021, we had outstanding surety bonds of $29.7 million, to secure various obligations and commitments. Future regulatory changes relating to these obligations could result in increased obligations, additional costs or additional collateral requirements.
Dividend
During the Company entered into a Bank Guarantee Facility Agreement with Westpac Banking Corporation with a limit of $28.6 million. At Junenine months to September 30, 2019 this facility was fully utilized.
Secured Credit Facilities Terms
Interest Rate
Borrowings under our Syndicated Facility Agreement bear interest at a floating rate which is either (i) LIBOR plus an applicable margin for US$ loans and (ii) Bank Bill Swap Bid Rate,2021, we did not pay dividends to stockholders or BBSY, bid plus an applicable margin for the A$ loan. The applicable margin for Facility A dependsCDI holders on the Net Debt to EBITDA ratio (as defined in the Syndicated Facility Agreement).ASX.
Financial Covenants
Under the SFA we are required to comply with financial covenants, namely leverage ratio, interest coverage ratio, tangible net worth.
Each financial covenant is calculated with reference to the definitions contained in the SFA. As of June 30, 2019, which was the last applicable compliance date under the SFA, we were in compliance with all applicable financial covenants under the SFA.
Dividend
We paid an aggregate dividend of $299.7 million on March 29, 2019 in A$ to holders of CDIs on the ASX as of March 5, 2019, based on the exchange rate on March 5, 2019.
Capital Requirements
Our main uses of cash have historically been and are expected to continue to be the funding of our operations, working capital, and capital expenditure, and the payment of interest and dividends. Following the refinancing transaction in May 2021, we intend to use cash to fund debt service payments on our Notes, the ABL Facility and our other indebtedness, to fund operating activities, working capital, capital expenditures, partial redemption of the Notes and, if declared, payment of dividends.
Coronado Global Resources Inc. Form 10-Q September 30, 202140
Historical Cash Flows
The following table summarizes our cash flows for the sixnine months ended JuneSeptember 30, 20192021 and 2018,2020, as reported in the accompanying consolidated financial statements:
Cash Flow
|
| Nine months ended September 30, | ||||
|
|
| 2021 |
|
| 2020 |
|
| (in US$ thousands) | ||||
Net cash provided by (used in) operating activities |
| $ | 171,115 |
| $ | (38,095) |
Net cash used in investing activities |
|
| (145,782) |
|
| (79,263) |
Net cash provided by financing activities |
|
| 122,623 |
|
| 102,206 |
Net change in cash and cash equivalents |
|
| 147,956 |
|
| (15,152) |
Effect of exchange rate changes on cash and restricted cash |
|
| 2,287 |
|
| 3,258 |
Cash and restricted cash at beginning of period |
|
| 45,736 |
|
| 26,553 |
Cash and restricted cash at end of period |
| $ | 195,979 |
| $ | 14,659 |
|
| Six Months Ended June 30, |
| ||
|
| 2019 |
| 2018 |
|
|
| ($ in thousands) |
| ||
Net cash provided by operating activities |
| 301,216 |
| 141,612 |
|
Net cash (used in) investing activities |
| (67,336 | ) | (584,335 | ) |
Net cash (used in) provided by financing activities |
| (312,145 | ) | 701,093 |
|
Net change in cash and cash equivalents |
| (78,265 | ) | 258,370 |
|
Effect of exchange rate changes on cash and restricted cash |
| (365 | ) | (2,384 | ) |
Cash and restricted cash at beginning of period |
| 124,881 |
| 28,069 |
|
Cash and restricted cash at end of period |
| 46,251 |
| 284,055 |
|
Operating activities
Net cash provided by operating activities was $301.2 million and $141.6$171.1 million for the sixnine months ended JuneSeptember 30, 2019 and 2018, respectively.2021, compared to a cash used in operating activities of $38.1 million for the nine months ended September 30, 2020. The increase in cash provided by operating activities duringwas driven by favorable movement in working capital, increase in coal revenues in the six months ended June 30, 2019 was primarily due to the additional cash contributedperiod partially offset by Curragh since it was acquired on March 29, 2018, and an improvement inhigher operating performance of the U.S. Operations.costs.
Investing activities
Net cash used in investing activities was $67.3$145.8 million for the sixnine months ended JuneSeptember 30, 2019,2021, compared to $584.3$79.3 million for the sixnine months ended JuneSeptember 30, 2018. Capital expenditure2020. Cash spent on capital expenditures for the sixnine months ended JuneSeptember 30, 20192021 was $66.4$75.9 million, of which $15.4$28.2 million related to Curragh and the remainderAustralian Operations, $46.1 million related to the U.S. Operations. Capital expenditureOperations and the remaining $1.6 million for other and corporate. During the nine months ended September 30, 2021, a net of $69.9 million of additional deposits were provided as collateral for bank guarantees and our U.S. Operationsworkers compensation obligations.
Financing activities
Net cash provided by financing activities was $51.0 million and $46.8$122.6 million for the sixnine months ended JuneSeptember 30, 2019 and 2018, respectively. Included in the cash flows in the six months ended June 30, 2018 was the cash consideration of $537.2 million used by Coronado2021, compared to purchase Curragh.
Financing activities
Net cash used in financing activities was $312.1$102.2 million for the sixnine months ended JuneSeptember 30, 2019, compared to $701.1 million of2020. Included in the net cash provided by financing activities duringfor the sixnine months ended JuneSeptember 30, 2018. Uses2021, were net proceeds from borrowings of cash$396.3 million, repayment of borrowings of $371.4 million and net proceeds from financing activities during the six months ended June 30, 2019 included $299.7 million for dividends paid to the shareholdersstock issuance of the Company and payments of contingent royalty consideration under the Value Share Mechanism of $12.7$97.7 million.
