Coronado Global Resources Inc.
Form 10-Q
March 31,June 30, 2023
3442Diesel Fuel
We may
be exposed
to price
risk in
relation to
other commodities
from time
to time
arising from
raw materials
used in our operations (such as gas or
diesel). These commodities may be hedged through financial instruments
if the
exposure is
considered material
and where
the exposure
cannot be
mitigated through
fixed price
supply
agreements.
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
March 31, June 30,2023, we had
$254.4 $253.4million of fixed rate
borrowings and Notes and
no
no variable-rate borrowings
outstanding.
We currently do not hedge against interest rate
fluctuations.
Foreign Exchange Risk
A significant portion of our
sales are denominated in US$.
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$. Approximately 40%
of our
of our Australian Operations’ purchases are
made with
made with reference to US$,
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).
premiums). Appreciation
of
of the
A$
A$ against
US$
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
$
25.726.0 million
and $51.7 and six months ended
March 31,June 30, 2023,
respectively.respectively. Under normal market conditions, we generally do not consider it necessary to hedge our
exposure
exposure to this foreign
exchange risk.
However,
there
may be
specific commercial
circumstances,
such
as
the
the hedging
of significant
capital
expenditure,
acquisitions,
disposals
and
other
financial
transactions,
where
we
may
deem
foreign
exchange hedging
as appropriate
and
where a
US$ 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
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
March 31,June 30,
2023, we
had financial
assets of
$
896.7823.4 million,
comprising
of
of cash
and
and restricted
cash,
trade
receivables and
restricted deposits,
which are
exposed to
counterparty credit
risk. These
financial assets
have
been assessed under ASC
326,
Financial Instruments – Credit Losses
Losses,, and a provision
for discounting and credit