ARCH - Earnings call transcript Q3 2021

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, and welcome to the Arch Resources, Inc.

Third Quarter 2021 Earnings Conference Call. Today's conference call is being recorded. I would now like to turn the call over to Deck Slone, Senior Vice President of Strategy.

Deck Slone

Good morning from St. joining for thanks and us today. Louis,

conducting want to we're spaced following this team morning's I boardroom, and closely. guidelines Arch's for CDC assure widely call is While you the that

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

take can of of that discuss Also the the have section Paul. we in over on With CEO; at non-GAAP at our this call website a morning COO; described different These a plan to in end as like matters to to financial measures posted reconciliation address information, and detail that by of participating those do we'll to uncertainties, new you that, press nature, Paul also in forward-looking may CFO. which remarks, We and their uncertain. of law. the this are SEC, events I'd may a which Matt to statements. release, Investors not I'll copy annual we by statements, the future turn update we of archrsc.com. cause our to After Forward-looking Lang, call that questions. otherwise, or be result than our materially our be future undertake file more the required except John morning's find happy our statements, be the expressed different in are, reports be Giljum, actual remind forward-looking will our now our Drexler, our degrees, whether quarterly Paul? to our results formal that you with as

Paul Lang

gross well-executed actionable but of upward years. we flow quarter doing strategy in quarter. and or greatly to volumes, paring operating XXXX. this throughout closure the with those range our in to both gross highly segment, domestic harvesting core the glad prices. set that million segment final in and $XX We our for legacy strong $XXX and and wide in and you Deck, continue we an segment, and our costs reduced deliver the on leverage we our margin could from latter prior Leer down strategic longwall production quarter planned a We business, strong momentum volumes in increase pleased cost maintained at during sales the a in period. In flex Arch X.X-year the and on sales and join sales-sensitive our thermal In mine Coal and margins into work free higher outage metallurgical on build-out; everyone. despite nearly the quarter. Leer call last at markets, pricing production up short, across where objectives XX% shipping growth structure reclamation the international for generating team at near-term Basin achieved Creek, In only stage obligations, creation XXX% our execute million capitalized coming XXXX, related capitalize to dynamics, cash quarter. for additional on further approximately competitive which today. book generated Powder a and a another simultaneously clear we not margin, higher-priced the I'm of the to we're the value long-term operating South River on We're pre-start-up increase us prior to continued report improvement and morning, from after also focused South so, Thanks, commenced good in the expanded In strong was ARO market long-term yield cash in

evolving capital rapidly our to Turning plans. allocation

same mode, to previously pre-XXXX ramp-up down With we intend, to intend stated, net restoration the effort, order return Central simultaneously our prioritize level. Leer plan time, and we focus in position. the to its that as the establishment through a sharp we South pay the closure of the sheet to defeasing commissioned sinking on at and/or to in debt longwall of At thermal to maintain our to and reducing balance minimal cash obligations the now debt long-term build assets fund. our

the make initiated excellent the mechanisms as per take share quarters, even we and outlook, $X.XX circumstances we the quarterly markets In view, progress Should can keeping pivot steps our Overall, the evaluate to robust merit, plans these dividend steel beginning cash with in objectives quarter. continue return return more given the modest power thermal and Fortunately, all resuming capital in quarters. towards progress strategic coal in excellent continue from to and the believe first coming we markets. towards has Board a generation Board program. coking away the this over to we of next on a capital near-term few fourth coal

this start-up producer coking drive premier portion step to that we high-quality same approximately ARO Coal River during the to of roughly With mine. for aside Arch final obligations reduce expect and XX% continue simultaneously fund into to with our for by forward intend serve direct of we've efforts XXXX, to by longwall, the obligation reduce Basin for retirement our prefund At another the driven accelerated Powder million South while mine our thermal our the segment $XX sinking its reduce mines. small we closure about will a thermal Creek of to to At principally global million Year-to-date, operational reclamation to $XXX of through we Central of set the during a coal. the the took XXXX cash quantum unlocking by $XXX million the the Leer transformation expects their to in these time, footprint a the generated year-end. free cash significant time, to asset forward same still effort, value. assets to a

future expect have and of beyond, now and cash a these from we drive cash fund fund balance available exceed thermal corporate Longer assets. build periods and in book manner with excellent Given generation our closure the generated in assets using to forward business term, systematic we still the position with the to these thermal to XXXX far objectives. to for other the continue should place to our in assets. priorities their obligations smart strong during to we from unlock in value we this, an continue be this legacy efforts significant committed remaining thermal With

tightness of flex hard-earned outer this we secure Towards our up during intense in for production the to commitments leveraged market to capacity XXXX years. our a end, period

Basin strong and built last assets this Colorado from million months, predictable strong for book and totaling for tons robust Over X the of shipments operations in more these and term. and Powder course, coal business made in in the commitments our should several both cash intermediate thermal we've near River ensure years future. base we've now Most of than the importantly, beyond, for flows contract a XXX XXXX to

a As we've is stated objective many metallurgical into times in the pure-play past, to producer. Arch's transition

of way we the that assets our takes on orderly into the our including and However, which employees, interest in U.S. many responsible communities segment and down careful, winding thermal in manner stakeholders, our and consumers. in a operate thermal a we're consideration intent power

global the to ongoing robust supply versus XX world continues the few markets. drive exports than August, snapback. comments seaborne more the wake production up in XXXX, largest pandemic let tons steel and the coking is compared and coal continues to Australia, metallurgical pre-pandemic XXXX. demand X% a call the me over the Before I lag was than to John, strong United in States Through The when which metric the markets. rebound the on with to incredible an production coking year in more steel of million turn global pricing coal from down coal world's of Canada, suppliers, Meanwhile, share

in you coal, demand FOB of has expect, and $XXX High-Vol that metric market, per to A the mismatch put significant As on principal pressure prompt price the lifting upward product, would the ton our vessel. supply

the exceptionally ramping volatility our constructive South greatly coking life term. coal our we overall time doing overall a we volumes. the as be to fact mine near opportune of dynamics commodity up so, in In the While Leer appear expanding this in in believe is and an see to business, short, intermediate

and expect of large slate, marketing global build-out to the continue With John integrated substantial further marketing top-tier for well our to John? positioned mills key ahead, the new and expertise, stockholder With for ESG asset other industry-leading and turn generate steel the we long-term premium that, demand value increase Looking to product Asia ongoing our base, by that call we're and details supported as around economy. new on I'll operational in our now world, Drexler gears performance metallurgical steel up to the confident base we're for world-class green stakeholders. world over performance. the logistics

