Q3 2023 Alpha Metallurgical Resources Inc Earnings Call
Greetings and welcome to Alpha Metallurgical Resources' third quarter 'twenty twenty-three results conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
Please note. This conference is being recorded I would now like to turn the conference over to your host Emily O'quinn Senior Vice President Investor Relations and Communications you May now begin.
Greetings and welcome to the Alpha Metallurgical resources third quarter 2023 results conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
Please note. This conference is being recorded I would now like to turn the conference over to your host Emily O'quinn Senior Vice President Investor Relations and Communications you May now begin.
Thank you, Rob and good morning, everyone.
Before we get started let me remind you that during our prepared remarks, our comments regarding anticipated business and financial performance contain forward looking statements and actual results may differ materially from those discussed for more information regarding forward looking statements and some of the factors that can affect them. Please refer to the Companys third quarter 2023 <unk>.
<unk> release and the associated SEC filings. Please also see those documents for information about our use of non-GAAP measures and their reconciliation to GAAP measures.
Participating on the call today are <unk>, Chief Executive Officer, Andy <unk>, and our President and Chief Operating Officer, Jason Whitehead also participating on the call are Todd <unk>, Our Chief Financial Officer, and Dan Horn, Our Chief commercial officer with that I'll turn the call over to Andy.
Thanks, Emily and good morning, everyone.
Earlier today, we announced our third quarter 2023 results with adjusted EBITDA of $154 million.
As we mentioned in our pre release a few weeks ago. Our Q3 results were impacted by some challenging events, including a mechanical failure at Dominion terminal associates.
This caused the delay and vessel loading, which in turn delayed shipments and revenue.
With some additional clarity into what we believe the balance of the year will hold as well as the understanding that there will be some tonnage that carries over into 2024, we tightened and lowered our shipment volume guidance for 2023.
We're focused on finishing 2023.
Strongly and I'm seeing evidence of this throughout the organization.
Operationally across the company our year to date performance against two important safety metrics <unk> and Nf L are both better than the national average.
With the recent closure of slab camp Alpha's years long transition to a pure play metallurgical company is complete and we just opened our newest metallurgical mine in October the Checkmate Pelton mine at the well known L. Crown complex, the outgrown preparation plant and load out are planned to come online early in 2024.
Yeah.
Last week, we completed the refinance of our asset based revolving credit facility, securing more favorable terms and a longer duration than the previous facility and has become standard our share buyback program program continues executing utilizing all of our free cash flow for the quarter, we have returned more than $940 million to stockholders.
In the form of buybacks since the program's inception in March of 2022 was roughly $560 million left on the newly extended $1 $5 billion Board authorization.
Following the most recently declared dividend payout, which will occur in December the dividend program will cease and our capital return efforts will be fully focused on the repurchase program contingent upon market conditions and cash flow level.
There are good things happening all across the company.
In recent weeks, we've also worked through the budgeting and preparation process for 2024, which we expect will be another year of what alpha has become known for safe production.
Being good stewards of the environment, creating shareholder value returning capital delivering outstanding customer service and challenging ourselves to raise the bar and performed better than before.
Based on the midpoint of next year's total shipment guidance that we announced this morning, we have allocated roughly 25% of our overall tonnage to the domestic market on a fixed price basis, the balance will be available for export into the global met market that has demonstrated strength in recent weeks and according to the current Australian premium low vol futures as expected to retain strength well into next year.
<unk>.
As those who have followed alpha for some time will recall, we usually place between a quarter to a third of our overall business in the domestic market.
Year to year that can fluctuate based on several decision points, including market strength pricing logistics and the outlook for the coming year, we have long standing relationships with domestic customers that we look forward to continuing to serve and locking in the domestic contract tracks also serves our company well vessel solidifying our base of business for the year.
Within our 2024 guidance, we expect to spend roughly $225 million in Capex next year, which is divided into three parts.
Sustaining our maintenance Capex is expected again measure about $10 per produced ton or about $171 million for the year.
This amount corresponds to the volume guidance midpoint of $17 1 million tonnes.
The second portion of our Capex is development Capex, which we expect to be about $33 million in 2024, and as the first half of half of development costs for the Kingston Solar project, Jason will have more to share on that later.
Lastly, we assumed $21 million in capital spending will be rolled over from this calendar year to the next due to timing and availability of certain equipment parts and contract labor.
We also provided more information in the release on special capital needed for infrastructure and equipment upgrades at Dominion terminal associates, our export facility in Newport news that loads and shifts the bulk of our coal to international customers.
Alpha has a 65% ownership stake in DTA and together with the terminals leadership and our partner, we're assessing needs and building a rough timeline for recommended improvements importantly, we believe the necessary improvements of DTA cannot occur over a period of time. So the facility can still be utilized while renovations occur.
In terms of costs.
We will continue to supply our portion of DTA as usual operating expenditures and <unk> expects to invest an incremental $25 million in 2024 to begin this work with the next several years likely requiring the same or similar annual investment.
Yeah.
I will now turn it over to Todd for a discussion of our third quarter financial results.
Thanks, Andy third quarter, adjusted EBITDA was $154 million down from our second quarter level of $258 million, we sold $4 2 million tons in the quarter $4 1 million of which came from our <unk> segment 100000 tons from the all other category.
Quarter over quarter realizations decreased for the met segment with an average realization of $154 73 in Q3 compared to $172 51 for the second quarter.
Export met tons priced against Atlantic indices, and other pricing mechanisms in the third quarter realized $136 76 per ton, while export coal priced on Australian indices realized $158 56.
These are compared to last quarters realizations of $175 69 per ton and $159 62, respectively, which reflected a stronger coal pricing environment.
