Q3 2023 Arch Resources Inc Earnings Call

[music].

Good morning, and welcome to the arch resources third quarter 2023 earnings Conference call. All participants will be in a listen only mode should you need assistance. Please signal our conference specialist by pressing the star key followed by zero.

After today's presentation there'll be an opportunity to ask questions.

Please note this event is being recorded.

I would now like to turn the conference over to deck Slone Senior Vice President of strategy. Please go ahead.

Good morning from St. Louis.

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.

We're looking statements by their nature address matters that are to different degrees uncertain. These.

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 investors section of our website at arch RFC Dot com.

Also participating on this morning's call will be Paul Lang, our CEO, John Drexler, Our C O O and Mac Gil Jim 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, <expletive> and good morning, everyone. We appreciate your interest would arch and are glad you could join us on the call. This morning.

I'm pleased to report that during the third quarter. The Rx team continued to drive forward with our simple consistent and actual plan for long term value creation and growth during the quarter. Just ended the Rx team achieved an adjusted EBITDA of $126 $3 million jet.

Generated $86 $5 million of discretionary cash flow.

Invested $28 $2 million to repurchase nearly 216000 shares and finally, we declared a quarterly cash dividend of $21 $6 million.

Or $1.13 per share.

In short Q3 served underscore yet again the value driver of our capital return program, which we view as the centerpiece of our value proposition.

Since February 2022, we've deployed more than $1 2 billion dollar sure the program, including the reduction will be equivalent to $4 3 million shares in the form of common stock and convertible note repurchases.

Plus the issuance of nearly $662 million in dividends inclusive for the payment to be made to shareholders in December.

When combined with phase one of the program during the 2017 and through 2019 time period, we've now returned more than $2 $1 billion to shareholders.

We view the central tenets of the capital return program to be the commitment to effectively returned 100% of our discretionary cash flow to shareholders. A commitment that is foundational to the program structure in.

In contrast, we view the program's capital allocation model, which is to say the precise manner in which the capital is returned to be flexible and dynamic indeed, the board evaluates capital allocation bought a lot of more or less continual basis hasnt endeavors to ensure that capital is returned to shareholders in the most optimal way.

Recently and as a function of that ongoing evaluation process. The board concluded that an adjustment to the capital allocation model made sense at this time.

As a result, the board decided to ratchet down the relative weighting the dividends while at the same time preserving a meaningful cash balance so it can be diverted towards share repurchases during the periods of market weakness.

It's important to highlight here that the board continues to view a significant dividend has been an integral component of March as long term capital return strategy. We believe that the return of cash is a clear correct.

I am Douglas way to reward shareholders for their continuing support and confidence.

At present, we believe that directing a larger percentage of our discretionary cash flow to share repurchases makes sense given arches ongoing progress on its key strategic objectives. The company's promising long term outlook and the ongoing evolution of the preferences the largest shareholders.

Yeah.

Turning now to the market dynamics, we've seen a significant strengthening of the global coal markets in recent months, despite continuing weakness in the macro environment.

Let's start with go global coking coal markets, where high vol. A coal arches principal product is being assessed at $277 per metric ton off the east coast of the United States, which is a strong price level when compared to historical averages what's more interesting in our view is that coking coal prices continue to trade at these elevated.

They did levels, despite relatively weak steel market dynamics.

As an indication of this weakness global output of hot metal and use the vast majority of arches coking coal is down roughly 1% year to date following the decline of nearly 10% in 2022.

Counterbalancing that weak demand environment to a large degree our continued constraints in metallurgical coal supply.

Year to date coking coal exports from Australia, the largest supplier of metallurgical coal seaborne market are under shooting the already weak 2022 levels by roughly 5 million tons and heading into an over 35 million ton, where almost 20% decrease from their high watermark in 2016.

Meanwhile, exports from the United States and Canada. The other major sources of high quality coking coal supply to the seaborne market remain relatively range bound despite persistently strong price you Didnt recent years.

As we've noted repeatedly the global global investment in new and existing mine capacity has been extremely muted. The last several years due to the increasing development costs mounting regulatory pressures and a host of other ESG related concerns and we see no evidence of that changing in the near future. Indeed, we suspect that even.

A modest improvement in global macroeconomic conditions could drive additional supply tightness well into the future.

As for the seaborne thermal coal markets, we see a similar dynamic with lackluster demand being counterbalanced by years of under supply.

Well thermal assets, while our thermal assets are effectively sold out at fixed prices for 2023, we expect current peripheral market dynamics and pricing levels should they persist.

To support substantial margins on our thermal export volumes in 2024 and beyond.

Yeah.

Looking ahead, we remain sharply focused on delivering operational excellence consistently quarter after quarter and year after year capitalizing on what we expect to be constructive seaborne coal markets well into the future maintaining and augmenting our already strong financial position.

Ginny and reward shareholders for their support and confidence through our capital return program.

And advancing our industry, leading sustainability practices through the substantial and ongoing efforts, we're laying a strong and durable foundation for growth and long term value creation as well as setting the stage for ongoing improvements in our mid cycle free cash flow generation.

I'll now turn the call over to John Drexler for further discussion of our operational performance in Q3 John.

Thanks, Paul and good morning, everyone.

As Paul just discussed the arch team delivered solid results and $86 $5 million and discretionary cash flow despite constrained advance rates at Leer south during the third quarter.

Our core metallurgical segment delivered higher per ton realizations and stronger cash margins on a sequential basis, while maintaining a cost structure that while elevated relative to expectations placed us comfortably in the first quartile of U S coking coal producers.

In addition, our thermal segment delivered solid supplemental cash flows well in excess of capital requirements. Despite a roughly breakeven performance at west Elk.

In short our talented workforce and high quality operating portfolio continued to deliver significant value for shareholders. Even as we address some near term challenges and laid the foundation for stronger results in the future.

I also want to highlight the continuing upward trajectory of the metallurgical portfolio on a year over year basis.

First it's worth underscoring that the arch team is on track to ship around 1.3 million more tons of coking coal in 2023 than we did in 2022 based on the midpoint of our full year guidance.

That's a significant step up clearly with substantial upside going forward.

Second I want to highlight the fact that we are guiding to metallurgical segment cash cost of less than $90 per ton at the midpoint of our full year guidance, which would be approximately 5% lower than our average cash cost in 2022.

Again, that's a market reduction, particularly in the face of inflationary pressures that continue to push cost higher across the industry.

But the most noteworthy aspect of this upward momentum is that we fully expect to drive continued progress on both these key metrics as we finished the year and move into 2024, followed by an even further step change in execution in 2025.

The primary driver behind this positive outlook is the expected improvement in operational execution at Leer South.

Let me be clear Leer, South is a very good mine today at its current run rate of approximately 3 million tons per year.

During its first two years of operation. It has contributed $470 million of segment level EBITDA against an initial capital investment of $400 million.

Moreover, it has contributed significantly to the step down that we have achieved in our operating costs from 2022 to 2020 three and is on track for what we expect to be incrementally stronger results in 2024.

But what is most exciting is that strong potential to become a great mine on the order of Lear in 2025, as we transitioned into the second Longwall district.

Of particular note we have greatly expanded the drilling program at Leer South to ensure that we have a clearer picture of the geology, which should greatly enhance our ability to optimize the mine plan.

And that expanded drilling program is reaffirming what we have long believed that the seam thickness in district, two was approximately 20% greater than the district one.

Thicker coal quite obviously means that we will be cutting more coal and less rock, which should drive significant improvements in coal you at.

At the same time cutting less rock means less wear and tear on equipment, which should contribute further to the productivity enhancement.

Of course this is mining and there is always the potential for surprises both positive and negative, but we remain confident and highly enthusiastic about the outlook for leer, south and its potential to shift into an even higher gear in coming quarters.

Unknown Executive: Good morning and welcome to the Arch Resources, 3rd quarter 2023 Earnings Conference call. Participants will be in a listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

Let's now spend a few minutes discussing the thermal segment has indicated the powder River basin assets performed at a high level. Once again in Q3 as they managed cost effectively while delivering a solid margin.

Unknown Executive: After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded.

This strong execution resulted in a substantial contribution to overall cash generation, which in turn counterbalanced and effectively breakeven performance by West Elm.

Deck Slone: I would now like to turn the conference over to Deck Slone Senior Vice President of Strategy. Please go ahead. Good morning from St. Lucas and thanks for joining us today. Before we begin, let me remind you that certain statements made during this call, including statements related to our expected future of business and financial performance may be considered forward-looking statements, according to the private security litigation reform act. Forward-looking statements by their nature address matters that are to different degrees uncertain.

The good news is that west Elk has now progressed into a new area of the reserve and is back in thicker and higher quality coal.

While we are still endeavoring to make up for some of the shipments missed in Q2 and Q3, we expect a much stronger contribution from west Elk in Q4 and throughout the course of 2024.

Then in mid 2025, the Westfeldt longwall will transition into the BC, where the coal is markedly thicker and the quality is substantially higher.

Deck Slone: 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.

In short the outlook for West Elk, which is one of the few remaining high quality low cost western bituminous coal mine because it is very promising.

Now, let's turn now let's discuss our marketing efforts in Q3, starting with our recently signed North American coking coal commitments.

Deck Slone: 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 archrfc.com.

Our marketing team was successful in achieving positive outcomes with several north American customers and we are committed to ship approximately one 5 million tons of coking coal to these customers in 2024 at an average fixed price of $100 and 50 $158 per ton.

Deck Slone: Also participating on this morning's call will be Paul Lang, our CEO, John Drexler, our COO, and Matt Gilgem for CSO. After our formal remarks, we'll be happy to take questions.

As we have stated many times in the past we are happy to place volumes into the North American market. When we can secure an appropriate price for the value and use of a high quality product slate.

Paul Lang: With that, I'll now turn the call over to Paul. Paul? Thanks, Dick, and good morning, everyone.