John Drexler

morning, and good Thanks, everyone. Paul,

quarter As made for the consummate every Paul team, another objectives the and the want and I to progress operating, third ESG behalf virtually during and believe with talented such in high-performing I'm I the and of to group, stage fully excellence even a future. sets tremendous professionalism. quarter. senior the yet laid marketing commend for we team's Resources dedication, one On entire success operational focus that exemplary on of out, management the our unwavering work on excellent greater of Arch proud associated workforce key be

most our momentous was start of me core Let coal development of the the the quarter, Leer segment, startup obviously, where the with South longwall. quite coking

asset a of the the cost noted, team all collectively services bringing operations. of chain did that the completion Paul goods at of operations and supply the job availability pandemic, spectacular face inflationary As in to key stress and constraints, environment an of our that world-class

budget, Herculean rapid the in schedule shorten Of an period currently shareholder we should further. in of course, ramping of an value longwall environment the and on because and already the project keep that to on are efforts deliver the process still exceptional payback team's

the is X up operating curve way South strong the Leer South key that on we we with other indicated, are up Leer our the the Leer August and the that I'm we early of well achieving sustainable a quickly rate to and in pleased our team from spent started to longwall first effort very metallurgical report by that are learning run systems. the XXXX. assistance personnel have and the months integrating moving technology XX, on making that operation of and lining headway out various excellent As mines,

realizations nevertheless While efficiently on the average the during maintained strong costs, $X executed the U.S. in longwall ton increase end per inflationary and a low cost position on the South, in associated per in metallurgical costs gradual our quarter ramp curve. with start-up, our of XX-day weighed the and pressures coal we production at outage sales-sensitive segment Leer all early of coking about the ton advance higher

operating our of earlier. forward, at in Of improvements act the to pressures Leer inflationary South should performance counterbalance going course, to many we expect achieve steady which noted

We QX. also despite from achieved a slipped into late with cans X solid seeing late shipping vessels quarter quarter QX

Given systematic more the adjusted guidance, as conservative at year of South late hope as chain-related well XXXX. here, logistics of our and but for approach ramp against to challenges outperform warranted. there ongoing have are in volumes coking parts moving We coal we Leer a several we cans, full a the the is late-year midpoint number think

producers we practice, In As the of on XXXX, XX past -- market, their lock products, ship approximately coking previously keeping the in or XX% coking requirements indicated, begun in high-quality North or for have in is the volumes our XXXX. Arch best market. XXX expect in coal North in million-ton million-ton where for American whether its the recent in obtaining seaborne price steel focused with approximately American coal weeks to to

U.S. indexes. have business prices awards, these these Of per $XXX in approximately to prices Low-Vol High-Vol tenders and participated coal committed date. have and we Coast ton to XXXX both linked the committed fixed tons A and approximately of We at have of XXX,XXX East

to are with for as North view these a commitments good in American pleased book them our and and are overall tenders. contract fit participate We continuing remaining the

capacity, throughput logistical attention demand will international on concludes, our pricing outlook leverage both arena brand significant expertise remains where to business we the we American North to for continue focus strong the our the plan and robust. where and awareness, terminal As

compared of Looking quarter, step-up fourth beginning to by in when volumes more a ahead the we significant first in increase to quarterly a QX, quarter expect volumes modest coking XXXX. in followed the coal sales

to will will our XX% realizations to export our continue as North an X I'm and declining be continues XX% be in thermal that associated will ongoing with our and be expectation despite output to improvement volumes into exceptional be our the into significant of volatile, X/X American South results marketplace. project exported, remaining of also markets total well The to we markets, While fourth metallurgical that a team with China. vessels pressures move of Of will Asian pleased quarter to deliver the the exported. into will America. domestic X/X shipped customers be XX% shipped report with Europe

detailed we've in customers, tons and to the expansion tons to commitments As the legacy impressive capital domestic accomplished view, these extreme the of beyond. you strong natural levels at in increase leveraged same gas of of the long-term our the to make thermal quarter my sequential rebounding progress at thermal million The PRB in and and in the this price offset significant up know, ton. XXXX was systematically and What in economy sustainable Paul most in while level production even well. our as manner. responsible still time, shrink our utility incremental XXXX while discipline today, to and in serve most side fact at significantly, was average value our for book XX the operational assets the our near-term grappling optimizing to the our at we we escalating a house upshot we approximately a coal XXXX smart on a an are fourth a to the expect exercise rapidly be of and who delivery XXXX third focus obligations, is and per of Perhaps with that those time closure continue shrinking more these in shipments across needs our QX, business same was footprint. we of quarter XX% in than prices. that into $XX all Through significant committed flexing

the our which the typically guidance domestic Elk whole, export well thermal in our will commitments X with As mix. for is expectation existing West Elk million a course, into segment in, of West that on tons as provide market. already volumes, of export but XXXX a reminder, as tons the than we those not more as in priced half necessarily roughly going includes produce Based locked

provide volumes in you a effectively only we should as XXXX, domestically explicit February, that sold Basin. assets useful be obligation to River in retirement amount As our provides whole out the entire guidance excess alone for hopefully, pricing half. of we indicated, our to finalized small asset year's for in mine in yet with is gross back Basin intend export purposes. some for leaves Powder That a but believe for business deliver next West the XXXX We margin that building and segment and with have River for Powder modeling more committed dramatically blocks locked a that XXXX our Elk of fully in