Included in the net cash provided in financing activities for the sixnine months ended JuneSeptember 30, 2018 was2020, were net proceeds from borrowings of $700.0$165.0 million, net proceeds from stock issuance of $171.6 million, repayment of borrowings of $216.8 million and $151.3 contributed by members of Coronado Group LLC (former parent$24.2 million for dividends paid to the shareholders of the Company), which were utilized for the purchaseCompany.
Coronado Global Resources Inc. Form 10-Q September 30, 202141
Contractual Obligations
There were no material changes toThe following is a summary of our contractual obligations at September 30, 2021:
|
| Payments Due By Year | |||||||||||||
|
|
| Total |
|
| Less than |
|
| 1 ‑ 3 |
|
| 3 ‑ 5 |
|
| More than |
|
|
|
|
|
| 1 Year |
|
| Years |
|
| Years |
|
| 5 Years |
|
| (in US$ thousands) | |||||||||||||
Long‑term debt obligations(1) |
| $ | 31,024 |
| $ | 7,295 |
| $ | 13,934 |
| $ | 9,795 |
| $ | — |
Senior secured notes (2) |
|
| 350,000 |
|
| — |
|
| — |
|
| 350,000 |
|
| — |
Mineral lease commitments(3) |
|
| 45,738 |
|
| 4,991 |
|
| 10,268 |
|
| 9,410 |
|
| 21,069 |
Operating and finance lease commitments |
|
| 26,322 |
|
| 9,555 |
|
| 14,640 |
|
| 1,721 |
|
| 406 |
Unconditional purchase obligations(4) |
|
| 14,968 |
|
| 14,968 |
|
| — |
|
| — |
|
| — |
Take‑or‑pay contracts(5) |
|
| 1,313,286 |
|
| 98,648 |
|
| 244,643 |
|
| 247,597 |
|
| 722,398 |
Total contractual cash obligations |
| $ | 1,781,338 |
| $ | 135,457 |
| $ | 283,485 |
| $ | 618,523 |
| $ | 743,873 |
(1)Represents financial obligation relating to amounts outstanding from financing equipment purchases, insurance premiums and financial liabilities for a sale and lease back type arrangement.
(2)Represents financial obligation outstanding under the information previously providedSenior Secured Notes. Refer to Note 11. “Interest bearing liabilities” in Item 2 of our registration statementthe accompanying audited unaudited condensed consolidated financial statements for additional discussion.
(3)Represents future minimum royalties and payments under mineral leases. Refer to Note 17. “Commitments” in the accompanying audited unaudited condensed consolidated financial statements for additional discussion.
(4)Represents firm purchase commitments for capital expenditures (based on Form 10, as amended, filed with the SEC and ASX on June 28, 2019,order to suppliers for capital purchases) for the year ended December 31, 2018.next twelve months.
(5)Represents various short- and long-term take-or-pay arrangements in Australia associated with rail and port commitments for the delivery of coal.
Critical Accounting Policies and Estimates
The preparation of our financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, we evaluate our estimates. Our estimates are based on historical experience and various other assumptions that we believe are appropriate, the results of which form the basis for making judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. All of these accounting estimates and assumptions, as well as the resulting impact to our financial statements, have been discussed with the audit committeeAudit Committee of our Board of Directors.
Our critical accounting policies are discussed in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” inof our registration statementAnnual Report on Form 10, as amended,10-K for the year ended December 31, 2020, filed with the SEC and ASX on June 28, 2019.February 25, 2021.
Newly Adopted Accounting Standards and Accounting Standards Not Yet Implemented
Unaudited Pro Forma Combined Financial Information
The followingSee Note 2. (a) “Newly Adopted Accounting Standards” to our unaudited condensed consolidated pro forma statements of operations present the combination of the historical financial statements of Coronado and Curragh, adjusted to give effect to the acquisition of Wesfarmers Curragh Pty Ltd by Coronado, which we refer to as the Curragh acquisition.
The unaudited consolidated pro forma statement of operations for the six months ended June 30, 2018 combine the historical consolidated statement of operations of Coronado and the historical combined statement of operations for Curragh, giving effect to the acquisition of Wesfarmers Curragh Pty Ltd by Coronado as if they had been consummated on January 1, 2018. This will facilitate a pro forma comparison between the six months ended June 30, 2019 and June 30, 2018 in Management’s Discussion and Analysis of Financial Condition and Results of Operations. We believe a discussion of these two periods is more meaningful as it is on a comparable basis.newly adopted accounting standards. As of September 30, 2021, there were no accounting standards not yet implemented.
Coronado Global Resources Inc. Form 10-Q September 30, 202142
The unaudited consolidated pro forma statements of operations do not reflect the costs of any integration activities or benefits. The unaudited pro forma adjustments are based upon current available information and assumptions that Coronado believes to be reasonable. The pro forma adjustments and related assumptions are described in the accompanying notes presented on the following pages.
The unaudited consolidated pro forma statements of operations are for informational purposes only and are not intended to represent or to be indicative of the actual results of operations or financial position that the combined business of Coronado and Curragh would have reported had the transactions been completed as of the dates set forth in the unaudited consolidated pro forma statements of operations and should not be taken as being indicative of Coronado’s future consolidated results of operation. The actual results may differ significantly from those reflected in the unaudited consolidated pro forma statements of operations for a number of reasons, including, but not limited to, differences between the assumptions used to prepare the unaudited consolidated pro forma statements of operations and actual amounts. As a result, the pro forma consolidated information does not purport to be indicative of what the results of operations would have been had the transaction been completed on the applicable dates of the unaudited consolidated pro forma statements of operations.
