ARCH - Earnings call transcript Q4 2019

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Operator

Good day, and welcome to the Arch Coal Fourth Quarter 2019 Earnings Conference Call. Today’s conference is being recorded.

I would now like to turn the call over to Deck Slone, Senior Vice President of Strategy. Please go ahead, sir.

Deck Slone

Good morning from St. Louis. us joining for you today. Thank

performance, let Before Private statements expected Securities you Forward-Looking financial certain Litigation Reform remind during we future according this the and our begin, made to call, that relating considered me including to be may Act. business Statements statements

may to with quarterly described our be different statements. as except as Forward-looking future to detail in forward-looking to materially cause are, in matters information, than our in statements otherwise, whether the We update may reports These those forward-looking be uncertain. the statements address nature a expressed new or degrees, undertake by result and required that of do more file we by uncertainties, SEC, their not events annual results future that different which actual are our law.

would find can posted a that morning Investors that of press of website like a financial our in section to plan our reconciliation at to I remind measures you we have non-GAAP this of which archcoal.com. discuss end we the you the also the copy at of release,

Drexler, On Senior CFO. have this morning, John Arch’s President Eaves, Paul Vice Arch’s call President COO; and John Lang, and and the CEO; we our

remarks, We take will your begin and questions. some will brief be with formal John. we thereafter, happy to

John Eaves

its Good everyone. on for and defined well that growth. deliver I’m morning, to strategy Deck creation Arch Thanks, pleased to continues report value and

and average Mount below more margins excluding ton. at the outstanding the Laurel portfolio and quarter, performance Our transition ton per $XX metallurgical $XX fourth cost turning metallurgical an mine in core than operational per with segment another

greater is had Leer of for range complete sets mid again significant process $XX We metallurgical the placing in metallurgical expect segment This the this in Our importantly, left process Leer in the a we future. the mine, transition believe of operation in Laurel our reorienting the current cost U.S. curve. success far in to Mountain replicating we at cost even to room-and-pillar once it the that made which strides South quarter. are and

Mount previously appreciably more performance shift quality But Laurel’s are costs, reserves mining translate consistent and into we enhanced for discussed, miner into longewall more As product going forward. continuous recently development. expect to to lower to than progressed room-and-pillar suitable operating

At value of make the of continue South same time, to progress dramatically. excellent the we portfolio metallurgical increase should on the our development which Leer

Leer of assets. As to we the in Leer South a copy premier indicated, hit all as steam developing the mine, industry's near continues one as are expanding carbon on cylinders which of and

reminder, a with spend we million be year biggest are and level this will XXX and of CapEx spending. the about As fact XXXX of at more in South comfortable enthusiastic budget Leer than

a this reflects the are asset. tremendous rapid making and out world-class it that in progress Given of build we

quarters expect up we discussed, As six just the now to longwall on on from time and start budget.

during The shareholder. would incremental South impact generation contribute and in depressing the other That kind and $XXX should cycle. more of substantially be metallurgical Leer on levels, expect estimated that and an Arch points relatively up earnings for million annually South the will to at Even we EBITDA pricing be of than today's transformational its cash Leer step profound. in

result across cash generating are metallurgical a powerful in in more upgrading be retooling portfolio multiple efforts future scenarios. The we short, market and range In should even of our ways. these an profile of the

of have our feet. a Perhaps which the outstanding bought more is XX% and in just shareholders the returned dividends. our via know, program you since excess returned million we impressively, rare buybacks quarter have to launched shareholders, to our bringing back timeframe, over million. the total has return XXXX, As May cash another capital In we shares of launching program initial ended, we that most XX since of to $XXX

Leer expect As of return the for doing, our out into slowdown cash excess the direct of we and we In to capital most build XXXX, to time head we South. being program fuel expect so in to cash Should build board an the even capital to the an potential program generation, view future. desirable. program return stronger even platform powerful more the as for such with a our

Turning now to virus potential the seaborne markets and marketplace, to recent in economy. more stabilize impact appear and weeks. extent severity global concerns about of its the metallurgical Despite ongoing on the corona somewhat the outbreak

product has of since the coal to High-Vol which XX% well. rebound of or metallurgical of mix XX% products A metallurgical comprise is first the XXXX The will price as nearly strengthening and other our so in year,

metallurgical eight deliver should addition, and of production demand now idled in producers closed or overtime. a healthier supply which tons million In had counting, balance

recent whether we of to and cycle stronger constructive and equipped lifting current could the downturn to trade China Southeast the integrated to progress steel restrictions capitalize begins that just in of is the it are talks. India appear the market build well up confident Asia environment equipped The Arch import occurs. market translate and out as macroeconomic and next in well importantly, and capacity whenever Finally, a all once rest of into continue global diminish. market the Most to concerns on ultimately

metallurgical the South, levels with to portfolio, challenging summary from with stage Leer even Peabody in our out forward of generation the reduce flow cash XXXX those into maintain generate through leading futures build costs the of plan heading industry with of our further, set our In balance completion for and environments thermal market efforts greater, we drive prepare our thermal assets synergistic strength. free cash JV to the sheet increasingly significant the

the With Lang that, on over thoughts Paul. performance. call our for further operational will to Paul turn I

