Arch Resources, Inc.

Good morning, ladies and gentlemen, and welcome to the Arch Resources Incorporated first quarter 2024 earnings call conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, April 25, 2024. I would like to turn the conference over to Dex Sloan, Senior Vice President of Strategy. Please go ahead.

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 at the FCC, 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've 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 Gilgamesh, our CFO. After our formal remarks, we'll be happy to take questions. With that, I'll now turn the call over to Paul.

Thanks, Nick, and good morning, everyone. We appreciate your interest in ARCH, and we're glad you could join us on the call this morning. I'm pleased to report that during the first quarter, Our continued drive forward with our consistent and proven plan for long-term value creation and growth despite some headwinds. During the quarter just ended, the team achieved an adjusted EBITDA of $103 million and generated $83 million in discretionary cash flow. Delivered a $56 per ton cash margin in our core metallurgical segment, underscoring the durability of our cash generating capabilities across a wide range of market providers. Reduced our outstanding share count by 3%, which included 315,000 shares associated with the unwinding of the capped call instrument and the repurchase of an additional 95,000 shares. Declared a quarterly cash dividend of nearly $21 million, or $1.11 per share, and perhaps most importantly, extended our industry leadership and sustainability as the state of West Virginia named Lear and Lear South co-recipients of the state's top safety, and honor Lear South with the state's top environmental. As we've noted many times in the past, our capital return program is the centerpiece of our value propositions. We've now deployed more than $1.3 billion to this program since its relaunch in February, 2022, a figure equivalent to 46% of our current market capitalization in a period of just over two years. Breaking that down further, we've paid $727 million for nearly $39 per share in dividends over that time frame, while reducing our share count by 3.5 million shares at roughly 16% versus the peak level in May 2022. As indicated, this last component, the systematic reduction in our share count, has taken center stage and is receiving our intense focus. We've already made significant progress on this front over the last two years. reducing the share count from 21.9 million shares in May of 2022 to 18.4 million shares today. Along with this, we believe we've positioned the company to drive even greater progress in the quarters ahead through our efforts to streamline the capital structure over the last two years, including the retirement of our convertible debt, the elimination of our warrants, and the recent liquidation of our capital, and our decision to build a substantial cash balance facilitate the opportunistic buying of our shares during market pullbacks. In short, we believe the stage is set for ongoing investment. It arches compelling long-term prospects for a strong and sustainable share repurchase program. Turning to the cold market dynamics, after declining steadily throughout the first quarter, seaborne coping core prices appear to have found a base in the last two weeks and are beginning to show signs of a rebound. At present, Flax is assessing high-volume A cocaine at $220 per metric ton, FOB the U.S. East Coast, versus an average of $285 per metric ton on the same basis just last December. It's worth noting that despite the relative market softness year-to-date, certain demand fundamentals appear generally supportive. For instance, global hot metal output for the world excluding China was up 2% during the first three months of the year, While China's imports of high-quality seaboard cooking coal continue to trend higher. Counterbalancing those positive indicators, the supply side has recovered modestly year-to-date, with Australian and U.S. cooking coal exports rebounding so much, albeit to levels significantly below their respective peaks. It's important to point out, as a world-class competitor with a first-portile cost program, Archer is exceptionally well-positioned to manage through extended periods of market weakness. while still driving value for shareholders. In fact, periods of market weakness can be healthy in our community by differentiating the stronger operator, reinforcing the fact that this is its modern business, the cycles that ebb and flow, and being a low-cost producer does that. But we also continue to believe in our longstanding thesis that underinvestment and ESG-related constraints will continue to support a constructive, long-term supply-demand balance in global cooking for the market. In fact, those dynamics could spur a quick recovery in such markets if global economic conditions start to strengthen or if major economies begin to increase their steel-intensive stimulus spending. It's also worth noting that recent price declines may already be taking a toll on high-cost U.S. operations. In recent weeks, several small cooking coal mines have idled sections or ceased production entirely, according to Market Intelligence. Turning now to the thermal markets, U.S. fundamentals remain challenged at present. Natural gas trading below $2 per million at Henry Hub and utility stockpiles at a historically high level after the mild winter. These natural factors in turn build an estimated 10% decline in domestic thermal coal production on a quarter-over-quarter basis. On a more positive note, the seaborne thermal market has rebounded somewhat, with Newcastle Price standing at $130 per metric ton and API 2 at $119 per metric ton. Being a part of this improvement in the price environment, U.S. thermal coal exports were up roughly 26% for the first two months of 2024 and compared to 2023. Looking ahead, we're sharply focused on driving continuous improvement across our operating platforms in support of ongoing and value-generating capital returns for our shareholders. At the same time, we'll continue to capitalize on the strategic optionality afforded to us by our ownership interest in the DTA terminal as we navigate through the tragedy of the Francis Scott Key Bridge collapse at the Port of Baltimore. While the closure of the port should not have any impact on production in our mind, it's likely to constrain second-quarter coal shipments somewhat, and in turn, dampen Q2 capital returns. However, we expect the impacts to be timing-related only, if the Port of Baltimore reopens as anticipated, with the effect of cash flows merely delaying rather than loss. In closing, let me say, in many respects, ARCH is built for periods such as this, when our low-cost positions and high-quality products afford us the ability to generate substantial cash flows despite softer market