Unaudited Consolidated pro forma statement of operations
For the six months-ended June 30, 2018
(U.S. dollars and AUD in thousands)
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| Historical 1 January 2018 to 29 March 2018 |
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| Historical |
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| Note 2(a) |
| Note 2(b) |
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| Note 2(c) |
| Pro Forma adjustments |
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| Coronado |
| Curragh |
| Reclassification |
| IFRS to US |
| Curragh in |
| Curragh in |
| Pro forma |
| Note 2 |
| Consolidated |
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| USD |
| AUD |
| AUD |
| AUD |
| AUD |
| USD |
| USD |
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| USD |
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Revenues: |
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Coal revenues |
| 561,363 |
| 406,696 |
| — |
| — |
| 406,696 |
| 313,494 |
| — |
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| 874,857 |
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Coal revenues from related parties |
| 222,983 |
| — |
| — |
| — |
| — |
| — |
| — |
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| 222,983 |
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Other Revenues |
| 15,337 |
| — |
| — |
| — |
| — |
| — |
| 3,006 |
| (d | ) | 18,343 |
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Total Revenues |
| 799,683 |
| 406,696 |
| — |
| — |
| 406,696 |
| 313,494 |
| 3,006 |
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| 1,116,183 |
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Cost and expenses: |
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Cost of coal revenues (exclusive of items shown separately below) |
| 424,620 |
| 204,132 |
| (15,367 | ) | — |
| 188,765 |
| 145,506 |
| — |
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| 570,126 |
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Depreciation, depletion and amortization |
| 64,402 |
| — |
| 16,971 |
| 1,525 |
| 18,496 |
| 14,257 |
| 7,977 |
| (e | ) | 86,636 |
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Freight expense |
| 45,155 |
| — |
| 47,769 |
| — |
| 47,769 |
| 36,822 |
| — |
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| 81,977 |
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Stanwell rebate |
| 32,812 |
| — |
| 55,949 |
| — |
| 55,949 |
| 43,127 |
| — |
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| 75,939 |
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Other royalty expenses |
| 82,987 |
| 93,886 |
| (55,949 | ) | — |
| 37,937 |
| 29,243 |
| — |
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| 112,230 |
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Impairment |
| — |
| (263,097 | ) | — |
| 263,097 |
| — |
| — |
| — |
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| — |
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Selling, general, and administrative expenses |
| 52,283 |
| 50,098 |
| (47,769 | ) | — |
| 2,329 |
| 1,795 |
| (38,101 | ) | (f | ) | 15,977 |
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Total costs and expenses |
| 702,259 |
| 85,019 |
| 1,604 |
| 264,622 |
| 351,245 |
| 270,750 |
| (30,124 | ) |
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| 942,885 |
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Operating income |
| 97,424 |
| 321,677 |
| (1,604 | ) | (264,622 | ) | 55,451 |
| 42,744 |
| 33,130 |
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| 173,298 |
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Other income (expenses): |
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Interest income |
| 585 |
| — |
| — |
| — |
| — |
| — |
| — |
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| 585 |
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Interest expense |
| (26,073 | ) | (444,895 | ) | 1,604 |
| — |
| (443,291 | ) | (341,703 | ) | 336,058 |
| (g | ) | (31,718 | ) | ||
Loss on debt extinguishment |
| (3,905 | ) | — |
| — |
| — |
| — |
| — |
| 3,905 |
| (h | ) | — |
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Other, net |
| (26,846 | ) | 10,098 |
| — |
| — |
| 10,098 |
| 7,784 |
| 15,695 |
| (i | ) | (3,367 | ) | ||
Total other income (loss), net |
| (56,239 | ) | (434,797 | ) | 1,604 |
| — |
| (433,193 | ) | (333,919 | ) | 355,658 |
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| (34,500 | ) | ||
Income before tax |
| 41,185 |
| (113,120 | ) | — |
| (264,622 | ) | (377,742 | ) | (291,175 | ) | 388,788 |
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| 138,798 |
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Income tax expense |
| (5,534 | ) | (102,443 | ) | — |
| 79,387 |
| (23,056 | ) | (17,772 | ) | (4,314 | ) | (j | ) | (27,620 | ) | ||
Net income |
| 35,651 |
| (215,563 | ) | — |
| (185,235 | ) | (400,798 | ) | (308,947 | ) | 384,474 |
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| 111,178 |
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Less: Net loss attributable to noncontrolling interest |
| (4 | ) | — |
| — |
| — |
| — |
| — |
| — |
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| (4 | ) | ||
Net income (loss) attributable to Coronado Global Resources Inc. |
| 35,655 |
| (215,563 | ) | — |
| (185,235 | ) | (400,798 | ) | (308,947 | ) | 384,474 |
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| 111,182 |
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Earnings per share of common stock |
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Basic |
| 0.37 |
| — |
| — |
| — |
| — |
| — |
| — |
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| $ | 1.15 |
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Diluted |
| 0.37 |
| — |
| — |
| — |
| — |
| — |
| — |
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| $ | 1.15 |
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Average common shares outstanding |
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Basic |
| $ | 96,651,692 |
| — |
| — |
| — |
| — |
| — |
| — |
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| 96,651,692 |
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Diluted |
| $ | 96,656,067 |
| — |
| — |
| — |
| — |
| — |
| — |
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| 96,656,067 |
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See accompanying notes to the unaudited pro forma consolidated statement of operations.