Paul Lang: We appreciate your interest in arch, and are glad you could join us on the call this morning. I'm pleased for a port that during the third quarter, the arch team continued to drive forward with our simple, consistent, and actionable plan for long-term value creation and growth. During the quarter just ended, the arch team achieved an adjusted even DA of $126.3 million, generated $86.5 million in discretionary cash flow. Invested $28.2 million to repurchase nearly 216,000 shares, and finally declared a quarterly cash dividend of $21.6 million, or $1.13 cents per share.

By the same token we are well equipped to move 100% of our coking coal volumes into the dramatically larger seaborne market index pricing on North American pricing dynamics are less favorable.

We are pleased with our success in placing north American volumes for delivery in 2024, and equally pleased with the large percentage of our 2020 for output that will be directed into the seaborne market.

Okay.

On the thermal side of the house, we are moving quickly towards sold out status for our powder River basin operations in 2024.

We have also placed virtually all of the west up tons for 2024 with approximately one third of those tons exposed to export pricing.

Paul Lang: In short, 2-3 served underscore yet again the valued driving of arch's capital return program, which we view as the centerpiece of our value proposition. Since February, 2022, we've deployed more than $1.2 billion through the program, including the reduction of the equivalent of $4.3 million shares in the form of common stock and convertible note repurchases. Plus, the issuance of nearly $662 million in dividends, inclusive of the payment to be made to shareholders in December.

As always the single greatest achievement of the arch team is its ability to continually deliver excellence across a wide range of sustainability metrics.

During the first nine months of 2023 arches subsidiary operations have achieved an aggregate total lost time incident rate of 0.42 per 200000 employee hours worked which is approximately five times better than the industry average.

At the same time arches subsidiaries once again recorded zero environmental violations and zero water quality Exceedances during Q3.

Paul Lang: When combined with phase one of the program during the 2017 through 2019 time period, we've now returned more than $2.1 billion to share. We view the central trend of the capital return program to be the commitment to effectively return 100% of our discretionary cash flow to shareholders, a commitment that is foundational to the program's structure. In contrast, we view the program's capital allocation model, which is to say the precise manner in which the capital is returned to be flexible and dynamic.

Yeah.

I'm also proud to report that the U S Department of interior recently honored arches powder River basin operating subsidiary as the sole recipient of the 2023 excellence in coal mining good neighbor awards, the nation's top honor for community engagement.

This marked the third time in five years and art subsidiary has been so honored.

In addition, the National Institute for Occupational safety and Health recently honored the Leer mine with the mine safety and Health Technology Innovation Award for the coal sector.

On behalf of the entire senior management team I want to express my admiration for an appreciation to the arts workforce for their tremendous efforts and this absolutely critical area of performance.

Paul Lang: Indeed, the board evaluates the capital allocation model on a more or less continual basis. As an endeavor to ensure that capital is returned to shareholders in the most optimal way. Recently, it has a function of that ongoing evaluation process. The board concluded that it adjusted to the capital allocation model made sense at this time. As a result, the board decided to ratchet down the relative weighting the dividends, while at the same time, preserving a meaningful cash balance that can be diverted toward share purchases during periods of market weakness.

With that I will now turn the call over to Matt for some additional color on our financial results Matt.

Thanks, John and good morning I'll.

I'll begin with a discussion of cash flows and liquidity for the third quarter operating cash flow totaled $131 million, which included a working capital benefit of $16 million.

Working capital benefit was lower than anticipated shipment timing and the increase in metallurgical prices towards the end of the quarter lead to additional growth in accounts receivable.

Paul Lang: It's important to highlight here that the board continues to view a significant dividend as the integral component marches long-term capital return strategy. We believe that the return of cash is a clear, direct and unambiguous way to reward shareholders for their continuing support and confidence. But at present, we believe that directing a larger percentage of our discretionary cash flow to share repurchases makes sense given arches ongoing progress on its key strategic objectives, the company's promising long-term outlook, and the ongoing evolution of the preferences of our shareholders.

Capital spending for the quarter totaled just over $44 million and discretionary cash flow was $87 million.

We ended the quarter with cash and short term investments of $214 million and total liquidity of $337 million, including availability under our credit facilities.

Debt at September 30 was $131 million, resulting in net cash of $82 million.

All of this is clearly a strong financial position. It is worth noting the cash and liquidity were at their lowest level in two years and at the lower end of our targeted range.

Paul Lang: Turning now to the market dynamics, we've seen a significant strength in the global coal markets in recent months. Despite continuing weaknesses in the macro environment. Let's start with global cooking coal markets where high-ball A coal, arches' principal product, is being assessed at $277 per metric ton off the east coast of the United States, which is a strong price level when compared to historical averages. What's more interesting in our view is that cooking coal prices continue to trade at these elevated levels despite relatively weak steel market dynamics.

Looking ahead to the fourth quarter, we expect sequential improvement in operating cash flows.

As always working capital trends will be largely determined by met pricing.

But at this point, we would anticipate a benefit in Q4 with a magnitude similar to what we experienced in the third quarter.

Capital spending in Q3 was not as high as we had anticipated with some planned expenditures delayed into the fourth quarter.

We now expect fourth quarter capex to be roughly in line with third quarter spending.

Paul Lang: As an indication of this weakness, global output of hot metal, the end use of the vast majority of arches' cooking coal, is down roughly 1% year today, following the decline of nearly 10% in 2022. Counter-balancing that weak demand environment to a large degree, a continuing constraints in metallurgical coal supply. Year-to-date, cooking coal exports from Australia, the largest supplier of metallurgical coal to seaboard market, are undershooting the already weak 2022 levels by roughly $5 million in heading to an over 35 million ton, or almost 20% decrease from their high water mark in 2016.

Moving onto our capital structure, we continue to reduce the overall diluted share count over the course of the third quarter repurchasing nearly 216000 shares.

On a year to date basis share repurchases now total just under 1 million shares at an average purchase price of $124 per share.

Combined with the first quarter convertible bond settlement.

The total impact of the repurchases represents 7% of the beginning of the year diluted shares outstanding.

Just as importantly, we reached a significant milestone in early October completing the process of simplifying our capital structure.

At the beginning of the year the diluted share count included both the remaining convertible bonds and warrants, which in total comprised more than one 5 million shares at that time.

Paul Lang: Meanwhile, exports for the United States and Canada, the other major sources of high-quality cooking coal supply to the seaboard market remain relatively range bound despite persistently strong pricing in recent years. As we've noted repeatedly, the global investment in new and existing mine capacity has been extremely muted the last several years due to increasing development costs, mounting regulatory pressures, and a host of other ESG-related concerns, and we see no evidence of that changing in the near future.

We repurchased the final convertibles earlier this year in virtually all of the remaining warrants were exercised by their expiration date in early October.

As expected the warrant activity increased our basic share count, but had no material impact on the diluted count.

Moving forward there will be minimal difference between our basic and diluted share count and we believe this simplicity has value.

And because we increased the weighting of share repurchases under our capital return program long term shareholders will have a growing claim to our underlying production and earnings as well as growth in per share dividends overtime.

Paul Lang: Indeed, we suspect that even a modest improvement in global macroeconomic conditions could drive additional supply kindness well into the future. As for the Seaborne Thermal Coal Markets, we see a similar dynamic with lackluster demand being counterbalanced by years of under supply. While our thermal assets are effectively sold out at fixed prices for 2023, we expect current thermal market dynamics and pricing levels should they persist to support substantial margins on our thermal export volumes in 2024 and gone.

Finally, I will remind everyone that the cap call that we purchased at the time of the convertible bond issuance remains outstanding.

The intrinsic value of the capped call remains approximately $62 million an amount that is not reflected in our financial statements or otherwise factored into our fully diluted share count.

We have the ability to exercise the cap call on or before its maturity date in the fourth quarter of 2025.

And can elect to receive either cash or shares.

If we elect to exercise prior to the maturity date, the amount of weird receive as the fair value at that time.

Paul Lang: Looking ahead, we remain sharply focused on delivering operational excellence consistently, quarter after quarter and year after year. Capitalizing on what we expect to be constructive, Seaborne Coal Markets well into the future, maintaining and augmenting our already strong financial position, continuing to reward shareholders for their support and confidence through our capital return program, in advancing our industry leading and sustainability practices. Through these substantial and ongoing efforts, we're laying a strong and durable foundation for growth and long-term value creation, as well as setting the stage for ongoing improvements in our mid-cycle free cash flow generation.

Yeah.

Before turning the call over for questions I wanted to make some final comments related to the capital return program.

First as Paul mentioned, the board has declared a dividend of $1 13 per share based on the third quarter cash flows.

The dividend will be paid on December 15th to stockholders of record on November 30th.

Paul also mentioned our commitment to returning cash to our shareholders and thus far this year, we have demonstrated that commitment.

Including the dividend announced today combined dividends share repurchases and convertible bond repurchases net of proceeds from warrant exercises totaled nearly $343 million year to date.

Which is actually slightly more than our discretionary cash flow over that same time period.

John Drexler: I'll now turn the call over to John Drexler for further discussion of our operational performance at Q3. John. Thanks, Paul.

With that we're ready to take questions operator, I will turn the call back over to you.

John Drexler: Good morning, everyone. As Paul just discussed, the ARCH team delivered solid results in $86.5 million in discretionary cash flow, despite constrained advanced rates at Lear South during the third quarter. Our core metallurgical segment delivered higher per ton realizations and stronger cash margins on a sequential basis, while maintaining a cost structure that, while elevated relative to expectations, placed us comfortably in the first quartile of U.S, cooking coal producers. In addition, our thermal segment delivered solid supplemental cash flows well in excess of capital requirements, despite a roughly break even performance at West Elk.

Well now begin the question and answer session to ask a question you May Press Star then one on your telephone.

So you see if you are using a speakerphone. Please pick up your handset before pressing the keys.

To withdraw your question. Please press Star then two.

The first question comes from Chris <unk> from Jefferies. Please go ahead.

Hey, guys. Thank you for taking my question.

Just a question on the capital return policy then the framework so.

Now we have 25% targeted for dividends of discretionary cash flow went up to 75 per cent for buybacks and Paul did you say that that 75%. The portion of that will be used to buy back sort of depends on where your share prices. So if you think you can accumulate cash on the balance sheet and maybe get an opportunity to buy shares cheaper later that is what you would do or should we expect.

