Arch Resources, Inc.

excuse me ladies and gentlemen thank you for your patience and holding your conference will begin in a few minutes again thank you for your patience and holding your conference will begin in a few minutes Thank you. Thank you. 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 Dex Sloan, Senior Vice President of Strategy.

Good morning from St. Louis and thanks for joining us today. While we're conducting this morning's call from our boardroom, I want to assure you that the team is widely spaced and following CDC guidelines closely. Before we begin, let me remind you that certain statements made during this call, including statements relating to our expected future business and financial performance, may be considered forward-looking statements according to the Private Securities Litigation Reform Act. Forward-looking statements, by their nature, address matters that are, to different degrees, uncertain. These uncertainties, which are described in more detail in the annual and quarterly reports that we file with the SEC, may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required by law. I'd also like to remind you that you can find a reconciliation of the non-GAAP financial measures that we plan to discuss this morning at the end of our press release, a copy of which we have posted in the investor section of our website at archrsc.com. Also participating on this morning's call will be Paul Lang, our CEO, John Drexler, our COO, and Matt Gilgham, our CFO. After our formal remarks, we'll be happy to take questions. With that, I'll now turn the call over to Paul. Paul?

Thanks, Dick, and good morning, everyone. We're glad you could join us on the call today. I'm pleased to report that the ARCH team continued to deliver across a wide range of strategic and operating objectives during the last quarter. In our core metallurgical segment, we commenced longwall production at the Lear South Mine after a well-executed two-and-a-half-year build-out. capitalized on strong market dynamics, generating $118 million in gross margin, which was nearly a 100% increase for the segment from the prior period. We achieved another strong shipping quarter and maintained our highly competitive cost structure, despite the planned pre-startup outage at Lear South and an increase in sales sensitive costs related to higher sales prices. In our legacy thermal segment, where we're focused on simultaneously harvesting cash and paring down our long-term closure obligations, we generated approximately $58 million in gross margin, or a 43% improvement from the prior quarter. We further reduced our Powder River Basin ARO with additional final reclamation work at Coal Creek, flexed up production to capitalize on strong pricing in both domestic and international markets and leverage those near-term volumes into a greatly expanded book of higher-priced business, not only in 2021, but also in the latter years. In short, we continue to execute on our clear and actionable strategy for long-term growth and value creation throughout the quarter. In doing so, we set the stage for upward momentum in sales volumes, operating margins, and free cash flow yield, this coming quarter and in 2022. Turning to our rapidly evolving capital allocation plans, with the Lear South Longwall now commissioned and in ramp-up mode, we intend, as previously stated, to prioritize the restoration of our balance sheet to its pre-2020 level. Central to that effort, we intend to pay down debt and or build cash in order to return to a minimal debt-debt position. At the same time, we plan to maintain our sharp focus on simultaneously reducing and defeasing the long-term closure obligations at our thermal assets through the establishment of the sinking fund. Fortunately, given the excellent near-term cash generation outlook, we believe we can make excellent progress on all of these objectives over the next few quarters, even as we take the first steps towards resuming a modest capital return program. In keeping with this view, the Board has initiated a 25 cent per share quarterly dividend beginning in the fourth quarter. Should circumstances continue to merit, the Board plans to evaluate more robust capital return mechanisms in the coming quarters. Overall, we continue to progress in our strategic pivot towards steel and coking coal markets and away from power and thermal coal markets. With the start up of the Lear South Longwall, we took a quantum step forward in our transformation into a premier global producer of high-quality coking coal. At the same time, we continue to drive forward with our efforts to reduce the operational footprint of our thermal assets while simultaneously unlocking their still significant value. Central to this effort, ARCH expects to reduce the asset retirement obligation for its Powder River Basin mines by about 15% during 2021, principally through accelerated reclamation of our Coal Creek mine. Year to date, we've trimmed the ARO for roughly $190 million to approximately $170 million and expect to reduce another $10 million by year end. At the same time, we intend to direct a small portion of the free cash generated by the thermal segment during 2021 to a sinking fund that will serve to set cash aside to pre-fund the final closure obligations for these mines. Given the strong committed book of thermal business we now have in place for 2022 and beyond, we should be in an excellent position to continue to build this fund during future periods in a smart and systematic manner using cash generated from our thermal assets. Longer term, we still expect the cash generation from these assets to far exceed their closure obligations with the balance available to fund other corporate priorities and objectives. With this, we continue to drive forward with our efforts to unlock the significant remaining value in these legacy thermal assets. Towards this end, we leveraged our hard-earned capacity to flex up our production in 2021 during a period of intense market tightness to secure commitments for the outer years. Over the last five months, we've made thermal coal commitments totaling more than 100 million tons for shipments in 2022 and beyond. And we've now built a strong contract base for both our Powder River Basin and Colorado operations for several years into the future. Most importantly, of course, this strong book of business should ensure robust and predictable cash flows from these assets in the near to intermediate term. As we've stated many times in the past, ARCH's objective is to transition into a pure-play metallurgical producer. However, we're intent on winding down our thermal assets in a careful, orderly, and responsible way, and in a manner that takes into consideration the interests of our many stakeholders, including our thermal segment employees, the communities in which we operate, and U.S. power consumers. Before I turn the call over to John, let me share a few comments on the coking coal markets. The ongoing rebound in global steel production in the wake of the pandemic continues to drive strong demand and robust pricing in the seaborne metallurgical coal markets. Through August, world steel production was up more than 6% versus the pre-pandemic year of 2019, which is an incredible snapback. Meanwhile, global coking coal supply continues to lag, with exports from the world's largest suppliers, Australia, the United States, and Canada, down more than 20 million metric tons when compared to 2019. As you would expect, that mismatch in supply and demand has put significant upward pressure on the market, lifting the prompt price of our principal product, high-volume coal, to $390 per metric ton FOB the vessels. While volatility is a fact of life in the commodity business, we believe the overall dynamics appear constructive in the near to intermediate term. In short, we see this as an exceptionally opportune time to be ramping up our Lear South mine, and in doing so, greatly expanding our overall coking coal volumes. Looking ahead, we expect global steel demand to continue to increase around the world, supported by the ongoing build-out of large, new integrated steel mills in Asia as the world gears up for the new green economy. With our world-class metallurgical asset base, premium product slate, industry-leading ESG performance, and top-tier marketing and logistics expertise, we're confident that we're well-positioned to generate substantial long-term value for our stockholder base and other key stakeholders. With that, I'll now turn the call over to John Drexler, for further details on our operational and marketing performance. John?