Coronado Coal cautious about market turnaround

US-Australian mining firm Coronado Coal is hopeful that government stimulus measures will bolster demand for steel, boost coking coal prices and allow it to reverse its first-half loss of $123.2mn, although it is cautious on the timing of any turnaround.

The firm swung to a loss during January-June compared with a profit of $214.4mn in the same period last year, amid what chief executive Gerry Spindler described as one of the most challenging periods in the last 50 years for the steel and metallurgical coal sectors. "Given the overall importance of government-backed economic stimulus post Covid-19, we anticipate a rapid recovery in steel demand and a return of production over time, however the timing of the recovery is uncertain at present," he added.

Margins at its Curragh coking and thermal coal mine in Queensland, Australia and its US operations more than halved in the latest half, as weaker demand saw sales drop and push costs per tonne up at the same time as received prices hit four-year lows. The company reiterated its production guidance for 2020 at 16.5mn-17mn t, down from its previously revised target of 19.7mn-20.2mn t.

Weaker demand and lower prices forced the firm to close its US operations at the end of March. It restarted its Buchanan and Logan mines, which produce 90pc of Coronado's US coal, on 1 June after substantially reducing a 750,000t stockpile. Its Greenbrier mine is likely to remain closed for the rest of the year, with the firm booking a $63mn impairment on this operation in its half-year results.

While both the firm's Australian and US operations reported a positive cash margin, the firm made a loss on corporate costs, including the write-down of Greenbrier.

The firm has deferred all but essential costs, including the planned expansion of Curragh to 15mn t/yr, as it seeks to preserve capital.

Coronado received an average price of $91.90/t fob Australia for its Curragh coal during April-June, down from $120/t in January-March. Argus last assessed the Australian premium hard coking coal price at $106.10/t fob Australia on 7 August, down from $150.25/t six months ago and at the lowest level since 8 August 2016.

By Jo Clarke