John Drexler: In short, our talented workforce and high-quality operating portfolio continue to deliver significant value for shareholders, even as we address from near-term challenges and laid the foundation for stronger results in the future. I also want to highlight the continuing upward trajectory of the metallurgical portfolio on a year-over-year basis. First, it's worth underscoring that the ARCH team is on track to ship around 1.3 million more tons of cooking coal in 2023 than we did in 2022 based on the midpoint of our full-year guidance.

That entire 75% of discretionary cash flow to be used as buybacks in real time.

Yeah, Chris Thanks look I think as we look at the capital return program you know, it's been very successful and as I noted.

It's got a lot of our expectations and as you know as we look at this change that we just announced which is change in the relative weighting, but we'd like to do as you know first and foremost.

John Drexler: That's a significant step up clearly with substantial upside going forward. Second, I want to highlight the fact that we are guiding to metallurgical segment cash costs of less than $90 per ton at the midpoint of our full-year guidance, which would be approximately 5% lower than our average cash costs in 2022. Again, that's a market reduction, particularly in the face of inflationary pressures that continue to push costs higher across the industry. But the most noteworthy aspect of this upward momentum is that we fully expect to drive continued progress on both these key metrics as we finish the year and move into 2024, followed by an even further step change in execution in 2025.

<unk> be a little more responsive or be responsive to shareholders plus to be a little more opportunistic.

So I could see a situation where in strong markets, we built a little bit of cash on the balance sheet.

And then when you know we're in a cyclic business when the market goes down we will hit the share repurchases heavily.

And look I think it's a it's kind of a smart way to do it but I think the fundamental thing for shareholders is the program really hasn't changed.

And when you look back over time, you know we will hit those targets.

Returning cash to shareholders, we're just gonna be a little more selective how we do it.

Right. So I guess that the you know the the.

John Drexler: The primary driver behind this positive outlook is the expected improvement in operational execution at Lear South. Let me be clear, Lear South is a very good mind today at its current run rate of approximately 3 million tons per year. During its first two years of operation, it has contributed $470 million of segment-level EBITDA against an initial capital investment of $400 million. Moreover, it has contributed significantly to the step down that we have achieved in our operating costs from 2022 to 2023, and is on track for what we expect to be incrementally stronger results in 2024.

Follow up question on that is if you're in a position, let's assume that your share price is 20, 30% higher than where it is today and you're accumulating cash on the balance sheet.

Do you worry about that sending a message to the market that your stock is or potentially overvalued I mean, I understand the point about buying it on the weakness, but not buying it on strengths I think of you know do we worry about sending a perverse message about kind of what the real value is in the equity does that question makes sense.

So it makes sense and it's one we've talked about quite a bit look I think what you'll see that we'll probably be in the market you know.

At all times I think what we'll do though is we may be heavier sometimes in less than others.

As I look back to last quarter, you know we were in the blackout and couldn't take advantage of it but when the share price was you know at the bottom end of the spectrum here around $1 15, and 120 at the start of Q3, it would've been nice to be able to jump in at that time and I think what we're looking at is just trying to take advantage of that so look I wouldn't be surprised.

John Drexler: But what is most exciting is its strong potential to become a great mind on the order of Lear in 2025 as we transition into the second-long wall district. Of particular note, we have greatly expanded the drilling program at Lear South to ensure that we have a clearer picture of the geology which should greatly enhance our ability to optimize the mind plan. And that expanded drilling program is reaffirming what we have long believed that the seam thickness in District 2 is approximately 20 percent greater than a District 1.

We build a little cash one quarter and we use them to mix.

That is as I said the old we're returning the cash that we've allocated for share buybacks to share buybacks.

Chris I would say.

Exactly I would say that capital preservation piece has been part of the formula since the very beginning with always that same view that you know building a little bit of a war chest. You know it can be useful, but it's probably not a big enough number where you're going to notice, but we certainly understand the question and the concern understood. Thank you I appreciate that good luck guys.

John Drexler: Thakkar Coal, quite obviously, means that we will be cutting more coal and less rock, which should drive significant improvements in coal use. At the same time, cutting less rock means less wear and tear on equipment, which should contribute further to the productivity enhancement. Of course, this is mining, and there is always the potential for surprises, both positive and negative, but we remain confident and highly enthusiastic about the outlook for Lear South and its potential to shift into an even higher gear in the coming quarters.

Okay.

The next question comes from catch it Johnson of BMO capital markets. Please go ahead.

Hi, Thank you for taking my questions maybe on the near South I think you mentioned that you expect production can improve next year can you talk a little bit more about what the.

John Drexler: Let's now spend a few minutes discussing the thermal segment. As indicated, the powder river basin assets performed at a high level once again in Q3 as they managed cost effectively while delivering a solid margin. This strong execution resulted in a substantial contribution to overall cast generation, which in turn counterbalanced and effectively break even performance by West O.

Actual production could be at Leer south.

Yeah, so as we can.

As we reported with Leer, south and some of the challenges we've experienced here. Most recently in the panel that we began mining in and in mid July our panel five we've been.

John Drexler: The good news is that West O could not progress into a new area of the reserve and is back in thicker and higher quality coal. While we are still endeavoring to make up for some of the shipments missing Q2 and Q3, we expect a much stronger contribution from West O, and Q4 throughout the course of 2024.

Appointed with some of the production that we've had it's been driven by some of the geologic challenges the thinning of the coal scene that.

We saw that was not expected.

As we transition out of that panel, which we expect to occur later in this quarter.

We'll be heading into other panels here in the remainder of district one.

John Drexler: Then, in mid 2025, the West O, along will transition into the bee scene, where the coal is markedly thicker and the quality is substantially higher. In short, the outlook for West O, which is one of the few remaining high quality low-cost western by two minutes coal martens is very promising.

We think get us back into the type of geology, we saw on panels, three and four where.

Well, we saw better production levels are to the tune that would put us on a pace of around 3 million tons on an annual basis. So as we look at it we transitioned into into 2024, we're comfortable kind of with how we're going to move forward, where we're really excited though is the opportunity as we finished mining in <unk>.

John Drexler: Now let's discuss our marketing efforts in Q3, starting with our recently fine North American Coal Commitments. Our marketing team was successful in achieving positive outcomes with several North American customers and we have committed to ship approximately 1.5 million times of working coal to these customers in 2024 at an average fixed price of $100 and $158 per ton. As we have stated many times in the past, we are happy to place volumes into the North American market when we can secure an appropriate price for the value and use of our high quality product slate.

For two and head into districts or I'm, sorry finish mining district, one head into district two we.

We see a meaningful improvement in the coal seam height.

We're substantiate that with the drilling.

We see a 20% improvement and as a result, we would expect volumes.

To approach those that we would see wood with Leer at four four plus million tons on an annual basis.

Just as a reminder, and in Q1 and Q2, we produced more than 800000 tonnes per quarter at Leer, South which is very much on that track for sort of that 3 million ton run rate. So.

John Drexler: By the same token, we are well equipped to move 100% of our co-king coal volumes into the dramatically larger seaborn market at index pricing on North American pricing dynamics or less favor. We are pleased with our success in placing North American volumes for delivery in 2024 and equally pleased with the large percentage of our 2024 output that will be directed into the Seaborn Market. On the thermal side of the house, we are moving quickly towards sold-out status for our Prada River Basin operations in 2024. We have also placed virtually all the west out tons for 2024 with approximately one-third of those tons exposed to export pricing.

We expect that to continue to be back in that sort of range. Throughout 2024 28 for Q4 look we're as John you said, we're still in panel five and will be in it for about half of them. This quarter and then we transition to panels thick. So somewhere between 520000 tons, we produced in Q3 and that and that more like <unk>.

800000 ton run rate in.

In Q4 is probably what to expect again since we're in panel three panel sorry panel five for part of that for part of that of the of the quarter and then you know as John said I think just to reiterate look at 3 million tons per year Leer South is a really good mine. It's a low cost mine into highly productive mine, it's just not where it's going to be and where.

John Drexler: As always, the single greatest achievement of the Arch team is its ability to continually deliver excellence across a wide range of sustainability metrics. During the first nine months of 2023, Arch's subsidiary operations have achieved an aggregate total lost time incident rate of 0.42 per 200,000 employee hours worth, which is approximately five times better than the industry average. At the same time, Arch's subsidiaries once again recorded zero environmental violations and zero water quality exceedances during Q3.

Are we where are we expected to be in 2025.

And what should the cost be at let's say 3 million tons a year.

You know as we look at our overall met segment you know what we've guided to here for 2023.

At the midpoint puts us at 80 950, you know as we move into 2024 and expect improvement at Leer, South I think you know, we we hope to be able to maintain that cost structure, if not improve on it with some improvement in volumes as we go forward.

John Drexler: I am also proud to report that the U.S. Department of Interior recently honored Arch's Prada River Basin operating subsidiary as the sole recipient of the 2023 Excellence in Coal Mining Good Neighbor Award, the nation's top honor for community engagement. This marked the third time in five years an Arch subsidiary has been so honored. In addition, the National Institute for Occupational Safety and Health recently honored the Lear Mine with the Mind Safety and Health Technology Innovation Award for the coal sector. On behalf of the entire senior management team, I want to express my admiration for an appreciation to the Arch workforce for their tremendous efforts in this absolutely critical area of performance.

You know leer, south clearly even at a 3 million ton a year pace as in the first quartile of the cost structure.

And so it's a it's a good mine and it's going to continue to work to get to that great status is as we go forward in the portfolio.

Okay, and then maybe shifting gears to P. R. B I think you mentioned, you're almost sold out for next year can you talk a bit about what volume that looks and what pricing is.

So as you look at our our our powder River Basin operations. You know, we're in that 60 plus million ton kind of volume between Black Thunder Coal Creek.