Note 1. Basis of Preparation
The accompanying unaudited consolidated pro forma statement of operations was prepared in accordance with Article 11 of Regulation S-X and presents the pro forma combined results of operations of Coronado based upon the historical financial statements of each of Coronado and Curragh, after giving effect to the Curragh acquisition and change in tax status, and are intended to reflect the impact of the Curragh acquisition and change in tax status on Coronado’s statement of operations. The accompanying unaudited consolidated pro forma statement of operations has been prepared using, and should be read in conjunction with the consolidated financial statements of Coronado for the three and six months ended June 30, 2019. Assumptions and estimates underlying the pro forma adjustments are described in these notes.
The accompanying unaudited consolidated pro forma statement of operations is presented for illustrative purposes only and does not purport to be indicative of the actual results that would have been achieved by Coronado if the Curragh acquisition had been consummated as of the beginning of the periods presented or that will be achieved in the future. The unaudited consolidated pro forma statement of operations does not reflect the costs of any integration activities or benefits that may result from realization of synergies expected to result from the Curragh acquisition. In addition, throughout the period presented in the unaudited consolidated pro forma statement of operations until the date of acquisition on March 29, 2018, the operations of Curragh were conducted and accounted for as part of the former shareholder. Curragh’s unaudited combined financial information has been derived from the former shareholder’s historical accounting records and reflect certain allocations of direct costs and expenses. All of the allocations and estimates in such financial information are based on assumptions that the management of the former shareholder believes are reasonable. In the opinion of management, the unaudited consolidated pro forma statement of operations includes all normal and recurring adjustments that are considered necessary for the fair presentation of the results for the period presented. Curragh’s financial information does not necessarily represent the financial position of Curragh had it been operated as a stand-alone company during the period.
The unaudited consolidated pro forma statement of operations combines the historical consolidated statement of operations of Coronado for the three and six months ended June 30, 2018 and the unaudited combined financial information of Wesfarmer’s Curragh Pty Ltd for the three months ended March 29, 2018, giving effect to the Curragh acquisition as if both had been consummated on January 1, 2018.
Note 2. Income Statement Adjustments
The unaudited consolidated pro forma statement of operations reflects the following adjustments ($ in thousands):
(A) Reclassifications
These adjustments represent reclassifications to conform the accounting presentation of Curragh’s financial statements to Coronado’s financial statements.
(B) International Financial Reporting Standards, or IFRS, to U.S. GAAP adjustments (in AUD)
Impairment was adjusted as follows:
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(1) Represents the removal of the IFRS, impairment reversal consistent with pushing back the U.S. GAAP acquisition fair values to January 1, 2018 and the prohibition under U.S. GAAP of the reversal of impairment expense.
Depreciation, depletion and amortization was adjusted as follows:
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(1) Under U.S. GAAP, a company-specific risk adjusted discount rate is used which is higher than the discount rate required by IFRS. The higher discount rate under U.S. GAAP reduces the asset retirement obligation, or ARO, booked initially and results in a higher accretion expense each period as the discounted ARO balance increases.
See Note J for discussion of the calculation of the income tax expense.
(C) USD translation rate
In order to translate the Curragh AUD results into USD, an exchange rate of .7708 was utilized. This represents the average exchange rate for the period from January 1, 2018 to June 30, 2018.
(D) Other revenues
Other revenues were adjusted as follows:
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(1) Relates to the amortization of the Stanwell below market coal supply agreement, or CSA. The Stanwell below market CSA represents the fair value attributable to the Australian coal supply obligation arising from the Coronado Curragh business combination.
(E) Depreciation, depletion and amortization
Depreciation, depletion and amortization were adjusted as follows:
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(1) Represents the adjustment to Curragh’s historical depreciation and amortization as a result of preliminary fair value adjustments to the acquired depreciable assets, mineral reserves and amortizable intangible assets.
(F) Selling, general and administrative
Selling, general and administrative expenses were adjusted as follows:
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(1) Relates to advisory and legal fees incurred in the year ended June 30, 2018, which are directly attributable to the Curragh acquisition, but which are not expected to have a continuing impact on results following the consummation of the Curragh acquisition.
(G) Interest expense
Interest expense was adjusted as follows:
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(1) Represents the removal of the historical interest charge in relation to an intercompany loan Curragh had with its previous shareholder, which was assigned to Coronado upon acquisitions and is therefore eliminated in consolidation.
(2) Represents the reversal of interest expense related to the Bank of America Term Loan on Coronado’s Statement of Operations. This loan was extinguished on March 29, 2018 in conjunction with the acquisition of Curragh. In order to represent the financing in-place as if the acquisition occurred on January 1, 2018, the effects of this note have been removed.
(3) Represents additional interest expense related to the DB Term Loan. This $700 million loan, established on March 29, 2018, was used to partially finance the acquisition of Curragh and the additional interest charge reflects this loan as if it were in existence on January 1, 2018. The assumed interest rate for the three months to March 29, 2018 was 8.802%, representing LIBOR plus a 6.5% spread. This is the actual interest rate of the loan at origination. Due to the proximity of the assumed origination (January 1, 2018) and the actual origination (March 29, 2018) as well as the fact the loan was extinguished on October 24, 2018, the interest rate at March 29, 2018 was determined to be representative and more meaningful for the pro forma adjustment than utilizing the current rate.
(4) For each one-eighth of 1% change in estimated interest rate associated with the $700 million DB Term Loan, interest expense would increase or decrease by $0.4 million for the six months ended June 30, 2018.
(5) Represents the additional amortization of debt issuance costs and the debt discount associated with the DB Term Loan.
(H) Loss on debt extinguishment
Loss on debt extinguishment was adjusted as follows:
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(1) Represents the reversal of the debt extinguishment expense related to the Bank of America Term Loan on Coronado’s Statement of Operations. This loan was extinguished on March 29, 2018 in conjunction with the acquisition of Curragh. In order to represent the financing in-place as if the acquisition occurred on January 1, 2018, the effects of this note have been removed.
