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Steel starts
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Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 2023.
TABLE OF CONTENTS
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52
Coronado Global Resources Inc.
PART I – FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets
(In US$ thousands, except share data)
Assets
Note
(Unaudited)
2023
December 31,
2022
Current assets:
Cash and restricted cash
$
$
Trade receivables, net
Income tax receivable
Inventories
5
Other current assets
7
Assets held for sale
4
Total
current assets
Non-current assets:
Property, plant and equipment,
net
6
Right of use asset – operating leases, net
9
Goodwill
Intangible assets, net
Restricted deposits
16
Deferred income tax assets
Other non-current assets
Total
assets
$
$
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$
$
Accrued expenses and other current liabilities
8
Income tax payable
Asset retirement obligations
Contract obligations
Lease liabilities
9
Other current financial liabilities
Liabilities held for sale
4
Total
current liabilities
Non-current liabilities:
Asset retirement obligations
Contract obligations
Deferred consideration liability
Interest bearing liabilities
10
Other financial liabilities
Lease liabilities
9
Deferred income tax liabilities
Other non-current liabilities
Total
liabilities
$
$
Common stock $
authorized,
September 30, 2023 and December 31, 2022
Series A Preferred stock $
authorized,
and December 31, 2022
—
—
Additional paid-in capital
Accumulated other comprehensive losses
14
(
121,970
)
(
91,423
)
Retained earnings
Total
stockholders’ equity
Total
liabilities and stockholders’ equity
$
$
See accompanying notes to unaudited condensed
consolidated financial statements.
Coronado Global Resources Inc.
Unaudited Condensed Consolidated Statements of
Operations and Comprehensive Income
(In US$ thousands, except share data)
Three months ended
Nine months ended
Note
2023
2022
2023
2022
Revenues:
Coal revenues
$
$
$
$
Other revenues
Total
revenues
3
Costs and expenses:
Cost of coal revenues (exclusive of items
shown separately below)
Depreciation, depletion and amortization
Freight expenses
Stanwell rebate
Other royalties
Selling, general, and administrative
expenses
Total
costs and expenses
Other (expense) income:
Interest expense, net
(
14,496
)
(
17,220
)
(
43,341
)
(
52,034
)
Loss on debt extinguishment
(
1,385
)
(
1,385
)
Decrease (increase) in provision for
discounting and credit losses
(
572
)
Other, net
Total
other (expense) income, net
(
7,156
)
(
22,767
)
(Loss) income before tax
(
39,313
)
Income tax benefit (expense)
11
(
51,423
)
(
37,775
)
(
235,391
)
Net (loss) income attributable to
Coronado Global Resources Inc.
$
(
21,083
)
$
$
$
Other comprehensive loss, net of income
taxes:
Foreign currency translation adjustments
14
(
18,247
)
(
41,998
)
(
30,547
)
(
75,908
)
Total
other comprehensive loss
(
18,247
)
(
41,998
)
(
30,547
)
(
75,908
)
Total
comprehensive (loss) income
attributable to Coronado Global
Resources Inc.
$
(
39,330
)
$
$
$
(Loss) earnings per share of common stock
Basic
12
(
0.13
)
Diluted
12
(
0.13
)
See accompanying notes to unaudited condensed
consolidated financial statements.
Coronado Global Resources Inc.
Unaudited Condensed Consolidated Statements of
Stockholders’ Equity
(In US$ thousands, except share data)
Common stock
Preferred stock
Additional
Accumulated other
Total
paid in
comprehensive
Retained
stockholders
Shares
Amount
Series A
Amount
capital
losses
earnings
equity
Balance December 31, 2022
$
$
$
$
(
91,423
)
$
$
Net income
—
—
Other comprehensive loss
—
—
(
4,503
)
(
4,503
)
Total
comprehensive (loss) income
—
—
(
4,503
)
Share-based compensation for equity
classified awards
—
—
(
308
)
(
308
)
Dividends
—
—
(
8,382
)
(
8,382
)
Balance March 31, 2023
$
$
$
$
(
95,926
)
$
$
Net income
—
—
Other comprehensive loss
—
—
(
7,797
)
(
7,797
)
Total
comprehensive (loss) income
—
—
(
7,797
)
Share-based compensation for equity
classified awards
—
—
Balance June 30, 2023
$
$
$
$
(
103,723
)
$
$
Net loss
—
—
(
21,083
)
(
21,083
)
Other comprehensive loss
—
—
(
18,247
)
(
18,247
)
Total
comprehensive loss
—
—
(
18,247
)
(
21,083
)
(
39,330
)
Share-based compensation for equity
classified awards
—
—
Dividends
—
—
(
8,382
)
(
8,382
)
Balance September 30, 2023
$
$
$
$
(
121,970
)
$
$
Coronado Global Resources Inc.
Common stock
Preferred stock
Additional
Accumulated other
Total
paid in
comprehensive
Retained
stockholders
Shares
Amount
Series A
Amount
capital
losses
earnings
equity
Balance December 31, 2021
$
$
$
$
(
44,228
)
$
$
Net income
—
—
Other comprehensive income
—
—
Total
comprehensive income
—
—
Share-based compensation for equity
classified awards
—
—
Dividends
—
—
(
150,881
)
(
150,881
)
Balance March 31, 2022
$
$
$
$
(
27,970
)
$
$
Net income
—
—
Other comprehensive loss
—
—
(
50,168
)
(
50,168
)
Total
comprehensive (loss) income
—
—
(
50,168
)
Share-based compensation for equity
classified awards
—
—
Dividends
—
—
(
200,040
)
(
200,040
)
Balance June 30, 2022
$
$
$
$
(
78,138
)
$
$
Net income
—
—
Other comprehensive loss
—
—
(
41,998
)
(
41,998
)
Total
comprehensive (loss) income
—
—
(
41,998
)
Share-based compensation for equity
classified awards
—
—
Dividends
—
—
(
125,734
)
(
125,734
)
Balance September 30, 2022
$
$
$
$
(
120,136
)
$
$
See accompanying notes to unaudited condensed
consolidated financial statements.
Coronado Global Resources Inc.
Unaudited Condensed Consolidated Statements of
Cash Flows
(In US$ thousands)
Nine months ended
September 30,
2023
2022
Cash flows from operating activities:
Net income
$
$
Adjustments to reconcile net income to cash and restricted cash
provided by
operating activities:
Depreciation, depletion and amortization
Amortization of right of use asset - operating leases
Amortization of deferred financing costs
Loss on debt extinguishment
Non-cash interest expense
Amortization of contract obligations
(
23,896
)
(
26,883
)
Loss on disposal of property,
plant and equipment
Equity-based compensation expense
Deferred income taxes
Reclamation of asset retirement obligations
(
3,168
)
(
3,961
)
(Decrease) increase in provision for discounting and credit
losses
(
4,255
)
Changes in operating assets and liabilities:
Accounts receivable
(
170,094
)
Inventories
(
54,704
)
Other assets
(
5,197
)
(
30,109
)
Accounts payable
(
3,371
)
Accrued expenses and other current liabilities
(
69,303
)
Operating lease liabilities
(
9,311
)
(
6,202
)
Income tax payable
(
128,418
)
Change in other liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Capital expenditures
(
182,442
)
(
141,928
)
Purchase of restricted and other deposits
(
26,836
)
(
9,558
)
Redemption of restricted and other deposits
Net cash used in investing activities
(
183,028
)
(
150,670
)
Cash flows from financing activities:
Debt issuance costs and other financing costs
(
3,420
)
Principal payments on interest bearing liabilities and other financial
liabilities
(
2,732
)
(
9,773
)
Principal payments on finance lease obligations
(
98
)
(
91
)
Premiums paid on early redemption of debt
(
90
)
Dividends paid
(
16,755
)
(
473,900
)
Net cash used in financing activities
(
23,005
)
(
483,854
)
Net increase in cash and restricted cash
Effect of exchange rate changes on cash and restricted
cash
(
15,180
)
(
50,144
)
Cash and restricted cash at beginning of period
Cash and restricted cash at end of period
$
$
Supplemental disclosure of cash flow information:
Cash payments for interest
$
$
Cash paid for taxes
$
$
Restricted cash
$
$
See accompanying notes to unaudited condensed
consolidated financial statements.
Coronado Global Resources Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
1.
Description of Business, Basis of Presentation
(a)
Description of the Business
Coronado
Global
Resources
Inc.
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 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 U.S. 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 Annual Report on Form 10-K filed with the
SEC and the
Australian Securities Exchange, or the ASX, on February
21, 2023.
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.
and
its
wholly-owned
subsidiaries.
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”
and
“Coronado”
are
used
interchangeably
to
refer
to
Coronado
Global
Resources
Inc.
and
its
subsidiaries,
collectively, or to Coronado Global Resources Inc., as
appropriate to the context.
All intercompany balances and
transactions have been eliminated upon 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,
2022 has been derived from
the Company’s audited consolidated balance sheet at
that date.
The
Company’s
results
of
operations
for
the
three
and
nine
months
ended
September
30,
2023
are
not
necessarily indicative of the results that may be expected for
the year ending December 31, 2023.
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, 2022 included in Coronado Global Resources Inc.’s Annual Report
on Form 10-K filed with the SEC and ASX on February
21, 2023.
(a) Newly Adopted Accounting Standards
During
the
period,
there
has
been
no
new
Accounting
Standards
Update
issued
by
the
Financial
Accounting
Standards Board that had a material impact on the Company’s
consolidated financial statements.
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
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
owned idled mine complex (Greenbrier) and
The
Company
operates
its
business
along
organization
of
the
CODM, manages and allocates resources to the various
components of the Company’s business.
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.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
Coronado Global Resources Inc.
Adjusted EBITDA is
defined as earnings
before interest, taxes,
depreciation, depletion and
amortization and other
foreign exchange 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
unaudited Condensed Consolidated Financial Statements.
Reportable segment
results as
of and for
the three
and nine
months ended
September 30,
2023 and
2022 are
presented below:
(in US$ thousands)
Australia
United
States
Other and
Corporate
Total
Three months ended September 30, 2023
Total
revenues
$
$
$
$
Adjusted EBITDA
(
32,353
)
(
11,899
)
Total
assets
Capital expenditures
Three months ended September 30, 2022
Total
revenues
$
$
$
$
Adjusted EBITDA
(
10,349
)
Total
assets
Capital expenditures
Nine months ended September 30, 2023
Total
revenues
$
$
$
$
Adjusted EBITDA
(
29,088
)
Total
assets
Capital expenditures
Nine months ended September 30, 2022
Total
revenues
$
$
$
$
Adjusted EBITDA
(
28,579
)
Total
assets
Capital expenditures
The reconciliations
of Adjusted EBITDA to net income attributable to the
Company for the three and nine months
ended September 30, 2023 and 2022 are as follows:
Three months ended
Nine months ended
September 30,
September 30,
(in US$ thousands)
2023
2022
2023
2022
Net (loss) income
$
(
21,083
)
$
$
$
Depreciation, depletion and amortization
Interest expense (net of interest income)
Income tax (benefit) expense
(
18,230
)
Other foreign exchange gains
(1)
(
7,859
)
(
31,917
)
(
17,265
)
(
55,064
)
Loss on extinguishment of debt
Losses (gains) on idled assets
(2)
(
1,221
)
(Decrease) increase in provision for
discounting and credit losses
(
536
)
(
12
)
(
4,255
)
Consolidated Adjusted EBITDA
$
$
$
$
(1)
certain entities within the group that
are denominated in currencies other than
their respective functional currencies. These gains
and losses
are included in “Other, net” on the unaudited Consolidated Statement
of Operations and Comprehensive Income.
(2)
assets that were classified as held for sale. Refer
to Note 4 “Assets held for sale” for further details.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
Coronado Global Resources Inc.
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, 2023 and 2022 are as follows:
Nine months ended September 30,
(in US$ thousands)
2023
2022
Capital expenditures per unaudited Condensed Consolidated
Statements of
Cash Flows
$
$
Accruals for capital expenditures
Payment for capital acquired in prior periods
(
11,241
)
(
7,475
)
Advance payment to acquire long lead capital items
(
21,577
)
Capital expenditures per segment detail
$
$
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
Company
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, 2023
(in US$ thousands)
Australia
United States
Total
Product Groups:
Metallurgical coal
$
$
$
Thermal coal
Total
coal revenue
Other
(1)
Total
$
$
$
Three months ended September 30, 2022
(in US$ thousands)
Australia
United States
Total
Product Groups:
Metallurgical coal
$
$
$
Thermal coal
Total
coal revenue
Other
(1)
Total
$
$
$
Nine months ended September 30, 2023
(in US$ thousands)
Australia
United States
Total
Product Groups:
Metallurgical coal
$
$
$
Thermal coal
Total
coal revenue
Other
(1)
Total
$
$
$
Nine months ended September 30, 2022
(in US$ thousands)
Australia
United States
Total
Product Groups:
Metallurgical coal
$
$
$
Thermal coal
Total
coal revenue
Other
(1)
Total
$
$
$
(1) Other revenue for the Australian segment includes
the amortization of the Stanwell non-market coal
supply contract obligation liability.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
Coronado Global Resources Inc.
4.
Assets Held for Sale
During
the
fourth
quarter
of
2020, the
Company
committed
to
a
plan
to
sell
the
Greenbrier
mining
asset
and
determined that all
of the criteria
to classify assets
and liabilities as
held for sale
were met. The
asset is part
of
our U.S. segment, located
in the State of Virginia
in the United States. The
Greenbrier asset does not
form part
of the Company’s core business strategy and
has been idle since April 1, 2020.
The
Company
remains
committed
to
a
plan
to
sell
the
asset,
however,
on
March
31,
2023,
the
Company
concluded that the timing of
the sale within the next
twelve months is uncertain.
As such, the Greenbrier
mining
asset
has
been
reclassified
as
held
and
used
since
March
31,
2023,
as
it
does
not
meet
the
criteria
for
classification as held for sale.
The Greenbrier
mining asset
remains idle
and the
Company does
not intend
to recommence
operations at
the
mine.
The assets and
liabilities of Greenbrier met
the criteria for
classification as held for
sale as of
December 31, 2022,
therefore the Condensed Consolidated Balance Sheet continues to reflect these assets and liabilities as held for
sale as of that date.