Matt Gilgem: With that, I will now turn the call over to Matt for some additional color on our financial results. Matt? Thanks, John. Good morning. I'll begin with the discussion of cash flows and liquidity for the third quarter operating cash flow total $131 million, which included a working capital benefit of $16 million. Working capital benefit was lower than anticipated as shipment timing and the increase in metallurgical prices towards the end of the quarter led to additional growth and accounts receivable.

As we wrap up 2023.

As we step into 'twenty 'twenty four we've been real pleased with the book that we've built the pricing associated with that belt book.

You know as being responsive to what we're seeing with the market there may be a modest reduction, but it would be a small reduction from the levels that we see here currently in 2023 from a shipment level perspective, we haven't given guidance, we're still working through the budget on that front, but wouldnt be that different significantly.

Matt Gilgem: Capital spending for the quarter totaled just over $44 million and discretionary cash flow with $87 million. We ended the quarter with cash and short-term investments of $214 million and total liquidity of $337 million including availability under our credit facilities. That at September 30th was $131 million resulting in net cash of $82 million. All this is clearly a strong financial position. It is worth noting that cash and liquidity were at their lowest level in two years and at the lower end of our targeted range.

Different from what we're seeing here in 2023 and kind of as we've discussed look we our expectation is that the market overall, probably steps down in the pace of something like 10% per year. We're very comfortable if that's you know that's what the market requires from US, we're very comfortable and stepping down to that same sort of level will still generate significant cash from you know the.

He asked that we will still maintain a good solid margin pier b assets now if in fact supply changes in some way and then we're prepared to to maintain more of that 60 million ton level, but again very much prepared for a gradual reduction over time. If in fact, you know the market continues to you know too.

Matt Gilgem: Looking ahead to the fourth quarter, we expect sequential improvement in operating cash flows. As always, working capital trends will be largely determined by met pricing but at this point, we would anticipate a benefit in Q4 with the magnitude similar to what we experienced in the third quarter. Capital spending in Q3 was not as high as we had anticipated with some planned expenditures delayed into the fourth quarter. We now expect fourth quarter cat-backs to be roughly in line with third quarter spend.

Two to decline at that kind of pace.

Okay. Thank you I'll hop into queue.

Thank you Carrie.

The next question comes from Nathan Martin from Benchmark. Please go ahead.

Hey, good morning, guys. Thanks for taking my question.

Matt Gilgem: Moving on to our capital structure, we continue to reduce the overall deluded share count over the course of the third quarter, repurchasing nearly 216,000 shares. On a year-to-date basis, share repurchases now total just under 1 million shares at an average purchase price of $124 per share. Combined with the first quarter convertible bond settlement, the total impact other repurchases represents 7% of the beginning of the year deluded shares outstanding. Just as importantly, we reached a significant milestone in early October, completing the process of simplifying our capital structure.

Yeah.

Just maybe starting on the coking coal side based on my math it looks like for Q shipments you know flattish kind of gets you to the midpoint of your full year guidance and what could possibly drive it to the top or low end of that range is it yourself performance. The logistics would just be great to get your thoughts there and then you know a lot of talk about improvements at Leer South.

That step change in 'twenty, five, but how should we think about the potential for coke and coal shipment growth and 24 before we do move into that second Longwall district.

Yeah, no. Good question, but I think as we look to the remainder of the year. It's a combination of production logistics you know as you guys know all.

Matt Gilgem: At the beginning of the year, the deluded share count included both the remaining convertible bonds and warrants, which in total comprised more than 1.5 million shares at that time. We repurchased the final convertibles earlier this year and virtually all the remaining warrants were exercised by their expiration date in early October. As expected, the warrant activity increased our basic share count, but had no material impact on the deluded count. Moving forward, there will be minimal difference between our basic and deluded share count, and we believe this simplicity has value.

All of that factors into where ultimately that volume is going to go and why we typically have that range. That's out there, but you know we're comfortable with the guidance range that we have out there and our ability to achieve it you know as you step into next year.

With our expectation that you're going to see you know leer south kind of in that three plus million ton a year run rate. You've got you know leer that this should be comfortably above four you've got you know the two other continuous miner operations back Lee of mountain Laurel executing well that 1 million tonnes a year on an annual basis, we have not provided.

Matt Gilgem: As we increase the weighting of share repurchases under our capital return program, long-term shareholders will have a growing claim to our underlying production and earnings, as well as growth and per share dividends over time. Finally, I will remind everyone that the cap call that we purchased at the time of the convertible bond issuance remains outstanding. The intrinsic value of the cap call remains approximately $62 million, an amount that is not reflected in our financial statements, or otherwise factored into our fully deluded share count.

<unk> guidance, yet we're deep in the budget process.

But I think we should be comfortably above 9 million tons at the midpoint as we look into into 'twenty four and then you know what.

Matt Gilgem: We have the ability to exercise the cap call on or before its maturity date in the fourth quarter of 2025, and can elect to receive either cash or shares. If we like to exercise prior to the maturity date, the amount we have received is the fair value at that time.

Ongoing growth is as we move further into <unk> into 'twenty five as we get into district, two with Leer South.

I appreciate that John and then maybe also a bit of a modeling question on thermal side for the fourth quarter. I think you guys. Previously said, you're roughly 60 million tons or so of pier b cells.

[noise] West Elk, excuse me three and a half before it gets near close to 64 million for the full year, but that would imply a pretty big step down in thermal shipments in the fourth quarter am I thinking about that correctly or am I missing something there or any update there.

Matt Gilgem: Before turning the call over for questions, I wanted to make some final comments related to the capital return program. First, as Paul mentioned, the board has declared a dividend of $1.13 per share based on the third quarter cash flows. The dividend will be paid on December 15th to stockholders of record on November 30th. Paul also mentioned our commitment to returning cash to our shareholders, and thus far this year we have demonstrated that commitment, including the dividend announced today, combined dividends, sharey purchases, and convertible bond repurchases, net of proceeds for more and exercises total nearly $343 million a year to date, which is actually slightly more than our discretionary cash flow over that same time period. With that, we are ready to take questions.

So I guess, the you know the midpoint of the guidance on the thermal side that where we're showing a 65 million tons you know you're you're at it call. It 60 to 63 million tons are in the powder River basin, you're probably at a N a.

<unk> at that number that you described around 3 million 3 million plus tons.

And then you also have to factor in at least on the thermal side. The mids that we show in the guidance table, which I think we've got 700000 tons. So you know approaching 1 million tons a on that basis is kind of what we're expecting.

Shipments to be you know one of the things that's always a little bit confused here and I think.

Unknown Executive: Operator, I will turn the call back over to you.

Unknown Executive: We will now begin the question and answer session to ask a question. You may press star then one on your telephone. If you are using a speaker phone, please pick up your hands up before pressing the keys. To withdraw your question, please press star then two.

If you look back you've seen the same thing in the last couple of quarters, we've guided below our sales on the thermal side and that's just the reality of what we were seeing earlier in the year, where we thought.

Customers are going to ask for rollover pushback comes in.

As I say, we are quite happy to.

Christopher LaFemina: The first question comes from Chris Femina from Jeffries. Please go ahead. Hey guys, thank you for taking my question. Just a question on the capital return policy in the framework. So now we have 25% targeted for dividends of discretionary cash flow and up to 75% for buybacks. Paul, did you say that 75% the portion of that will be used for buybacks depends on where your share price is. So if you think you can accumulate cash on the balance sheet and maybe get an opportunity to buy shares cheaper later, that is what you would do or should we expect that entire 75% of discretionary cash flow to be used as buybacks in real time.

Dominate them as long as we can be.

The same value or a little bit more and that's what we're anticipating with some of that guidance.

Got it I appreciate that guys and then and then maybe just curious John Youre talking about west Elk and stick with that for a second.

It sounded like production in 2025, it could take another step up when you hit bigger higher quality coal what what does that production level look like versus maybe in the more normal run rate today.

Yeah. So you know as we've worked through the challenges that we had in the Sunset district panels at at West Elk, We've transitioned out of those we've moved.

Christopher LaFemina: Yeah, Chris, thanks. Look, I think as we look at the Catford Turb Program, you know, it's been very successful. And as I know, it's, you know, it's, it's hit a lot of our expectations. And as, you know, as we look at this change that we just announced, which has changed in the relative waiting, what we'd like to do is, you know, first and foremost, you know, try and be a little more responsive, or be responsive to shareholders, plus be a little more opportunistic.

Another area of the reserve the longwall is got nothing going.

And things are going well there.

We've got to manage a few things we got some sometimes that we still need to ship from volumes that we missed in the first two quarters and will continue to manage that but as we step into next year you know at at West Elk, you know our expectation is we should be around that 4 million ton a year level and then as we step into the b.

Christopher LaFemina: So I can see a situation where in, you know, strong markets, we build a little bit of cash on the balance sheet. Then when, you know, we're in a cyclic business, when the market goes down, we'll hit the share repurchases heavily. And look, I think it's, it's kind of a smart way to do it. But I think the fundamental thing for shareholders is the program really hasn't changed. And when you look back over time, you know, we'll hit those targets of returning cash to shareholders.

Seen in 2025 are theirs.

Theres further opportunity with that better quality call more consistency in the in the thickness.

To ramp it back up to the levels that we've seen before at west Elk, where youre approaching 455 million tons on an annual basis.

We think so.

Great opportunity.

To access the export market the Kohl's well received it's a great quality coal into the international markets.

Christopher LaFemina: We're just going to be a little more selective how we do it. Right. So I, I guess that the, you know, the file of a question on that is if you're in a position, let's assume that your share price is 20, 30% higher than where it is today. And you're accumulating cash on the balance sheet. You know, do you worry about that sending a message to the market that your stock is potentially overvalued?

Right now as we look at 'twenty for about a third of the volume that we have is exposed to those markets and we're excited where west Elk is getting itself too as it moves forward.

B team.

You know as John said appreciably better quality and Youre looking at a step up in beta use of 400 to 500 Btu per pounds. So you know significant step up and appreciably better than the new castle sort of quality. So that's another aspect of the story not only as a cold thicker and as John said gives us that opportunity.

