Now guys, if I give you good info you really should respect it. You all only like to hear good news. Do you think negative stuff i post here is going to affect the share price?
You really need to see both siders and then make your decision whether Coronado is or isn't a good investment or trade.Rating Action Commentary
Fitch Downgrades Coronado Global Resources to 'CCC+'
Wed 14 May, 2025 - 4:06 am ET
Fitch Ratings - Singapore - 14 May 2025: Fitch Ratings has downgraded Coronado Global Resources Inc.'s (CRN) Long-Term Issuer Default Rating (IDR) to 'CCC+', from 'B'.
Fitch has also downgraded the rating on the US dollar senior secured notes issued by CRN's wholly owned subsidiary, Coronado Finance Pty Ltd, to 'B', from 'BB-', with a Recovery Rating (RR) of 'RR2'. The notes are guaranteed by CRN and all its operating subsidiaries, and are their senior secured obligations. The RR is constrained under Fitch's criteria, as we treat the notes effectively as having second lien status behind CRN's USD150 million asset-based revolving credit facility (RCF).
The IDR downgrade reflects CRN's minimal liquidity headroom, as we expect the cash depletion seen in 1Q25 to worsen in the absence of additional funding. The company's efforts to negotiate amendments to its RCF has been delayed, along with plans to secure additional financing. Geopolitical uncertainty around US tariffs and their impact on prices of metallurgical (met) coal, CRN's primary output, and interest rates has exacerbated risks.
Key Rating Drivers
One-ThirdofCash Depleted:CRN's cash balance fell by 32% in 1Q25 to USD229 million, hit by lower coal sales volume and qoq higher mining cost per tonne (t) sold. CRN's 1Q25 sales volume, excluding non-produced coal, fell by 8% yoy and 17% qoq, which the company said was partly due to external factors that delayed shipments. Unit mining costs were 10% lower yoy, but jumped 16% qoq on lower volume. CRN expects sales volume to recover from 2Q25.
Further Cash Drain Likely:We forecast negative FCF of over USD400 million in 2025, which would drain cash without additional funding. We estimate an EBITDA loss of over USD150 million in 2025, assuming an average realised met coal price of USD137/t and unit mining cost of USD94/t. Our price assumption is roughly 10% below CRN's 1Q25 realised price, and we expect the impact of weak spot prices in March 2025 to be felt in 2Q25. We expect unit mining costs to fall in 2H25 and assume they will average around 15% lower in 2025 than in 1Q25.
Additional FundingUncertain:CRN continues to engage lenders of its RCF on changes granting covenant and usage flexibility, which would allow the company to use the facility beyond the covenant-test deferral until 31 May 2025. CRN is also seeking other financing that would exempt it from the minimum fixed-charge cover incurrence covenant of 2.0x under the notes. We think obtaining additional funding in a timely manner at a manageable cost could be challenging due to market volatility.
Volatile Coal Prices:Premium hard met coal spot prices for Australia have recovered to around USD190/t as of end-April 2025, after falling to below USD170/t in March 2025. However, we see risk that coal prices could decline again on weak prospects for global growth and steel demand due to the uncertainty around US tariff hikes.
High Costs Likely to Decrease:CRN was in the fourth quartile of CRU's business cost curve for met coal exports in 2024, on a weighted-average basis. We estimate CRN's cost position will improve in 2H25, based on CRU data, driven by higher output from the new Mammoth underground mine in Curragh Complex, Australia, and Buchanan mine expansion in the US.
Higher Output in 2025:We expect CRN's coal sales volumes to jump by over 10% in 2025, on higher output at key assets. CRN plans to increase the mining units at Mammoth to three, from one, by 2H25. It also aims to add a raw coal storage facility and coal hoisting capacity at Buchanan in 2Q25. It expects to incur most of the planned 2025 capex on these projects in 1H25.