(I) Other, net
Other, net was adjusted as follows:
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(1) Relates to the loss on Foreign Exchange, or FX, swap incurred in the six months ended June 30, 2018, which is directly attributable to the Curragh acquisition as it locked in the USD exchange rate in advance of the purchase of Curragh. This loss on FX swap is not expected to have a continuing impact on results following the consummation of the Curragh acquisition.
(J) Income tax provisions
For purposes of the unaudited pro forma condensed combined financial statements, an Australian statutory tax rate of approximately 30% has been used for pro forma adjustments related to Curragh. A U.S. blended statutory tax rate (Federal and State) of approximately 27% has been used for pro forma adjustments related to the U.S. LLC’s. This does not reflect Coronado’s effective tax rate, which will include other tax items such as state and foreign taxes as well as other tax charges and benefits, and does not take into account any historical or possible future tax events that may impact Coronado following the consummation of the Curragh acquisition.
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKQuantitative and Qualitative Disclosures About Market Risk
Our activities expose us to a variety of financial risks, including market risk such as commodity price risk, interest rate risk, foreign currency risk, liquidity risk and credit risk. OurThe overall risk management objective is to minimize potential adverse effects on our financial performance from those risks which are not coal price related.
We manage financial risk through policies and procedures approved by our Board of Directors. These specify the responsibility of the Board of Directors and management with regard to the management of financial risk. Financial risks are managed centrally by our finance team under the direction of the Group Chief Financial Officer. The finance team manages risk exposures primarily through delegated authority limits approved by the Board of Directors. The finance team regularly monitors our exposure to these financial risks and reports to management and the Board of Directors on a regular basis. Policies are reviewed at least annually and amended where appropriate.
We may use derivative financial instruments such as forward fixed price commodity contracts, interest rate swaps and foreign exchange rate contracts to hedge certain risk exposures. Derivatives are exclusively used for economic hedging purposes and hedging for speculative purposes is strictly prohibited by the Treasury Risk managementManagement Policy approved by our Board of Directors. We use different methods to measure the extent to which we are exposed to various financial risks. These methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risks and aging analysis for credit risk.
Commodity Price Risk
Coal Price Risk
We are exposed to domestic and global coal prices. Our principal philosophy is that our investors would not consider hedging of coal prices to be in the long-term interest of our stockholders. Therefore, any potential hedging of coal prices through long-term fixed price contracts is subject to the approval of our Board of Directors and would only be adopted in exceptional circumstances.
Access to international markets may be subject to ongoing interruptions and trade barriers due to policies and tariffs of individual countries, and the actions of certain interest groups to restrict the import or export of certain commodities. For example, the current imposition of tariffs and import quota restrictions by China on U.S. and Australian coal imports, respectively, including the ongoing suspension of imports of Australian coal into China, may in the future have a negative impact on our profitability. We may or may not be able to access alternate markets for our coal should additional interruptions and trade barriers occur in the future. An inability for Met coal suppliers to access international markets, including China, would likely result in an oversupply of Met coal and may result in a decrease in prices and or the curtailment of production.
We manage our commodity price risk for our non-trading, thermal coal sales through the use of long-term coal supply agreements in our U.S. Operations. In Australia, thermal coal is sold to Stanwell on a supply contract. See Item 1A. “Risk Factors—Risks related to the Supply Deed with Stanwell may adversely affect our financial condition and results of operations” in our registration statementAnnual Report on Form 10, as amended,10-K filed with the SEC and ASX on June 28, 2019.February 25, 2021.
Sales commitments in the Met coal market are typically not long-term in nature, and we are therefore subject to fluctuations in market pricing. For example,Certain coal sales are provisionally priced initially. Provisionally priced sales are those for which price finalization, referenced to the relevant index, is outstanding at the reporting date. The final sales price is determined within 7 to 90 days after delivery to the customer. At September 30, 2021, there were $95.6 million of outstanding provisionally priced sales. If prices were to decrease 10%, provisionally priced sales would decrease by $9.6 million. See item 1A. “Risk Factors—Our profitability depends upon the prices we receive for our coal. Prices for coal are volatile and can fluctuate widely based upon a 10% decreasenumber of factors beyond our control” in our Annual Report on Form 10-K filed with the hard coking coal, or HCC, benchmark price would have decreased reported revenues for the three months ended June 30, 2019SEC and six months ended June, 2019 by approximately $363.3 million and $698.4 million respectively.ASX on February 25, 2021.
Diesel Fuel
We may be exposed to price risk in relation to other commodities from time to time arising from raw materials used in our operations (such as gas or diesel). These commodities may be hedged through financial instruments if the exposure is considered material and where the exposure cannot be mitigated through fixed price supply agreements.
In 2018, we entered into fixed price contracts with ourThe fuel suppliers to purchase 19.1 million liters of fuelrequired for our U.S. Operations with a total commitment of $11.3 million for 2019. The remaining commitment as of June 30, 2019 was $5.6 million with respect to 9.5 million liters. Any additional fuel requiredoperations in fiscal year 2021 will be purchased under fixed-price contracts or on a spot basis.
In the same period, we have entered into forward derivative contracts to purchase 93.4 million liters of diesel fuel in 2019 with respect to the fuel requirements for the Curragh operations in Australia. During the three month period ended June 30, 2019 we have entered into additional forward derivative contracts to purchase 126 million liters of diesel fuel with respect to the expected 2020 fuel requirements for Curragh. The fair value of the forward derivative contract as of June 30, 2019 was an asset of $3.6 million with respect to outstanding 173.3 million liters.