Christopher LaFemina: I mean, I'm just saying the point about buying it on the weakness, but not buying it on strengths. I think, you know, do we worry about sending a perverse message about kind of what the real value is in the equity? Does that question make sense? Oh, it makes sense and it's one we've talked about quite a bit. Look, I think what you'll see that will probably be in the market, you know, at all times.

To move back to sort of 5 million tons potentially even above that at west Elk, but also just that higher quality is going to make it that much more attractive in the seaborne market and it's already a really good new castle look alike. In fact, a little better than Newcastle Yeah. I think you know what's lost in all this is we really view west Elk is a long term.

Christopher LaFemina: I think what we'll do though is we may be heavier at some times and less than others. You know, as I looked back to last quarter, you know, we were in the blackout and couldn't take advantage of it. But when the share price was, you know, at the bottom end of the spectrum here, around one 15 to 120, it started two, three. It had been nice to be able to jump in at that time.

Asset for the company.

Christopher LaFemina: And I think what we're looking at is just trying to take advantage of that. So, look, I wouldn't be surprised. We built a little cash one quarter and we use it for next, but the intent is, as I said, that we've allocated for share buybacks to share buybacks. I would say that cap of preservation piece has been part of the formula since the very beginning. With always that same view that, you know, building a little bit of a war chest, you know, it can be useful. But it's probably not a big enough number where you're going to note it, but we certainly understand the question and the concern. I want to say thank you. Appreciate that. Good luck, guys. Thank you.

It's access to the seaborne market and particularly you know whats going into Asia based on New Castle pricing is really pretty exciting.

Say the BC, we got a lot of experience via the be seen and when we get down to it as Dexter the quality goes up considerably and that's a it's a very good product.

You know it gives a lot of advantage of particularly the Japanese markets.

Great color there guys and if I may just one more don't want to leave that out.

What's kind of driving the Capex increase about $10 million at the midpoint I think Matt you mentioned.

Some capex that carried into the fourth quarter, but is there anything particular there to note.

Yeah, you know a lot of that really is just timing.

Katja Jancic: The next question comes from Kasha, Jansik of BMO Capital Market. Please go ahead. Hi. Thank you for taking my questions. Maybe on the Lear South. I think you mentioned that you expect production to improve next year. Can you talk a little bit more about what the actual production could be at Lear South? Yeah, so as we, as we reported with Lear South and some of the challenges we've experienced here most recently in the panel that we began mining in mid-July, panel five, we've been disappointed with some of the production that we've had.

I'll, let John chime in if he's got anything to add a lot a lot of it is just timing of when we receive things obviously with some of the supply chain lags that we've seen trying to predict when those things are going to arrive certainly is not as easy as it. Once was you know the other thing I would mention is we are bringing on some additional equipment as we look into next year trying to.

To find opportunities to expand production, where it makes sense.

As we go into the 'twenty 'twenty four time frame I think Matt said it well you know you can get a little lumpy here when you've got some lead time items that are 18 to 24 months out trying to predict exactly when theyre going to come in you know is difficult. So we're glad to get some of the stuff that we got well we'll get it in place you know I think we've discussed in the past you know as we move.

Katja Jancic: It's been driven by some of the geologic challenges, the thinning of the coal scene that we saw that was not expected. As we transition out of that panel, which we expect to occur later in this quarter, we'll be heading into other panels here in the remainder of district one that we think it is back into the type of geology we saw in panels three and four. Where we saw better production levels to the tune that would put us on a pace of around three million tons on an annual basis.

Forward and we're not providing specific guidance, yet, but we would expect.

Future Years' of Capex to be in similar ranges to what we've seen in the last couple of years as well. So we feel good about kind of how we're managing all of that and moving forward.

Yeah.

Very helpful guys I appreciate the time and best of luck in the fourth quarter.

Katja Jancic: So as we look at, we transition into into 2024, you know, we're comfortable kind of with how we're going to move forward. Where we're really excited, though, is the opportunity as we finish mining in district two and head into district, sorry, finish mining in district one, head into district two. We see a meaningful improvement in the coal scene height. We're substantiating that with the drilling. We see a 20% improvement, and as a result, we would expect volumes to approach those that we would see with Lear at four or four plus million tons on an annual basis.

They I think.

The next question comes from Michael Dudas of vertical Research partners. Please go ahead.

Good morning, gentlemen.

Hey, Michael.

So.

Paul I think is very appropriate to be cautious on outlook for U S thermal consumption regarding your pier b assets, but maybe you can.

Can you remind us or <unk>.

Over the next how do you how do you look at the mine plans over the next five to 10 years, given what may be you would've thought when you instituted your reclamation you diffusion plan.

Relative to what consumption has been what utility customers are saying I mean, theres been even though theres always talks about net retirements and cold there's been some plants that stay on for grid and other type reasons. So is there a chance that maybe you could accelerate some of those future cash flows into some of the curb for near term years again.

Katja Jancic: And Katja, just as a reminder, in Q1 and Q2, we produced more than 800,000 tons per quarter of Lear South, which is very much on that track for that 3 million ton run race. So, we expect that to continue to be back in that sort of range throughout 2024. For Q4, look, as John just said, we're still on panel 5, and we'll be in it for about half of this quarter, and then we transition to panel 6.

Where your plan is right now and maybe what your customers are thinking recognizing that you want to be cautious on on expectations on thermal demand.

Katja Jancic: So, somewhere between the 520,000 tons, we've produced in Q3, and that more like 800,000 ton run rate in Q4 is probably what to expect, again, since we're in panel 5 for part of that quarter. And then, as John said, I think just to reiterate, look at 3 million tons per year, Lear South is a really good mine. It's a low cost mine, it's a highly productive mine.

Mike I'll start out here I'm sure a few others will weigh in but real proud of the team in the powder River basin and the way they've managed.

In that declining market environment and as you know you know you don't have to go back that far you know a decade decade, plus where.

We were you know mining out of the powder River basin, and well in excess of 100 million tons on an annual basis. So.

The team has done an incredible job modifying the mine plans.

Katja Jancic: It's just not where it's going to be, and where we expected to be in 2025. And what should the cost be at, let's say, 3 million tons per year? You know, as we look at our overall met segment, you know, what we've guided to here for 2023, you know, at the midpoint puts us at 89.50, you know, as we move into 2024 and expect improvement at Lear South, I think, you know, we hope to be able to maintain that cost structure, if not improve on it, with some improvement in volumes as we go forward.

Effectively you know.

Managing production and still maintaining a very healthy margin and.

In managing the cost structure, which as you know it is difficult and our businesses as volumes are declining you know, it's hard to predict where things are going to go but we continue to see that trend downward.

The teams very focused on being in that position to maintain those costs and maintain those margins to generate cash.

All through that cycle.

We have done an outstanding job of managing the reclamation footprint, we've been shrinking the profile of the operations you can look at coal Creek, where we still have some modest volume where it makes economic sense to do so yet we've roughly closed 80% to 90% of that operation and quite frankly essentially fully with.

Katja Jancic: You know, Lear South, clearly even at a 3 million 20 year pace, is in the first quartile of the cost structure. And so it's a good mine, and it's going to continue to work to get to that great status as we go forward in the portfolio.

Katja Jancic: Okay, and then maybe shifting gears to PRB. I think you mentioned you're almost sold out for next year. Can you talk a bit about what volume that looks and what pricing is? Yeah, so as you look at our pot of river basin operations, you know, we're in that 60 plus million tons kind of volume between Black Thunder and Cold Creek as we wrap up 2023. As we step into 2024, we've been real pleased with the book that we've built, the pricing associated with that built book, you know, as being responsive to what we're seeing with the market.

Claimed it so.

So no real proud of the team there.

When opportunities present themselves in the market. The team has responded very well to.

Optimize the production with the fleet of equipment that you know, we've kind of essentially shrunk down to.

And we would expect that there may be those types of opportunities as we go forward and will fully be prepared to execute on those as we go.

Because I look at the P. R b.

I still have you know relative positive view I mean, I think we're set up well I think the key to success in the PRP is being very flexible.

Katja Jancic: There may be a modest reduction, but it would be a small reduction from the levels that we see here currently in 2023 from a shipment level perspective. We haven't given guidance. We're still working through the budget on that front, but wouldn't be that different significantly different from what we're seeing here in 2023. And Kati, as we've discussed, look, our expectation is that the market overall probably steps down in a pace of something like 10% per year.

We've been we've done a very good job of cutting our costs as we've dropped production and kept the margins in a fairly good line.

Going forward you know the key to our future success is going to be the same watching cost and being very careful about the capital we've put in but you know I I feel pretty good we got pretty good clarity in the next five years and you know at the end of the day. The thermal mine Reclamation fund was created just a real easy option for us out there.

Katja Jancic: We're very comfortable. If that's, you know, if that's what the market requires from us, we're very comfortable stepping down that same sort of level will still generate significant cash from, you know, the PRB assets will still maintain a good solid margin, you know, the PRB assets. Now, you know, if in fact supply changes in some way, and then we're prepared to maintain more of that 60 million ton level, but again, very much prepared for, you know, a gradual reduction over time.

And.

I think we're set up to play it well the team out there has done a great job and.

You know I still have a little bit of optimism from the operations Yeah, Mike It's deck and look you know the fact is we think that that now and the end result, the domestic market is going to continue to decline, but we are absolutely prepared you know if we get a period of time, where we get a bit of a plateau and it stabilizes you know we're ready for that but the fact is that the.

Katja Jancic: If in fact, you know, the market continues to, you know, to decline that kind of...

Hopefully does continue to age you know natural gas prices right now remain well, we're still seeing those systematic steady sort of coal plant closures each year, but theres still a significant market. So we are taking advantage of that as Paul said, we certainly believe we can for the next five years plus but in the end, we still think we prepared appropriately for.

Unknown Executive: Hey, good morning guys. Thanks for taking the question. This may be starting on the coping cold side. Based on my math, it looks like 4Q shipments, you know, flatish kind of get you to the midpoint of your full year guidance. And what could possibly drive you to the top or low end of that range? Is it near style performance? The logistics would just be great to get your thoughts there. And then, you know, a lot of talk about improvements at near style, kind of that step change in 25.