Paul Lang

everyone. good and morning John Thanks

peer segment at sub we U.S. our John $XX we level core median least undertook Laurel. groups. a even high major metallurgical at Mount quarter, noted, the for cost ton, excluding as Laurel metallurgical believe Mount per is the last again our As was franchise $XX executed a which structure below transition of at The

$XX the Leer aggressively would out build with operation sister range. the are the we forward expect, per led with why away Again underscoring you As the moving Leer cost its mine South. ton cash of mid in

demonstrated has operational excellence. segment consistently While our metallurgical

and still are see improvement. far from We opportunities for continued significant satisfied

First opportunity Mount the is of Laurel. transition

remaining Laurel we longwall of While an efficient at the and profitable we fifth operation. the mining, we had unit Mount the support end of in XXXX suitable to longer continuous enthusiastic for March. room-and-pillar and to By are the their expect a quarter room-and-pillar add are reserves five in potential about fourth configuration of four miners operating no

have of the have plan to mine achieved operated and the units To-date, advance. rates that new solid transitioned well

we expect at progress Mount year. changes at improvement we the steady With these Laurel, through operation the as

quality reconfiguration variations deliver during and a cash importantly, improvement about ton XXXX more per should the across reserve. consistent decrease the due geology the to as in the most In of performance well $XX of operation in meaningful mine's to as total, a the operating address operating a our cost greater coal ability

should the that metallurgical segment improvement in into flagship opportunity Second reserves. our progression drive the of mine is thicker Leer

systematically As at discussed, we quarters should recent geology we previously in improved progress. where and costs Leer are have the reduced experiencing continue this currently

improvements With performing Leer but past in remain of on level, quarters. at the a incremental operation the a already at coming each ton $XX mid we in cost high is three focused quarters structure per

come South. segments, our improvement for at startup opportunity in will biggest and third course, of Leer metallurgical the with of The longwall the

this world-class XXXX. and asset excellent mining are we third are in making to in this development quarter the of indicated, longwall on-track progress well As the of

replacement Within Just mine. sharp million capital Mount with this development and comfortable the original on the the shields, of estimate, $XXX as million discipline maintaining $XXX the we are at insurance are guidance out importantly, Laurel our against recovery. expected lost for remain we netting the focus of of our cost to

XXXX expect $XX to the further a range costs expected contribution improvement $XX in down step cost the our next metallurgical In summary, segment's year, per ton, we a Leer volume longwall. South cash from in a cash our with structure to in and

progress with that leading the on decrease further new the cash longwall are unique a We XXXX showing an we and our still full-year. already base. the expect We we operational longwall, costs will in industry in U.S. be are for believe long-term when new

contractor to of around the total operations tons price the quarter. a U.S. start, per an are B High-Vol We our attractive $XXX commitments Moving build market and we we through to High-Vol XXXX of position bringing contracting XXX,XXX in Canada for we America, and roughly added season. contract pleased this fixed both the at progress tons also as solid to the price, view fourth conditions million North foundation in with out A prevail the ton. To at our X.X during that given segment solid from marketing, the a made metallurgical

a that pricing fixed more at X.X product. addition, we million tons and during remaining XX% for the increased at XX% commitments seaborne High-Vol the than a to based market of B our price quarter with In

and to-date above fixed for American which us healthy our balance. The a good account XX% sales and business our believe represents to ratable provides We term of solid activity contracting again price. North business, with expect a we

extends in approximately XXXX of and All placed international strengthening projected providing now XX% the volumes those business in markets. we are customers. Seaborne into potential further negotiations our penetration our international The to the with midst arena exposure market coking have while told, of coal

segment. to capital to and cash, our and growth legacy return levels is our our Turning generate helping program mines significant metallurgical continue fund our thermal assets, free it of in

it in segment $XXX our XXXX. emergence XXXX, $XXX then This of performance capital. total over in that brings late million In in level thermal million on to generation assets same EBITDA spent more cash the had free more than they basis since generated

