Arch Resources, Inc.

today's audience and plan to be underway shortly. Thank you for your patience and please remain on the line. Good day and welcome to the Arch Resources, Inc. First Quarter 2022 Earnings Conference Call. Today's conference 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. 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 your questions. With that, I'll now turn the call over to Paul. Paul?

Thanks, Dick, and good morning, everyone. We appreciate your interest in ARCH and are glad you could join us on the call this morning. I'm pleased to report that during the quarter just ended, the ARCH team once again executed at a high level, delivering record earnings despite the pervasive drag of rail-related challenges. It was our second straight quarter of record earnings, and more importantly, a quarter of significant progress against each of our key strategic priorities. Among the highlights, ARCH achieved a record gross margin in our core metallurgical segment, repaid more than $280 million of indebtedness, and restored the balance sheet to a net debt neutral position. Reached $100 million, or almost 80% of the targeted balance in our thermal mine reclamation fund, putting us well along the path towards completing this effort by July. And finally, announced a second quarter dividend of more than $135 million, or $8.11 per share payable in June. While these are all significant events, I think the relaunch of the capital return program deserves particular focus because it signals an inflection point in the evolution of ARCH's long-term value proposition. As you know, we have viewed a robust capital return program as a central tenet of our long-term strategy for creating shareholder value. Toward that end, we launched the initial phase of our capital return program in May 2017. Hit pause on that program in early 2020 at the start of COVID in order to drive forward with the construction of a more powerful cash generating portfolio through the build out of Lear South. Finally, we relaunched the new program in February 2022, less than six months after the commissioning of the Lear South loan. Today, we demonstrated just how powerful the combination of our upgraded operating portfolio and our new capital allocation model are by announcing the first substantial dividend under the new program. We realize it's atypical for a company to commit to returning effectively 100 percent of its discretionary cash flow to shareholders, but it's also atypical for a company with our cash generating capabilities to have such modest cash requirements going forward. In short, we've now accomplished what we set out to achieve when we initiated our strategic pivot more than 10 years ago. We have a world-class coking coal portfolio that is well positioned to compete on the world stage for decades to come. We have a legacy thermal segment that generates significant levels of cash, requires very little capital, and can be systematically wound down in a responsible manner. And just as importantly, we have a well-fortified balance sheet with as much cash as debt, effectively no refinancing risks, as well as a newly constructed asset in the form of our thermal mine reclamation funds that counterbalances the principal concern associated with these operations. When we made the decision to move forward with the build out of Lear South back in February 2019, we made it clear that we planned to enhance the capital return program once that project came online. Consequently, the Board views our new capital return model as making good on that commitment, and more broadly, rewarding shareholders for their years of support during our strategic pivot towards steel and metallurgical products. Before passing the call to John, I'd like to share a few thoughts on the coke and coal markets, which remain at historically high levels. At present, Arch's primary metallurgical product, high-volume coal, is being assessed at $470 per metric ton on the U.S. East Coast, which, needless to say, translates into attractive netback for our low-cost and highly competitive coking coal operations. As we repeatedly said in the past, though, markets work, and thus we don't expect these elevated prices to last indefinitely. We do, however... continue to view coking coal markets as fundamentally well-supported. Of course, the macro environment is complex at present, due in large part to disrupted trade flows stemming from hostilities in Europe, coupled with the Chinese importation ban of Australian coals. Even with this, steel continues to trade at highly profitable price levels in both Europe and North America, and the outlook for steel markets in Asia is positive. Economic development remains a sharp focus. Steel-intensive stimulus efforts are underway, and the build-out of new integrated steel capacity has resumed in India as well as other parts of Southeast Asia. Even more significantly, coking coal supplies remain persistently constrained. Exports from Australia, the United States, and Canada are undershooting 2021 levels year-to-date and lagging pre-pandemic levels even more dramatically. As we've noted many times in the past, the industry is feeling the effects of years of underinvestment, and the pipeline of new coke and coal projects remains light. While a protracted period of high prices could ultimately prove the remedy for such underinvestment, capacity additions require long lead times have yet to get underway in any meaningful fashion. At the same time, the maturing of the existing mining operations continues to take its predictable toll. Along with this, current strong seaborne thermal demand and elevated prices are also acting to support cooking coal markets. Thermal coal is currently trading at prices of about $300 per metric ton in both the Pacific and Atlantic basins, which is acting to pull lower quality cooking coal into the thermal markets. Such crossover volumes are further pressuring an already strained seaborne cooking coal supply and demand balance. Looking ahead to the second quarter, we anticipate a significant step up in our financial results given the current pricing levels across all our products in conjunction with an expected increase in coking coal volumes as rail service continues to slowly recover. Additionally, we expect further strength in our results in the back half of the year as shipment levels return to normal and we have the chance to monetize our currently large and highly valuable coking coal inventories. The most important takeaway, however, is that all of these positive catalysts in aggregate should translate into high levels of discretionary cash flow and thus high levels of capital return for our shareholders as the year progresses. Today, the art story is, by design, a relatively simple one. We've developed a world-class metallurgical asset base with a premium high-volume product slate, forged an industry-leading ESG performance, and cultivated top-tier marketing and logistics expertise. On the strength of these attributes and keeping with our clear and well-defined strategy, we believe we're in an excellent position to generate substantial long-term value for our shareholders through the deployment of our new capital return program, while at the same time positioning the company to capitalize on renewed global economic development and the transition to a low-carbon economy. With that, I'll turn the call over to John Drexler for further details on our operational and marketing performance. John?