5.
Inventories
(in US$ thousands)
September 30,
2023
December 31,
2022
Raw coal
$
$
Saleable coal
Total
coal inventories
Supplies inventory
Total
inventories
$
$
Coal inventories measured at
its net realizable value
were $
million
and $
and December 31, 2022,
respectively,
and primarily relates
to coal designated for
deliveries under the Stanwell
non-market coal supply agreement.
6.
Property, Plant and
Equipment
(in US$ thousands)
September 30,
2023
December 31,
2022
Land
$
$
Buildings and improvements
Plant, machinery, mining
equipment and transportation vehicles
Mineral rights and reserves
Office and computer equipment
Mine development
Asset retirement obligation asset
Construction in process
Total
cost of property,
plant and equipment
Less accumulated depreciation, depletion and amortization
Property, plant and
equipment, net
$
$
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
Coronado Global Resources Inc.
7. Other Assets
(in US$ thousands)
September 30,
2023
December 31,
2022
Other current assets
Prepayments
$
$
Long service leave receivable
Tax
credits receivable
Deposits to acquire capital items
Short term deposits
Other
Total
other current assets
$
$
The Company has
other current assets
which includes prepayments,
favorable mineral leases,
long service leave
receivable,
equipment
deposits,
short
term
deposits
and
coalfield
employment
enhancement
tax
credit
receivable.
Short term deposits are term deposits that do not meet
the cash and cash equivalents criteria.
8.
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the
following:
(in US$ thousands)
September 30,
2023
December 31,
2022
Wages and employee benefits
$
$
Taxes
other than income taxes
Accrued royalties
Accrued freight costs
Accrued mining fees
Acquisition related accruals
Other liabilities
Total
accrued expenses and other current liabilities
$
$
Acquisition
related
accruals
is
an
accrual
for
the
estimated
remaining
stamp
duty
payable
on
the
Curragh
acquisition,
including
penalty
interest,
of
$
further details.
9.
Leases
From time to
time, the Company
enters into mining
services contracts,
which may include
embedded leases
of
mining equipment
and other
contractual agreements
to lease
mining equipment
and facilities.
Based upon
the
Company’s assessment
of terms within
these agreements,
the Company classifies
a lease as
either finance
or
operating.
During the nine months
period ended September 30,
2023, the Company entered
into a number of agreements
to
lease
mining
equipment.
On
mobilization
of
this
mining
equipment,
the
Company
recognized
right-of-use
assets and operating lease liabilities of $
As of September 30,
2023, there are additional
operating leases of
mining equipment, which
have not yet been
mobilized, that have
a present value
of minimum lease
payments of approximately $
leases have commenced in October 2023 with lease terms
of
Information related to the Company’s right-of-use
assets and related lease liabilities are as follows:
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
Coronado Global Resources Inc.
Three months ended
Nine months ended
(in US$ thousands)
September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
Operating lease costs
$
$
$
$
Cash paid for operating lease liabilities
Finance lease costs:
Amortization of right of use assets
Interest on lease liabilities
Total
finance lease costs
$
$
$
$
(in US$ thousands)
September 30,
2023
December 31,
2022
Operating leases:
Operating lease right-of-use assets
$
$
Finance leases:
Property and equipment
Accumulated depreciation
(
243
)
(
186
)
Property and equipment, net
Current operating lease obligations
Operating lease liabilities, less current portion
Total
operating lease liabilities
Current finance lease obligations
Finance lease liabilities, less current portion
Total
Finance lease liabilities
Current lease obligation
Non-current lease obligation
Total
Lease liability
$
$
September 30,
2023
December 31,
2022
Weighted Average Remaining
Lease Term (Years)
Weighted average remaining lease term – finance
leases
Weighted average remaining lease term – operating
leases
Weighted Average Discount
Rate
Weighted discount rate – finance lease
Weighted discount rate – operating lease
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
Coronado Global Resources Inc.
The Company’s operating leases have remaining lease
terms of
to extend the terms
where the Company deems
it is reasonably certain
the options will be
exercised. Maturities
of lease liabilities as at September 30, 2023, are as follows:
(in US$ thousands)
Operating
Lease
Finance
Lease
Year ending
December 31,
2023
$
$
2024
2025
2026
2027
Thereafter
Total
lease payments
Less imputed interest
(
7,462
)
(
3
)
Total
lease liability
$
$
10.
Interest Bearing Liabilities
The following is a summary of interest-bearing liabilities
at September 30, 2023:
September 30, 2023
December 31, 2022
Weighted Average
Interest Rate at
September 30, 2023
Final
Maturity
% Senior Secured Notes
$
$
%
(2)
New ABL Facility
Discount and debt issuance costs
(1)
(
7,608
)
(
9,373
)
Total
interest bearing liabilities
$
$
(1)
Debt issuance costs incurred on the establishment
of the ABL Facility has been included within
"Other non-current assets" in the
unaudited Condensed Consolidated Balance Sheet.
(2)
Senior Secured Notes
As of
September 30,
2023, the
Company’s
aggregate principal
amount of
the
% Senior
Secured Notes
due
2026,
or
the
Notes,
outstanding
was
$
secured obligations of the Company.
The
terms
of
the
Notes
are
governed
by
an
indenture,
dated
as
of
May
12,
2021,
or
the
Indenture,
among
Coronado Finance
Pty Ltd,
an Australian
proprietary
company,
as issuer,
Coronado,
as parent
guarantor,
the
other guarantors
party thereto
and Wilmington
Trust,
National Association,
as trustee.
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. As of
September 30, 2023, the Company was in
compliance with all applicable covenants under
the Indenture.
Under the terms of the
Indenture, upon the occurrence of a “Change
of Control” (as defined in the
Indenture), the
issuer
is
required
to
make
an
offer,
or
a
Change
of
Control
Offer,
to
repurchase
the
Notes
at
%
of
the
aggregate principal
amount thereof,
plus accrued
and unpaid
interest, if
any,
to, but
excluding, the
repurchase
date. Alternatively,
if the
issuer elects
to redeem
all of
the Notes,
during the
12-month period
commencing
on
May 15 of
the years set
forth below at
the redemption
prices (expressed
in percentages of
principal amount on
the redemption date) set forth below, plus accrued and unpaid interest to,
but not including, the redemption date,
the issuer is not required to make a Change of Control
Offer:
Period
Redemption price
2023
108.06%
2024
104.03%
2025 and thereafter
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
Coronado Global Resources Inc.
New Asset Based Revolving Credit Facility
On May
8, 2023,
the Company, Coronado Coal
Corporation, a Delaware
corporation and wholly
owned subsidiary
of the Company,
Coronado Finance Pty
Ltd, an Australian
proprietary company
and a wholly
owned subsidiary
of the Company,
or an Australian
Borrower, Coronado
Curragh Pty Ltd,
an Australian proprietary
company and
wholly
owned
subsidiary
of
the
Company,
or
an
Australian
Borrower
and,
together
with
the
other
Australian
Borrower, the Borrowers,
and the other guarantors party
thereto, collectively with the
Company,
the Guarantors
and, together
with the
Borrowers, the
Loan Parties,
entered into
a senior
secured asset-based
revolving credit
agreement in
an initial
aggregate amount
of $
Services Australia
Pty Ltd,
as the
Administrative Agent,
Global Loan
Agency Services
Australia Nominees
Pty
Ltd, as the
Collateral Agent,
the Hongkong and
Shanghai Banking Corporation
Limited, Sydney
Branch, as the
Lender, and DBS Bank
Limited, Australia Branch,
as the
Lender and, together
with the other
Lender, the Lenders.
On August 3, 2023, the Company
satisfied all conditions precedent
under the New ABL Facility,
at which time it
became effective and replaced the predecessor
ABL Facility.
The New
ABL Facility
matures in
August 2026
and provides
for up
to $
$
Availability under the New
ABL Facility is
limited to an
eligible borrowing base, determined
by applying customary
advance rates to eligible accounts receivable and inventory.
Borrowings under
the New
ABL Facility
bear interest
at a
rate per
annum equal
to an
applicable rate
of
%
plus BBSY,
for loans denominated in A$, or SOFR, for loans denominated
in US$, at the Borrower’s election.
The New
ABL Facility
is guaranteed
by the
Guarantors.
Amounts outstanding
under the
New ABL
Facility are
secured by
(i) first
priority lien
in the
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, collectively,
the New ABL Collateral, (ii)
a second-priority lien on substantially
all of the Company’s
assets and the assets
of
the guarantors, other than the New ABL
Collateral, and (iii) solely in the case of
the obligations of the Australian
Borrower, a featherweight
floating security interest over certain
assets of the Australian Borrower,
in each case,
subject to certain customary exceptions.
The New
ABL Facility
contains customary representations
and warranties
and affirmative and
negative covenants
including, among
others, a
covenant regarding
the maintenance
of leverage
ratio to
be less
than
covenant regarding maintenance of interest coverage ratio to be more than
payment of dividends, or purchase or redemption of, with respect to any Equity Interests of Holdings or
any of its
Subsidiaries,
covenants
relating
to
financial
reporting,
covenants
relating
to
the
incurrence
of
liens
or
encumbrances, covenants relating to the incurrence or prepayment of certain debt, compliance with laws, use of
proceeds, maintenance of properties, maintenance of insurance, payment obligations, financial accommodation,
mergers and
sales of all
or substantially all
of the Borrowers
and Guarantors’, collectively
the Loan Parties,
assets
and limitations on changes in the nature of the Loan Parties’
business.
Subject
to
customary
grace
periods
and
notice
requirements,
the
New
ABL
Facility
also
contains
customary
events of default.
Under the terms of New ABL Facility,
a Review Event (as defined in the New ABL Facility) is triggered if, among
other matters, a “change of control” (as defined in the
New ABL Facility) occurs.
Following the
occurrence of
a Review
Event, the
Borrowers must
promptly meet
and consult
in good
faith with
the Administrative Agent and the Lenders to agree a
strategy to address the relevant Review Event including but
not limited to a restructure of the terms of the New ABL Facility to the satisfaction of the Lenders
.
If at the end of
a period
of
result of their discussion or meeting with the Borrowers or do not wish to
continue to provide their commitments,
the Lenders may declare all amounts owing
under the ABL Facility immediately due and payable,
terminate such
Lenders’
commitments
to
make
loans
under
the
ABL
Facility,
require
the
Borrowers
to
cash
collateralize
any
letter of credit obligations and/or exercise any and all remedies
and other rights under the New ABL Facility.
To establish
the New ABL Facility, the Company incurred debt issuance costs of $
elected an accounting
policy to present debt
issuance costs incurred
before the debt liability
is recognized (e.g.
before the debt
proceeds are received)
as an asset
which will be
amortized ratably
over the term
of the facility.
The costs
will not
be subsequently
reclassified as
a direct
deduction of
the liability.
The carrying
value of
debt
issuance costs, recorded
as “Other
non-current assets” in
the unaudited Condensed
Consolidated Balance Sheet
was $
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
Coronado Global Resources Inc.
As
at
September
30,
2023,
the
letter
of
credit
sublimit
had
been
partially
used
to
issue
$
guarantees on
behalf of
the Company
and
ABL Facility.
As at September 30,
2023, the Company was in
compliance with all applicable covenants under the
New ABL Facility.
Predecessor ABL Facility
On
August
3,
2023,
the
New
ABL
Facility
replaced
the
predecessor
ABL
Facility.
As
a
result
of
the
early
termination of the predecessor ABL Facility, the Company recorded a loss on
debt extinguishment of $
in its unaudited
Condensed Consolidated
Statement of
Operations and
Comprehensive Income
for each
of the
three and nine months ended September 30, 2023.
The
foregoing
descriptions
of
the
Notes
and
the
New
ABL
Facility
are
subject
to
the
disclosure
in
Note
17.
“Related Party Transactions” incorporated
herein by reference.
11.
Income Taxes
For the nine months ended
September 30, 2023 and
2022, 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
effects
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 2023 estimated annual effective tax rate is
%, which has been favorably impacted by
mine depletion deductions in
the United States.
The Company had an
income tax expense of
$
on
an
income
before
tax
of
$
discrete benefit of $
Income tax expense of
$
an estimated annual effective tax rate of
% for the period.
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,
2023, the Company
had
interest
or
penalties
is
required,
it
is
the
Company’s
policy
to
include
these
as
a
component
of
income
tax
expense.
The Company is
subject to taxation
in the
U.S. and its
various states, as
well as Australia
and its
various localities.
In the
U.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 federal
level and
five years
at the
state level.
In Australia,
companies
are subject
to open
tax audits
for a
period of
four years
from the
date of
assessment.
The Company assessed the need for valuation allowances by evaluating future taxable income, available for tax
strategies and the reversal of temporary tax differences.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
Coronado Global Resources Inc.
12.
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.
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)
2023
2022
2023
2022
Numerator:
Net (loss) income attributable to Company
stockholders
$
(
21,083
)
$
$
$
Denominator (in thousands):
Weighted-average shares of common stock
outstanding
Effects of dilutive shares
Weighted average diluted shares of common
stock outstanding
(Loss) Earnings Per Share (US$):
Basic
(
0.13
)
Dilutive
(
0.13
)
The Company’s common stock is publicly traded on the
ASX in the form of CDIs, convertible at the option of the
holders into shares of the Company’s common stock
on a
.
13.
Fair Value Measurement
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.
Financial Instruments Measured on a Recurring Basis
As
of
September
30,
2023,
there
were
recurring basis.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
Coronado Global Resources Inc.
Other Financial Instruments
The following methods
and assumptions
are used to
estimate the fair
value of other
financial instruments
as of
September 30, 2023 and December 31, 2022:
●
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.
●
values
approximate
the
carrying
values
reported
in
the
unaudited
Condensed
Consolidated
Balance
Sheets.
●
cost. As of September 30, 2023, there were
New ABL
Facility.
The estimated
fair value
of the
Notes as
of September
30, 2023
was approximately
$
14.
Accumulated Other Comprehensive Losses
The Company’s Accumulated Other Comprehensive
Losses consists of foreign currency translation adjustment
of subsidiaries for which the functional currency is different
of the Group’s functional currency in U.S.
dollar.