were nearly position, of we are index two XX Of tons today's for Powder committed view volumes, sold environment. committed, guidance that an Basin per as solid in basis As fixed contracting are million million million tons our XX.XX ton position and levels. committed current thermal River on XX of overall at another of tons XX% market We coal on we price basis. these a which volume have

remain Peabody, by to we an the we prove a supply shareholders, stable beneficial long-term regulatory to with joint review this in combination challenging our business engage Federal as the employees efficient, will and to that make Commission marketplace. venture We way continue Moving creating all customers, platform our cost the and process. competitive through including Trade confident energy stakeholders, with increasingly

comment can on the to As cannot other things as say expected. we appreciate, progressing specifically than process are you

we in key manage time, believe our platform, positioned are and environment. advantage are on execution ahead, every we the expect our of At to and we market uniquely ahead. same XXXX plan strong the quarters in extend further improve to current Looking we through competitive metric even the across looking another operating thrive operational year entire in to

now John. John that, With over to call Drexler, turn I our CFO. will the

John Drexler

morning everyone. Thanks Paul and good

Paul quarter of operation, plan. Laurel a our and mountain indicated, at our execution fourth John transition than continuation our expected represent have on As strong absent earlier results our

of foundation with cost and the strong but maintained allowed market to purposely That as our strong X, have generate cycle work weakened, Tier us balance healthy liquidity. healthy we has foundation ongoing sheet restructuring, us through operations market expect even a cash more to allows lived importantly cash the combined the from emergence our Since flows flows as we abundant low cycle. long has

The million of and operating challenging fourth even good example at cash capability, coking coal thermal we costs Despite we robust transition encountered flow cash quarter markets. flow our than is $XX Mount of Laurel, less the coal in and markets. a generated

life to cash during utilized capital mine the significantly quarter acquire of continue and flow. to leaving the to the million, the free out $XX of reserves South maintenance the was build That extend flow was cash Leer the Leer operation. Leer million Our of North $XX

cost ahead that to free our liquidity. and cash cash a our look of XXXX, we of well out and continuing capital excess strong our flow world-class sheet build balance to low requirements Leer healthy continue portfolio we to As to to expect South while in operation generate to to utilize continue maintenance maintain

on capital liquidity focus now and Let's our allocation Arch's position. attention

have during capital the signaled reduced during we given our we call, program quarter return As the significantly downturn. last fourth the market earnings

dividend shares. our During the we million quarter, XXX,XXX to paid quarterly back million $X $XX of recurring buy and utilized

per Xrd. common to paid per quarterly dividends March quarterly scheduled at close XXth on with Board be XX% are to to the the increase share, $X.XX an forward, in is record on which common rate to the from Moving March approving stockholders share of we $X.XX of Arch's committed business

repurchases. spending result However, will available with higher with capital our program as build-out XXXX, South along share excess capital we Leer look that reduction lower in cash a pricing return in we met-coal the in at associated flows for the expect

of is cash are Quite capital frankly, amount that is how envisioned are excess the are program the cash flows modest, the repurchases flows always high reduced share via for When Conversely, Board when and capital available needs as reduced, buybacks. excess return working. well.

cash plan cash build of As in will dividend in of of to after capable of online per his is market the payment direct even rival quarterly South. met Leer, capability lower excess the indicated to Once remarks, ton. Leer plus of that cash out the John which we complex generating our $XX flows environment, margin that generating today's

liquidity, liquidity of we facilities. cash borrowing ended our with the Regarding with $XXX our and $XXX in credit in on capacity million million quarter $XXX million

As indicated on previous calls.

While construction existing facilitate cash out have raise levels of to the attractive our ability that build at to we of modest help flows the and capital utilize fund we to with confident Leer additional explore are project. continue comfortable South, to we are to will the ability of the rates

removing during Conditions of of removal from that the at As to Mount longwall shields. us the longwall XXX systems developed mentioned, anticipated. more Paul Laurel XXX precluded proved be than difficult removal the

know, Leer to are we longwall refurbishing utilized South. you As this at be

of arrive anticipated the will date the the replace will advance in quarter on-site loss, which result third XXXX. in XXX a startup of well we shields As our of

for We new are insurance an prior shields. will expected claim Proceeds for capital amount to required $XX the billion million cover mid-year. that to $XX the of are finalizing

CapEx we of that capital very for while Leer $XXX million for CapEx. maintenance of of leaving guiding spending of a $XXX levels CapEx view range South, our XXXX, of for portfolio. We are is the development the to manageable for midpoint, million million $XX that our Regarding as at

we a in return flow. free excess any we generating cash in where would market scenario rapid challenge Leer great significant cash a offers Absent South, will South in markets, Leer is and payback direct even coal our be flows.