Now recap let's quick ESG our turn to a execution. of

highest engagement the a you time team's hallmark culture. of As and of our environmental know, in community for safety, the stewardship, Arch those corporate the commitment who have ethics business some deep to excellence followed is company

our hours is again incident Arch X.XX overarching rate highest safety commitment demonstrated During roughly the than of which average. lost as the a to value, worked, achieving industry time single our quarter, Xx XXX,XXX per third employee better once

among continue safety large aren't we a until we perfect and of satisfied with producers. X While for integrated year, won't industry single performance result that the every standard our set achieved operations to coal every be one

begin more maintained the and intermediate parameters we months first over water for in quality value will tested our our addition, ever plan upon outfalls XXXX. and significant When to global for quality you thermal XXX,XXX advantaged these careful, our environmental water water that remain Matt to during of believe thoughts than our In X over outlook markets. have record we during than perfect execute and coking responsible consider XXX to both financial at our by well-funded assets. metallurgical complementary precision Arch on of contribute that the wind-down already the compliance is with we pleased franchise without level single of the operations are the as every I positioned even summary, the and day. In minor applied cash exceedance, course understand Moreover, year even a With constructive being transformation team to ongoing care performance. you of call near on are assets for we substantial we better and the excess Matt? turn long-term term coal that that, legacy shareholders this our for

Matthew Giljum

unrestricted flows, both Thanks, John, of with and the liquidity higher good cash with usual, discussion third liquidity we of than of quarter $XXX morning, and million, everyone. June Again, million as $XXX and slightly XX total the levels. cash finished

that in much flows increase experienced QX, in cash of to $XX due back seaborne our cash was of build significant that below Operating $XX improvement in were half earnings We totaled the improved primarily in quarter. million, prices million, reported to receivable all the well in totaling quarter. not the another While accounts converted the EBITDA. metallurgical accelerated

to we for in River capitalized Additionally, export expenditures development quarter related reduce to spending we $X margin for And our aggressively million positions the to final thermal that million, Leer for spent provide Powder $XX closure reclamation hedge including interest Newcastle South. required in as continue liabilities pricing. to Basin. and are the were we was tied Capital $XX requirements lastly, the million

both the quarter, if segments continued see we prices increase maintenance flows Looking sales remain margin will ahead levels. as completed. reverse and capital capital hedged as return elevated, requirements conditions significantly remain the fourth may in to while cash extremely will market growth in And are to physical expenditures working favorable

Coal Creek. from spending near-term to earlier as decline our completion near year the the at reclamation we levels projected seen in is efforts Additionally, planned of

topics our discussed, liabilities thermal the like approach reducing I'd our couple to Next, at starting a elaborate operations. with to Paul of that on

as having viewed prongs. We this effort X have always

work and to reclamation basis. and exactly done And our priority we've possible. accelerated when prong this John perform discussed, is first that is on have both year as an Paul what The

approach will that the don't allow be times there in of The acknowledges for second part sequence that our significant reclamation. mining

Given And prong in cash we now sinking thermal date, reach to points the progress those plan the mines fund. shift to Creek one directing made from we our flows of to will quarter. of at the a some by fourth second to Coal the

our a fund We for have pay develop collaborated building partners to this to surety program future reclamation. with for

to of over plan fourth solid have the for amount contributions outlook wanted closure given part amounts. funds the $XX around pay the prefund funds drawing to it's of amounts as the John performed. in year build we and and additional As just program, minimum minimum final allocation. mine's thermal time, fund. contribute to next we $XX will make agreed of In And also this I some outlined, million provide to to we that future obligations, the to that in periods advance likely million we reclamation short, ARO above quarter the to expect capital down in thoughts those

flows strength discussed, extend improved, just be to expect will As XXXX. fourth and into that quarter cash much we

clear will been have that and to priority be primarily strengthen in liquidity. increasing the is that the form fourth sheet, quarter, our We balance of initial in the

we term the As next convertible maturity consider which, we as settled reducing the nearest mechanism will specific the low loan, to that we the have well pivot bonds. as for to plan move we year, also both And not while is while into cost on debt. yet,

minimum respect to to for the utilize to amount minimize dilution. at our cash in reminder, with principal is intent a order a convertibles As the

a dividend. Finally, outlook, to startup makes resume an South appropriate quarterly time spending along capital and the with this the reduced improved recurring Leer

that, to of to Operator, the approved to questions. stockholders December paid XX. per Board of the share take For $X.XX the quarter, call I fourth on a over has we are turn back on you. record November will ready With be to XX dividend

Operator

Instructions]. We'll question our BMO Gagliano David from [Operator with take first Capital Markets.

David Gagliano

could here. on. we take going lot this Obviously, There's Great. of ways. different lot lot of information a Okay. a A

going thermal and in side first. I think try the I'm focus on to

think maybe the or -- said you PRB, I not On PRB.

And that ton $XX committed a You correct? that West include that what for And XXXX. said volume? West Elk much? how of so, million tons XX was the at volume? if any of Elk does And thermal price for that Is

John Drexler

is John this Dave, Drexler.

right. You're it's and on, lot exactly There's exciting a going an time.

XX that's per me prepared that So report ton. happy approximately is all the we and said that's clarify, PRB, of tons PRB that on And that. discussed remarks, let million we priced in $XX the to at

than indicated into about go know, we we the you it to segment, market as we've previously, West it the been Of million, tons the domestic dynamics X $X there. next we reported of half got thermal that expect ship Elk which year, As and million a higher from market given will of has provide building that and that. give And will half blocks, not a go as guidance for any it point, you the we're forward. we for that's I PRB lay market. move the the to wanted good foundation, pricing ready Obviously, there. with this into export to out piece specific basic especially at But is to us

David Gagliano

Obviously, have Okay. remaining related years, how XXXX? kind and kind I XX% committed you go of bit like volumes the actually then with to this And XXXX. XXXX at questions. XXXX you think breakdown to million, it's believe, wind give the if bigger were XXXX slope previous picture, a wind 'XX I the after couple And same we the down in could, as What's guidance, XXXX. much and price, business the us XXXX versus up down and in of can to to The it the what of year-over-year, numbers in was it's also, XXXX? speak XX from, as roughly plans, then out little a you of flat of