Accumulated other comprehensive losses consisted of
the following at September 30, 2023:
(in US$ thousands)
Foreign
currency
translation
adjustments
Balance at December 31, 2022
$
(
91,423
)
Net current-period other comprehensive income (loss):
Loss in other comprehensive income before reclassifications
(
11,939
)
Loss on long-term intra-entity foreign currency transactions
(
18,608
)
Total
net current-period other comprehensive loss
(
30,547
)
Balance at September 30, 2023
$
(
121,970
)
15.
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
as of September 30, 2023 are as follows:
(in US$ thousands)
Amount
Year ending
December 31,
2023
$
2024
2025
2026
2027
Thereafter
Total
$
Mineral leases are not in scope of Accounting Standards Codification,
or ASC, 842 and continue to be
accounted for under the guidance in ASC 932, Extractive
Activities – Mining.
(b)
Other commitments
As of
September
30, 2023,
purchase
commitments
for
capital expenditures
were $
obligated within the next twelve months.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
Coronado Global Resources Inc.
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
.
In
the
U.S.,
the
Company
typically
negotiates
its
rail
and
coal
terminal
access
on
an
annual
basis.
As
of
September
30,
2023,
these
Australian
and
U.S.
commitments
under
take-or-pay
arrangements
totaled
$
16.
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.
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.
As required
by certain
agreements, the
Company had
cash collateral
in the
form of
deposits in
the amount
of
$
to-back support for bank guarantees, financial payments, other performance obligations, various other operating
agreements and
contractual obligations
under workers
compensation insurance
.
These deposits
are restricted
and classified as long-term assets in the unaudited Condensed
Consolidated Balance Sheets.
In accordance
with the
terms of
the New
ABL Facility,
the Company
may be
required to
cash collateralize
the
New 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,
2023,
and
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, 2023,
the Company had
outstanding surety
bonds of $
of
credit
of
$
contractual obligations under
workers compensation insurance
and to
secure other obligations
and commitments.
For the
Australian Operations,
the Company
had bank
guarantees outstanding
of $
million issued from
the New ABL
Facility,
as at September
30, 2023, primarily
in respect of
certain rail and
port
arrangements.
As at September 30, 2023, the Company
in aggregate had total outstanding bank
guarantees provided of $
million to
secure obligations
and commitments,
including $
regulatory changes
relating to
these obligations could
result in
increased obligations, additional
costs or
additional
collateral requirements.
Stamp duty on Curragh acquisition
On September 27, 2022, the Company received from
the Queensland Revenue Office, or QRO,
an assessment
of the stamp duty
payable on its
acquisition of the Curragh
mine in March
2018. The QRO assessed
the stamp
duty
on
this
acquisition
at
an
amount
of
$
(A$
awaiting the outcome of this objection. The outcome of this
objection remains uncertain.
The Company continues to
maintain its position and
the estimated accrual of
$
duty
payable
on
the
Curragh
acquisition
based
on
legal
and
valuation
advice
obtained.
In
October
2022,
the
Company made a partial payment following filing of the objection reducing the estimated accrual to $
(A$
Condensed Consolidated Balance sheet,
as at September 30, 2023.
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
condition,
results
of
operations
or
cash
flows.
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)
Coronado Global Resources Inc.
17. Related
‑
Party Transactions
The Energy & Minerals Group
On September 25, 2023, Energy &
Minerals Group, the Company’s controlling stockholder through its ownership
of Coronado Group
LLC, including through
certain of its
affiliates and managed
funds (the Sellers),
advised the
Company
that
it
had
entered
into
a
membership
interest
purchase
agreement,
or
MIPA,
with
Sev.en
Global
Investments
a.s.,
or
SGI.
A
copy
of
the
MIPA
has
not
been
made
available
to
the
Company
or
the
Special
Committee
referred
to
below
as
of
the
date
of
this
Quarterly
Report
on
Form
10-Q.
However,
the
Company
understands that, pursuant
to the terms of
the MIPA,
the Sellers agreed to
sell all of their
interests
in Coronado
Group LLC to
a wholly-owned
subsidiary of
SGI. We
refer to the
proposed transaction
as the SGI
Transaction.
The
Company
also
understands
that,
under
the
MIPA,
the
SGI
Transaction
is
subject
to
customary
closing
conditions including regulatory approvals in the U.S. and Australia.
The Board of
Directors has appointed
a special committee
of independent
directors, or the
Special Committee,
to, among other things, assess
the impact and consequences of the
SGI Transaction on the
Company and take
such actions as the Special Committee deems appropriate
in connection with the SGI Transaction.
The Energy and
Minerals Group
has reported that
following the
closing of
the SGI Transaction,
SGI will
be the
direct or indirect owner of
Coronado Group LLC. As of the
date of this Quarterly Report on
Form 10-Q, Coronado
Group LLC
is currently
the direct
owner of
shares
of common
stock,
or
% of
the Company’s
outstanding
total common
stock)
and the
Share.
Based on information that the Company is currently aware of,
on completion of the SGI Transaction,
a change of
control as defined under the terms of Notes and New
ABL Facility may occur. Refer to Note 10. “Interest Bearing
Liabilities” for further information.
Under the
Company’s
2018
Equity
Incentive
Plan,
the
change
of control
provisions
may
also
be
triggered
on
completion
of
the
SGI
Transaction,
however
the
Compensation
and
Nominating
Committee
of
the
Board
of
Directors, at its
sole discretion, will determine
how the outstanding awards
under the plan
will be dealt
with, which
may include acceleration of the vesting conditions.
In
addition,
certain
contract
counterparties,
including
Stanwell,
customers,
suppliers
and
third-party
providers
may assert
contractual rights, such
as consent or
termination rights that
may be triggered
by the
change of control
resulting from the consummation of the SGI Transaction.
For a number of
customers and supplier agreements, including
contractor agreements, the completion of
the SGI
Transaction
may
trigger
a
financial
or
suitability
assessment
by
the
counterparty,
which
may
entitle
the
counterparty
to
terminate
the
agreement,
request
further
security
or
seek
amendments
to
the
terms
of
the
agreement.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
Coronado Global Resources Inc.
18. Material Transactions
Curragh Housing Transaction
On May 8, 2023, the Company entered into an
agreement, the Curragh Housing Agreement, for accommodation
services
and
to
sell
and
leaseback
housing
and
accommodation
assets
included
in
property,
plant
and
equipment.
The
transaction
did
not
satisfy
the
sale
criteria
under
ASC
606
–
Revenues
from
Contracts
with
Customers
underlying property,
plant and
equipment on
its condensed
consolidated balance
sheet. Upon
completion,
the
proceeds
of
$
Liabilities” on the Company’s Condensed Consolidated Balance Sheet. The term of the
financing arrangement is
%.
In connection
with this
transaction, the Company
will borrow an
additional amount of
$
which will
be recorded
in “Interest
Bearing Liabilities”
on completion
date. The
term of
the arrangement
is
ten
years
%.
The Curragh Housing Agreement is subject to conditions
precedent not completed as at September 30, 2023.
In line
with the
Company’s
capital management
strategy,
the above
transactions provide
additional liquidity.
In
addition, the accommodation
services component of the
Curragh Housing Agreement
is anticipated to enhance
the level of service for our employees at our Curragh
mine.
Coronado Global Resources Inc.
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 Statements
We
have
reviewed
the
accompanying
condensed
consolidated
balance sheet
of
Coronado
Global
Resources
Inc. (the Company) as
of September 30, 2023, the
related condensed consolidated statements of operations and
comprehensive
income
for
the
three
and
nine-month
periods
ended
September
30,
2023
and
2022,
the
condensed consolidated statements of stockholders’
equity for the three-months periods
ended March 31,
June
30 and September 30, 2023 and 2022, the condensed consolidated statements of cash flows for the nine-month
periods ended September
30, 2023 and 2022,
and the related
notes (collectively referred
to as the “condensed
consolidated interim financial
statements”). Based on our
reviews, we are
not aware of
any material modifications
that should be made to the
condensed consolidated interim financial statements for them 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, 2022, the
related consolidated statements
of operations
and comprehensive
income, stockholders'
equity and cash
flows
for the year then ended, and
the related notes (not presented herein), and
in our report dated February 21, 2023,
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, 2022,
is
fairly stated, in all material
respects, in relation to the consolidated balance
sheet from which it has been
derived.
Basis for Review Results
These financial
statements
are the
responsibility
of the
Company'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
SEC and
the PCAOB.
We
conducted our review
in accordance with
the standards of
the PCAOB. A
review of interim
financial statements
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/ Ernst & Young
Brisbane, Australia
November 8, 2023.
Coronado Global Resources Inc.
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
Quarterly
Report
on Form 10
-Q.
In addition,
this
Quarterly Report on Form 10-Q report should be read in conjunction with the Consolidated Financial Statements
for year ended December 31,
2022 included in Coronado Global
Resources Inc.’s Annual
Report on Form 10-K
for the year
ended December
31, 2022, filed
with the U.S.
Securities and
Exchange Commission,
or SEC,
and
the Australian Securities Exchange, or the ASX, on February
21, 2023.
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, 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,
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,”
“intends,”
“plans,”
“anticipate,”
“forecast,”
“outlook,”
“target,”
“likely,”
“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, our
announced plans, or an investment in our securities include,
but are not limited to:
●
●
unrest and wars,
as well as
risks related to
government actions with
respect to trade
agreements, treaties
or policies;
●
as diesel fuel, steel, explosives and tires, as the result
of inflationary pressures or otherwise;
●
developments. For example,
the amendments to
the coal
royalty regime implemented
by the Queensland
state Government in
Australia in 2022 introducing
higher tiers to the
coal royalty rates
applicable to our
Australian Operations;
●
relating
to
mining
activities,
including
possible
impacts
on global
climate
issues,
which
could
result
in
increased
regulation
of
coal
combustion
and
requirements
to
reduce
GHG
emissions
in
many
jurisdictions, including federal and state government initiatives to control GHG emissions could increase
costs associated with
coal production
and consumption, such
as costs for
additional controls to
reduce
carbon
dioxide
emissions
or
costs
to
purchase
emissions
reduction
credits
to
comply
with
future
emissions
trading
programs,
which
could
significantly
impact
our
financial
condition
and
results
of
operations, affect demand
for our products
or our
securities and reduced
access to capital
and insurance;
Coronado Global Resources Inc.
●
related provisions in material agreements;
●
due
to
future
public
health
crisis
(such
as
the
COVID-19
pandemic),
of
one
or
more
of
our
major
customers,
including
customers
in
the
steel
industry,
key
suppliers/contractors,
which
among
other
adverse effects,
could lead
to reduced
demand for
our coal,
increased difficulty
collecting receivables
and
customers
and/or
suppliers
asserting
force
majeure
or
other
reasons
for
not
performing
their
contractual obligations to us;
●
●
governing such indebtedness;
●
performance or otherwise;
●
●
coal deliveries, or increase the cost of operating our business;
●
●
●
●
●
●
●
arrangements with rail and port operators;
●
●
●
●
any
exposure
to
hazardous
substances
caused
by
our
operations,
as
well
as
any
environmental
contamination our properties may have or our operations
may cause;
●
●
regulations;
●
●
proprietary or confidential information about us, our customers
or other third parties;
●
require us to recognize impairment charges related to those assets;
●
●
impact our reported financial results; and
Coronado Global Resources Inc.
●
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 Annual Report
on Form 10-K for
the year ended December
31, 2022,
filed with the
SEC and
ASX on February
21, 2023,
and Part
II, Item 1A.
“Risk Factors”
of our Quarterly
Report
on Form 10-Q for
the quarterly period ended March
31, 2023, filed with
SEC and ASX on
May 8, 2023, 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
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
We
are
a
global
producer,
marketer
and
exporter
of
a
full
range
of
Met
coal
products.
We
own
a
portfolio
of
operating mines and development
projects in Queensland, Australia,
and in the states of
Virginia, West Virginia
and Pennsylvania in the United States.
Our Australian
Operations
comprise the
100%-owned
Curragh producing
mine complex.
Our U.S.
Operations
comprise
two
100%-owned
producing
mine
complexes
(Buchanan
and
Logan),
one
100%-owned
idled
mine
complex (Greenbrier) and two development properties (Mon Valley
and Russell County). In addition to Met coal,
our Australian
Operations sell
thermal coal
domestically,
which is
used to
generate electricity,
to Stanwell
and
some thermal
coal in
the export
market. Our
U.S. Operations
primarily focus
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.
During the third quarter
of 2023, Coronado navigated
through some operational headwinds
that were out of
our
control,
including
adverse
geological
conditions
at
our
U.S.
Operations
impacting
production
rates
yield
and
unexpected downtime for
repairs and maintenance
following a mechanical
failure of one
of the draglines
at our
Australian
Operations.
In
addition,
coal
production
rates
at
our
Australian
Operations
were
lower
in
the
third
quarter of
2023 primarily
due to
planned focus
on advancing
pre-strip waste
movement and
the completion
of
planned maintenance on the two coal preparation plants. Overall, these events contributed to the lower saleable
production of 0.8 MMt compared
to the three months ended
June 30, 2023. Despite the
lower production, sales
volume
compared
to
the
three
months
ended
June
30,
2023
increased
as
the
Company
drew
down
on
coal
inventory built in the previous quarter.
Coking
coal
index
prices
improved
in
the
third
quarter
of
2023
compared
to
the
previous
quarter
due
to
a
combination
of
tight
supply
from
the
Australian
coal
market,
which
was
impacted
negatively
by continued
rail
constraints
and
planned
maintenance
disruptions
to
operations
and
at
Queensland
ports,
and
heightened
demand from Indian steel mills restocking raw material as
the monsoon season comes to an end. The Australian
Premium Low
Volatile
Hard Coking
Coal, or
AUS PLV
HCC, index
price averaged
$263.6 per
Mt for
the three
months ended September
30, 2023, $20.8
per Mt higher,
compared to the
three months
ended June 30,
2023.
The
AUS PLV
HCC
averaged
$283.5
per
Mt
for
the
nine months
ended
September
30,
2023,
$109.0
per
Mt
lower, compared to the nine months ended September 30, 2022. The spot price of AUS PLV HCC reached $333
per Mt during the three months ended September 30, 2023.