As XXXX, the up and position step we with Company. of we XXXX wrap into are pleased the

designed Our low generate cost flows meaningful cash all to market are in the cycle. stages operations of

of development balance only are healthy of operation through market we the not cycle, Arch liquidity, withstand the positioned South. of improve to a strong world-class another bottom we cost with sheet ultra low the foundation Combined position continue and to but the well the Leer with of

the room-and-pillar of base, enthusiastic about venture of of to of value, remain Mount Leer and ongoing the We build completion of of costs its ultimate a our to and heart Leer reserve transition the with lower Laurel drivers operationally the consistent key joint mine South, transition the out the more Peabody.

call back questions. to With Operator, I turn will ready that, you. are take we to over the

Operator

B. first Pipes, [Operator question Instructions] Lucas Our comes from Riley FBR.

Lucas Pipes

Hey good morning everyone.

John Eaves

Lucas. morning Good

John Drexler

Lucas. morning Good

Lucas Pipes

you John, to leverage a wanted Would like little bit a just that were bit, elaborate little you go maybe to about that few numbers if for that. I bit, on about from in Could a you we when be you. longer? regards last amount making liquidity, point, follow-up you the could with. of where that leverage, could some market when and liquidity that little around this think appreciate Thank weaker just stays think you comfortable

John Eaves

of the the that like cash positioned capability So, With needs asset very amounts generating of have continue profile from at course with Lucas, generating the comfortable anchor indicated, of an in we CapEx during markets to Leer comfortable difficult call, the very existing the flows. Company a flow, to remain have cash we Company. obviously even of as are the the Leer cash out and we fund flow indicated build have as can we we continue South the meaningful we

there that for have are obviously levels sheet. indicated strong in we additional very modest leverage. of We my other also remarks, know think I balance you As opportunities a

to healthy continue this. strong as sheet manage liquidity maintain expect very to We balance we a through and

think we are, those that. will available, comfortable continue additional continue will from if that Absent add explore some to out have there flows. build avenues can consider Leer to ways we aren't think they to opportunistic but of we remained leverage, cash smart if But is we we we on existing that South

Lucas Pipes

can going their where expect a other the cash is times also to the miners. portfolio consideration forward on just what Laurel. quick conducted. be helpful. and I on see production with Good transition current what out appreciate Could of separately, that would you Yes, going or mine curious that. us be regards you we occurring. movements under very that like there Just shaking of terms should then And And this Mount level were in thermal follow-up side from to the continuous that XXXX, noticed the I cost their it committed changed some forward on mine look Thank then in much. tell

Paul Lang

Alright Lucas, this start is guess Paul. with Mount Laurel. I

up about X.X fifth four tones. The in start and earlier, production five I to currently of X.X As level we have March what will million is million right running. mentioned are we now to targeting a CMs

this you X.X mine and rate. But X.X tons think to we have opportunity to we now Lucas, million of that set four run to that. as about of year million million ton kind a in was lot are at a it But right going up expand

On Laurel what think your I the impact of on know, you is I U.S. question average Coal-Mac in right I sale with the range. and remember in the industry, what cost will third other side, seeing with Mount If that would I think mid-XXs a the Coal-Mac for the are call the probably sale. fall ton committed you thermal,

Lucas Pipes

gotcha. Okay,

helpful. Well, is appreciate best I of that straight all this that luck. So is forward. and really very

John Eaves

Thanks Lucas.

Paul Lang

Lucas. Thank you

Operator

comes Our Daniel Instructions] next Scott, from Clarksons. [Operator question

Daniel Scott

on. quarter Thanks particularly segment good in met guys. going Real with the that all was

kind Just looking piece? Lucas's are you keep that you follow-up at of to life Mount that for we reserve want X.X assuming to there at about what it on Laurel. describing, are question rate Is run X.X,

John Drexler

Well there are XX-years, XX-years.

Daniel Scott

Okay.