John Drexler

here, sure I'm jump I'll but and in So start. others will go ahead Dave,

that in for close us. Thermal pressure specifically, think managing we've clear and to beginning, I on what such and down reducing why strategy over the doesn't the see long we're I change tremendous over a to we're conditions focus we require plants think But be time. the a had present continue CapEx footprint It's That that the And the is as eyed that responsive real segment, term, very from thermal at all going looked market the in in our PRB we've as of there. of proud meaningful to they're we've opportunity that doesn't the the whatever to would way and the how managing the do I'm to us said have significant themselves from to here. provide is it segment and and responding to segment. we team that beginning

ability the So in environment just sit we'll significant this been. as indicated term, in be and we're from positive seeing to we cash here we'll change 'XX today, We But of our set move we've remarks, be forward. focus 'XX. gives as I of important have are questions responsive to portion more Longer our and that us going reclamation to We're on prepared as volumes already environment. kind utility responsive in in generate managing will which won't final footprint. go confidence that market continue think for for about as cash one forward being into talked years we not very 'XX, market as layering of aside your shrink, our going provide what multiple is a we we a interest, guidance But path to forward. and again specific most we years, beyond we the in as once with market

Paul Lang

is David, this Paul.

do that a into of In What the and to to market. flex leverage at path situation. the to unique provide tight, picture cash, that this I the end going We're to little if a generate what opportunity to our where months this market line be systematic can very shrink X But in We're down, is got going permanently. changed day, it is to we arises, reclamation. respond we will. We're at 'XX how The best addressing in complete and it. extra volumes, at good a it. about we bottom think us We'll the said. the do the to kind going 'XX, we order volumes view. about still we're nothing fashion the ability a But logical the last think and pretty working is going limited end in heading saw exactly from macro closing of But the kind long-term the do Creek. And of in we I the it to should prices. glide be mining have in keep able footprint. was where but we we're up to the of take do we advantage Coal sober were you those same. way. towards We're Creek of short-term we operation Coal as some has game is example

Deck Slone

Deck. the strategy for Dave, said. assets amount John always have And of harvest and us the reiterate capital what to both this is Look, Paul is the about thermal for which just was minimizing thing, spend. principally one

rate possible be objective just there invest as extent as So run to current our capital subsistence continue possible. sort to little continues to really the of levels and to at operate

market move opportunistic of we Paul here said, was take the an that advantage saw. to it As

Creek, or Paul ARO is limited that is is look, That than demand near we in there that end of for of requirements, And to at but million. meet closure. as still we mine down cash footprint to so, $XX term, be And long at to are less year, this skinny continues in the focus will consumer by indicated to the as Coal generate least fashion goal be a ours. our the dramatically. Creek there total Coal a strong continue will final at

generate much we said closure But stranded skinny would to as as still asset So we can we've we what obligations to do, which meaningful look reduce want to down leaving as long-term done obligation. is, assets. avoid cash we footprint, the the retirement we also again, and

at in the to opportunistic, possibly still little have continue -- capital that asset the as simply we'll to value. available spending focus and maintain assets be can and but an So we that's cash Elk, be are still basin West as will for the and significant harvest

David Gagliano

Okay.

XXX two all, in got think prepared said wherever, yes, tons million million the for XXXX. thermal, -- in I release, Just remarks point on of first We've years. out, on a in just the of One press quick it just future you think so this round total -- at forward XX follow-ups. or two I sold the to

Deck Slone

David, for XXX obviously only million we we've out. it committed tons, more XXXX, committed we broken We year. and said than this a actually that -- million the of haven't was that portion XX really small

out volume lot a of there's the So years. in

So XX sitting would said, or the XX done XXXX. or million to John million were tons for at just additional another you that so we've if book XX million we out for that reiterate there's whatever, years. and assume so what mean XXXX, substantial for And it's tons a

solid a position are So in for really strong XXXX. we very foundation

into that at looking in. even flows locked the and at meaningful are XXXX point this So continuing cash XXXX, you're least already into assets thermal from at

David Gagliano

Okay. then And to out in versus $XX been the tell okay. for that great. XXXX, And that's million for us And locked just if the and -- the million years, that $XX volumes, the the that's relative price. price in then locked been down XX want the to you just number, XXXX up be would $XX or

John Drexler

that real specifics near term, the in follow seen we've here indications the at what's number. as going of not the the in in seen and market you've happened look to recently, price. those We're improvement you Dave, all substantial give there's opportunity in pricing here been a that and market Yes. But market, and near-term

for a period, and outer in 'XX at been we're where seen that building that years a above from beyond you've commitments and those prices from very periods so levels strong have assured, new then But historical And there. outer be little outer those backwardated perspective. years, rest in might however, those a book it bit

Deck Slone

And price Dave. moving outer up, years are in the the

domestically really is result, bit to in to of gas high volumes So coal look prices well new come a scramble as and as there's have of just see now we've as a around everywhere just a strong reality lift. limited generators as level burn. as a additional $X. they Inventories And down. production continue as been some seen lift there's internationally. here, right very been There's find The investment with at are

as trying to on help requirements 'XX goes very the our are what and XXXX. we're build just and we and have look, respond. need, and needs And that of doing so They And beyond 'XX them their We're customers. can for out beyond well. meeting we a focused to requirements

David Gagliano

quickly, steel tons and same what I more. that the side. XXXX. that at a I then But other ask, And was the business just one coal? U.S. for of the to as you that in the wanted committed, Okay. turning sense think, with queue last quality back -- to just year to got The the of Can ton $XXX vast then I'll a XXX,XXX just I've give thing get a on really producers us number for because majority

Paul Lang

$XX. $XX,

John Drexler

$XX. was pricing The

Deck Slone

We average $XX. customers. meaning with gave last, year. And shipments in last The North XXXX tons for X.X fall that was did we million the $XX XXXX American was of in