Our
results
for
the
nine
months
ended
September
30,
2023,
were
adversely
impacted
by
(1)
lower
average
realized Met
price per
Mt sold
compared
to the
nine
months
ended September
30, 2022,
(2)
additional
fleets
deployed to
recover pre-strip
overburden removal,
(3) significant
wet weather
events during
the first
quarter of
2023
and
equipment
breakdown
at
our
Australian
Operations
impacting
production,
(4)
rail
constraints
and
disruption
to
port
operations
impacting
timing
of
sales
at
our
Australian
Operations,
(5)
adverse
geological
Coronado Global Resources Inc.
conditions at our U.S. Operations
resulting in slower production rates
and yield in the quarter
ended September
30, 2023, and (6) continued inflationary pressure on labor and
supply costs.
For the
nine months
ended September
30, 2023,
we produced
11.9
MMt and
sold 11.7
MMt of
coal. Met
coal
sales represented 75.8%
of our total
volume of coal
sold and 91.0%
of total coal
revenues for the
nine months
ended September 30, 2023, compared to 78.4% and 96.2%, respectively, for the nine months ended September
30, 2022.
Coal
revenues
of
$2,163.1
million
for
the
nine
months
ended
September
30,
2023,
decreased
by
23.3%
compared to the same period in 2022, driven by average realized Met price per Mt sold, which was $57.9 per Mt
lower than
the
average
realized
price
per
Mt sold
of
$279.4
for
the
nine
months
ended
September
30,
2022.
Additionally,
sales volumes were 0.7 Mt lower
for the nine months ended September
30, 2023, compared to the
same
period
in
2022,
primarily
driven
by
lower
production
as
well
as
required
coal
qualities
to
meet
sales
commitments during the nine months ended September 30,
2023.
Mining costs for the nine months ended September 30, 2023, were $1,210.4 million or $105.5 per Mt sold, $17.9
per Mt sold higher compared
to the corresponding period in
2022, largely driven by elevated
inflation levels, the
impacts
of
lower
production
following
significant
weather
events,
equipment
breakdown,
adverse
geological
conditions at
our U.S.
Operations
and additional
fleets
mobilized
at our
Australian Operations
during the
nine
months ended September 30, 2023.
Dividends
In September
2023, the
Company settled
its previously
declared dividends
of $8.4
million, which
were paid
to
stockholders from available cash.
Liquidity
As of September
30, 2023,
our net cash
position, comprising
of $336.8
million cash
(excluding restricted
cash)
less $242.3 million aggregate principal amount of Notes outstanding, was $94.5 million.
Coronado has available
liquidity of $486.8
million as of
September 30, 2023,
consisting of cash
(excluding restricted cash),
unrestricted
short term deposits of $21.6 million and $128.4 million
availability under our New ABL facility.
Safety
For
our
Australian
Operations,
the
twelve-month
rolling
average
Total
Reportable
Injury
Frequency
Rate,
or
TRIFR, at
September 30,
2023 was
2.43,
compared to
a rate of
3.92 at the
end of
December 31,
2022. At
our
U.S. Operations,
the twelve
-month rolling
average Total
Reportable Incident
Rate, or
TRIR, at
September
30,
2023 was 1.60, compared
to a rate of
2.42 at the end
of December 31, 2022.
These strong results
year to date
reflect a
record
safety
rate
at our
U.S. Operations
and the
best safety
rate since
July
2018 for
our Australian
Operations. Reportable rates for
our Australian and
U.S. Operations are
below the relevant industry
benchmarks.
Our
Logan
mining
complex
at
our
U.S.
Operations,
which
includes
multiple
underground
and
surface
mines,
achieved 1.5 million hours Lost Time
Injury, or
LTI, free during the
quarter.
The
health
and
safety
of
our
workforce
is
our
number
one
priority
and
Coronado
continues
implement
safety
initiatives to improve our safety rates every quarter.
Segment Reporting
In accordance with
Accounting Standards Codification,
or ASC, 280,
Segment Reporting, we
have adopted the
following reporting
segments: Australia and
the United
States. In
addition, “Other and
Corporate” is
not a
reporting
segment but is disclosed for the purposes of reconciliation
to our consolidated financial statements.
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, on a quarterly 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) Adjusted EBITDA; (iii) total sales volumes and average realized
price
per
Mt
sold,
which
we
define
as
total
coal
revenues
divided
by
total
sales
volume;
(iv) Met
coal
sales
Coronado Global Resources Inc.
volumes and average realized Met price per
Mt sold, which we define as Met coal
revenues divided by Met coal
sales volume; (v) average
segment mining costs
per Mt sold,
which we define
as mining costs
divided by sales
volumes (excluding non-produced coal) for the respective segment; (vi) average segment operating costs
per Mt
sold, which we define as segment operating costs divided by sales volumes for the respective segment; and (vii)
net cash, which we define
as cash and cash equivalents
(excluding restricted cash)
less outstanding aggregate
principal amount of the Notes.
Coal
revenues
are
shown
on
our
statement
of
operations
and
comprehensive
income
exclusive
of
other
revenues.
Generally,
export
sale contracts
for our
Australian
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. Sales to the
export market from
our U.S.
Operations are generally
recognized
when title
to the coal
passes to
the customer
at the
mine load
out similar
to a
domestic sale.
For our
domestic
sales,
customers
typically
bear
the
cost
of
freight.
As
such,
freight
expenses
are
excluded
from
cost
of
coal
revenues to allow for consistency and comparability
in evaluating our operating performance.
Non-GAAP Financial Measures; Other Measures
The
following
discussion
of
our
results
includes
references
to
and
analysis
of
Adjusted
EBITDA,
Segment
Adjusted EBITDA and mining
costs, which are financial
measures not recognized in
accordance with U.S. GAAP.
Non-GAAP financial
measures, including
Adjusted EBITDA,
Segment Adjusted
EBITDA and
mining costs,
are
used by investors to measure our operating performance.
Non-GAAP financial measures are intended to provide additional information only and do not have any standard
meaning prescribed by U.S. GAAP.
These measures should not be considered
in isolation or as a substitute for
measures of performance prepared in accordance with
U.S. GAAP.
Adjusted EBITDA, a non-GAAP measure, is defined as earnings before interest, tax, depreciation, depletion and
amortization
and
other
foreign
exchange
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
including total
revenues, total
costs and expenses,
net income or
cash flows from
operating activities as
those terms are
defined by U.S.
GAAP.
Adjusted EBITDA may
therefore not be
comparable to
similarly titled measures
presented by other
companies.
A reconciliation of
Adjusted EBITDA to
its most
directly comparable measure
under U.S. GAAP is
included below.
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 a mine. Mining costs excludes these cost
components as
our CODM
does not
view these
costs as
directly attributabl
e
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.
Coronado Global Resources Inc.
Three Months Ended September 30, 2023 Compared
to Three Months Ended September 30, 2022
Summary
The financial and operational highlights for the three months
ended September 30, 2023 include:
●
compared to
net income
of $150.6
million for
the three
months ended
September 30, 2022.
This decrease
was
driven
by
lower
coal
revenues
due
to
lower
average
realized
Met
coal
price
per
Mt
sold,
higher
mining
and
operating
costs,
partially
offset
by
tax
benefit
of
$18.2
million
in
the
third
quarter
of
2023
compared to an income tax expense of $51.4 million for
the same period in 2022.
●
$45.6 per Mt
lower compared to
average realized price of
$253.0 per Mt
sold for the
same period in
2022.
Although coking coal
index prices improved
during the third
quarter of
2023 due to
tight supply,
coking
coal prices were significantly lower than the same period in 2022 when supply in global
met coal market
was readjusting from the impact of the Russia and Ukraine
war.
●
2023, increased 0.1 MMt as compared to
the same period in 2022, as the Company
drew down on coal
inventory built in the second quarter of 2023.
●
$220.2
million,
compared to $223.6 million for the three months ended September 30, 2022, largely due
to lower coal sales revenues and higher operating costs.
●
$336.8
million
cash
(excluding
restricted
cash),
$21.6
million
of
unrestricted
short-term
deposits
and
$128.4 million of availability under the New ABL Facility.
Coronado Global Resources Inc.
Three months ended September 30,
2023
2022
Change
%
(in US$ thousands)
Revenues:
Coal revenues
$
707,303
$
863,709
$
(156,406)
(18.1%)
Other revenues
10,527
10,948
(421)
(3.8%)
Total
revenues
717,830
874,657
(156,827)
(17.9%)
Costs and expenses:
Cost of coal revenues (exclusive of items
shown separately below)
501,471
385,504
115,967
30.1%
Depreciation, depletion and amortization
34,749
37,508
(2,759)
(7.4%)
Freight expenses
71,746
63,026
8,720
13.8%
Stanwell rebate
37,100
54,575
(17,475)
(32.0%)
Other royalties
92,700
137,331
(44,631)
(32.5%)
Selling, general, and administrative expenses
12,221
10,405
1,816
17.5%
Total
costs and expenses
749,987
688,349
61,638
9.0%
Other income (expenses):
Interest expense, net
(14,496)
(17,220)
2,724
(15.8%)
Loss on debt extinguishment
(1,385)
—
(1,385)
100.0%
Decrease in provision for discounting and
credit losses
536
12
524
4,366.7%
Other, net
8,189
32,898
(24,709)
(75.1%)
Total
other (expenses) income, net
(7,156)
15,690
(22,846)
(145.6%)
Net (loss) income before tax
(39,313)
201,998
(241,311)
(119.5%)
Income tax benefit (expense)
18,230
(51,423)
69,653
(135.5%)
Net (loss) income attributable to Coronado Global
Resources, Inc.
$
(21,083)
$
150,575
$
(171,658)
(114.0%)
Coal Revenues
Coal revenues were
$707.3 million for
the three months
ended September 30,
2023, a
decrease of $156.4
million,
compared to $863.7 million
for the three months
ended September 30, 2022.
Lower Met coal price
indices, due
to varied
market conditions
compared to
the third
quarter of
2022, saw
the average
realized Met
coal price
for
the three months
ended September 30,
2023,
reduced by $45.6
to $207.4 per
Mt sold compared
to $253.0 per
Mt sold for the same period in 2022.
Cost of Coal Revenues (Exclusive of Items Shown
Separately Below)
Cost of coal revenues comprise 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
was $501.5 million for the
three months ended September
30, 2023, $116.0
million,
or 30.1% higher,
compared to $385.5 million for the three months ended
September 30, 2022.
Cost of coal
revenues for our
U.S. Operations for the
three months ended September
30, 2023, was $38.8
million
higher
compared
to
the
three
months
September
30,
2022,
largely
due
draw
down
of
coal
stocks
from
the
previous quarter,
as sales
volume exceeded
saleable production
in the
2023 period,
combined with
continued
impact of
inflation on
labor,
contractor and
other supply
costs. Our
Australian Operations
contributed to
$77.2
million
of
the
increase
in
cost
of
coal
revenues,
primarily
driven
by
additional
fleets
mobilized
during
2023
to
advance
pre-strip
overburden
removal,
impact
of
high
inflation
on
mining
costs
and
drawn
of
coal
inventory,
resulting from
sales volume
exceeding saleable
production in
the 2023
period. Increase
in costs
were partially
offset by favorable
average foreign exchange
rate on translation
of the
Australian Operations for
the three months
ended September 30, 2023, of A$/US$: 0.66 compared
to 0.68 for the same period in 2022.
Depreciation, Depletion and Amortization
Depreciation, depletion
and amortization
was $34.7
million for
the three
months ended
September 30,
2023, a
decrease
of
$2.8
million,
compared
to
$37.5
million
for
the
three
months
ended
September
30,
2022.
The
decrease
was
associated
with
assets
fully
depreciated,
lower
depreciation
rates
following
annual
useful
life
Coronado Global Resources Inc.
review at
the
beginning
of
2023 and
favorable
average
foreign exchange
rate on
translation of
the
Australian
Operations,
partially
offset
by
additional
equipment
brought
into
service
during
the
twelve
months
since
September 30, 2022.
Freight Expenses
Freight expenses
relate to
costs associated
with rail
and port
providers, including
take-or-pay commitments
at
our
Australian
Operations,
and
demurrage
costs.
Freight
expenses
totaled
$71.7
million
for the
three
months
ended September
30, 2023,
an increase of
$8.7 million,
compared to
$63.0 million
for the three
months ended
September 30, 2022. Our
Australian Operations’ freight costs
contributed $11.8
million to the increase
primarily
driven by penalties incurred due to underutilization
of rail capacity.
This was partially offset by freight
cost at our
U.S.
Operations,
which
decreased
by
$3.1
million,
driven
by
lower
coal
sales
under
Free
on
Board,
or
FOB,
terms, compared to the three months ended September
30, 2022.
Stanwell Rebate
The Stanwell
rebate
was
$37.1
million for
the three
months
ended September
30, 2023,
a decrease
of $17.5
million, compared
to $54.6
million for
the three
months ended
September 30,
2022. The
decrease was
largely
driven by lower
realized reference coal
pricing for the
prior twelve-month period applicable
to three months
ended
September 30, 2023,
used to calculate
the rebate compared
to the same
period in 2022,
and favorable foreign
exchange rate on translation of our Australian Operations.
Other Royalties
Other royalties were
$92.7 million in
the three months
ended September 30,
2023, a decrease
of $44.6 million,
compared to
$137.3 million
for the
three months
ended September
30, 2022.
The decrease
in Other
royalties
was
due
to
lower
coal revenues,
largely
driven
by
lower
average
realized
prices,
for the
three
months
ended
September 30, 2023,
compared to the
same period in
2022, combined with
favorable foreign exchange
rate on
translation of our Australian Operations.
Interest Expense, net
Interest
expense,
net
was
$14.5
million
in
the
three
months
ended
September
30,
2023,
a
decrease
of
$2.7
million compared
to $17.2
million for
the three
months
ended September
30, 2022.
The decrease
was due
to
lower
Notes
outstanding
during
the
three
months
ended
September
30,
2023,
following
redemptions
since
September 30, 2022.
Other, net
Other,
net
was
$8.2
million
for
the
three
months
ended
September
30,
2023,
a
decrease
of
$24.7
million
compared to $32.9 million for the three months ended September
30, 2022. The decrease was largely driven by
lower exchange
losses on translation
of short-term
inter-entity balances
in certain
entities within
the group
that
are denominated in currencies other than their respective
functional currencies.