So balance. of that is part steady the a

When handle be in trending know you drops said when of you year, on year have South, without the in next down versus going average that that cost Leer its year. going are is presumably add to production mid-XXs from not that we full to potential hard this get cost you point this mine talking were the four about think year South Leer I you I last its So guidance structure. structure, giving versus then a $XX to unreasonable. costs is

John Drexler

direction get that mean trying to to. are is I the we

Daniel Scott

know lot the covering served that reported And then the venture joint and a support at two the Viper, else was Well is that flow you of that core this is would everything couple ones. free Cole-Mac then a sale was Springfield are asset given point. certainly. cash of the units closing of last is Viper, One kind in by it

Paul Lang

You on knew a were we integrated what they continue run. two Springfield down will newer of big think units Obviously especially city announcement to They trying I one know was to plan. part would their to older time basis. The basically a say best the ran what not resource units surprise. I shutting the get with on are the that to

a Incrementally of its generates nice explore it captive and production we to not, one way we it Viper Viper. what of XXX,XXX of of CWLP the city from is out in create tons value think it it about to mines. the it think bit lower is interesting is, it of It little is other would a Springfield, is it. by if a I means, is there EBITDA some was core, those

John Eaves

has the do most in follow five-years We again. place Just that contract secured have the for of there been next to Viper. from on volume five-year a with

we as to market Paul very not much open at subject are said, all. So, the really

years next that positioned we in five- we the mine with or think for are So so. certainly well

Daniel Scott

for defense any good Leer, year? lastly, then a move longwall this I And there. is it schedule Alright, guess,

John Drexler

We one last Leer just week. at finished

The QX late other early will one be QX. in

Daniel Scott

Good helpful. Thanks job. guys. very Great,

John Eaves

Thank you.

Paul Lang

Thanks.

Operator

comes next Levin, Mark Our Benchmark. question from

Mark Levin

much guys. very Thanks Great.

How this versus of do the couple to for expect So sell PRB coal questions. thermal. a U.S. you much year quick last? One

John Eaves

thermal million Mark. to But going imply five million be exact like our We we We I from guidance you can guidance. look versus year. didn't think tons are anywhere down last two give from to

Mark Levin

get And perfect. are interest else noted not is bridge, for cash great, cash to is then when that that Okay, EBITDA John, you you captured Is noted CapEx anything free it Drexler. needs question there to EBITDA expense. that the to below in cash number? be to line, accounted obviously free doing kind second for John we and of flow

John Drexler

Yes.

is a other cash we few just so taxes a not reference future, to as component. not know is you of position, So, foreseeable a items tax that Mark expecting any are for from the

of there positive the XXXX And some that was are XX recognized quarter. we that then that so in provide the that million is impact that items we expect in PRLA a referenced have fourth other settlement gain

the realized the We that be over of expect to XXXX. majority course gain of

in of it in $XX that We but do component do in flowing to of provide component we to through tax between million range split our the SG&A reference is And is million. through guidance, million EBITDA, that another a we we that while an called expect to $XX a as compensation non-cash. out negatively impacting guidance, refund cash a somewhere AMT that be There well. $XX cash tune XXXX, and in flowing item and $XX that million stock-based won't is of

we So affected you smooth to the - out. lot capital are back need to we of kind reconcile. of add over while any those year, expect things themselves the of a course don't adjustments those by We think positives working

Mark Levin

I Got are, funded? this is year expected $XX reserves you million purchase how it. believe And Blackhawk. Is of there be and would hit from that to a that guys

John Drexler

the quarter. through So in fourth came the that cash in

cash and balance is that our in already liquidity. affecting reflected So

Mark Levin

Got it.

I broader comment to It about our probably is is and net I - think terrific perfect. more That Okay, circling had question. market. one market back

and this [Mittal] I'm markets, if Brazilian are release So press the are about European any they you mentioned his and (Ph) destocking of or either steel is just that European demand morning, the in markets over. feeling of a into improving guys heading Brazilian seeing met in stabilization better XXXX? lot signs curious

Paul Lang

was weeks, six is it picture. a bleak Mark, with this rewind will I pretty Paul. about start

want we of and concern Europe, I but pretty - it say particularly of depressing lot South our also. a I to in customers, was think was worse, had don't America

we little positive last are be really we though, and is of what seen little a What of more over have been going news weeks, coming discussion it, couple a more there to has movement the of is XXXX. you a about index as year. have the I in since on think prices reflected the we are seeing, $XX seen that in High-Vol And end A of doing out

John Eaves

my know the we grow think to cost opening App, Mark about structure with have million Central production probably a to at I that current out, just come number comments, we I be going of price in as million tons, eight several in seen of think challenging. made is tons is going levels lot You

as of So, said, the seen back virus mean see the that. uptick market head structure last I Paul pickup half now logistics the with the little an year, be certainly a of weeks, probably have there the we a capitalize prepared because and our will right into and cost over in could pause we is couple concerns. But, our to we as we on

