Coronado lowers guidance and announces yet another special dividend

Coronado Global Resources (ASX: CRN) was up 4.30% at the open after the cashed-up coal miner issued a September quarter update which included a special dividend and senior secured notes purchase offer of $200m.

Despite operations being affected by unseasonable wet weather, rising inflation and higher mining costs during the third quarter, the miner still managed to record year-to-date (YTD) results and strong liquidity.

The miner reported group revenue of $2.85bn for the first three quarters of 2022, more than double the level at the previous period last year ($1,374m).

As a result, the company declared a $225m third-quarter special dividend which will see shareholders receive US13.4 cents per CDI on 12 December 2022.

After payment of the Special Dividend in December, the fifth dividend the company has offered shareholders this year, Coronado will have returned $699m in cash dividends to shareholders in 2022.

Still no deal with Peabody

While no merger deal with Peabody Energy (NYSE: BTU) has been agreed on, management notes that discussions are ongoing.

Management also notes that while Coronado is not yet in a position to provide further details, there is no certainty that the discussions will lead to a transaction.

Coronado will keep the market informed in accordance with its continuous disclosure obligations.

While the deal with Peabody remains elusive, the company notes its stronger balance sheet and more valuable scrip has given it greater tools with which to strike mergers and acquisitions.

It’s understood the two companies, which both mine coal in Australia and the US, would have a combined market cap of around $10bn.

September quarter highlights

• Revenue fell -15.3% quarter-on-quarter to $US875m ($1.36bn)

• Coal sales were 4.8% higher on the previous quarter to 4.1Mt

• Reported closing cash of $US699m

• Group Realised Price Per Tonne of Met Coal Sold of $253.0 per tonne (mix of FOR / FOB / Domestic pricing), down -21.2% compared to the record June quarter

• Sales from the U.S. were 1.7 Mt, up 5.8%

• Sales from Curragh of 2.4 Mt were 4.2% higher

• Export sales of 66.8% were aligned with the previous quarter

• YTD 2022 capital expenditure of $140.0m was up 100.3% on YTD 2021

Downgraded guidance

Due to the YTD impacts of wet weather at its Curragh operations, the company has lowered its saleable production guidance for FY22.

Senior secured notes

In conjunction with the special dividend declaration, Coronado has commenced an offer to purchase for cash up to $200m aggregate principal amount of its 10.750% senior secured notes due 2026.

The offer is being made at a purchase price equal to 104% of the aggregate principal amount thereof, plus accrued and unpaid interest up to, but excluding, the settlement date.

What brokers think

Coronado’s share price is up 36% over the past 12 months.

Consensus on Coronado is Strong Buy.

Goldman Sachs has a Buy rating and a target price of $2.25.

Based on Morningstar’s fair value of $2.38 the stock appears to be undervalued.

Based on the four brokers that cover Coronado (as reported on by FN Arena) the stock is currently trading with 29.3% upside to the target price of $2.48.

Both UBS and Citi have initiated coverage with a Neutral rating and target price of $1.81.

Coronado Global Resources share price over 12 months.