David Gagliano

of at was that But Understood. tons sort XXX,XXX is this $XXX priced Okay. quality. average

John Drexler

portion was Dave, So committed, the there tons that, of there's actually was the market. $XXX fixed what that XXX,XXX indicated a indexed that of portion we of that, was and that price, was at domestic a into

$XXX that the at an were from High-Vol half operation. obviously, in indicated largest High-Vol split product, is X, those So volumes it XXX,XXX South, Leer tons our being and of from -- then and A Low-Vol Leer of A. Low-Vol price, Beckley and it half the We our index. that maybe

Operator

We'll take Riley Securities. Pipes question from B. Lucas next with our

Lucas Pipes

on news wanted Dave's -- to of good it when me they job. questions QX. every remind he the maybe First, peers But And to pricing asked wouldn't hone bit about his good in from and is XXXX single quite quarter, a XXXX of one either. anyways, answer the questions your little I

this if is export, there are I You here mentioned, John, recall few And in Obviously, a XX% parts going market. moving correctly.

have We end markets, Europe, different Asia. lags,

to for netback I range really it. would had appreciate those QX, tons in on us export a you pricing give If

Just ballpark. a rough

John Drexler

volatile one that's especially of question Lucas, that's market a the hardest always in yes, it answer, as to now. as So is

If And look you you to for prompt backwardation there's are then they third that Coast the average basis, at the we where it on pricing higher quarter. quarter, and comes are today of markers the a average the for XX% for third markets off than for that. were the compare East

you what roughly. East talk convert today of net for most our that's a short, and is all But Coast there's increase $XXX. we which everyone take third and to $XXX back Backout important $XX our move that predicting just metallurgical on ton We A, the forward. back these a quarter, if it's variety is at at you're But impossible. as Platts, But that at we to depending that's to I to take costs ways so prices, $XX, So price, think price offline product transportation so variability try of expect can a the are. in where is it those where a going go to virtually substantial mine. pricing tells in High-Vol

every been at It's a that's pricing. netback day. changing once You're $XXX But volatile. again, ton

we difficult And the But again, third a you are improvement once fourth number. give quarter quarter. so pricing a in from expecting meaningful to very specific

Lucas Pipes

that or But export on reasonable? minus $XXX, your is plus tons, kind of

Deck Slone

Yes. prompt price you I'm daily the mean today. I giving

As from that's quarter the you where come probably up even started we know, at.

of South that. of There's mechanisms and There's have Platts. as into So into variety And Europe, be that's for pricing volatility East into well. products markets going variety there'll we America. the in a different all Coast Asia, of differentials that

again, triangulate So those once hard you numbers. around to for

John Drexler

as we selling in numbers price look receiving would business index. earlier, as locked you our American Asian at business, markers, that not what of at be the you markers are a cetera. Lucas, was said, those there. fall receiving, there we are We're seeing that There's different John But et to us for $XX. the XX% out But are expect we about at indicated Queensland reported talk so -- the that, numbers when North as last we that's you're are except

XX% those this just is, So but fact, the year, of at in business remaining discussed. the of markers through the international that's that ongoing we've course

Lucas Pipes

they vessels, be that Got would it. helpful. above rough or Very marker? below Chinese The

Deck Slone

U.S. -- we've been volumes been vessel FOB the really, Lucas, East we've the selling Chinese selling mainly Coast.

So price, what that while quoted, is as sort the tends that's Coast of to East to us And and fine will look for upward East pricing additional gets have add well. logistics. U.S. vessel there useful to there's that sort the buy come they a some on that manage on that lift activity in they and works the additional buying well. to And the obviously, that really based so of in be Coast delivered China Chinese price really,

been a on rather the have Chinese buy than So to in manner happy basis. we've delivered that in

Lucas Pipes

But pieces looking know issue what us there you'll kind I remind this for appropriate pressures. wondered cost and the you obviously, noted are here South. if you're cost guidance met -- ballpark on time. impact. volumes could at with a I cost few the obviously, moving Got XXXX the the potential the have you And super coming of side, XXXX coal low mine then for And it. low-cost ramp-up Leer of but then on you inflationary also, online,

qualitative comments would superb. quantitative So be

John Drexler

Thanks, Lucas. Yes.

but in be as look have I good, rapid and for at And on shortens Leer here, just the have. that that we our indicated, lucky we think the than in South for as market the a exciting we've a brought to couldn't marketplace. better investment asset we opportunity sometimes more payback environment time with

South coal rate, million the into ramp X of of Leer up incrementally additional get a we've which what full about and portfolio. on beginning to think our to we consistent to expect pretty tons metallurgical into normal by I step we a as production been we add expect

XX us roughly taking million to next tons. So year

yet. portfolio. is up South specific and how asset budgets, We're provide ramped the our kind very get the cost get that of guidance changed expectation have we've constructive we'll from into with Now that we looking been addition Obviously, that. and you'll overall help communicating you'll that provided of it nothing portfolio. will of us still from the we've environment our with has not Leer But at on a the volumes our all once views

quite those ones benefiting of same high. business. lot use are industry fuel at all-time line, top energy right? clearly, well. significantly steel use us the the So levels, of You a the to we're across the pressures record and the referred to is that see our That well. that diesel on inflationary helps frankly, in But steel pressures thermal a as from side we some portfolio part costs pricing on our wants of facing, as some of We of lot

them. inflationary pressures manage will those So out there. be We'll

budget Leer South, once yet, going again, step think specific provided We with we XXXX. especially manage any going the process. we're through to guidance going that additional effectively But volumes into be able as forward that haven't we at to the

Deck Slone

our our majority Leer the one Leer own Lucas, of reserves portfolio coal And vast fee. asset coking of is our remember, in base, advantage we and at that South

lower lower. tend are be to costs sales-sensitive and our So

currently Mountain we're own We that the Laurel reserves at team. of also the mining majority gas and #X increasingly vast our

X% netback do a paying consequence. really severance Virginia. line based state we're So We exactly it's West in pay a about the of the only top of where we royalty the tax and have on

we're given a have cost, base. to do that would much we reserve going say our fact I upward the So sales-sensitive costs. have own of on from the our sales-sensitive reserve so Clearly, advantaged own we some but that and we relative pressure basis, are, base

Lucas Pipes

turn really difference the then and $XXX it question, last No, My selling a for Terrific. you're makes I'll when that at over. mine.

to You commented XXXX on coal the production? your tightness What take increase in the it thermal coal thermal would market.