Income Tax Benefit (Expense)
Income tax
benefit of
$18.2 million
for the
three months
ended September
30, 2023,
variance of
$69.7 million,
compared to the income tax expense of $51.4 million for the three
months ended September 30, 2022, driven by
net loss before tax in the 2023 period.
Coronado Global Resources Inc.
Nine months ended September 30, 2023 compared to
Nine months ended September 30, 2022
Summary
The financial and operational highlights for the nine months ended
September 30, 2023 include:
●
million, from $712.5 million
for the nine months
ended September 30,
2022. The decrease
was a result
of lower revenues and higher operating costs partially
offset by lower income tax expense.
●
the nine
months ended
September 30,
2022. The
lower sales
volumes were
primarily driven
by the
impact
of wet
weather
and equipment
breakdowns
on production
performance,
coal availability,
and required
coal qualities to meet
sales commitments at our
Australian Operations combined with adverse
geological
conditions caused by a rock intrusion at our U.S. Operations
.
●
20.7% lower compared to $279.4
per Mt sold for
the nine months ended September
30, 2022, as the
Met
coal price index
rebalanced from record
highs achieved in
2022, particularly in
the first half
of 2022, as
steel demand
weakened.
During the third
quarter of 2023,
the Met coal
prices trended upwards,
however,
the Company was not able
to take full advantage of
this due to the three
-month lag in price
realizations
for certain sales contracts at our Australian Operation.
●
lower compared to $1,072.9 million for
the nine months ended September 30,
2022. This decrease was
a result of lower coal revenues and higher operating costs.
●
balance
(excluding
restricted
cash)
of
$336.8
million
and
$242.3
million
aggregate
principal
amount
outstanding of the Notes.
Nine months ended September 30,
2023
2022
Change
%
(in US$ thousands)
Revenues:
Coal revenues
$
2,163,093
$
2,821,334
$
(658,241)
(23.3%)
Other revenues
47,977
33,152
14,825
44.7%
Total
revenues
2,211,070
2,854,486
(643,416)
(22.5%)
Costs and expenses:
Cost of coal revenues (exclusive of items
shown separately below)
1,262,907
1,140,467
122,440
10.7%
Depreciation, depletion and amortization
113,052
126,901
(13,849)
(10.9%)
Freight expenses
192,542
189,316
3,226
1.7%
Stanwell rebate
105,357
124,160
(18,803)
(15.1%)
Other royalties
268,606
299,711
(31,105)
(10.4%)
Selling, general, and administrative expenses
29,976
28,657
1,319
4.6%
Total
costs and expenses
1,972,440
1,909,212
63,228
3.3%
Other income (expenses):
Interest expense, net
(43,341)
(52,034)
8,693
(16.7%)
Loss on debt extinguishment
(1,385)
—
(1,385)
100.0%
Decrease (increase) in provision for discounting
and credit losses
4,255
(572)
4,827
(843.9%)
Other, net
17,704
55,191
(37,487)
(67.9%)
Total
other (expenses) income, net
(22,767)
2,585
(25,352)
(980.7%)
Net income before tax
215,863
947,859
(731,996)
(77.2%)
Income tax expense
(37,775)
(235,391)
197,616
(84.0%)
Net income
178,088
712,468
(534,380)
(75.0%)
Net income attributable to Coronado Global
Resources, Inc.
$
178,088
$
712,468
$
(534,380)
(75.0%)
Coronado Global Resources Inc.
Coal Revenues
Coal
revenues
were
$2,163.1
million
for
the
nine
months
ended
September
30,
2023,
a
decrease
of
$658.2
million, compared to $2,821.3 million for the nine months ended September 30, 2022. The decrease was largely
driven by
lower average
realized Met
price of
$221.5 per
Mt sold
compared to
$279.4 per
Mt sold
for the
nine
months ended September 30, 2022, combined with 0.7 MMt lower sales volume compared to the
same period in
2022.
Other Revenues
Other revenues were $48.0 million for the nine months ended September 30, 2023, an increase of $14.8 million,
compared to $33.2 million for the nine months ended September 30, 2022.
This increase was primarily driven by
a termination fee revenue from a coal sales contract cancelled
at our U.S. Operations.
Cost of Coal Revenues (Exclusive of Items Shown
Separately Below)
Total
cost of coal revenues was $1,262.9 million for the nine months
ended September 30, 2023, an increase of
$122.4 million, compared to $1,140.5 million for the nine
months ended September 30, 2022.
Cost of coal revenues for
our Australian Operations in
the nine months ended September
30, 2023, were $85.6
million higher compared
to the same
period in 2022,
primarily driven
by additional
fleets mobilized
during 2023
to advance pre-strip overburden removal,
the continued impact of inflation
on labor,
contractor and other supply
costs, higher
maintenance
expenses following
a dragline
propel failure,
partially offset
by a
significant
build in
coal
inventories
from
saleable
production
exceeding
sales
volume
in
period compared
to
a draw
down
in
the
same period
in 2022,
lower purchase
coal and favorable
foreign exchange
rate on
translation of
our Australian
Operations
for
the
nine
months
ended
September
30,
2023,
of
A$/US$:
0.67
compared
to
0.71
for the
same
period
in
2022.
Cost
of
coal
revenues
for
our
U.S.
Operations
were
$36.8
million
higher
for
the
nine
months
ended
September
30,
2023,
compared
to the
same
period
in 2022,
also impacted
by
an elevated
inflationary
environment
and
higher
consumables
and
maintenance
costs
following
a
rock
intrusion
in
the
quarter
ended
September 30, 2023.
Depreciation, Depletion and Amortization
Depreciation, depletion
and amortization
was $113.1
million for the
nine months
ended September 30,
2023, a
decrease of
$13.8 million,
as compared
to $126.9
million for
the nine
months ended
September 30,
2022. The
decrease
was
associated
with
assets
fully
depreciated,
lower
depreciation
rates
following
annual
useful
life
review at
the
beginning
of
2023 and
favorable
average
foreign exchange
rate on
translation of
the
Australian
Operations,
partially
offset
by
additional
equipment
brought
into
service
during
the
twelve
months
since
September 30, 2022.
Freight Expenses
Freight
expenses
totaled
$192.5
million
for
the
nine
months
ended
September
30,
2023,
an
increase
of
$3.2
million, compared
to $189.3 million
for the nine
months ended
September 30,
2022. Our Australian
Operations
contributed
$4.4
million
to
the
increase
due
to
higher
rail
costs
primarily
driven
by
penalties
incurred
due
to
underutilization of
rail capacities
in our
Australian Operations,
partially offset
by lower
sales volumes
reducing
freight costs at our Australian Operations and U.S. Operations
.
Stanwell Rebate
The Stanwell
rebate was
$105.4 million
for the
nine months
ended September
30, 2023,
a decrease
of $18.8
million, as compared
to $124.2 million
for the nine
months ended
September 30,
2022. The decrease
was due
lower
realized
reference
coal
pricing
for
the
prior
twelve-month
period
applicable
to
the
nine
months
ended
September 30, 2023, used
to calculate the rebate
compared to the same
period in 2022 and
favorable average
foreign exchange rate on translation of the Australian
Operations.
Other Royalties
Other royalties were $268.6 million for the nine months ended September 30, 2023, a decrease
of $31.1 million,
as
compared
to
$299.7
million
for
the
nine
months
ended
September
30,
2022.
Our
Australian
Operations
contributed
to
$27.7
million
of the
decrease
due
to
lower
average
realized
export
pricing
for
the
nine
months
ended September 30, 2023,
compared to the same period in 2022 and favorable average foreign exchange rate
on translation
of the
Australian Operations,
partially offset
by the
adverse
impact
that the
new royalty
regime,
which was
effective from
July 1,
2022, had
in the
first half
of 2023 compared
to the
first half
of 2022
under the
old regime. The new royalty regime resulted in $58.7
million additional royalty costs in the 2023 period.
Coronado Global Resources Inc.
Interest Expense, net
Interest expense, net was
$43.3 million in
the nine months ended
September 30, 2023, a
decrease of $8.7
million
compared to $52.0 million
for the nine months
ended September 30, 2022.
The decrease was due
to lower Notes
outstanding following redemptions since September 30,
2022.
Decrease (increase) in Provision for Discounting and
Credit Losses
Decrease in provision for
discounting and credit
losses of $4.3 million
in the nine months
ended September 30,
2023, a favorable
movement of $4.8
million compared to
increase in provision
for discounting and
credit losses
of $0.6 million for
the nine months ended September
30, 2022. The lower
provision was primarily driven by
timely
collection of certain overdue trade receivables
at December 31, 2022 during the
nine months ended September
30, 2023.
Other, net
Other, net was
$17.7 million in
the nine
months ended September
30, 2023,
a decrease of
$37.5 million
compared
to the
net gain
of $55.2
million
for the
nine months
ended
September 30,
2022. The
decrease
was
driven
by
lower foreign exchange gains on translation of short-term inter-entity balances in certain entities within the group
that are denominated in currencies other than their
respective functional currencies.
Income Tax Expense
Income tax expense
of $37.8 million
for the nine
months ended September
30, 2023 decreased
by $197.6 million,
compared
to
$235.4
million
tax
expense
for
the
nine
months
ended
September
30,
2022,
primarily
driven
by
lower net income before tax in the 2023 period.
The income tax expense for the nine
months ended September 30, 2023 is based
on an annual effective tax rate
of 18.5%, which includes a discrete benefit of $2.1 million
relating to prior year for Australia.
Supplemental Segment Financial Data
Three months ended September 30, 2023 compared to
three months ended September 30, 2022
Australia
Three months ended September 30,
2023
2022
Change
%
(in US$ thousands)
Sales volume (MMt)
2.6
2.4
0.2
7.1%
Total
revenues ($)
455,774
546,485
(90,711)
(16.6)%
Coal revenues ($)
446,815
537,256
(90,441)
(16.8)%
Average realized price per Mt sold ($/Mt)
172.3
221.8
(49.5)
(22.3)%
Met sales volume (MMt)
1.8
1.7
0.1
7.2%
Met coal revenues ($)
419,032
518,010
(98,978)
(19.1)%
Average realized Met price per Mt sold ($/Mt)
236.2
313.0
(76.8)
(24.5)%
Mining costs ($)
310,727
241,674
69,053
28.6%
Mining cost per Mt sold ($/Mt)
121.7
99.8
21.9
21.9%
Operating costs ($)
487,864
458,405
29,459
6.4%
Operating costs per Mt sold ($/Mt)
188.2
189.3
(1.1)
(0.6)%
Segment Adjusted EBITDA ($)
(32,353)
88,035
(120,388)
(136.8)%
Coal
revenues
for
our
Australian
Operations,
for
the
three
months
ended
September
30,
2023,
were
$446.8
million, a decrease of
$90.4 million, or 16.8%, compared
to $537.3 million for
the three months ended September
30, 2022. This decrease was driven by lower average
realized Met coal price per Mt sold of $236.2 for the three
months ended September
30, 2023, compared to
$313.0 per Mt sold
for the same period
in 2022, when supply
in global
met coal
market was
readjusting from
the impact
of the
Russia and
Ukraine war.
The lower
realized
pricing was partially offset by higher sales volume of 0.2 MMt compared to the same
period in 2022. Production,
and sales,
performance in
the three
months ended
September 30,
2022, was
impacted by
unprecedented wet
weather events at our Australian Operations.
Operating costs were $487.9
million, an increase of
$29.5 million or
6.4%, for the
three months ended September
30, 2023, compared to $458.4 million for the three
months ended September 30, 2022. The increase was largely
Coronado Global Resources Inc.
driven
by
additional
fleets
mobilized
in
2023
to
advance
pre-strip
overburden
removal,
continued
inflationary
pressures
on contractor
and supply
costs, higher
freight expense
and
increased
third-party
coal purchases
to
meet sales commitments. This was partially offset by favorable average foreign exchange rates on translation of
the Australian
Operations. Mining
cost per
Mt sold for
the three
months ended
September 30,
2023, increased
by $21.9 to $121.7,
compared to the same
period in 2022, driven
by higher mining costs, partially
offset by higher
sales volumes.
Segment Adjusted EBITDA
decreased by $120.4
million, or 136.8%,
to an EBITDA
loss of $32.4
million for the
three months ended September 30, 2023, compared to $88.0 million
for the three months ended September 30,
2022, largely driven by lower coal revenues and higher
operating costs.
United States
Three months ended September 30,
2023
2022
Change
%
(in US$ thousands)
Sales volume (MMt)
1.5
1.7
(0.2)
(11.3)%
Total
revenues ($)
262,056
328,172
(66,116)
(20.1)%
Coal revenues ($)
260,488
326,453
(65,965)
(20.2)%
Average realized price per Mt sold ($/Mt)
172.6
193.1
(20.5)
(10.6)%
Met sales volume (MMt)
1.4
1.6
(0.2)
(15.9)%
Met coal revenues ($)
232,870
309,609
(76,739)
(24.8)%
Average realized Met price per Mt sold ($/Mt)
170.2
191.6
(21.4)
(11.2)%
Mining costs ($)
175,883
132,380
43,503
32.9%
Mining cost per Mt sold ($/Mt)
119.3
81.4
37.9
46.6%
Operating costs ($)
215,153
182,031
33,122
18.2%
Operating costs per Mt sold ($/Mt)
142.6
107.0
35.6
33.3%
Segment Adjusted EBITDA ($)
47,630
145,890
(98,260)
(67.4)%
Coal revenues
decreased by
$66.0 million,
or 20.2%,
to $260.5
million for
the three
months ended
September
30,
2023,
compared
to
$326.5
million
for
the
three
months
ended
September
30,
2022.
This
decrease
was
primarily
a result
of
lower
average
realized
Met
price
per
Mt sold
for
the
three
months
ended
September
30,
2023, which was
$20.5 per Mt
sold below for
the same
period in
2022, due to
lower coal
price indices
albeit at
the back of a less volatile coal market. Coal revenues were also impacted by lower sales volume of 0.2 MMt due
to adverse geological conditions impacting production
at our Buchanan mine complex.