Interest Rate Risk
Interest rate risk is the risk that a change in interest rates on our borrowing facilities will have an adverse impact on financial performance, investment decisions and stockholder returns.return. Our objectives in managing our exposure to interest rates include minimizing interest costs in the long term, providing a reliable estimate of interest costs for the annual work program and budget and ensuring that changes in interest rates will not have a material impact on our financial performance.
As of JuneSeptember 30, 2019,2021, we had $17.1$378.1 million of fixed-ratefixed rate borrowings outstanding. As discussed in Item 2. “Management’s Discussion and Analysis of Financial ConditionNotes and Results Of Operations—Liquidity and Capital Resources—Liquidity,” as of June 30, 2019, we had undrawn debt facility of $350 million with a variableno variable-rate borrowings outstanding.
We currently do not hedge against interest rate fluctuations.
Coronado Global Resources Inc. Form 10-Q September 30, 202143
Foreign Exchange Risk
A significant portion of our sales are denominated in US$. Foreign exchange risk is the risk that our earnings or cash flows are adversely impacted by movements in exchange rates of currencies that are not in US$.
Our main exposure is to the A$-US$ exchange rate through our Australian Operations, which have predominantly A$ denominated costs. Greater than 90% of expenses incurred at Curraghour Australian Operations are denominated in A$. Approximately 10% of Curragh’sour Australian Operations’ purchases are made with reference to US$, which provides a natural hedge against foreign exchange movements on these purchases (including fuel, the Wiggins Island Coal Export Terminal Pty Ltd, or WICET, Terminal Handling Charge,some port handling charges, demurrage, purchased coal and some insurance premiums). Appreciation of the A$ against US$ will increase Curragh’sour Australian Operations’ US$ reported cost base and reduce US$ reported net income. Assuming we had no foreign currency hedging instruments in place,For the portion of US$ required to purchase A$ to settle our Australian Operations’ operating costs, a 5%10% increase in the A$ to US$ exchange rate would increase reported total costs and expenses by approximately $7.9$22.4 million and $16.0$68.5 million for the three and nine months ended JuneSeptember 30, 2019 and the six months ended June 30, 2019,2021, respectively.
Under normal market conditions, we generally do not consider it necessary to hedge our exposure to this foreign exchange risk. However, there may be specific commercial circumstances, such as the hedging of significant capital expenditure, acquisitions, disposals and other financial transactions, where we may deem foreign exchange hedging as appropriate and where a US$ contract cannot be negotiated directly with suppliers and other third parties.
During 2018, we entered into a foreign exchange swap to hedge the exposure to fluctuations in the A$-US$ in connection with the acquisition of Curragh. At June 30, 2019, we did not have any foreign exchange contracts outstanding.
For our Australian Operations, we translate all monetary assets and liabilities at the period-end exchange rate, all non-monetary assets and liabilities at historical rates and revenue and expenses at the average exchange rates in effect during the periods. The net effect of these translation adjustments is shown in the accompanying consolidated financial statements within components of net income.
We currently do not hedge our non-US$ exposures against exchange rate fluctuations.
Liquidity Risk
Liquidity risk is the risk that we will not have sufficient liquid funds to meet our financial commitments as and when they fall due. Liquidity risk is managed centrally through short-term cash forecasting and longer-term strategic planning. Our objective is to ensure that we have sufficient liquid assets and funding to meet both our anticipated and unexpected financial obligations.
Access to capital is also an important feature of liquidity risk management. We manage this risk through proactive management of our funding profile by ensuring that we have access to diverse sources of funds and that we do not have material refinancing risk in any single reporting period.
Credit Risk
Credit risk is the risk of sustaining a financial loss as a result of a counterparty not meeting its obligations under a financial instrument or customer contract.
We are exposed to credit risk when we have financial derivatives, cash deposits, lines of credit, letters of credit or bank guarantees in place with financial institutions. To mitigate against credit risk from financial counterparties, we have minimum credit rating requirements with financial institutions where we transact.
We are also exposed to counterparty credit risk arising from our operating activities, primarily from trade receivables. Customers who wish to trade on credit terms are subject to credit verification procedures, including an assessment of their independent credit rating, financial position, past experience and industry reputation. We monitor the financial performance of counterparties on a routine basis to ensure credit thresholds are achieved. Where required, we will request additional credit support, such as letters of credit, to mitigate against credit risk. Credit risk is monitored regularly, and performance reports are provided to our management.management and Board of Directors.
Coronado Global Resources Inc. Form 10-Q September 30, 202144
ITEMitem 4.CONTROLS AND PROCEDURES Controls and Procedures
Disclosure Controls and Procedures
Disclosure controls and procedures areWe maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controlsforms, and procedures include, without limitation, controls and procedures designed to ensure that such information required to be disclosed by our company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executivethe Chief Executive Officer and principal financial officers, or persons performing similar functions,the Group Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
The Company,disclosure based solely on the definition of “disclosure controls and procedures” in Rule 13a-15(e) promulgated under the supervisionExchange Act. In designing and withevaluating the participation of its management, including the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures, (as definedmanagement recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in Rules 13a-15(e)evaluating the cost-benefit relationship of possible controls and 15d-15(e) under the Exchange Act) asprocedures.
As of the end of the period covered by this report, we carried out an evaluation under the supervision and with the participation of our management, including the Chief Executive Officer and the Group Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, the Chief Executive Officer and the Group Chief Financial Officer concluded that suchour disclosure controls and procedures were effectiveeffective.
Changes to provide reasonable assurance that the desired control objectives were achieved.
Internal Control over Financial Reporting
Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP. We are not currently required to comply with the SEC’s rules implementing Section 404 of the Sarbanes-Oxley Act of 2002, and are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. We will not be required to submit a report of management’s assessment regarding internal control over financial reporting or an attestation report of the Company’s registered public accounting firm until our second annual report on 10-K due to a transition period established by the rules of the SEC for newly registered companies.