Opexand Capex FlexibilityLimited:CRN plans to optimise contractor structure and idle surface operations at Logan in the US to reduce operating costs, undertake future development capex in phases and push sustaining capex back by a few months. The company does not intend to take steps such as lowering strip ratios, which would weaken longer-term profitability.
We see risk that CRN may be forced to cut costs further by adjusting its mining plan to maintain liquidity. The company may also have to prolong the deferral of sustaining capex, which would increase risk of unplanned outages.
Stanwell Uplift from 2027:Profitability at Curragh, CRN's largest asset by volume, is weakened by thermal coal sales to Stanwell Corporation Ltd. at below market rates and revenue sharing from coal exports with Stanwell through rebates. CRN expects its agreement with Stanwell to expire by early 2027 upon delivery of contracted volumes. The group would then no longer pay rebates on coal exports and could export around 1 million tonnes per year of low-grade met coal, instead of selling it as thermal coal to Stanwell at below market rates.
Metrics to Improve from 2026:CRN is susceptible to small changes in coal prices. Therefore, any improvement in prices, combined with cost reduction, would improve EBITDA rapidly. We estimate CRN's EBITDA net leverage will improve to 6.9x in 2026 and 3.1x by end-2027. In 2026, we expect CRN to benefit from a full year of higher output and lower costs, which should be seen from 2H25. Our 2027 expectations incorporate the uplift from the expiry of the Stanwell contract. We forecast EBITDA interest coverage to improve to 1.3x in 2026 and 2.8x in 2027.
Rated on Standalone Basis:Fitch rates CRN based on its standalone credit profile, despite Coronado Group LLC's 50.4% stake. We do not have any information on Coronado Group, held by Energy & Minerals Group (EMG), a private equity firm. We see limited risk to CRN's credit profile from large dividends or other forms of exceptional returns to Coronado Group and EMG. CRN is listed in Australia and most of its directors are independent. We think CRN's share price would fall if EMG exerted undue influence on CRN's decisions, hurting EMG's profits.
Peer Analysis
CRN's ratings can be compared with other rated met coal producers Golden Energy and Resources Pte. Ltd. (GEAR, B+/Stable) and Mongolian Mining Corporation (MMC, B+/Stable).
GEAR owns 59% of Australia-based met coal mining company Stanmore Resources and a 70% stake in an Illawarra met coal asset. GEAR's assets have a better cost position than CRN's, within the third quartile of the global met coal cost curve. We expect GEAR's average proportionately consolidated EBITDA over 2025-2027 to be significantly higher than CRN's average. CRN's business profile disadvantages compared with GEAR, along with a weaker financial profile highlighted by significant liquidity risk, drive the lower IDR for CRN.
MMC is the largest producer and exporter of high-quality hard met coal in Mongolia. MMC has a significantly stronger financial profile than CRN. This drives MMC's higher rating, despite its IDR being affected by the concentration of end customers in northern China and high country-risk for its mining operations in Mongolia.
Key Assumptions
Fitch's Key Assumptions Within Our Rating Case for CRN:
- Total coal sales volume, including thermal coal, of 18mt in 2025 and 19mt from 2026 (2024: 16mt);
- Average realised price for coal sales of around USD120/t over 2025-2027 (2024: USD155/t);
- Unit cost of coal revenues declines by USD14/t each in 2025 and 2026;
- Average annual capex of around USD180 million over 2025-2027 (2024: USD248 million);
- Flat annual dividend of USD17 million during 2025-2027.
Recovery Analysis
Key Recovery Rating Assumptions
- The recovery analysis assumes that CRN would be liquidated in bankruptcy, based on our estimate of higher recoveries for debtholders in case of liquidation compared with CRN's going-concern enterprise value.
- We have assumed a 10% administrative claim.
- We use an 80% advance rate against the value of trade receivables as of end-2024 and a 50% advance rate against the value of inventory to calculate the liquidation value. This is in line with typical advance rates Fitch uses for receivables and inventories. We use a 25% advance rate against the value of property, plant and equipment, which is lower than Fitch's typical assumption. The higher discount is based on our assessment that the liquidation value could be hampered by the old age of a large portion of CRN's plant and equipment.