John Drexler

the back quarter quarter Lucas, in we we that beyond, run say rate at you sustainable look some into we that were I segment. and have the into you that of numbers think gets third Thermal fourth the if for is the reporting the

So the and evaluate once managing sustain requirements, look responsive fleet it the of capital through of moving significant forward is we to should be we the to -- required. our additional material online, then some again, we as But environment, equipment utilization our have, continue back without CapEx at had think fleet we of of the 'XX, market levels, can we're making is It's portfolio where of what that at the type capital. be scaled that that that it it's these of at sure capital that and we market overall levels we're investment, minimal with to bring in and down to But portfolio we'll insignificant. prudently.

Paul Lang

just beyond. and 'XX not this production what into that about harvest and We're as more cash up. We we back the any and Deck Paul. aside to you're be this the intent going you do. get having spend do going leveraged just sales opportunity closure And Lucas, that without an on spending -- QX. ultimate set line And to -- had QX people. probably is cash not to smart is did really and bottom cash of treadmill. the here see with try is the capital -- us that we issues this of we're to and, -- to guess importantly, we ramp any The ramp in without and and We up I to said, speak that. back going mine for

lots right make decision at mine. that of in sitting We'll right to close when sinking have is time fund. the that the cash flexibility We the

Lucas Pipes

it Got continue Well, of appreciate and really I luck. best it. Terrific.

Paul Lang

Thank you, Lucas.

Operator

next our We'll Martin from question Company. take Nathan with Benchmark

Nathan Martin

good already. Pretty discussion

million my rate points of of one XX for clarification. been a seen of a Obviously, probably So questions of Maybe guidance little couple XXXX, we've the tons around have quick addressed. with PRB just of or bit run just think about. minus, this a is John's comments saying in of million a ramp there, up I and heard kind plus XX tons, the to good quarter

you mentioned could of 'XX some Just confirming, like run winding I it in well. you're sounds it you down, but as think that that Coal had kind Creek as guys maybe

Just expect the kind come increase the the from? to of there thermal in you side where bulk of curious

John Drexler

that made there Yes, Nate, about expectation today. And we've continues progress sit where Coal good that that we close we'll down. we've talked question. the even significant through indicated, as our Creek, we And be to

the is XX% of have all yardage the yardage. of that through of of the end year, of essentially about all we'll expectation Our disturbed there, disturbed reclaimed

see significantly that can you and So footprint. we're shrinking dramatically

opportunity cost lies has structure it's small overall is is and the to one piece a us of that frankly, so have and been And footprint that, pit very the small piece, continues What's where a remains. outstanding ongoing. left for quite

is that wouldn't a expect prices move a if the market It's while we significant we And environment, an evaluate going that of is needed, we up majority production bit, so we've this That's in Creek. to been continue very flex minimal volumes coal Btu continue opportunity to quality that, little vast the that to in the we and forward. Thunder, there. indicate that lower Coal And increase from have Black have X,XXX of product. come of to And X,XXX levels may the opportunity product. product. that a at out

Deck Slone

So very cost though. Nate, is also low it

nice a and there's in postage small stamp worth to again, with of for bit fact, a it's So it's it a worth a margin, if, active that maintaining footprint, that the just It's need pit us. quality.

need. we're level so of seeing far, some And

see quarters. a again, reclamation where next tremendous we'll obligation, ultimate the continue reduce over But couple we with with closure. done So that always go the to and the of was we've to Creek objective of work, Cold do amount we'll

Nathan Martin

Elk, I pressure Yes. if Creek, tons makes it. and with tons, year plus West kind business, mean X next I little thermal higher guess, I which I cost Got ramping of that per for the bit inflation mean, sense. XX up Lucas touched million million like? on is a -- ton thermal tons where usually that any Maybe someone I costs side like, again, labor. met kind plus, mean let's of X positive to you sounds assumes clarify call looks on -- million up could also commentary to it. cost basis, is of the going minus maybe sounds and from, from next. of just next Coal year go or year, just it, side, And of go on wanted which to it it this for kind a but was some things. with the I touch on like where then Deck,

John Drexler

Yes, Nate.

So an dynamic. interesting

occurring. portfolio, sales-sensitive are it less portfolio in have about the Deck price is as or increased talked reserves. In reminder, impact the of PRB, met the of the Eastern volumes of in the the we ownership a costs X/X sales-sensitive and the One sales where You've that thing, got given form costs.

have, but So as least at in that, for any and that's see factor us, a good one pressures of PRB, types type and that of at, need the our average Outside course to to the XX% XXXX you of of you date. the million projection into one cost today, cost We consume been look have, increase alone. the it's the you annual cost. price we ramp-up on costs are XX an those of to it's where we pressure gallons about over basis, a fuel. diesel biggest has ones on will be Where diesel

from kind the range budget And and pricing. pressures of update you we little as maybe costs the overall look to guys And As But costs to at we've wouldn't sales-sensitive a next a you report quarter XXXX year. for at again, of as this you tried expect numbers again, at once doubled that our the outside have this to at inflationary of steel. post give it to looked point. bit formal such least fourth is portfolio guidance We'll at fuel our not And X% use a can steel lot steel once type diesel, X% We obviously, be look XXXX. increase outside costs. direction.

can the continue types are think those of manage effectively, so but we'll by that. to And things we be affected will manage look we at and and we

Nathan Martin

to and for I confirm, guidance, of not X% price to up specifically, piece. that understand correct? but completely sensitive sales that said again, thermal Just X/X I think X% next formal outside Is year you that,