During the preparation of our financial statements for the year ended December 31, 2018, we and our auditors identified a material weakness in our internal control over financial reporting related to the recognition and presentation of the impact of the Reorganization Transaction, which occurred just prior to the Australian IPO. The presentation was corrected prior to the issuance of the financial statements and did not result in any material misstatement of our financial statements or disclosures.
In the period since December 31, 2018, management has remediated the identified material weakness. The remediation efforts implemented specifically focused on the identified item and have also aided in enhancing our overall financial control environment. Remediation efforts applied during the period included (a) the immediate posting of the identified one-off item to ensure no material misstatement in our financial statements; (b) the continued recognition of this position since December 31, 2018 in our financial statements for the period ending June 30, 2019; (c) the Company has employed additional qualified resources to prepare, review and provide guidance on technical matters of this nature; and (d) the Company continues to utilize the expertise of certain third party technical advisors to assist in the review of complex transactions.
Our Chief Executive Officer and Chief Financial Officer have concluded that the Consolidated Financial Statements included infiscal quarter covered by this Quarterly Report on Form 10-Q, present fairly, in all material respects, the financial position of the Company at June 30, 2019 and the consolidated results of operations and cash flows for the period ended June 30, 2019 in conformity with U.S. generally accepted accounting principles.
Changes to Internal Control over Financial Reporting
As previously reported, we expect to continue to makethere were no changes in ourthe Company's internal control over financial reporting, as such term is defined in connection with our compliance efforts with respectRule 13a-15(f) of the Exchange Act, that materially affected, or are reasonably likely to materially affect, the Sarbanes-Oxley Act of 2002. As such, we will continue to assess the adequacy of ourCompany’s internal controlcontrols over financial reporting, remediate any control weaknesses that may be identified, validate through testing that controls are functioning as designed and implement a continuous reporting and improvement process for internal control over financial reporting.
Coronado Global Resources Inc. Form 10-Q September 30, 202145
item 1. lEGAL PROCEEDINGS
We are involved insubject to various legal proceedings from time to time in the normal courseand regulatory proceedings. For a description of business including proceedings related to employment matters. These liabilities do not include costs associated with legal representation, which are expensed as they are incurred. In management’s opinion, except for what is described below, we are not currently involved in anyour significant legal proceedings which, individually or in the aggregate and if determined adversely, could have a material effect on our financial condition, results of operations and/or liquidity or that would otherwise be requiredrefer to be disclosed herein.
Curragh is a co-defendant to proceedings in the Queensland Supreme Court brought by Aurizon. Aurizon’s claim relates to costs relatingNote 18. “Contingencies” to the co-defendants’ use of the WICET rail links,unaudited condensed consolidated financial statements included in particular, whether the “First Milestone Target Date”, which triggers certain “WIRP Fee” payments under the Wiggins Island Rail Project Deed, or WIRP Deed, has been achieved. On June 27, 2019, the Queensland Supreme Court delivered judgements in favor of Aurizon against Coronado Curragh Pty Ltd and the other co-defendants. The Company intends to continue to strongly contest the matter. The Company, together with the other co-defendants, lodged a notice of appeal of the Queensland Supreme Court judgement on July 25, 2019. It is currently expected that, were Aurizon successful in the ultimate result of the litigation and expert determinations, Coronado Curragh Pty Ltd would be required to pay approximately A$2.3 million per annum for the term of the WIRP Deed (which is 233 months). ResolutionPart I, Item 1. “Financial Statements” of this dispute would also result in the Company’s below rail access to WICET (of 1.5 MMtpa) becoming a firm contractual capacity entitlement (and the subject of a 20 year take-or-pay access agreement) instead of an ad hoc entitlement only. The Company’s unaudited Condensed Consolidated Balance Sheet includes an estimated loss contingency associated with these proceedings.
In February 2019, the Queensland Competition Authority, or QCA, issued its final decision in respect of Access Undertaking 5, or UT5. The final decision, consistent with the draft decision issued in December 2017, reduces the rate of return that can be chargedQuarterly Report, which information is incorporated by Aurizon on its network routes. The Queensland coal producers experienced material rail haulage underperformance because soon after the draft UT5 decision was handed down by the QCA, the rail track network was severely restricted due to Aurizon’s modification of its maintenance practices in order to lower costs. It is possible that Aurizon will modify its maintenance practices in the future to lower costs should similar decisions be issued by the QCA, resulting in constrained access to the rail network, making it more difficult for customers (including us) to arrange for the transportation of coal in excess of their contracted capacity entitlement and having the potential to increase demurrage costs.reference herein.
In a constrained rail capacity and high demand environment, there is a risk that we and other users of the network will not be allocated additional access to rail above annual contracted entitlements. Should this occur, the potential impact on us is higher in the short term as our contracted access entitlement for 1.5 MMt per annum of below rail capacity to WICET is currently treated as an ad hoc entitlement. This means that, in the event of a scheduling contest with a contracted user (which could arise because of changes by Aurizon to maintenance practices or because of increased usage of the line by other customers), a path we request may not be able to be scheduled. This capacity is now expected to become the subject of a long-term access agreement as the judgment from the litigation concluded in September 2018 has been handed down and the dispute between Wiggins Island Rail Project customers and Aurizon regarding the “First Milestone Target Date” under the WIRP Deed has been finally resolved.