So pretty going. we good about we we where and feel are where are

Mark Levin

for today great of gas or given versus That is Last going kind question, to XXXX, what the XXXX this think appreciate in on color, Deck. Any be where you I actually situation? demand is is and it. thoughts one PRB consumption inventory is

Deck Slone

been going say, guess be with doing so and the gas cash focus. have we we thermal had is levels high more I going assets, of to I the market, that is pretty our to terms a the continue tough. whatever continues that prices generate of our strategy, in mid-XXXs, us, we winter mild we to are are of clearly are we extent which have obviously, on to take to going Yes, really I there guess And that we thanks. can, a Mark, is far. for kind to with focus would in as is the call hard

EBITDA indicated, have since we of $XXX million excess segment capital we emergence, about As in generated level expenditures. of

know the to continue be of And be, pressure. going we sort of some to is going sweating, where under level rather than markets so to it

continue and just possible to cash our are to capital that taking harvest that going disciplined fullest We to in on extent focus way. a managing strategy

So we significant in was thermal XXXX, one be hard in to still. pretty a call saw another XXXX could consumption. down us terms it of for step overall exactly, as

obviously, got but out for starting great have we we strategy that. not right are We think the

Mark Levin

Thanks. I and time appreciate congratulations the guys.

John Eaves

Mark. Thanks

Paul Lang

Thank Mark. you

Operator

from FBR. Lucas The next question Riley comes B. Pipes,

Lucas Pipes

a again, that. picture North of is wanted actually And taking met-coal you very you across. kind bigger on And about much? morning market balance the for roughly Good so I some the how that of thanks your my follow-up American on came questions for there if kind for question. follow-up need much just production to think if in market cuts? that more of prospective Thank and the

John Eaves

You know a lot Lucas, to I Deck XX-ish for the I a it average, be pricing current let in is these it jump will cost to it. structure, with think, going here. think But I call certainly challenging for guys make of

You know, balance a some which had of them also to put also going sheets, is pretty stressed challenge.

conservative times next is we rate. conservative a you kind at But of what globally I the over number demand five look on very guess, the very we we look and you depletion know, of world a going when growth at and know, as years, put a out

think the under to world we six supplied know, over be is the years. five next You years going to

is don’t comments? of think Deck, of it it I the any challenge some very going the be America think structure. I just with to challenging. got know I to point that kind North guys cost of making their is you in

Deck Slone

think the agree the know, with downturn would wheat Lucas this you Certainly we you We all comments those Yes. that think us. for fairly pretty and fact and the is useful actually we is know, separating chaff have constructive is, as here. indicated, from

the even that in cost the production of market was cost There to in high rocks the really clinging high kind out, that come is environment. high should priced production

because Quite so, we healthy really this be weather balance quarters to this, run. turndown the a but for know, think from we more are, the in to exit long is of a And several think so built are barriers supply we range of we would reasons, you desirable. demand obviously

of July downturn fact need of that of eight even the some the really we tells to has to didn't production down, come of And earnest already those produce. continue and know. times happened million The as mean, reductions XXXX X, just was everything months, that is seven turned that I really the market quite just of you kind There to have in which frankly, significant. you sort before some need began to in seen, out market

XX you did. it minutes then, happened some And know, after

have We seen of reductions. this steady additional drumbeat

can And couple see just for up. quite frankly, quarters of America so supply the we more sure like play that that North out not this to would are in side particular we in a hold

production And right so couldn't that is tell the we U.S. level? is needs dissipate. say quite you frankly what that, could there in that the We but that to

went up add capital, also three-year is capacity. of investment with in through expansion significant you limited very limited would pricing new cycle development which we a there for in years three mining investment through sort go very that, and We $XXX when was

I to think forward. markets constructive of nature coal sort speaks of going this that well

probably coking up that going balance have of said ensure resource demand to supply five that depletion you are for we with a coal depletion, this XX terms healthy and a know well downturn and markets as as the and John continues natural business This globally. in next years sets we think really that to the

John Eaves

standpoint structure for that mean Lucas and low High-Vol well mean just with a we around you are A, I coal. think producing quality I A people globe our positioned a well. mean the think There cost not about you cost, is on. we decades that from of quality, And we to I logistics, our high High-Vol if our just as think lot going is to be demand strong follow focus know and on

Deck Slone

one It is interesting too. comment. And more Lucas just

soft U.S., is We it week a impact the to and cuts seems to international last there saw where, the arena is we coal, New so where starting Wales, little it in a in are see to structuring shutdown to are going quicker. well. as going be South in just U.S. going confined not see the to biggest the be, on is that is Mozambique We