Operating costs
increased by
$33.1 million,
or 18.2%,
to $215.2 million
for the three
months ended
September
30, 2023, compared
to operating
costs of
$182.0 million
for the
three months
ended September
30, 2022.
The
increase
was largely
driven by
higher mining
costs due
to continued
impact
of inflation
on supplies
and
labor
costs
and
a
higher
drawdown
of
coal
inventories,
resulting
from
lower
sales
production
volumes
outweighing
lower sales
volume when
comparing the
third quarter
of 2023
to the
third quarter
of 2022.
Sales volume
exceeding
saleable production in the period. The increase in mining costs was partially offset by lower freight expense from
lower sales on FOB terms and lower royalties as a result
of lower coal revenues.
Segment Adjusted EBITDA of
$47.6 million for
the three months ended
September 30, 2023, decreased
by $98.3
million compared
to $145.9
million for
the three
months ended
September 30,
2022, primarily
driven by
lower
average realized Met price per Mt sold and higher operating
costs.
Corporate and Other Adjusted EBITDA
The following table presents a summary of the components
of Corporate and Other Adjusted EBITDA:
Three months ended September 30,
2023
2022
Change
%
(in US$ thousands)
Selling, general, and administrative expenses
$
12,221
$
10,405
$
1,816
17.5%
Other, net
(322)
(56)
(266)
n/m
Total
Corporate and Other Adjusted EBITDA
$
11,899
$
10,349
$
1,550
15.0%
n/m – Not meaningful for comparison.
Coronado Global Resources Inc.
Corporate and
other costs
of $11.9
million for
the three
months ended
September 30,
2023, were
$1.6 million
higher
compared
to
$10.3
million
for
the
three
months
ended
September
30,
2022,
due
to
timing
of
certain
corporate costs.
Mining
and
operating
costs
for
the
three
months
ended
September
30,
2023
compared
to
three
months ended September 30, 2022
A reconciliation of
segment costs and
expenses, segment operating
costs, and segment
mining costs is
shown
below:
Three months ended September 30, 2023
(in US$ thousands)
Australia
United
States
Other /
Corporate
Total
Consolidated
Total costs and
expenses
$
501,021
$
236,478
$
12,488
$
749,987
Less: Selling, general and administrative
expense
—
—
(12,221)
(12,221)
Less: Depreciation, depletion and amortization
(13,157)
(21,325)
(267)
(34,749)
Total operating costs
487,864
215,153
—
703,017
Less: Other royalties
(80,726)
(11,974)
—
(92,700)
Less: Stanwell rebate
(37,100)
—
—
(37,100)
Less: Freight expenses
(49,712)
(22,034)
—
(71,746)
Less: Other non-mining costs
(9,599)
(5,262)
—
(14,861)
Total mining costs
310,727
175,883
—
486,610
Sales Volume excluding non-produced
coal
(MMt)
2.6
1.5
—
4.0
Mining cost per Mt sold ($/Mt)
121.7
119.3
—
120.8
Three months ended September 30, 2022
(in US$ thousands)
Australia
United
States
Other /
Corporate
Total
Consolidated
Total costs and
expenses
$
475,496
$
202,167
$
10,686
$
688,349
Less: Selling, general and administrative
expense
—
—
(10,405)
(10,405)
Less: Depreciation, depletion and amortization
(17,091)
(20,136)
(281)
(37,508)
Total operating costs
458,405
182,031
—
640,436
Less: Other royalties
(122,820)
(14,511)
—
(137,331)
Less: Stanwell rebate
(54,575)
—
—
(54,575)
Less: Freight expenses
(37,885)
(25,141)
—
(63,026)
Less: Other non-mining costs
(1,451)
(9,999)
—
(11,450)
Total mining costs
241,674
132,380
—
374,054
Sales Volume excluding non-produced
coal
(MMt)
2.4
1.6
—
4.0
Mining cost per Mt sold ($/Mt)
99.8
81.4
—
92.4
Average realized Met price per
Mt sold for the three months
ended September 30, 2023
compared to
three months ended September 30, 2022
A reconciliation of the Company’s average realized
Met price per Mt sold is shown below:
Three months ended September 30,
2023
2022
Change
%
(in US$ thousands)
Met sales volume (MMt)
3.1
3.3
(0.2)
(4.3)%
Met coal revenues ($)
651,902
827,619
(175,717)
(21.2)%
Average realized Met price per Mt sold ($/Mt)
207.4
253.0
(45.6)
(18.0)%
Coronado Global Resources Inc.
Nine months ended September 30, 2023 compared to
Nine months ended September 30, 2022
Australia
Nine months ended September 30,
2023
2022
Change
%
(in US$ thousands)
Sales volume (MMt)
7.2
7.5
(0.3)
(3.8)%
Total
revenues ($)
1,286,242
1,730,172
(443,930)
(25.7)%
Coal revenues ($)
1,260,741
1,701,901
(441,160)
(25.9)%
Average realized price per Mt sold ($/Mt)
174.0
225.9
(51.9)
(23.0)%
Met sales volume (MMt)
5.0
5.0
—
0.5%
Met coal revenues ($)
1,195,413
1,615,364
(419,951)
(26.0)%
Average realized Met price per Mt sold ($/Mt)
238.5
323.9
(85.4)
(26.4)%
Mining costs ($)
772,561
648,965
123,596
19.0%
Mining cost per Mt sold ($/Mt)
107.8
89.3
18.5
20.7%
Operating costs ($)
1,249,490
1,206,022
43,468
3.6%
Operating costs per Mt sold ($/Mt)
172.5
160.1
12.4
7.7%
Segment Adjusted EBITDA ($)
35,580
523,319
(487,739)
(93.2)%
Coal
revenues
for
our
Australian
Operations
for
the
nine
months
ended
September
30,
2023,
were
$1,260.7
million,
a
decrease
of
$441.2
million,
or
25.9%,
compared
to
$1,701.9
million
for
the
nine
months
ended
September 30, 2022. This decrease was driven by lower average
realized Met price per Mt sold of $238.5,
$85.4
per Mt lower compared to $323.9 per Mt
sold for the nine months ended September
30, 2022, as Met coal price
index
rebalanced
from
record
highs
achieved
in
2022,
particularly
in
the
first
half
of
2022,
as
steel
demand
weakened. Coal
revenues were
further impacted
by significant
wet weather
events and
equipment breakdown
and their associated recovery time resulting in
sales volumes 0.3 MMt lower compared to
the nine months ended
September 30, 2022.
Operating costs increased by $43.5 million, or 3.6%, for the nine
months ended September 30, 2023, compared
to
the
nine
months
ended
September
30,
2022,
primarily
driven
by
higher
mining
costs
and
freight
expense.
Mining costs were $123.6 million higher for the nine
months ended September 30, 2023, due to additional
fleets
mobilized in 2023
to advance
pre-strip overburden
removal, the
continued impact
of inflation on
contractor and
supply costs,
and costs
associated
with equipment
breakdown. This
increase was
partially offset
by favorable
average
foreign
exchange
on
translation
of
our
Australian
Operations
and
lower
Stanwell
rebate
and
other
royalties
expense.
Increase
in
costs
and
lower
sales
volumes
saw
Mining
and
Operating
costs
per
Mt
sold
increased by $18.5 and $12.4, respectively,
compared to the same period in 2022.
For the
nine months
ended September
30, 2023,
Adjusted EBITDA
of $35.6
million, were
$487.7 million
lower
compared to $523.3 million for the nine months ended September 30, 2022. This decrease was a result of lower
coal revenues
and higher mining and operating costs.
United States
Nine months ended September 30,
2023
2022
Change
%
(in US$ thousands)
Sales volume (MMt)
4.5
4.9
(0.4)
(8.1)%
Total
revenues ($)
924,828
1,124,314
(199,486)
(17.7)%
Coal revenues ($)
902,352
1,119,433
(217,081)
(19.4)%
Average realized price per Mt sold ($/Mt)
201.2
230.5
(29.3)
(12.6)%
Met sales volume (MMt)
3.9
4.7
(0.8)
(18.4)%
Met coal revenues ($)
773,184
1,098,186
(325,002)
(29.6)%
Average realized Met price per Mt sold ($/Mt)
199.5
232.4
(32.9)
(14.0)%
Mining costs ($)
437,860
396,562
41,298
10.4%
Mining cost per Mt sold ($/Mt)
101.6
85.0
16.6
19.8%
Operating costs ($)
579,922
547,632
32,290
5.9%
Operating costs per Mt sold ($/Mt)
129.3
112.8
16.5
14.8%
Segment Adjusted EBITDA ($)
349,160
578,183
(229,023)
(39.6)%
Coal revenues
decreased by
$217.1 million,
or 19.4%,
to $902.4 million
for the nine
months ended
September
30,
2023,
compared
to
$1,119.4
million
for
the
nine
months
ended
September
30,
2022.
This
decrease
was
Coronado Global Resources Inc.
primarily due to lower average realized
Met price per Mt sold for
the nine months ended September
30, 2023 of
$199.5 compared to $232.4
per Mt sold for
the same period in
2022, product mix
skewed towards lower
quality
Met coal
and lower
sales volume
driven by
lower production
which was
impacted by
adverse geological
conditions
and wet weather events in the 2023 period.
Operating costs of
$580.0 million were
$32.3 million higher
compared to $547.6 million
for the nine
months ended
September
30,
2023.
Mining
costs
contributed
$41.3
million
of
the
increase
driven
by
continued
inflationary
impact on
labor and
supply
costs
and unplanned
maintenance
costs. Mining
and Operating
costs per
Mt sold
increased by $16.6
and $16.5, respectively, due to
lower sales volume
and higher costs
in the
nine months ended
September 30, 2023.
Adjusted EBITDA of $349.2
million decreased by $229.0
million, or 39.6%, for
the nine months ended
September
30,
2023,
compared
to
$578.2
million
for
the
nine
months
ended
September
30,
2022.
This
decrease
was
primarily driven by lower coal revenues
and higher mining and operating costs.
Corporate and Other Adjusted EBITDA
The following table presents a summary of the components
of Corporate and Other Adjusted EBITDA:
Nine months ended September 30,
2023
2022
Change
%
(in US$ thousands)
Selling, general, and administrative expenses
$
29,976
$
28,657
$
1,319
4.6%
Other, net
(888)
(78)
(810)
n/m
Total
Corporate and Other Adjusted EBITDA
$
29,088
$
28,579
$
509
1.8%
n/m – Not meaningful for comparison.
Corporate and
other costs
of $29.1
million for
the nine
months
ended September
30, 2023,
were $0.5
million
higher
compared
to
$28.6
million
for
the
nine
months
ended
September
30,
2022,
due
to
timing
of
certain
corporate costs.
Coronado Global Resources Inc.
Mining and operating costs
for the Nine
months ended September 30,
2023 compared to Nine
months
ended September 30, 2022
A reconciliation of
segment costs and
expenses, segment operating
costs, and segment
mining costs is
shown
below:
Nine months ended September 30, 2023
(in US$ thousands)
Australia
United
States
Other /
Corporate
Total
Consolidated
Total costs and
expenses
$
1,297,492
$
644,168
$
30,780
$
1,972,440
Less: Selling, general and administrative
expense
—
—
(29,976)
(29,976)
Less: Depreciation, depletion and amortization
(48,002)
(64,246)
(804)
(113,052)
Total operating costs
1,249,490
579,922
—
1,829,412
Less: Other royalties
(231,443)
(37,163)
—
(268,606)
Less: Stanwell rebate
(105,357)
—
—
(105,357)
Less: Freight expenses
(120,747)
(71,795)
—
(192,542)
Less: Other non-mining costs
(19,382)
(33,104)
—
(52,486)
Total mining costs
772,561
437,860
—
1,210,421
Sales Volume excluding non-produced
coal
(MMt)
7.2
4.3
—
11.5
Mining cost per Mt sold ($/Mt)
107.8
101.6
—
105.5
Nine months ended September 30, 2022
(in US$ thousands)
Australia
United
States
Other /
Corporate
Total
Consolidated
Total costs and
expenses
$
1,270,397
$
609,291
$
29,524
$
1,909,212
Less: Selling, general and administrative
expense
—
—
(28,657)
(28,657)
Less: Depreciation, depletion and amortization
(64,375)
(61,659)
(867)
(126,901)
Total operating costs
1,206,022
547,632
—
1,753,654
Less: Other royalties
(259,140)
(40,571)
—
(299,711)
Less: Stanwell rebate
(124,160)
—
—
(124,160)
Less: Freight expenses
(116,386)
(72,930)
—
(189,316)
Less: Other non-mining costs
(57,371)
(37,569)
—
(94,940)
Total mining costs
648,965
396,562
—
1,045,527
Sales Volume excluding non-produced
coal
(MMt)
7.3
4.7
—
11.9
Mining cost per Mt sold ($/Mt)
89.3
85.0
—
87.6
Average realized Met
price per Mt
sold for the
Nine months ended
September 30, 2023
compared to
Nine months ended September 30, 2022
A reconciliation of the Company’s average realized
Met price per Mt sold is shown below:
Nine months ended September 30,
2023
2022
Change
%
(in US$ thousands)
Met sales volume (MMt)
8.9
9.7
(0.8)
(8.7)%
Met coal revenues ($)
1,968,597
2,713,550
(744,953)
(27.5)%
Average realized Met price per Mt sold ($/Mt)
221.5
279.4
(57.9)
(20.7)%
Coronado Global Resources Inc.
Reconciliation of Non-GAAP Financial Measures
Adjusted EBITDA
Three months ended September
30,
Nine months ended September
30,
(in US$ thousands)
2023
2022
2023
2022
Reconciliation to Adjusted EBITDA:
Net (loss) income
$
(21,083)
$
150,575
$
178,088
$
712,468
Add: Depreciation, depletion and amortization
34,749
37,508
113,052
126,901
Add: Interest expense (net of interest income)
14,496
17,220
43,341
52,034
Add: Other foreign exchange gains
(7,859)
(31,917)
(17,265)
(55,064)
Add: Loss on extinguishment of debt
1,385
—
1,385
—
Add: Income tax expense
(18,230)
51,423
37,775
235,391
Add: Losses on idled assets
456
(1,221)
3,531
621
Add: (Decrease) increase in provision for
discounting and credit losses
(536)
(12)
(4,255)
572
Adjusted EBITDA
$
3,378
$
223,576
$
355,652
$
1,072,923
Liquidity and Capital Resources
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 availability under our debt
facilities.