In June 2018, two holders of preference equity issued by WICET Holdings commenced legal proceedings in the Supreme Court of New South Wales against WICET Pty Ltd and WICET Holdings alleging unpaid dividends in respect of the shares held by them. Although we are not exposed directly to this litigation, an adverse finding may detrimentally impact the financial position of WICET Holdings and WICET Pty Ltd and could result in the senior lenders or a receiver appointed by them taking steps to seek to recover against the shippers (including us) whether through increased terminal handling charges or otherwise.
Our registration statementThere were no material changes to the risk factors previously disclosed in Part I, Item 1A, “Risk Factors”, of our Annual Report on Form 10, as amended,10-K for the year ended December 31, 2020, filed with the SEC and ASX on June 28, 2019, which we refer to as our Form 10, includes a detailed discussion of certain material risk factors we face. The information presented below restates the risk factor set forth under the heading “Risks related to our investment in WICET may adversely affect our financial conditionFebruary 25, 2021 and results of operations” inPart II, Item 1A1A. “Risk Factors” of our Form 10. You should consider this risk factor together with the other risk factors and other matters described in our registration statement and in this Quarterly Report on Form 10-Q.
Risks related to our investment in WICET may adversely affect our financial condition and results of operations .
We have a minority interest in WICET Holdings Pty Ltd, whose wholly owned subsidiary, WICET Pty Ltd, owns WICET. Other coal producers who export coal through WICET also hold shares in WICET Holdings Pty Ltd. In addition, we and the other coal producers (or shippers) have evergreen, ten year take-or-pay agreements with WICET Pty Ltd and pay a terminal handling charge to export coal through WICET, which is calculated by reference to WICET’s annual operating costs, as well as finance costs associated with WICET Pty Ltd’s external debt facilities, refinanced and extended in late 2018.
Under our take-or-pay agreement with WICET Pty Ltd, or the WICET Take-or-Pay Agreement, we are obligated to pay for that capacity via terminal handling charges, whether utilized or not. The terminal handling charge payable by us can be adjusted by WICET Pty Ltd if our share of WICET Pty Ltd’s operating and finance cost increases, due to increased operating costs or because another shipper defaults and has its capacity reduced to nil. The terminal handling charge calculation is subject to a finance cap set under the terms of the WICET Take-or-Pay Agreement and this cap has already been reached and is in force. Since WICET began shipping export tonnages in April 2015, four WICET Holdings Pty Ltd shipper-shareholders have entered administration, resulting in defaults under their take-or-pay agreements and a decrease in the aggregate contracted tonnage at WICET from 27 MMtpa to 15.5 MMtpa.
Given the operation of the finance cap (agreed as part of WICET’s refinance) there is a limit to the recovery by WICET of its financing costs from shippers (subject to certain review event triggers). Accordingly, prior defaults referred to above have resulted in only minor increases to the terminal handling charges payable by the remaining shipper shareholders (including us). These increases have related to higher $/ton operating costs resulting from a lower contract base. If any of the four-remaining shipper shareholders liquidates and/or defaults under its take-or-pay agreement, a review of the finance cap would be triggered and the terminal handling charges10-Q for the remaining shipper shareholders, including us, will increase as each remaining shipper effectively would be proportionately liable to payquarterly period ended March 31, 2021, filed with the defaulting shipper’s share of WICET’s operatingSEC and financing costs going forward.
In addition, if we default under our take-or-pay agreement with WICET Pty Ltd, we might be liable for a significant termination payment. The termination payment is approximately equal to our proportion of WICET Pty Ltd’s total external debt (which is basedASX on the proportion that our contracted tonnage bears to the total contracted tonnage at WICET when the payment obligation is triggered). We have provided security to WICET Pty Ltd in the form of a bank guarantee, the amount of which is required to cover our estimated liabilities as a shipper under the WICET Take-or-Pay Agreement for the following 12 month period.May 10, 2021.
Any attempt by the senior lenders for WICET Pty Ltd’s external debt, or a receiver appointed by them, to take steps to seek to recover against the shipper-shareholders (whether through increased terminal handling charges or otherwise) could materially and adversely impact our business and results of operations. If an insolvency or other event ultimately resulted in a permanent cessation of operations at WICET, we may also be required to procure additional port capacity, as well as be liable for a termination payment under our take-or-pay agreement.
ITEMitem 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
None.
ITEMitem 3. DEFAULTS UPON SENIOR SECURITIES
None.
None.
ITEM 4. MINE SAFETY DISCLOSURES
Safety is the cornerstone of the Company’s values and is the number one priority for all employees at Coronado Global Resources.
Our U.S. Operations include multiple mining complexes across three states and are regulated by both the U.S. Mine Safety and Health Administration, or MSHA, and state regulatory agencies. Under regulations mandated by the Federal Mine Safety and Health Act of 1977, or the Mine Act, MSHA inspects our U.S. mines on a regular basis and issues various citations and orders when it believes a violation has occurred under the Mine Act.
In accordance with Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104), each operator of a coal or other mine in the United States is required to report certain mine safety results in its periodic reports filed with the SEC under the Exchange Act.
Information pertaining to mine safety matters is included in Exhibit 95.1 attached to this Quarterly Report on Form 10-Q. The disclosures reflect the United States mining operations only, as these requirements do not apply to our mines operated outside the United States.
ITEM 5. OTHER INFORMATION
None.
Coronado Global Resources Inc. Form 10-Q September 30, 202146
The following documents are filed as exhibits hereto:
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15.1 | Acknowledgement of Independent Registered Public Accounting Firm | |
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101.SCH | ||
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| Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | ||
| Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | ||
| Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | ||
| Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | ||
| Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
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Coronado Global Resources Inc. Form 10-Q September 30, 202147
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Coronado Global Resources Inc. | ||
By: | /s/ | |
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Group Chief Financial Officer (as duly authorized officer and as principal financial officer of the registrant) |
Date: August 5, 2019November 8, 2021