NACCO Industries, Inc.

Hello and welcome to the NACO Industries third quarter earnings call. My name is Elliot and I will be coordinating your call today. If you would like to register a question during the presentation, you may do so by pressing star followed by one on your telephone keypad. I'll now hand over to our host, Christina Kometko. Christina, please go ahead when you're ready.

Thank you. Good morning, everyone, and welcome to our 2021 third quarter earnings call. Thank you for joining us this morning. I am Christina Kometko, and I'm responsible for investor relations at NACO Industries. Joining me today are J.C. Butler, President and Chief Executive Officer, and Elizabeth Loveman, Vice President and Controller. Yesterday, we published our third quarter 2021 results and filed our 10-Q. This information is available on our website. Today's call is also being webcast. The webcast will be on our website later this afternoon and available for approximately 12 months. Our remarks that follow, including answers to your questions, could contain forward-looking statements. These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements made here today. These risks include, among others, matters that we have described in our earnings relief issued last night and in our train queue and other filings with the SEC. We disclaim any obligation to update these forward-looking statements which may not be updated until our next quarterly earnings conference call, if at all. In addition, we will be discussing non-GAAP information that we believe is useful in evaluating the company's operating performance. Reconciliations for these non-GAAP measures can be found in our earnings release and on our website. In a moment, I'll discuss our third quarter results. But first, let me turn the call over to our president and CEO, J.C. Butler, for some opening remarks. J.C.

Thank you, Christine. Good morning, everyone. The third quarter of 2021 was another very strong quarter for us. Our third quarter earnings benefited from a $10.3 million payment as a result of Intech's decision to self-perform. As of October 1st, Intech has assumed control and a responsibility for operation and all required reclamation at the Navajo Mine. I just add that I'm very thankful that we have the opportunity to work with the people and leaders of the Navajo Nation. They were great partners, and I am proud of the work that we did while we operated the mine. By applying our own unique and proven approach to managing and operating surface coal mines, we're able to quickly improve safety for everyone who works at the mine, improve the quality of the environmental work being done at the mine, and improve the level of service and support for the power plant. These things are at the core of what we do, and I am proud that we were able to bring value to the Navajo mind, to our customers at NTECH, and to the Navajo people through our work. Turning back to our quarter, I'm pleased to report that our earnings improved significantly, even in excluding the Bestai termination payment. Earnings increased at all of our segments. In particular, our minerals management segment had an outstanding quarter, helped in part by settlement income, higher natural gas and oil prices, and income from newly acquired mineral interests. Our team at Catapult Mineral Partners continues to look for opportunities to expand our portfolio of mineral interests while they actively oversee the performance of our owned royalty and mineral interests. In the coal mining segment, third quarter 2021 coal mining operating profit improved over the prior year quarter, mainly due to the Bestai termination payment, as well as an increase in earnings of unconsolidated operations, resulting from contractual price escalation and strong demand. As more and more baseload power generation facilities are shut down and natural gas prices increase, power generation companies are increasingly relying on coal to provide low-cost and dependable electricity. Turning to North American mining, we began deliveries at two new sand and gravel quarries located in Texas and Arkansas in the third quarter as we delivered on our goal to expand North American mining scope of work and geographic footprint. We are conducting all mining operations at these two quarries, just as we do in our coal mining operations and will do at the lithium mine in Nevada. As I've said before, there's a lot of growth potential in this business, and North American mining's pipeline of new projects remains strong. We can leverage decades of experience and a whole company of experts to provide specialized mining services or operate an entire mine or quarry, and we can apply our skills to mine a wide range of minerals. I'd also like to note that Lithium Americas, our customer at the Thacker Pass mine, issued an update on the Thacker Pass project in early October. At that time, they noted that final permitting decisions are expected to be received in the first quarter of 2022, and early works construction is expected to begin in the first half of 2022. We continue to provide support as they move forward with this project. At maturity, this management fee contract is expected to deliver fee income similar to a mid-sized management fee coal mine. The mitigation resources of North America team continues to advance development of their existing mitigation projects and is evaluating a number of interesting new projects as well. I'm really very pleased with the way all of these businesses are advancing their strategies. Lastly, I should note that the previously announced sale of GRE's Coal Creek Station to Rainbow Energy Center has not yet closed. Presently, closing is expected to occur in the first quarter of 2022. Once the sale is complete, the existing agreements between GRE and Falkirk will terminate. We will receive a $14 million termination payment from GRE, and GRE will transfer ownership of certain other assets to us. We look forward to the completion of this transaction. I continue to be very optimistic about our long-term outlook because I have a lot of confidence in our strategies to protect the core and to grow and diversify. I believe that we have strong businesses with strong teams executing on sound business strategies, and I'm enthusiastic about how we can continue to grow our business by bringing natural resources to life. With that, I will turn the call back over to Christy to cover our results for the quarter in more detail.