John Drexler

correct. That's

Paul Lang

a look think way I good it, that's at Nate. to

Nathan Martin

export with quarter today, for rail right other the side transportation-related, you just thoughts one markets? where service that, of a, Was the the they Perfect. vessels on I how I from Maybe tons, are some with should transportation guys the health obviously, any I guys the transportation fourth prices that housekeeping now to what perspective? cost is appreciate labor-related, XXX,XXX -- And guys. type seeing about from then cetera. mean to are slipped on: say, thought. quarter Okay. et a third net you transportation-wise, that being

Paul Lang

for Yes, Nate, quarter the is out I'll off QX start started This transportation rough kind it I'll on. and plained of a little rail that off. as you tell Paul. we're

So the struggled Set lot particularly in employees. these The Coast vaccine in of and of issues quarter, the railroads the the Eastern of the requirements to part railroads. West also Western that about the We're complaints Colorado, a that because not general, what's is out early service fires. plays -- think all rent all and concerned those how big going their railroads on about out tight. of and between happen aside, it's I

is to obviously, a know, indexes, in rate in side, the we've and East X as times East, the talked the our On you cost Coast the tied particularly quarter usually it's rail lag. many past,

as And rates. low increase in from the QX, we'll it's in see, go it's saw the to rail If is we'll we So could XXs, relatively that it up round numbers, these see in That substantial. step QX. the rail to low on what is prices it just mid-XXs XXs. upper

Deck Slone

just to add on Nate, rate that. And rail get capped. that point does Ultimately, one

continue climb levels. could well, then see those So say look, QX at probably just solid, Paul in are service, it it's that, Paul also Leer rail beyond of that And to But the worth on kind been as very as we said, and ramping level said, doesn't considering. South. we

South that sure to Leer whether here sufficient that to of that cautions the slower in we happen, and to QX able deliver ramps, been we on remains higher those make as get sure little one not and make are volumes has service a So will QX volumes, need seen. we be for it's to

John Drexler

probably once those you as level. kind look of all where that around modeling, again of cap Nathan, through at, is $XX the its kind

at so see these that. prices, could ultimately, And we

Nathan Martin

question. next my read be you John, going to my That mind. was

So and year. the that. your for and guys always the of appreciate time all as best the of you color end Thank I through luck appreciate

Paul Lang

Nate. you, Thank

Deck Slone

Nate. Thanks,

Operator

Hacking our Alex next with from take Citi. We'll question

Alexander Hacking

call. few the I the apologize, I missed first minutes of

was I apologize. So then addressed, if this already

million In envelope, generation more than to even That's terms going $XX the XX of the existing margin. cash conservatively -- that going the sinking ARO. more fund, is price, to I than mean, cover back cover of $X tons,

in about that year So are how you today? fully looking mean, next of thinking you're terms I it fund to

Matthew Giljum

that fills reduction in be well. So to the balance Alex, priorities strengthening this going got really cash and is Matt as timing other but Giljum. dependent for ultimate the sheet terms only when debt on of thermal I'd the not sinking say fund flows, is we've

it's it's the across to of it think don't strong next are come terms met be time about the But think flows see the at, think a the if think but years, frame prices it if about strength off, that to could of cash probably where completed you stay could where more the business, given those we year, scenarios probably, in I to year unreasonable maybe thermal accelerate. time it's on certain likely in frame. X X Again, couple clearly, side. better next in to that of they're see over So

Paul Lang

the day, at Alex, faster about the table, if you how that of without about take to do issue the mean the and I fast need done, if you do off ring-fence extent end do. this, this is a breaking you thermal could it's we the there's argument it, the to think And -- what it's basically but assets. we the strive to we sweat

Deck Slone

translates on We're margin the another $X.XX modeling. And probably wouldn't increase $X remember, Alex, PRB anyway. I think $X sales-sensitive just -- cost. $X a a one point increase, into about for of

should you in. factor that So

up does. Elk could margin Elk meaningfully. that West what see push we'll Now clearly, West And

that sense. makes perspective, a if you're broadly, PRB talking So from that might But be.

Alexander Hacking

of be you And around any for thermal And that's obviously the CapEx on CapEx Okay. through. kind year, next of coming as next year around mentioned, sense. previous helpful. thoughts But commentary volume. any next year? the to volumes But CapEx it really change side, got makes then CapEx You've your would light kind just additional

Paul Lang

thing real. is pressure -- capital through $XXX what's think, heading year, on with you as gives we're into sticking given inflationary I work to where that code we ZIP only but the And numbers inflation the the budget, is on, between, we're maintenance going I things if million. at. million seeing are side next somewhere and Alex, loose model think Those cost CapEx we're $XXX the you are pretty I'd of say -- the and The still

Operator

Michael with next We'll from our Vertical take Dudas Research. question

Michael Dudas

the in here but leaks area, New we're No roof the yet. northeaster's surviving. big in York The

operating here. as Thunder, So And recoverable on just help it does today, left the give that run? think because the how you're Black long reserves that you will a -- can what's ballpark lease I mine remind out people like in question what's to

Paul Lang

automatically it every used lease reduced million take X I'll XXX and I and million the It's track runs, XXX don't about Michael, as shot, years. good or as a to. it's I tons, Yes.

Michael Dudas

Right.