Our main uses of cash have historically been, and are expected to continue to be, the funding of our
operations,
working capital,
capital
expenditure,
debt
service
obligations,
business
or assets
acquisitions
and
payment
of
dividends. Based
on our
outlook for
the next
twelve months,
which is
subject to
completion of
the SGI
Transaction,
continued changing demand from our customers, 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
ongoing
civil
unrest
and
wars,
we
believe
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,
service our
debt obligations
and, if
declared,
payment of dividends.
Under
the
Senior
Secured
Notes
Indenture,
upon
a
change
of
control,
we
are
required
to
make
an
offer
to
purchase the Notes from the holders at a
price of 101% of the principal amount thereof,
plus accrued and unpaid
interest.
Under the New ABL Facility,
a change of control constitutes a Review Event pursuant to which the Lenders may
request to meet
and consult with
us to agree
a strategy to
address the relevant
Review Event including
but not
limited to a restructure
of the terms of the
New ABL Facility to
the satisfaction of the
Lenders. Refer to Note
10.
“Interest Bearing Liabilities” for further information.
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, and Part
I, Item 1A. “Risk
Factors” of our
Annual Report on
Form 10-K for the
year
ended December 31,
2022, filed
with the SEC
and ASX on
February 21, 2023
, and Part
II, Item
1A. “Risk Factors”
of our Quarterly Report
on Form 10-Q for
the quarterly period ended March
31, 2023, filed with
the SEC and ASX
on May 8, 2023.
Coronado Global Resources Inc.
Liquidity as of September 30, 2023 and December 31,
2022 was as follows:
(in US$ thousands)
September 30,
2023
December 31,
2022
Cash, excluding restricted cash
$
336,845
$
334,378
Short term deposits
21,618
—
Availability under the Predecessor ABL Facility
—
100,000
Availability under the New ABL Facility
(1)
128,382
—
Total
$
486,845
$
434,378
(1)
The New ABL Facility
provides for up to
$150.0 million in borrowings,
including a $100.0 million
sublimit for the issuance
of letters of credit,
of which $21.6 million
has been issued, and
$70.0 million sublimit as
a revolving credit facility.
The letter
of credit sublimit contributes to our liquidity as the Company has the ability
to replace cash collateral, provided in the form of
restricted deposits, with letters of credit allowing the release of such restricted deposits to cash and cash equivalents.
Our total indebtedness as of September 30, 2023 and
December 31, 2022 consisted of the following:
(in US$ thousands)
September 30,
2023
December 31,
2022
Current installments of interest bearing liabilities
$
242,326
$
242,326
Current installments of other financial liabilities and finance
lease obligations
4,040
4,585
Other financial liabilities and finance lease obligations, excluding
current
installments
5,748
8,336
Total
$
252,114
$
255,247
Liquidity
As
of
September
30,
2023,
available
liquidity
was
$486.8 million,
comprised
of
cash
and
cash
equivalents
(excluding restricted cash) of $336.8
million, unrestricted short term deposits
of $21.6 million and $128.4 million
of available borrowings under our New ABL Facility.
As
of
December
31,
2022,
available
liquidity
was
$434.4
million,
comprised
of
cash
and
cash
equivalents
(excluding restricted cash) of $334.4 million and $100.0
million of available borrowings under our ABL Facility.
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 or used to repay
interest bearing liabilities.
Senior Secured Notes
As of
September
30,
2023, the
outstanding
principal
amount of
our Notes
was
$242.3 million
.
Interest on
the
Notes is payable semi-annually in arrears on May 15 and November 15 of each year.
The Notes mature on May
15, 2026 and are senior secured obligations of the Company.
The 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 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.
The Company may
redeem some or
all of the
Notes at the
redemption prices and
on the terms
specified in the
Indenture. In addition, the Company may,
from time to time, seek to retire or purchase outstanding
debt through
open-market purchases,
privately negotiated
transactions or
otherwise. Such
repurchases,
if any,
will be
upon
such terms and at such prices as the Company may determine, and will depend on prevailing market conditions,
liquidity requirements, contractual restrictions and other
factors.
Coronado Global Resources Inc.
Based on information that
we are currently aware
of, on completion of
the SGI Transaction, a “Change
of Control”
as defined under
the terms of
the Notes may
occur. Refer to Part
I, Item
I. Financial Statements,
Note 10. “Interest
Bearing Liabilities” for further information.
As of September 30, 2023, we were in compliance with
all applicable covenants under the Indenture.
New ABL Facility
On May 8, 2023, we entered into
a senior secured asset-based revolving credit agreement in
an initial aggregate
amount of $150.0 million, or the New ABL Facility.
On August 3, 2023, the Company
satisfied all conditions precedent
under the New ABL Facility,
at which time it
became effective and replaced the predecessor
ABL Facility.
The New
ABL Facility
matures in
August 2026
and provides
for up
to $150.0
million in
borrowings, including
a
$100.0 million sublimit for the issuance
of letters of credit and $70.0
million sublimit as a revolving
credit facility.
Availability under the New
ABL Facility is
limited to an
eligible borrowing base, determined
by applying customary
advance rates to eligible accounts receivable and inventory.
Borrowings under the New
ABL Facility bear interest
at a rate per
annum equal to applicable
rate of 2.80% and
BBSY,
for loans denominated in A$, or SOFR, for loans
denominated in US$, at the Borrower’s election.
Subject
to
customary
grace
periods
and
notice
requirements,
the
New
ABL
Facility
also
contains
customary
events of default.
Based on information
that we are
currently aware of,
on completion of
the SGI Transaction,
a “Change of
Control”
as defined under the terms of the
New ABL Facility may occur. Refer to Part I, Item I.
Financial Statements, Note
10. “Interest Bearing Liabilities” for further information.
As
at
September
30,
2023,
letter
of
credit
sublimit
had
been
partially
used
to
issue
$21.6
million
of
bank
guarantees
on
behalf
of
the
Company
and
no
amounts
were drawn
and
no
letters
of credit
were
outstanding
under
the
revolving
credit
sublimit
of
New
ABL
Facility.
As
at
September
30,
2023,
the
Company
was
in
compliance with all applicable covenants under the New
ABL Facility.
Predecessor ABL Facility
On August 3, 2023, the Company satisfied all conditions precedent under
the New ABL Facility at which time the
New ABL Facility replaced
the predecessor ABL Facility.
As a result of the
early termination of
the predecessor
ABL Facility,
the Company
recorded a
loss on
debt extinguishment
of $1.4
million in
its unaudited
Condensed
Consolidated Statement of Operations and Comprehensive Income for each of
the three and nine months ended
September 30, 2023.
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.
As required by certain agreements,
we had cash collateral in the form
of deposits in the amount of $67.9
million
and
$89.1
million
as
of
September
30,
2023,
and
December
31,
2022,
respectively,
to
provide
back-to-back
support
for
bank
guarantees,
financial
payments,
other
performance
obligations,
various
other
operating
agreements and
contractual obligations
under workers
compensation insurance.
These deposits
are restricted
and classified as long-term assets in the unaudited Condensed
Consolidated Balance Sheets.
In accordance with the terms of the ABL Facility, we 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,
2023,
no
letter
of
credit
was
outstanding
after
the
expiration
or
termination
date
and
no
cash
collateral was required.
For the U.S. Operations
in order to
provide the required
financial assurance, we
generally use surety
bonds for
post-mining
reclamation.
We
can
also
use
bank
letters
of
credit
to
collateralize
certain
obligations.
As
of
September 30, 2023,
we had outstanding
surety bonds of
$40.9 million and
letters of credit
of $16.8 million
issued
from our available
bank guarantees
under the New
ABL Facility,
to meet contractual
obligations under
workers
compensation insurance and to secure other obligations
and commitments.
Coronado Global Resources Inc.
For the Australian
Operations, we had bank
guarantees outstanding of $24.1
million,
including $4.9 million issued
from the New ABL
Facility,
as at September 30,
2023, primarily in respect
of certain rail and
port arrangements
of the Company.
As
at
September
30,
2023,
we
had
total
outstanding
bank
guarantees
provided
of
$40.9
million
to
secure
obligations and
commitments. Future
regulatory changes
relating to
these obligations
could result
in increased
obligations, additional costs or additional collateral requirements.
Dividend
On February 21,
2023, our Board
of Directors declared
a bi-annual fully
franked fixed ordinary
dividend of $8.4
million, or 0.5
cents per CDI.
On April
5, 2023, the
Company paid $8.3
million, net of
$0.1 million foreign
exchange
gain on payment of dividends to certain CDI holders
who elected to be paid in Australian dollars.
On
August
7,
2023,
our
Board
of
Directors
declared
a
bi-annual
fully
franked
fixed
ordinary
dividend
of
$8.4
million, or 0.5 cents per CDI. On September 19, 2023,
the Company paid $8.3 million, net of $0.1 million foreign
exchange loss on payment of dividends to certain CDI
holders who elected to be paid in Australian dollars.
Capital Requirements
Our main uses of cash have historically been the
funding of our operations, working capital, capital expenditure,
the payment of
interest and dividends.
We intend
to use cash
to fund debt
service payments
on our Notes,
the
New ABL Facility and our
other indebtedness, to fund
operating activities, working capital,
capital expenditures,
partial redemption of the Notes, business or assets acquisitions
and, if declared, payment of dividends.
Historical Cash Flows
The following
table summarizes
our cash
flows for
the nine
months ended
September 30,
2023 and
2022, as
reported in the accompanying consolidated financial statements:
Cash Flow
Nine months ended September 30,
(in US$ thousands)
2023
2022
Net cash provided by operating activities
$
223,681
$
945,384
Net cash used in investing activities
(183,028)
(150,670)
Net cash used in financing activities
(23,005)
(483,854)
Net change in cash and cash equivalents
17,648
310,860
Effect of exchange rate changes on cash and restricted
cash
(15,180)
(50,144)
Cash and restricted cash at beginning of period
334,629
437,931
Cash and restricted cash at end of period
$
337,097
$
698,647
Operating activities
Net cash
provided by
operating activities
was $223.7
million for
the nine
months ended
September 30,
2023,
compared to $945.4 million
for the nine
months ended September 30,
2022. The decrease in
cash from operating
activities was driven
by the lower
coal revenues, higher
operating costs and
income tax paid
during the period,
including $107.6 million relating to 2022 taxable income.
Investing activities
Net
cash
used
in
investing
activities
was
$183.0
million
for
the
nine
months
ended
September
30,
2023,
compared to $150.7 million for the nine months ended September 30, 2022. Cash spent on capital expenditures
for the
nine months
ended September
30, 2023
was $182.4
million, of
which $
44.3 million
was related
to the
Australian Operations and $ 138.1 million was related
to the U.S. Operations.
Financing activities
Net cash used
in financing activities was
$23.0 million
for the nine
months ended September 30,
2023, compared
to cash
used in
financing
activities
of $483.9
million for
the nine
months ended
September 30,
2022. The
net
cash
used
in
financing
activities
for
the
nine
months
ended
September
30,
2023
largely
related
to
dividends
payment of $16.8
million, payment of
deferred debt issuance
costs for the
New ABL Facility
of $3.4 million
and
repayment of borrowings and other financial liabilities
of $2.8 million.
Coronado Global Resources Inc.
Included in net cash used in financing activities
for the nine months ended September
30, 2022, were dividends
paid of $473.9 million and repayment of borrowings and
other financial liabilities of $10.0 million.
Contractual Obligations
There were no
material changes
to our contractual
obligations from
the information
previously provided
in Item
7.
“Management’s
Discussion
and
Analysis
of
Financial
Conditions
and
Results
of
Operations”
of
our
Annual
Report on Form 10-K for the year ended December 31, 2022, filed with the SEC and
ASX on February 21, 2023.
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 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” of our Annual
Report on Form 10-K for
the year ended December
31, 2022,
filed with the SEC and ASX on February 21, 2023.
Newly Adopted Accounting Standards and Accounting
Standards Not Yet Implemented
See
Note
2.
(a)
“Newly
Adopted
Accounting
Standards”
to
our
unaudited
condensed
consolidated
financial
statements for
a discussion
of newly
adopted accounting
standards. As
of September
30, 2023,
there were
no
accounting standards not yet implemented.
Coronado Global Resources Inc.
ITEM 3.
QUANTITATIVE
AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
Our activities
expose us
to
a variety
of financial
risks, such
as commodity
price risk,
interest rate
risk, foreign
currency risk, liquidity risk and credit
risk. The 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
for
speculative
purposes
is
strictly prohibited by the Treasury Risk Management 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 rates,
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.
The
expectation
of
future
prices
for
coal
depends
upon
many
factors
beyond
our
control.
Met
coal
has
been
volatile commodity over the past ten
years. In the second quarter of
2022, seaborne prices reached record levels
with
both
the
Australian
and
U.S.
Met
coal
price
indices
exceeding
$600
per
Mt,
largely
as
result
of
supply
concerns in key Met coal markets and continued trade flow disruptions caused by geopolitical tensions following
Russian invasion of Ukraine. The demand
and supply in the Met coal industry
changes from time to time. There
are
no
assurances
that
oversupply
will
not
occur,
that
demand
will
not
decrease
or
that
overcapacity
will
not
occur, which could
cause declines in
the prices
of coal,
which could
have a
material adverse effect
on our
financial
condition and results of operations.
Access to
international markets
may be
subject to
ongoing interruptions
and trade
barriers due
to policies
and
tariffs of individual countries. For example, the imposition of
tariffs and import quota restrictions by China on U.S.
and Australian coal
imports, respectively,
may in the future
have a negative
impact on our
profitability.
We may
or may not be able to access alternate markets of our coal should additional interruptions or trade barriers
occur
in the future. An
inability for metallurgical 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 Annual Report on Form 10-K filed with the SEC and ASX on February
21, 2023.
Sales commitments in the
Met coal market are typically
not long-term in nature,
and we are therefore subject
to
fluctuations in
market pricing.
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.
As of September
30, 2023,
we had
$26.7
million
of
outstanding
provisionally
priced
receivables
subject
to
changes
in
the
relevant
price
index.