- We assume that the USD150 million RCF will be fully drawn and practically rank ahead of the USD400 million senior secured notes in the event of liquidation. The RCF has first lien status over trade receivables and inventories, among other assets, which are more easily liquidated than other assets. This effectively renders the US dollar notes second lien, in our view.
The assumptions result in an 'RR2' Recovery Rating for the US dollar notes under Fitch's Corporate Recovery Ratings and Instrument Ratings Criteria.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade:
- A deterioration in liquidity, potentially due to an inability to obtain additional financing.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade:
- An improvement in CRN's liquidity profile.
Liquidity and Debt Structure
CRN had USD229 million of cash as of 31 March 2024. In addition, it had USD96 million available under the USD150 million RCF, which matures in August 2026. The group has around USD450 million of debt, mainly comprising USD400 million in secured notes due in 2029.
CRN does not have material debt maturities in 2025 and 2026. However, we forecast large negative FCF in 2025-2026, which would impair CRN's liquidity in the absence of additional financing. We assume that CRN will be able to amend its RCF and secure additional financing in the next few months to fund operations, helped by an improvement in its business profile. However, CRN's liquidity is at risk from coal price and debt market volatility.
Issuer Profile
CRN is an Australia-listed miner of met coal and some thermal coal. It has assets in Australia and the US and sold 16mt of coal in 2024.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS
Click hereto access Fitch's latest quarterly Global Corporates Macro and Sector Forecasts data file which aggregates key data points used in our credit analysis. Fitch's macroeconomic forecasts, commodity price assumptions, default rate forecasts, sector key performance indicators and sector-level forecasts are among the data items included.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visithttps://www.fitchratings.com/topics/esg/products#esg-relevance-scores.
Additional information is available onwww.fitchratings.com
PARTICIPATION STATUS
The rated entity (and/or its agents) or, in the case of structured finance, one or more of the transaction parties participated in the rating process except that the following issuer(s), if any, did not participate in the rating process, or provide additional information, beyond the issuer’s available public disclosure.
APPLICABLE CRITERIA
APPLICABLE MODELS
Numbers in parentheses accompanying applicable model(s) contain hyperlinks to criteria providing description of model(s).
- Corporate Monitoring & Forecasting Model (COMFORT Model), v8.1.0(1)
ADDITIONAL DISCLOSURES
ENDORSEMENT STATUS
Coronado Finance Pty Ltd EU Endorsed, UK Endorsed 1 Coronado Global Resources Inc. EU Endorsed, UK Endorsed DISCLAIMER & DISCLOSURES
All Fitch Ratings (Fitch) credit ratings are subject to certain limitations and disclaimers. Please read these limitations and disclaimers by following this link:https://www.fitchratings.com/understandingcreditratings. In addition, the followinghttps://www.fitchratings.com/rating-definitions-documentdetails Fitch's rating definitions for each rating s
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Solicitation Status
The ratings above were solicited and assigned or maintained by Fitch at the request of the rated entity/issuer or a related third party. Any exceptions follow below.
Endorsement Policy
Fitch’s international credit ratings produced outside the EU or the UK, as the case may be, are endorsed for use by regulated entities within the EU or the UK, respectively, for regulatory purposes, pursuant to the terms of the EU CRA Regulation or the UK Credit Rating Agencies (Amendment etc.) (EU Exit) Regulations 2019, as the case may be. Fitch’s approach to endorsement in the EU and the UK can be found on Fitch’sRegulatory Affairspage on Fitch’s website. The endorsement status of international credit ratings is provided within the entity summary page for each rated entity and in the transaction detail pages for structured finance transactions on the Fitch website. These disclosures are updated on a daily basis.
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38.0¢ |
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Mkt cap ! $637.0M | |||
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