Okay.

tons. be... and what XXX be the So run this would then million rate would year -- And the

John Drexler

done that to markets while time think, are out to strong as there and XX production tons Once of as decades down we to extend expect right will sell it's What the if also we we opportunity right? kind over just markets I indicate well. come XXXX, that, million for coal. continue that indicated would sold opportunity we've are work, if in now, past, But requiring giving the shrink the again, acknowledge would in the aren't so of markets the responsibly be that PRB

Deck Slone

thermal let Mike, coal -- come reminder, in the obviously, we've XXX down million this year. from consumption about And U.S. me billion in of tons XXXX X.X tons to

is So the should down clearly, market. our continue manage long-lasting, with continue appropriately. continues be the about expectation and XX we this gigawatts But additional to is market closures for the opportunity to will next the X production years, shrink, our to

Michael Dudas

Right.

wanted in on. very given quickly And so creation accelerate Now in last going the chance why several to been of that value months. that's the I happened things attention? Is here point towards anybody what's have to Any marketplace? kind paying

Deck Slone

Mike, mean, -- I by of mean advantage aggressively. XXXX you opportunity, have taken into the if mean, I obviously, we obviously, selling

this creates coal in U.S. you've been is back, in So and, really here And advantage really, as seeing been even on production well, energy just snapped assets take of crunch what downward described, consumption and has the this economy the attractive goal pressure we're that's balance discussed. coking underinvestments which as an has on the that that internationally on is potentially a been lot attractive which supply-demand here side everywhere. talked really that that we to the the with really really there's thermal and a we opportunity profound world call about

John Drexler

come operation. What with got as happening And great running we PRB, is the Michael, the we've what in structure, people great said they're well marketplace, seen beyond in great all in leverage take as asset a great we've we've tried and business and flows us deals. cost of and near-term multiyear interested in We've the give our some to utilities cash 'XX. build opportunity, seen indicated book we've we've the stability in marketplace out to what's along, seen the quality,

evaluate of And continue we'll types things as look forward. to so we those at are the and move

Michael Dudas

think coal little of XX Do is seen world. news this a given the going particularly the bit word It's you you've cyclical? the in Is shortage amazing there how what's days. last the of in over much like structural kind on

John Drexler

of of we've it to for we significant continue time. been There's in lack coal there'll some new lack supply. in And Look, a a be said new significant think investment supply. investment

we think going as so And we the forward. look move future interesting to is

Deck Slone

And ahead, Paul. obviously, Mike go --

Paul Lang

talked the dissimilar say, what just Michael, last quarter. day, about the to end of we I'd not it's at

think asked We me a natural gas similar I got prices. high question. you

did. We have for of as higher-priced not what been opportunity, anymore. work out. is investment low doesn't respond the It inventories. there. has the utility exist we will that's producers to we took The of The not And it things some and what advantage in look, throw think, an was. saw just we ability thought I said, themselves exports, utilities, these it. We And

Deck Slone

equivalent Europe, same to oil the equipped things. is $X, experiencing side with and clearly, oil certainly of trading not right the now, the side like natural the domestic But gas that gas we're at obviously, about with in and pressure. feels at of $XX gas talk Mike, And gas somewhat

if be opportunity longer and alternative continue quite the the So really yes, expensive, obviously, then, lasting. we've fuels be of to sort could shift here, I seen some mean,

to to see regardless quite think going really continue that our we what that from important that. We're I clear. of here, we is it's deviate not strategy point out

with but remaining continue additional assets, tremendous harvest said, those to harvest coal be coking great all not Our pivot that, to value are but to still we the opportunistic high quality but plan start capital have and this not is the of instead put continue into assets as towards over markets, structure, chase, potentially value. to assets, just in to John many start place, years, the remaining which cost to

Michael Dudas

in have energy own market. guess these is I to assets going line to bottom capitalized the the days well And

Deck Slone

Absolutely.

Michael Dudas

me. for question final One

Paul to the John On on ground the coking coal on side, this world's observation the the labor productivity. or needs coal meet coking from ability for

thoughts maybe read I'm You you Do But a hear sense retention, down are minors. some anecdotally long reserves getting the life is dislocation quality. your U.S. locked pretty people stories coming could the several happening some -- And anticipating you. guys and assuming given that about are you you next out get on that what's some lead around more to of as something flows over quarters?

John Drexler

us about is Michael, talk think, quite and heard that. views you've issue, I an on our frankly, Yes, labor

asset benefit the bus. feel around we important our and for always money our it mean structure, step and long-live of the is challenges operations, Those clearly, our is in as drive company alignment stories, we wage equivalent something opportunities our didn't they're people. that heard them the to present for most reiterate, challenges are to to out some Because other given in the right? nature of you've And especially. seen just close labor go and wage or but it or opportunities it's used are paying of and to, that kind and make structure So someone have cable the out money. very making good. work operate stories a seeing where themselves around safely cost us, minimizes the assets the fact underground I to something school anecdotally, and -- we impact can that industries. And what types our a a bus, or competitive team even that to Those someone be hearing. we're make of we're attention We've

those continue that and we of industries forward. our move lot perspective we seeing we look from across it issues evaluate. work and the be manage as things don't We're it, that at So will continue see any we to a we'll but with, to

Paul Lang

Leer the maybe guess it, to were about is was cost if only lucky, but require said, as response, of the you good construction just to John, add over probably, John is, number, as if long but higher debate bring cost fact And we project, it the John capital. this don't you some South aren't I increase know, that term. we start financing, were XX% today, what is or get is going Look, said we incremental and be Michael, it's my the think online us. for good I'd those for could recipes that if what other this thing to

Michael Dudas

remember was I this you of showed. going and the do to difficult midst a guys and patience that you you're announcing controversy in the market this some actually

decision on that, well So great done.

Paul Lang

Thank Michael. you,

Operator

remarks. constraints, At time for Paul this concludes time, conference back to Due that session. today's Lang turn to I will question-and-answer closing the

Paul Lang

everyone dividend, call, value we've production With short, our which stage return healthy, and well levels, program into our to actionable thermal February. look and in consistent at historically Arch. segment South creation to times robust producer an These invaluable capital to the set our the and the volatility point We cash resuming that, historically strong status, into are a towards doing strategy clear, transformation for safe Leer and the and our interest today. view forward the final quarterly for healthy markets. market conclude coal ongoing laid given healthy We've We again, sheet everyone. operator, step premier of Stay a taken a prices like, manner excess in for forward their have capping thank and we'll exciting I'd global our metallurgical the ensures returning obligations. sold at delivered off growth. reporting balance maintained as of their to we so, the that its through of first group future in a in in markets. reinstatement strong inherent we've the generation, closure and In for environment, foundation we

Operator

your call. today's Thank for concludes This you participation.

now may disconnect. You

Arch Resources (ARCH) 26 Oct 212021 Q3 Earnings call transcript