If
prices decreased 10%, these provisionally
priced receivables would decrease by
$2.7 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 number
of factors
beyond our
control” in
our Annual
Report on
Form 10-K
filed
with the SEC and ASX on February 21, 2023.
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).
The expectation
of future
prices for
diesel depends
upon many
factors
beyond
our
control.
The
current
Israel-Palestine
conflict
could
create
significant
uncertainty
regarding
interruptions to global oil supply causing significant
volatility in prices of related commodities,
including the price
Coronado Global Resources Inc.
of diesel fuel we
purchase. 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.
The fuel
required
for
our operations
for
the remainder
of fiscal
year
2023
will
be
purchased
under
fixed-price
contracts or on a spot basis.
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
our
financial
performance,
investment
decisions
and
stockholder
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
September
30,
2023,
we
had
$252.1
million
of
fixed
rate
borrowings
and
Notes
and
no
variable-rate
borrowings outstanding.
We currently do not hedge against interest rate
fluctuations.
Foreign Exchange Risk
A significant portion of our
sales are denominated in US$.
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 60% of expenses incurred at our Australian Operations are denominated in
A$. Approximately 40%
of our Australian Operations’ purchases are
made with reference to US$,
which provides
a natural hedge against foreign
exchange movements on these
purchases (including fuel, several
port handling
charges, demurrage,
purchased coal
and some
insurance premiums).
Appreciation of
the A$
against US$
will
increase our Australian
Operations’ US$ reported
cost base and
reduce US$ reported
net income. For
the portion
of US$ required to purchase A$ to settle our Australian Operations’ operating costs, a 10% increase in the A$ to
US$ exchange rate would increase reported
total costs and expenses by approximately
$34.4 million and $86.1
million for the three and nine months ended September
30, 2023, respectively.
Under normal market conditions, we generally do not consider it necessary to hedge our
exposure to this foreign
exchange risk.
However,
there
may be
specific
commercial
circumstances,
such
as the
hedging
of significant
capital
expenditure,
acquisitions,
disposals
and
other
financial
transactions,
where
we
may
deem
foreign
exchange hedging
as appropriate
and
where a
US$ contract
cannot
be negotiated
directly with
suppliers
and
other third parties.
For our Australian
Operations, we
translate all
monetary assets
and liabilities
at the period-end
exchange rate,
all
nonmonetary
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.
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
and
Board
of
Directors.
As of
September 30,
2023, we
had financial
assets of
$690.1 million,
comprising
of cash
and restricted
cash,
trade receivables and
restricted and other
deposits, which are
exposed to counterparty
credit risk. These
financial
assets
have
been
assessed
under
ASC
326,
Financial
Instruments
–
Credit
Losses
,
and
a
provision
for
discounting and credit losses of $0.8 million was recorded
as of September 30, 2023.
Coronado Global Resources Inc.
ITEM 4.
CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We
maintain
disclosure
controls
and
procedures
that
are
designed
to
ensure
that
information
required
to
be
disclosed in our Exchange Act reports is recorded, processed, summarized and
reported within the time periods
specified
in
the
SEC’s
rules
and
forms,
and
that
such
information
is
accumulated
and
communicated
to
our
management, including the
Chief Executive Officer
and the Group
Chief Financial Officer, as appropriate,
to allow
timely
decisions
regarding
required
disclosure
based
solely
on
the
definition
of
“disclosure
controls
and
procedures” in Rule 13a-15(e) promulgated under the
Exchange Act. In designing and evaluating the disclosure
controls
and
procedures,
management
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
evaluating the cost-benefit
relationship of possible
controls and procedures.
As of the end
of the period
covered by this Quarterly
Report on Form
10-Q, 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 our
disclosure controls and procedures were effective.
Changes to Internal Control over Financial Reporting
During the
fiscal quarter covered
by this
Quarterly Report on
Form 10-Q,
there were
no changes
in the
Company's
internal
control
over
financial
reporting,
as
such
term
is
defined
in
Rule
13a-15(f)
of
the
Exchange
Act,
that
materially affected,
or are
reasonably
likely to
materially
affect,
the
Company’s
internal controls
over financial
reporting.
Coronado Global Resources Inc.
PART II – OTHER
INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
We are subject to various legal and
regulatory proceedings. For a description of our significant legal
proceedings
refer
to
Note 16. “Contingencies” to
the
unaudited
condensed
consolidated
financial
statements
included
in
Part I, Item 1. “Financial
Statements” of
this Quarterly
Report on
Form 10-Q,
which information
is incorporated
by reference herein.
ITEM 1A.
RISK FACTORS
Except as set forth below,
there were no material changes
to the risk factors previously
disclosed in Part I, Item
1A, “Risk Factors”, of
our Annual Report on
Form 10-K for the
year ended December 31,
2022, filed with the
SEC
and ASX on February 21, 2023
and Part II, Item 1A, “Risk Factors”, of
our Quarterly Report on Form 10-Q for
the
quarterly period ended March 31, 2023, filed with the
SEC and ASX on May 8, 2023.
Consummation
of the
proposed SGI
Transaction
may constitute
a change
of control
under our
Senior
Secured
Notes
Indenture
and
our
New
ABL
Facility,
which
could
materially
and
adversely
affect
our
business, financial condition and results of operations
.
On September
25, 2023,
the Sellers
advised the
Company that
the Sellers
had entered
into a
MIPA
with SGI.
The Company understands that, pursuant to the terms of the
MIPA, the Sellers agreed to sell all of their interests
in
Coronado
Group
LLC
to
a
wholly-owned
subsidiary
of
SGI
in
the
SGI
Transaction.
For
a
more
detailed
description of
the SGI
Transaction
refer to
Note 17.
“Related Party
Transactions”
to the
unaudited condensed
consolidated financial
statements included
in Part
I, Item
1. “Financial
Statements” of
this Quarterly
Report on
Form 10-Q, which information is incorporated by reference
herein.
Energy & Minerals Group has
reported that following the closing
of the SGI Transaction
,
the timing of which the
Company is not aware, SGI will be the direct or indirect owner of Coronado Group LLC. Coronado Group LLC
is
currently
the
direct
owner
of
845,061,399
CDIs
(representing
a
beneficial
interest
in
84,506,140
shares
of
common stock, or 50.4% of the Company’s
outstanding total common stock) and the one Series
A Share.
The consummation
of the
proposed SGI
Transaction
may constitute
a change
of control
under the
Company’s
Senior Secured
Notes
Indenture,
dated as
of May
12,
2021, pursuant
to which
the Company
has issued
and
outstanding approximately $242.3 million
aggregate principal amount of
its 10.750% Senior Secured Notes
due
2026, or the Notes, as of September 30, 2023. Upon a change of control, Coronado
Finance Pty Ltd., the issuer
of the
Notes, is
required to
offer
to repurchase
all or
any part
of a
holder’s Notes
at a
purchase price
in cash
equal to
101% of
the principal
amount thereof,
plus accrued
and unpaid
interest, if
any,
to, but
excluding, the
date
of
repurchase,
subject
to
the
terms
and
conditions
of
the
indenture.
Failure
to
consummate
a
required
repurchase
offer,
whether
as a
result
of lack
of sufficient
funds
or otherwise
,
is an
event
of default
under
the
Senior Secured
Notes Indenture
that would
accelerate the
maturity of
the Notes
and permit
holders to
pursue
available remedies.
The consummation of the proposed
SGI Transaction may also constitute a change of
control under our New ABL
Facility.
A
change
of
control,
under
the
New
ABL
Facility
constitutes
a
Review
Event,
pursuant
to
which
the
Lenders
may
request
to
meet
and
consult
with
us
to
agree
a
strategy
to
address
the
relevant
Review
Event
including but not limited
to, a restructure of
the terms of the
New ABL Facility to
the satisfaction of the
Lenders,
for
example
any
unpaid
amounts
may
become
due
and
payable
or
existing
undrawn
commitments
may
be
cancelled. As of September 30,
2023, the Company had drawn
down $21.6 million of
borrowings and had $128.4
million of undrawn commitments under our New ABL
Facility.
Should these potential
events collectively occur,
we may need
to seek to
refinance the Notes,
replace the New
ABL Facility,
raise new
capital through
a public
offering or
modify existing
or future
capital expense
projects to
restore the Company’s liquidity.
Although we would expect to have numerous options available to us to address
our liquidity needs, there is no assurance that the Company will be able to refinance the Notes, replace the
New
ABL Facility,
raise
new
capital
through
a public
offering
or modify
existing
capital
expense
projects,
on terms
which are favorable to us, in which case
and taken as a whole, our liquidity profile
could deteriorate which could
materially and adversely affect our financial condition.
Coronado Global Resources Inc.
Uncertainty
about
the
effects
of
the
SGI
Transaction
may
affect
our
potential
and
existing
financial
arrangements
and
customer
relationships,
including
contractual
rights
triggered
upon
a
change
of
control in
connection with
the SGI
Transaction,
and may
materially and
adversely affect
our business,
results of operations and financial condition.
Certain contract counterparties,
including customers, suppliers
and third-party providers
may assert contractual
rights, such as consent or termination rights that may be triggered by the consummation of the SGI Transaction.
In relation to the arrangements
with Stanwell, we are required
to request Stanwell’s
prior consent to the change
of control that is expected to occur on consummation of the SGI Transaction. Stanwell must either give or refuse
to give consent within a specified period following receipt
of the request, and may only refuse to consent
if in its’
reasonable opinion,
it determines,
that the
SGI Transaction
will have
a material
adverse effect
on the
financial
ability of Coronado Curragh
Pty Ltd to perform
its obligations under
the Stanwell agreements.
In circumstances
where consent is
not obtained, the
Company would
seek to
find mutually
agreeable alternative
terms on which
Stanwell would consent to the change in control.
The Company is also required to request Aurizon’s consent to the change of control that is expected to occur on
consummation
of
the
SGI
Transaction
under
the
Aurizon
UT5
Rail
Access
Agreement.
A
failure
to
obtain
Aurizon’s consent to the
consummation of the SGI
Transaction will constitute a breach of
the agreement, entitling
Aurizon to legal or equitable remedies which may include termination
of the agreement.
For a number of
customers and supplier agreements, including
contractor agreements, the completion of
the SGI
Transaction
may
trigger
a
financial
or
suitability
assessment
by
the
counterparty,
which
may
entitle
the
counterparty
to
terminate
the
agreement,
request
further
security
or
seek
amendments
to
the
terms
of
the
agreement. The
termination
of these
arrangements, or
the requirement
to provide
further security,
could harm
our
relationships
with
such
third
parties
and
could
have
a
material
adverse
effect
on
our
business,
financial
condition, and results of operations.
Consummation
of
the
SGI
Transaction
will
also
constitute
a
“changed
holder
event”
for
the
purposes
of
Queensland
financial
provisioning
legislation
relating
to
rehabilitation
obligations
for
the
Curragh
mining
tenements, which
may result
in the
Queensland
government reviewing
the “risk
category” to
which the
mining
tenements
are
allocated
(i.e.,
very
low,
low,
moderate
or
high),
which
may
require
us
to
provide
further
contribution or surety to the Queensland government.
Following the consummation
of the SGI
Transaction, we
expect that
SGI through
Coronado Group
LLC
will
have
significant
influence
over
corporate
matters,
including
control
over
certain
decisions
that
require the approval of stockholders.
The Special Committee is reviewing
the terms of the Certificate
of Incorporation regarding the Series A
Preferred
Stock and the terms
of the Stockholder’s Agreement
dated as of September 24,
2018 between the Company and
Coronado Group LLC
to evaluate whether
the rights ascribed
collectively to “EMG”
(as defined thereunder)
will
inure to
SGI as
the new
owner of
the Coronado
Group LLC.
Even apart
from those
rights, SGI
as the
indirect
owner of a majority of the Company’s common
stock will have significant influence over corporate
matters.
Further,
uncertainty
about
the
timing
of;
and
effects
of
the
SGI
Transaction
on
counterparties
to
contracts,
employees
and
other
parties
may
have
an
adverse
effect
on
us.
These
uncertainties
could
cause
contract
counterparties and
others who
deal with
us to
seek to
terminate or
amend their
existing business
relationships
with us, and may
impair our ability
to attract, retain
and motivate key
personnel for a
period of time
prior to and
following the consummation of the SGI
Transaction. As a result, uncertainties regarding the timing of;
and impact
of the
SGI Transaction on
our business
strategy may have
a material
and adverse
effect on our
business, financial
condition and results of operations.
ITEM
2.
UNREGISTERED
SALES
OF
EQUITY
SECURITIES,
USE
OF
PROCEEDS
AND
ISSUER
PURCHASES OF EQUITY SECURITIES
None.
ITEM 3.
DEFAULTS
UPON SENIOR SECURITIES
None.
Coronado Global Resources Inc.
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 Inc.
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
During the
quarter ended
September 30,
2023, no
director or
officer
(as defined
in Rule
16a-1(f) promulgated
under the Exchange
Act) of the
Company
Coronado Global Resources Inc.
ITEM 6.
EXHIBITS
The following documents are filed as exhibits hereto:
Exhibit No.
Description of Document
3.1
3.2
10.1
15.1
31.1
31.2
32.1
95.1
101.INS
Inline XBRL Instance Document
101.SCH
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)
___________________________
* Certain schedules
and exhibits to
this agreement have
been omitted pursuant
to Item 601(a)(5)
of Regulation
S-K. A copy of any omitted
schedule and/or exhibit will be furnished to
the Securities and Exchange Commission
upon request.
Coronado Global Resources Inc.
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/ Gerhard Ziems
Gerhard Ziems
Group Chief Financial Officer (as duly authorized officer
and as principal financial officer of the registrant)
Date: November 8, 2023
TABLE OF CONTENTS
Part I, Item 1. Financial Statements Of This Quarterly Report on Form 10-q, Which Information Is IncorporatedItem 1A. Risk FactorsItem 2. Unregistered Sales Of Equity Securities, Use Of Proceeds and IssuerItem 3. Defaults Upon Senior SecuritiesItem 4. Mine Safety DisclosuresItem 104 Of Regulation S-k (17 Cfr 229. 104), Each Operator Of A Coal Or Other Mine in The United States IsItem 5. Other InformationItem 6. Exhibits