Lucas Pipes

perspective, coal are on interest helpful Very of America Is restructurings. could out there just some North and you one portfolio yourself? of quick maybe In happy on build have you the assets your to that in anything there, pretty this. pipeline be follow-up back with coking or

John Eaves

But frankly, eye. with XXX standpoint becomes that nothing and our it we we Leer I South Lucas, to a can we get critical ton, with to know in reserve from You against do port. standpoint, it the yet. as From ability and quality benchmark you also million what a up cost can stacked at quite imagine, look really mean, that and available everything a

continue will our like around, very growth but we strategy good, to organic we so. So look

Lucas Pipes

Thank you Perfect. color. Great. Best luck. the very additional much for of

John Eaves

Thanks Lucas.

Paul Lang

you Thank Lucas.

Operator

Our next BMO Markets. Dave from question comes Capital Gagliano,

Dave Gagliano

it taking I plans free questions. apologize my the or has back bit I generation cash come up assuming wanted market after XXXX looks thoughts to a already. there. obviously, like obviously to not just quite - for XXXX been hold After thanks covered goes relatively flows and if this but Hi, stable. conditions

that Leer has buybacks, dividends, or So, about more special capital just And kind after Thanks. developed. curious for is I the plans allocation philosophy South a prioritizing was uses? there thing of preference other

Paul Lang

market any as allow with low the to free assets cost generation, Leer us generate Hey company around what Dave the to built Obviously, is it that good flow we The question. most enhanced cash foundation move be is is in are South. right. cash important flow, has only environments forward going is entire which to going significant

didn't that For an on was the investment focused been last felt very appropriate Back have we healthier focused that several and program. share Leer really were capital we we repurchases, it capital needs significant South, of one. on when markets return have years, more a because

big We of program. there, have reduced strides have the that during by the shares outstanding course made we XX%

But a will Obviously, generating market cash for a market now lower asset. us. a opportunity to going substantial. environment that That we significant on forward this great - post be the is coal time and into is you with we environment, have needs as now move period, generation we referenced, have right cash XXXX right higher for XXXX indicated, shift flow bringing as

will that that is with And informed a in the Board time will keep an investment obviously, we evaluate will continue that we term will continue period. come is do of there ultimately to John. over be - believe appropriate to We directions. lot our here. and as Arch the markets and to so more a on what But that management we longer team and

John Eaves

for EBITDA, Dave, compelling I think. on, incremental million just in additional and an as prudent environment we pretty of in $XXX pricing on decision Leer annual South we even to follow-on. said as business basis our Certainly, is this investment the early investors, a

spend as as up you, Board quite we So, I can we fast can every I assure are running. frankly, we this capital going can production to And in this talk as at spend as it that get quick Meeting. and year, Board, in my capital about returns

will very clearly on. that and get that as XXXX, we generating we cover into a topic be early So this are all cash we

Dave Gagliano

I Really those - I was and you. answers, appreciate thank Okay. what

preference organic was clarify, capital And for beyond in or more preference form really is is get inorganic to or to, the or so opportunities. whatever I just preference there trying in XXXX returns what to shift for for

John Eaves

environments, certainly will and up running Dave, that Board’s make today on as think get mean I right decision, depend environment as business those and are said the with we and ongoing the our to conversations the is Leer but the I market in South we can. focus management Board as the I will quickly

Dave Gagliano

you. I Thank Okay. appreciate it.

Paul Lang

you Dave. Thank

Operator

Chris LaFemina, next from comes Jefferies. Our question

Chris LaFemina

Hey guys. good morning. for Thanks my question. Thanks taking

John Eaves

Chris. Hi

Chris LaFemina

to South, to said I’m positive? First out coal fund secondly, of you you Does that from in prices think Leer cash little that for XXXX on stable, assuming flows. profile stay I expect flow able Arch that to the higher And mean be coal that expect cash Leer with South, project be a existing for here. development free you relatively

the flow looking but smart significantly should your about if point then a to some be just improve beyond potentially is I'm also the when you your cash covered adding like by commented free seems net going cash But business to to then might made your should project leverage, anything, reconcile that for profile flows you South XXXX trying XXXX. specifically on add Dave free and cash down? improves debt leverage what it think XXXX. do earlier beyond if Leer I in

John Drexler

this Yes, John so is Drexler. Chris,

from meaningful you of all South cycle the and we flows. to have the given environment, significant in call is Leer think, to believe generate of over cash flow know excess the over course course the we from existing that can are expectation confident I we forward, as this we ability Company have our call, we cash indicated of discussed fund market continue the phases of moving today's the

is some my other think positive in well. I noted I as items with cash discussion impacting that Mark there

we from we Leer as totality to look continue So of at that, clearly, South there cash believe existing to the the fund opportunity is flows.