violence. At the same time, we believe we're equally well-positioned to capitalize on the situation, and return even more robust amounts of cash to our shareholders when the markets recover. With that, I'll turn the call over to John Drexler for further discussion on our operational performance in Q1. John? Thanks, Paul, and good morning, everyone. As Paul just discussed, the ARCH team successfully navigated through significant disruptions to logistics chain in a weakening market environment during Q1, while still delivering substantial amounts of discretionary cash. While production levels for our core metallurgical segment were less than radical from an annual guidance perspective, the portfolio is currently transitioning into increasingly favorable geologic conditions, and we expect good momentum as we progress through the year. In the first quarter, our core metallurgical segment once again delivered a first quartile cost performance and generated nearly $130 million in adjusted EBITDA, Despite less than ratable output stemming from longwall moves at both Lear and Learside, typical geologic variability and issues I would characterize as just minor. Included in this latter category, we lost seven days of longwall production at the Lear mine during Q1 at an estimated impact of around 70,000 times due to our efforts to coordinate the longwall startup with a local utility's relocation of power lines that were to be undermined. While the steps we took on that front resulted in our receipt of a $9.1 million payment, which was recorded as other income, we estimate that the lost tonnage inflated our Q1 metallurgical segment costs by close to $2 per ton. Even with that impact, the segment's average cash cost came in at $94 per ton, which was modestly above the high end of our full-year guidance range, but still top tier when compared to other U.S. cocaine coal producers. As indicated, our coking coal mines are transitioning into increasingly favorable geology, and as a result, we remain comfortable with our four-year guidance and the cash cost midpoint of $89.50 per ton. In the thermal segment, the West Elk Mine continued to operate efficiently and generated solid adjusted EBTA, even as it continued to ship under several legacy contracts that dampened net fats there. The Potter River Basin assets also operated efficiently, but lost cash in spite of that fact due to the rapidly cooling domestic thermal demand environment. In short, we ended the year stripping at a pace consistent with a 55 million ton per year sales volume level, but are currently anticipating 2024 shipments that could be as much as 10 million tons lower than that. As a result, the PRB operated in the red in Q1, counterbalancing the solid performance at West Elk. On a more positive note, stripping completed in the PRB in the years back half, and as in the past, to preserve value by negotiating additional out-year commitments in exchange for any customer-requested deferrals. Looking ahead, we continue to be encouraged by the general progression of our cooking coal operations. Rear South is currently operating at a good, productive pace and is well on track, in our view, to achieve the 3 million ton annual production figure we have targeted for the mine for 2024. Moreover, the development work we are currently doing in District 2 is serving to reinforce our confidence in the much-enhanced geologic conditions we expect to encounter there. As previously discussed, our drilling data, as well as our experience via the early development work in that district, suggests a materially thicker coal seam and more favorable credibility overall in District 2. which would prove beneficial when we began longwall mining there in the fourth quarter. I will say again, at a time when many other operations are wrestling with the migration to less advantageous and higher cost reserves, we are fortunate to be moving in the opposite direction of Ruslan. Now let's spend a few minutes discussing the closing of the shipping channel in Baltimore following the tragic bridge collapse there. As we have discussed, we typically ship the majority of our Lear and Learsouth export volumes or roughly half of our cooking coal volumes overall, via the Curtis Bay Terminal in Baltimore. With the channel closed, we are having to direct volumes elsewhere, and I'm pleased to report that the team is doing a terrific job on that front and remains focused on maximizing our shipments using alternative routes. Of course, our strategic investment in Dominion Terminal Associates and Newport News has been pivotal to our success on that front. as has been the great support we have received from our rail partners. While we continue to work around capacity constraints and DTA, we believe we will be able to achieve sales volumes in the range of 1.9 to 2.2 million tons in Q2, depending on the exact timing of the channel reopening that is currently projected for the end of May, according to the U.S. Army Corps of Engineers. That volume level would put us at around 4 million tons through the first two quarters, suggesting a little over a 2.4 million ton quarterly run rate in the year back end. Given our available alternative logistics and stockpile capacity, we do not expect any impact to our production levels at the mines due to the port outage and continue to view our prior volume guidance of 8.6 to 9 million tons as achievable. Before passing the baton to Matt, let's spend a few minutes discussing the team's exemplary achievements in the sustainability arena. As you know, we firmly believe that a culture of safety and environmental stewardship is essential for long-term success in our business. During Q1, ARCH's subsidiary operations achieved an aggregate total lost time incident rate of 0.62 incidents per 200,000 employee hours worked, which was more than three times better than the industry average. On the environmental front, the company again recorded zero environmental violations under SNCRA, as well as zero water quality exceedances across all of our subsidiary operations. Highlighting the team's excellent work, the state of West Virginia recently named the Lear and Lear South Mines co-recipients of the Governor's Milestone of Safety Award, the state's highest safety award. In addition, the Mount Laurel Line and the Lear, Lear South, and Mount Laurel Preparation Plan We're each honored with a Mountaineer Guardian Award for safety excellence. In the environmental arena, Lear South claimed the Greenlands Award, the state's highest honor for environmental achievement. And Lear and Lear South were honored with additional environmental excellence. On behalf of the board and the senior management team, I want to commend the entire workforce for their deep commitment to excellence in these essential areas of performance. With that, I will now turn the call over to Matt for some additional color on our financial results.