Right now what you'd have to say is as you know continuing declines you know over the next decade.

Well those are great great observations I appreciate that and just make quick follow up Paul or for the group.

Met coal prices are high volume.

Risen quite nicely here the last several weeks in the midst of maybe some.

Unknown Executive: But how should we think about the potential for you guys? No, all of that factors into where ultimately that volume is going to go and why we typically have that range that's out there. But, you know, we're comfortable with the guidance range that we have out there and our ability to achieve it. You know, as you step into next year, you know, with our expectation that you're going to see, you know, lear south kind of in that 3 plus million ton of year run rate.

Steel production is down and what have you.

Do you get the sense from your customer base, how you're looking to your export shipments next year that is some reality to that that there's reason for that or is it a short term blip. Just is there a sense of maybe some better momentum because of the limited supply that we've seen or is there the expectation at some some more pig iron might come out of the come into the marketplace next year.

Some of your some of the calls.

Yeah, I'll, let John follow up with a more direct contact with customers, but you know I think it's all of the above that you mentioned.

Unknown Executive: You've got, you know, lear that should be comfortably above 4. You've got, you know, the two other continuous minor operations, Beckley, a mountain laurel, executing well at a million tons a year on an annual basis. You know, we have not provided guidance yet. We're deep in the budget process. But I think, you know, we should be comfortably above 9 million tons at the midpoint as we look into 24. And then, you know, with ongoing growth as we move further into into 25 as we get into district 2 with lear south. We shape that, John.

There is no question that the curve.

Current market is under the supply is very tight the underinvestment in the coal sector is really reared its head as I noted in my comments you know hot steel production is down 1%. This year, it's down 10% last year, but at the same time prices have held up.

You know 789 10 years ago. It would've been a you know a big dip in coal prices.

I think there is also a little bit of hope on the macro side, but we're not counting on it you know these are extremely good prices at current levels $2 77, as you know mixed.

Unknown Executive: And then maybe also a bit of a modeling question on thermal side for the fourth quarter. I think you guys previously said you're roughly 60 million tons or so PRB fails. And if I assume West Elk, excuse me, 3 half before, it gets me close to 64 million for the whole year, but that would imply a pretty big step down in thermal shipments in the fourth quarter.

It makes for a very good netback for us, particularly with our cost structure.

And you know I think if if the customers are.

In the North American side, what you saw US do is what we've said for the last couple of years, we're continuing to Willow down our North American exposure last year was at about 20%. It's looking like this year, it's going to be about 15, Yeah look I mean, there's a lot of value to shipping coal with North America as far as logistics, but.

Unknown Executive: Am I thinking about that correctly or missing something during the update there? So I guess the, you know, the midpoint of the guidance on the thermal side that we're showing a 65 million tons. You know, you're, you're it, it call it 60, 263 million tons in the potter river basin. You're probably at a West Elk at that number that you described around 3 million, 3 million plus tons. And then you also have to factor in, at least on the thermal side, the mids that we show in the guidance table, which I think we've got 700,000 tons. So, you know, approaching a million tons on that basis is kind of what we're expecting shipments to be.

You know at the discounts that were being requested and those that we understand were settled.

We're quite happy with where we ended up so.

So Michael I agree, 100% with Paul on on one of the biggest drivers here is just the challenges you see across supply.

Both near term as you just look at it as so many of the announcements that we've seen here, even recently and the challenges that the industry faces quite frankly around the world and then longer term.

And how that's going to continue to play out for for something for steel that clearly we've got our views that.

Unknown Executive: You know, they, one of the things that's always a little bit confusion. I think if you look back, you've seen the same thing in the last couple quarters. We've guided below our sales on the thermal side. And that's just the reality of what we were seeing earlier in the year where we thought, you know, customers are going to ask for roll over pushback tons. And, you know, as I said, we're quite happy to accommodate them as long as we achieve these. The same value are a little bit more and that's what we're anticipating with some of that guidance.

There's going to be comfortable demand for decades to come so we feel real good about that is as we deal with our customers I think the one thing I'll add very proud of our marketing team and the.

Our efforts and success that they've had with our customers in the international market.

Especially new markets for us such as Asia.

And getting the product, they're getting out of the qualities of the product realize the benefits.

Unknown Executive: I'd appreciate that guys and then and it may be just curious John you're you're talking about Westell could stick with that for a second. Found like production in 2025 could take another step up when you hit bigger higher quality coal. What what does that production level look like versus maybe in the more normal run rate today?

And that puts us in a position going forward that that value and use of our product in those markets.

Puts us into those blends and then allows us to continue that as we continue to move forward as well. So we feel good with where things are going and Mike I would stack and I look I would add that in.

Unknown Executive: Yeah, so you know as we've worked through the challenges that we had in the sunset district panels at Westell, you know we've transitioned out of those we've moved to another area of the reserve. The long wall got up and going and things are going well there. You know we've got to manage a few things we've got some sometimes that we still need to ship from volumes that we missed in the first two quarters and we'll continue to manage that but as we step into next year you know at at Westell, you know our expectation is we should be around that 4 million ton of year level.

Mid July we actually saw MGA prices drift down to $200 or so at that level, you're starting to see rationalization, which certainly suggests that you know given the marginal cost of production that there is support.

Level around that $200 Mark now that that's not perfect and you can dip below that level for some period of time, but it certainly feels like their support at that level and then in fact.

Unknown Executive: And then as we stepped into the B seam in 2025, there's further opportunity with that better quality coal more consistency in the in the thickness to ramp it back up to levels that we've seen before at Westell for your approaching 4 and a half 5 million tons on an annual basis. You know Westell, we think that a great opportunity to access the export market that calls well received. It's a great quality coal into the international markets.

Since that time, obviously, we've jumped a good bit and were $2 77, Interestingly P. L D and a premium low vol out of Australia and in an off the Queensland Cleveland.

It was more than $70 higher than that so you know again not suggested 277 isn't a great number. It is we don't need a higher number than that but right now you know what.

What has typically been a $7 spread between T. L V in HVA over the past seven years as a $70 spread. So you can see that there is still that sort of pressure on pricing as Paul said, you know supply sort of highly constrained and we think there is the opportunity the minimum to close that dip.

French you'll know how that gets close remains to be seen and also just a reminder that look over the.

Unknown Executive: You know right now as we look at 24 about a third of the volume that we have as exposed to to those markets and more excited where Westell is getting itself to as it moves forward. The B team is you know as John said, appreciably better quality. You know you're looking at a step up in B to use a 400 to 500 B to use per pound. So you know significant step up and appreciably better than the new castle sort of quality.

Since 2010, the average price in the <unk>.

Our market has been $238. So again I think that the world has changed a good bad because of the supply constraints. The pressures we continue to see in the various jurisdictions around ESG and regulatory constraints.

Under investment and so we're pretty constructive on the outlook sort of longer term.

Well done guys. Thank you.

Unknown Executive: So you know that's another aspect of the story not only is the coal thicker and as John said, give us that opportunity to move back to sort of 5 million tons potentially been above that at Westell, but also just that higher quality is going to make it that much more attractive in the seabor market. And it's already you know a really good new castle look alike in fact a little better than the council.

Thank you.

As a reminder, if you have a question. Please press star one. The next question comes from Lucas pipes of B Riley. Please go ahead.

Thank you very much operator, good morning, everyone.

Lucas.

My first question is on on D. T. A one of your well your peer at the terminal mentioned that Theres a need for.

Unknown Executive: You know I think you know what's lost enough is you know we really view Westell because a lot of turn asset for the company. You know it's it's access to the seabor market particularly you know what's going into Asia based on new castle pricing is really pretty exciting and say the B scene we we've got a lot of experience buying the B scene and when we get down to it as Dex said the quality goes up considerably and it's a very good product. And you know it gives a lot of advantage particularly the Japanese markets.

Long range capital improvement projects and I Wonder if you could maybe speak to what.

One.

What what sort of.

Capital improvement projects may be necessary and at what cost may be necessary.

And then two just kind of more broadly how strategic is D. T to you.

Would appreciate your perspective on that thank you.

So Lucas I'll start out here you know just as a reminder, DTA, we have a 35% ownership interest in that asset. It is a strategic asset for us, but it has more than sufficient capacity for us for to meet our needs. You know right now we're using about 3 million tons of that capacity you know that.

Matt Gilgem: Great color there guys and if I may just one more don't want to leave Matt out. What's what's kind of driving the capex increase about 10 million dollars at the big point. I think Matt you mentioned some capex doctorate of 4 quarters anything particular there to know. Yeah you know a lot of that Nate really is just timing and you know I'll add John chime in if you've got anything to add a lot a lot of it is just timing of one we received things obviously with some of the supply chain.

Leaves us probably with an excess of 2 million tons.

DTA as an asset like all asset that needs to have a capital evaluation, we are working with DTA to evaluate those capital needs.

Matt Gilgem: Likes that we've seen trying to predict when those things are going to arrive certainly is not as easy as it once was. And the other thing I would would mention is we are you know bringing on some additional equipment as we look into next year trying to find opportunities to expand production where it makes sense as we go into the 2024 timeframe. I think Matt said it well you know you you can get a little lumpy here when you've got some lead time items that are 18 24 months out trying to predict exactly when they're going to come in you know is difficult so.

Where necessary we're economic.

I'll make sure we're committing to that capital.

We've got a unique opportunity is with our excess capacity you know kind of given where we see you know the market for that throughput.

You know we can recover a lot of the additional capital that may.

May be required as we go forward with the throughput capacity that goes through there. So you know DTA has been a great asset it continues to be a great asset for us that we expect that it will move as we move forward.

Matt Gilgem: We're glad to get some of the stuff that we got will get it in place you know I think we've discussed in the past you know as we move forward and we're not providing specific guidance yet but we would expect future years of capex to be you know in similar ranges to what we've seen in the last couple of years as well so. You know we feel good about kind of how we're managing all that and moving forward.

And you know.

I think we feel good and a lot of different ways, we can manage the needs of that capital as we go forward.

I'd add to what John said is that.

It's a it's a great relationship with our partner for Doc.