we know markets that all dynamic. said, can be volatile, be markets With know can we

way be levels leverage, probably continue paid back in back we put could so, South paid will very with opportunities to or of a designed modest explore accordance on Leer And online. that getting to in back

once prudent all of leverage balance stress on evaluating would the evolve, would we continue would we markets watch to brought modest, those type opportunities. that be sheet. Any of types again, be in not And as the very of will

Chris LaFemina

helpful. is very you. That Thank

Operator

next Research. Our question from comes Michael Vertical Dudas,

Michael Dudas

has And early kind me could Drexler, on spending XXXX? John is whether much And for cadence is you us Leer spent --. year the guys. Thanks the squeezing into or of South. you it where anticipate is what in remind how to-date and been that level peak this

John Drexler

are we as online. long still As

questions I to think we the South. the majority related got of Leer

we a XXX. to XXX from expenditure standpoint, are So guiding capital

million build the it of XXXX We the $XXX capital And we out for significant $XXX indicated of is in capital for incurred our capital. year required which million. most have guidance XXXX is that

into starting what of cadence. third around backing million be XXXX quarter up in is rounded that $XX remaining the million in remaining in it the of XXXX longwall advance numbers, is then would $XX is to the in So essentially that

year So all the we XXXX. in in of CapEx significant a designed once around making in quarter XXXX and are up longwall again third position sure to the the is start

Operator

Cobalt comes from Cooperman, question Capital. next Our Wayne

Wayne Cooperman

number actual an you XXXX number I beyond sort comfortable as and using are So is just one. that? one in of question ongoing total And What last that after spending this more for on guys question. follow-up capital is have number the CapEx there a

John Drexler

from for fact Wayne, the is that provide Leer you capital the that a Maintenance XXXX this we CapEx So $XX guidance guidance to right. into million. South, for than year perspective can don't other back

the that $XXX kind $XX a comfortable of made million range think I for Company perspective. today, Company going million maintenance structure the a previously it we of the to from as have is range that for forward is a indications

Wayne Cooperman

That up includes South Leer after in it is running.

John Drexler

specific that that is XXXX that there different Leer provided haven't South wouldn't for be but for maybe it we guidance step for going modest again range I capital forward, from maintenance significantly up Once described. in and a just

Wayne Cooperman

million. outstanding since - just, the loss, net the a So quarter had you I income shares like XX was

bit shares income the positive assuming the have like was an had is you It low. be seems net little right XX you - a number? what Assuming diluted outstanding - on

John Drexler

actual XX so shares is Yes, outstanding. the

go the rough quarters from shares had those diluted effect I see previous and XXX,XXX actual to back we is and the I guess can net If you of that. range. income, the to a a go anywhere you to say million where filings back would themselves

So rules loss at the a of once accounting the have require in dilution net because the taken of that was not again, line effect dilutive shares. it we the bottom

anywhere access I from it you should to that call specific. you quarterly again, once is shares go So back those but to million have filings think the it to can X.X a million

Wayne Cooperman

conservative guys income, get being net the and give back right XX take million was number. you would I obviously if And or to about be

John Drexler

out reason. the Not of of range

Wayne Cooperman

much. Alright. Thanks very

John Eaves

Wayne. Thanks

John Drexler

Wayne. Thanks

Paul Lang

Thanks Wayne.

Operator

time. further back to this I questions And have call like Eaves. to in no John over queue hand And the the at we would

John Eaves

for in I you. and Thank everybody the to Arch call want again joining thank interest today. for your

As that up XXXX could for Arch commodity a well year the transition of in exceptionally discussed, be industry following well-equipped year is But a three cycle. mid off ride XXXX. leveled the cycle

and forces global positive. While XXXX choppy, already in is the outlook are marketplace, could long-term for met-coal start corrective underway

Arch the we investment. me of attractive like let an remind you key value closing, drivers In that believe

some industry's products. of the We lowest industry's quality highest producing cost of the have some mines

will well over Arch short in the you is positioned compelling we look thrive believe unmatched to regardless balance that to updating Thank of a and is forward organic growth that have In story and a long-term. downturn manage We the any industry. you effectively we the market April. us sheet serve and we in through have

Operator

ladies you, Thank today's gentlemen. and teleconference. This concludes

now may disconnect. You

Arch Resources (ARCH) 6 Feb 202019 Q4 Earnings call transcript