We clearly have a little less pressure on us and them as far as throughput and it's you know as we've given guidance. These these capital projects that they're talking about are not are not a surprise.

Unknown Executive: Very helpful, guys. Appreciate the time. That's the luck in the fourth quarter. Appreciate the day.

Michael Dudas: I think the next question comes from Michael Dudas of Vertical Research Partners. Please go ahead.

Demand in our numbers as we've talked about capex over the years.

And we also think we may have the ability to offset a large degree of it with our excess capacity and going out to a third party. So look I think.

Michael Dudas: Morning, gentlemen. Michael, Michael. So Paul, I think it's very appropriate to be cautious on outlook for US thermal consumption regarding your PRB assets. But maybe we'll remind this or open the next, how do you, how do you look at the mind plans over the next five to 10 years, given what maybe you would have thought when you instituted your reclamation and your defeatsment plan relative to what consumption's been, what utility customers are saying.

It's all well and good but you know, it's really not a surprise to us is really not an issue to us as we look at it but there's a the annual requirement for us we expect to be relatively modest and as John indicated with that spare capacity to generate additional cash flows associated with third party throughput.

You know really view it as very manageable. So yeah, it's a good asset and we want to continue to invest in it.

Michael Dudas: I mean, there's been even though everybody talks about net, you know, retirements and call. There's been some plans that need to stay on for grid and other type of reasons. So is there a chance that maybe you can accelerate some of those feature cash flows? And to some of your term years, again, where your plan is right now, maybe what your customers are thinking, recognizing that you want to be cautious on expectations on thermal demand.

We think it's going to be an important part of the of our overall logistics chain going forward, but again highly manageable.

And it's the it is your excess capacity there.

Currently leased to a third party or is it is it just.

Quote idle at the moment.

Yeah.

Paul Lang: Michael, I'll start out here. I'm sure a few others will weigh in, but, you know, real proud of the team in the pot of river basin, in the way they've managed in that declining market environment. And as you know, you don't have to go back that fall, you know, a decade, decade plus where we were, you know, mining out of the pot of river basin and well in excess of 100 million tons on an annual basis.

We've just recently offered out some spare capacity with some of that capacity. We had we have been really husband that for the last few years, but have started that process and and likely will continue to do so we can expand on it meaningfully Ah, but I have just taken the first step on that front and really a focus.

Paul Lang: So, the team has done an incredible job modifying the mind plans effectively, you know, managing production and still maintaining a very healthy margin and managing the cost structure, which, as you know, is difficult in our business as volumes are declining. You know, it's hard to predict where things are going to go, but we continue to see that trend downward. The team's very focused on being in that position to maintain those costs and maintain those margins to generate cash.

On the on Thermo throughput.

To this point, there's been demand for it on the thermal side, which is which is a good fit for us would rather you know move those volumes is thermal.

That's that's helpful. Thank you and then.

Going back to your coking coal volume Oh look in and.

The way I think about my knowledge, but typically it's just kind of on that.

On a on a normal distribution on a bell shaped curve or so and and you know I don't I wouldn't.

Expect it to them.

Ill provide a bell shaped curve here on a call, but I wonder if you could maybe speak to.

Paul Lang: You know, all through that cycle, we have done an outstanding job of managing the reclamation footprint. We've been shrinking the profile of the operation. You can look at Col Creek where, you know, we still have some modest volume where it makes economic sense to do so, yet we've roughly closed, you know, 80 to 90% of that operation and quite frankly, essentially fully reclaimed it. So, you know, real proud of the team there when opportunities present themselves in the market, the team has responded very well to optimize the production with the fleet of equipment that, you know, we kind of essentially shrunk down to.

The range of outcomes.

For the full year for coking coal mines.

Again, no no need to be to scientific but you know a one standard deviation for four of mind, what what does that look like.

If you could just provide some ranges are for them for your coking coal portfolio I think that would be really helpful. Thank you. Yeah. Lukas I mean, I think you know we may not get into one standard deviation discussion here, but I mean, just as a general you know kind of view, we've got two powerhouse longwall operations.

Leer South you know between the two of them you know I think in broad scale, you would expect from high vol. A.

Paul Lang: And, you know, we would expect that there may be those types of opportunities as we go forward and will fully be prepared to execute on those as we go. You know, Mike, as I look at the PRB, you know, I still have a relative positive view. I mean, I think we're set up well. I think the key to success in the PRB is being very flexible. You know, we've been, we've done a very good job of cutting our costs as we've dropped production and kept the margins in a fairly good line.

Production the opportunity of of 8 million tons right. You may have a you know in certain periods, where one mine is a little less you may have other periods, where another mine is a little more and then as we've indicated.

With our our two continuous miner operations Beckley of Mount Laurel are there. Each you know kind of built to be around that million ton a year pace. We will always look to optimize the volumes and quite frankly have had all kinds of success.

Paul Lang: Going forward, you know, the key to future success is going to be the same, watching costs and being very careful about the capital we put in. But, you know, I feel pretty good, you know, we've got pretty good clarity in the next five years. And, you know, at the end of the day, the Thermal Mine Reclamation Fund was created just a real easy option for us out there. And, you know, I think we're set up to play it well.

In ringing out additional volumes across the portfolio through efficiency projects what have you.

But kind of in the most simplistic view, that's how I would kind of view it that that kind of gets you right around the 10 million tons there.

And look as we think about guiding for next year again, we're not there yet we're going through the budget process.

Paul Lang: The team out there is done a great job. And, you know, I still have a little bit of optimism for the operation. Yeah, Mike is deck and look, you know, the fact is we think that that, you know, in the end results, the domestic market is going to continue to climb, but we are absolutely prepared. You know, if we get a period of time where we get a bit of a plateau and it stabilizers, you know, we're ready for that, but the fact is that the cold sleep does continue to age, you know, natural gas prices right now remain low.

There has been in that 4 million ton per year range and coking coal it isn't very thick coal next year. So there is potentially upside there and again, we'll take that into consideration as we think about guidance and as we as we provide guidance going forward that we feel very confident in and now of Leer South is that that 3 million ton range, which is why we're kind of sort of indicating we expect in 2000.

24, no both Beckley and mountain Laurel had been more in the one one range. So there's certainly upside to that idea of 9 million tons for next year, but we want to be careful and make sure that we're guiding to very conservative numbers and under promise and over deliver as we go forward, but that maybe gives you a little color.

Paul Lang: We're still seeing, you know, those systematic, steady sort of cold plant closures each year, but there's still a significant market. So we are taking advantage of that. As Paul said, we certainly believe we can for the next five years, plus, but in the end, we still think we've prepared appropriately for, you know, right now, what you'd have to say is, you know, continuing declines, you know, over the next decade.

Yeah.

I appreciate that thank you.

And then on.

On the domestic Oh, the domestic side.

Paul Lang: Those are great, great observations. I appreciate that. And just make quick follow up, Paul or for the group. You know, mech cold prices, your high-volume is quite nicely here to last several weeks. In the midst of maybe a little bit, you know, some, you know, the steel production down, what have you? If you get the chance for your customer base and how you're looking at your export cheapest next year, that is some reality to that.

The North American medical contracts for 2024.

The quality of that coal how would you describe that was that overweight at Lee of mountain Laurel or was that mostly hi, Molly. Thank you very much for.

Yeah Lucas Yeah look we were real pleased with the opportunity we had with the North American markets and I would say that the products.

Paul Lang: It is reason for that or it's a short-term lift. Is there a sense of maybe some better momentum because of the limited supply that we've seen? Or is there the expectation that some, some more thing I might come out of the coming to the marketplace next year, firing some of your some of the calls?

Products that we sold the $1 5 million tonnes does represent the full suite of our products. The high vol. A low vol high vol B.

Obviously, the vast majority or the majority of that I should say.

<unk> is a high vol, a weighted and likely for modeling purposes, you can.

John Drexler: Yeah, I'll let John follow up with the more direct contact with customers. But, you know, I think it's all the above that you mentioned, you know, there is no question that the current market is under, you know, the supply is very tight. The underinvestment in the coal sector is really rare in its head. As I noted, my comments, you know, hot steel production is down 1% this year and it's down 10% last year.

<unk> used our typical splits that we have amongst the various volumes, but yeah, we're real pleased with.

Where we got and the outcomes that we achieved equally excited about the volume that we have exposed to the export markets as we stepped into 'twenty four as Paul indicated.

Okay.

Okay. Thank you then.

John Drexler: But at the same time, prices fell up, you know, 7, 8, 9, 10 years ago, this would have been a, you know, a big dip in coal prices. And, you know, I think there is also a little bit of hope on the macro side, but we're not counting on it. You know, these are extremely good prices at current levels. You know, 277 is, you know, mix for a very good net back for us, particularly with our cost structure.

Last question for now for for me.

On the M&A side.

How would you describe your level.

Of interest are you are you looking.

There are some assets out there that are for sale down there.

Public companies that trade at very attractive valuations.

How do you think about M&A in this in this environment. Thank you.

John Drexler: And, you know, I think if the customers in the North America side, what you saw us do is what we've said for the last couple of years, we're continuing to willow down our North American exposure. Last year is at about 20%. It's looking like this year. It's going to be about 15. And look, there's a lot of value to shipping coal in North America as far as logistics. But, you know, at the discounts that will be requested and those that we understand were settled, we're quite happy with where we end.

Lucas I'll I'll answer it probably the way we've answer it every time.

We've looked at everything and we will continue to look at anything that's out there.

Particularly anything that comes up.

Yeah.

B L.

Anything that can bring lower costs and greater value, we're all ears.

At the same time, we looked at ourselves, particularly where we're currently at our best investment right now is in our own stock and that's what our focus is.

John Drexler: Michael, I agree 100% with Paul on one of the biggest drivers here is just the challenges you see across supply. Both near term, as you just look at so many of the announcements that we've seen here even recently in the challenges that the industry faces quite frankly around the world. And then longer term in how that's going to continue to play out for something for steel that clearly we've got our views that there's going to be a comfortable demand for decades to come.

I will assure you and I should and I would expect the shareholders would expect US to also is that we will look at everything and we'll we'll question ourselves and trying to figure out if it's the right move and.

We will always hold it against what our own option is against purchasing our own stock.

Makes sense, all right well I appreciate it.

Well continue to come to the best of luck.

Okay. Thank you Lucas.

John Drexler: So we feel real good about that is as we deal with our customers. I think the one thing I'll add, very proud of our marketing team and the efforts and success that they've had with our customers in the international market, you know, especially new markets for us, such as Asia, in getting the product there, getting the qualities of the product realized the benefits and that puts us in a position going forward.

This concludes our question and answer session I would like to turn the conference back over to Paul Lang for closing remarks.

John Drexler: That that value and use of our product in those markets, you know, puts us into those blends and then allows us to continue that as we continue to move forward as well. So we feel good with where things are going.

I want to thank you again for your interest in arch as I noted earlier, we remain sharply focused on delivering operational excellence. We're in the process of making significant progress with our metallurgical portfolio and expect a nearly 20% increase in coking coal volumes in 2023 versus 2022.

I think just as importantly, we expect that momentum to continue with an anticipated step up in 2024 and yet another change in 2025.

We remain optimistic about arches long term outlook as well as the company's potential to reward shareholders in a substantial way through our capital return program.

Deck Slone: And like I would it's deck and look, I would add that, you know, in mid July, we actually saw HBA prices drift down to $200 or so. At that level, you started to see rationalization, which certainly suggests that, you know, given the marginal cost of production that there is support, you know, at some level around, you know, that $200 mark. Now, that's not perfect. And, you know, you can dip below that level for some period of time, but it certainly feels like there's support at that level.

With that operator, we'll conclude the call and we look forward to reporting to the group in February stay safe and healthy everyone.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Deck Slone: And then in fact, you know, since that time, obviously, we've jumped a good bit and we're $277. Interestingly, PLV, you know, premium logo out of Australia and off the Queensland coast is more than $70 higher than that. So, you know, again, not suggest that $277 isn't a great number. It is. We don't need a higher number than that. But right now, you know, what has typically been a $7 spread, you know, between PLV and HBA over the past seven years is a $70 spread.

Deck Slone: So, you know, you can see that there's still that sort of pressure on pricing, as Paul said, you know, supply sort of highly constrained. And, you know, we think there is, you know, the opportunity to minimum to close that differential. Now, how that gets closed remains to be seen. And also just a reminder that look over the, you know, since 2010, the average price, you know, the seaboard market has been $238.

Deck Slone: So, again, I think the world has changed a good bit because the supply constraints, the pressures we continue to see in the various jurisdictions around ESG and regulatory constraints, the underinvestment. So, we're pretty constructive on the outlook sort of longer term.

Unknown Executive: Well done, guys. Thank you.

Unknown Executive: As a reminder, if you have a question, please press star one.

Lucas Pipes: The next question comes from Lucas Pipes of B. Riley. Please go ahead. Thank you very much, operator. Good morning, everyone. My first question is on DTA. One of your, well, you're pure at the terminal mentioned that there's a need for long range, capital improvement projects. And I, I wondered if you could maybe speak to one. Thank you very much, and what sort of capital improvement projects may be necessary and what cost may be necessary.

Lucas Pipes: And then two, just kind of more broadly, how strategic is DTA to you would appreciate your perspective on that. Thank you. So Lucas, I'll start out here, you know, just as a reminder, DTA, we have a 35% ownership in that asset. It is a strategic asset for us, but it has more than sufficient capacity for us to meet our needs. You know, right now, we're using about 3 million tons of that capacity.

Lucas Pipes: You know, that leaves us probably with an excess of 2 million tons. You know, DTA is an asset like all assets that needs to have capital evaluation. We are working with DTA to evaluate those capital needs, where necessary, where economic, you know, will make sure we're committing to that capital, you know, where we've got a unique opportunity, is with our access capacity, you know, kind of given where we see, you know, the market for that throughput.

Lucas Pipes: You know, we can recover a lot of the additional capital that may be required as we go forward with the throughput capacity that goes through there. So, you know, DTA has been a great asset. It continues to be a great asset for us. We expect that it will move as we move forward. And, you know, I think we feel good in a lot of different ways we can manage the needs of that capital as we go forward.

Lucas Pipes: You know, I think I've had what John said is that, look, it's a great relationship with our partner for Doc. We clearly have a little less pressure on us than them as far as throughput. And, you know, as we've given guidance, these capital projects that they're talking about are not a surprise. You know, we've baked them in our numbers and we've talked about CAPEX over the years. And we also think we may have the ability to offset a large degree of it with our access capacity and going out to a third party.

Lucas Pipes: So, look, I think it's all well and good, but, you know, it's really not a surprise to us and really not an issue to us. You know, as we look at it, look at the annual requirement for us. We expect to be, you know, relatively modest and, you know, as John indicated, you know, with that spare capacity to generate, you know, additional cashflow is associated with third party throughput. You know, really view it as very manageable.

Lucas Pipes: So, you know, it's a good asset. We want to continue investing it. You know, we think it's going to be an important part of our overall logistics chain going forward, but again, highly manageable. And if your access capacity there currently leased to a third party, where is it, is it just quote idle at the moment. You know, we just recently offered out some spare capacity. We had been really husbanding that for the last few years, but had started that process.

Lucas Pipes: And likely we'll continue to do so. We can expand on it meaningfully, but have just taken the first sort of step on that front. And really focused on the thermal throughput to this point, there's been demand for it on the thermal side, which is a good fit for us. We would rather, you know, move those volumes this term.

Lucas Pipes: That's the helpful thank you. And then going back to your Coking Coal volume look and the way I think about mine output typically is it's kind of on a on a on a normal distribution on a bell shaped curve or so. And, you know, I wouldn't expect you to, you know, provide a bell shaped curve here on a call. But I wonder if you could maybe speak to the range of outcomes for your four Coking Coal mines.

Lucas Pipes: Again, no need to be too scientific. But, you know, one standard deviation for mine, what does that look like if you could just provide some ranges for your Coking Coal portfolio. I think that would be really helpful. Thank you. Yeah, Lucas, I mean, I think, you know, we may not get the one standard deviation discussion here, but I mean, just as a general, you know, kind of view, we've got to powerhouse long wall operations.

Lucas Pipes: You know, between the two of them, you know, I think in broad scale, you would expect from high ball apron production, the opportunity of eight million tons, right? You may have, you know, in certain periods where one mine is a little less, you may have other periods where another mine is a little more. And then as we've indicated with our two continuous minor operations, backly amount, Laurel, there each, you know, kind of built to be around that.

Lucas Pipes: That million ton of your pace, you know, we will always look to optimize the volumes and quite frankly, have had all kinds of success, you know, in ringing out additional volumes across the portfolio through efficiency projects, you know, what have you. But kind of in the most simplistic view, that's how I would kind of view it, that kind of gets you right around the 10 million tons there. And, you know, look, as we think about guiding for next year, again, we're not there yet.

Lucas Pipes: We're going through the budget process. You know, Lear has been in that four million ton for your range and cooking cold. It is in very thick coal next year. So there is potentially upside there. And again, we'll take that into consideration as we think about guidance. And as we, as we provide guidance going forward that we feel very confident in. And, you know, lear south is at that three million ton range, which is what we're kind of sort of indicating.

Lucas Pipes: We expect in 2024, you know, both Beckley and Mount Laurel have been more in the one one range. So there's certainly upside, you know, that idea of nine million tons for next year. But, you know, we want to be careful and make sure that we're guiding to very conservative numbers and, you know, under promise and over deliver as we go forward. But that's, you know, maybe gives you a little color. I appreciate that.

Lucas Pipes: Thank you. Then on the domestic, on the domestic side, you know, North American medical contract for 2024. The quality of that coal, how would you describe that was that overweight, equity or Mount Laurel or was that mostly highway? Thank you very much for. Yeah, Lucas. Yeah, look, we were real pleased with the opportunity we had with the North American markets. And, and I would say that the products that that we sold the 1.5 million tons does represent the full suite of our product, the high volume will have all be, obviously, the vast majority or the majority of that, I should say, is high volume weighted.

Lucas Pipes: And likely for modeling purposes, you can use our typical split that we have amongst the various volumes, but yeah, we're real pleased with where we got and the outcomes that we achieved equally excited about the volume that we have exposed to the export markets as we stepped into 24 as Paul. Thank you then. Last question for now for me. On the M&A side, how would you describe your level of interest? Are you are you looking?

Lucas Pipes: There are some assets out there that are for sale, there are some public companies that trade a very attractive valuation. How do you think about M&A in this environment? Thank you. You know, Lucas, I'll answer it probably the way we've answered every time. We've looked at everything and we will continue to look at anything out there, particularly anything that comes up. You know, the anything that can bring lower costs and greater value we're all ears.

Lucas Pipes: But at the same time, we look at ourselves particularly where we're currently at. Our best investment right now is in our own stock and that's what our focus is. I will assure you and I should and I would expect the shareholders would expect us to also is that we'll look at everything and we'll question ourselves and try to figure out if it's the right move and you know, we'll always hold it against what our own option is against purchasing our own stock. Makes sense? All right, well, I appreciate it. I'll continue to continue to best look. Thank you Lucas.

Paul Lang: This concludes our question and answer session. I would like to turn the conference back over to Paul Lang for closing remarks. I want to thank you again for your interest in our arts. As I noted earlier, we remain sharply focused on delivering operational excellence. We're in the process of making significant progress with our metallurgical portfolio and expected nearly 20% increase in co-kin coal volume in 2023 versus 2022. I think just as importantly, we expect that momentum to continue with an anticipated step up in 2024 and yet another change in 2025.

Paul Lang: In short, we remain optimistic about arts as long-term outlook as well as the company's potential to reward shareholders in a substantial way through our capital return program. With that operator, we'll conclude the call and we look forward to reporting the group in February. Stay safe and healthy, everyone.

Unknown Executive: The conference is all concluded. Thank you for attending today's presentation.

Unknown Executive: You may now disconnect.