Realization for our metallurgical sales in the third quarter was a total weighted average of $160 43 per ton down from $176 four per ton.
In the prior quarter.
Realizations and the incidental thermal portion of the met segment decreased to $92 22 per ton in Q3 as compared to $115 50 per ton in Q2.
Due to the lower market pricing for thermal coal.
And the all other category realizations were also down as a result of the declining pricing environment for thermal coal coming in at $68 32 for the third quarter as compared to $99 66 per ton in the second quarter.
Third quarter cost of coal sales for our <unk> segment increased to $109 95 per ton up from $106 35 per ton in the second quarter.
Cost of coal sales in the all other category decreased quarter over quarter to $84 73 per ton as compared to $88 59 per ton in the second quarter 2023.
SG&A, excluding noncash stock compensation and nonrecurring items increased to $15 1 million in the third quarter as compared to $14 million in the second quarter.
Q3, Capex was $54 7 million roughly flat against the second quarter level of $54 $9 million.
Moving to the balance sheet and cash flows as of September 32023, we had $296 $1 million in unrestricted cash down from $312 $4 million at the end of the second quarter.
$94 $1 million in unused availability on our ABL at the end of the quarter.
Alpha had total liquidity of $391 million as of the end of September.
Which is net of.
$102 million in share repurchases during the quarter.
By comparison total liquidity at the end of the second quarter was $405 $5 million.
Cash provided by operating activities decreased quarter over quarter to $157 2 million in Q3 as compared to $317 $2 million in Q2.
As of September 30, our ABL facility had no borrowings and $60 $9 million of letters of credit outstanding unchanged from the prior quarter.
The company has successfully completed the refinancing of its asset based revolving credit facility, which was previously set to expire in December 2024.
On October 27, 2023, the company terminated its then existing ABL agreement and entered into a new facility.
Cures in October of 2027 with regions Bank as the administrative agent and lead arranger, along with service first bank in Texas Capital Bank, serving as joint lead Arrangers.
New ABL facility allows the company to borrow cash or obtained letters of credit on a revolving basis up to $155 million.
Under the terms of the agreement interest on letters of credit will be 3% to 5%.
As part of the transition from the previous ABL facility to the new ABL facility. The company temporarily collateralized outstanding Lcs with approximately $62 $8 million in cash and expects to replace this cash collateral with new Lcs under the new ABL facility prior to year end.
We are pleased to close on the ABL refinancing and to secure more favorable terms and a longer duration than our prior facility all of which benefits the company and further strengthens our financial position.
Turning now to our committed position for the year, 88% of our metallurgical tonnage in our mass segment is committed and priced at the midpoint of guidance at an average price of $182 and <unk>. Another 12% of our 2023 met tonnage as committed but not yet price, meaning we are fully committed for the rest of the year at the midpoint of guide.
Since the thermal byproduct portion of the met segment is 100% committed and priced at the midpoint of guidance at an average price of $102 45.
And we are 95% committed and priced for this year in our all other category with an average price of $92 23.
Alpha's Board has declared a quarterly cash dividend of <unk> 50 per share, which will become payable on December 15th for holders of record as of December one.
Following this payment the dividend program will cease in order to focus our capital return efforts on the buyback program.
Pursuant to our share repurchase program, we repurchased roughly 545000 shares at a cost of $102 million in the third quarter of 2023.
Since the beginning of the program. We have spent approximately $940 million to acquire roughly $6 1 million shares of alpha's common stock at.
At a weighted average price of $153 90 per share.
The.
Ending share count has been reduced by more than 28% from the time when the program began.
As of October 27, 2023, the number of common stock shares outstanding was approximately $13 3 million.
The board recently increased its repurchase program authorization of about $300 million to a total authorization of $1 5 billion up from the previous level of $1 2 billion.
This increase permits approximately $560 million and additional repurchases.
Looking ahead to 2024, we issued guidance for the coming year, which includes the expectation of shipping between $15 5 million $16 5 million tonnes of metallurgical coal as.
As well as between 900001 3 million tons of incidental thermal coal.
Together. This brings total anticipated shipment guidance to a range of $16 4 million to $17 8 million tonnes.
With the closure of slab camp as planned we expect all of our financial activity to be reported within the met segment going forward.
So the all other category does not appear on our 2020 for guidance.
In terms of cost of coal sales expectations, we are guiding to a range of $110 to $116 per ton.
The 2024 guidance range for selling general and administrative costs $60 million to $66 million, excluding nonrecurring expenses and noncash stock compensation.
Idaho operations expense is anticipated to be between 18% and $28 million.
The company expects net cash interest income of between 2 million to $8 million and depreciation depletion and amortization between 140 and $160 million.
Capital expenditures for 2024 are expected to be between 210 and $240 million, which includes sustaining maintenance capital planned projects to invest in mine development and some carryover from 2023 due to timing and availability of supplies and contract labor.
In connection with expected capital investments of DTA. We are also guiding to a 2024 range of $40 million to $50 million for capital contributions to equity affiliates.
Cash contribution range includes both the expected cash needed for normal operations of the facility of approximately $20 million along with the amounts expected to be spent in 2024 related to facility upgrades of approximately $25 million.
Lastly, the company expects a tax rate of between 12 and 17% next year.
In terms of our committed in price position for 2024, our metallurgical tonnage at the midpoint of guidance is 25% committed at an average price of $161 91.
With another 49% committed and unpriced.
The incidental thermal tonnage at the midpoint of guidance is already 98% committed at an average price of $76 and 85.
The remaining 2% at the midpoint of incidental thermal guidance is uncommitted.
I'll now turn the call over to Jason for some details on operations.
Thanks, Tom Good morning, everyone.
As we've spoken about in previous calls.
Our last remaining thermal coal mine slab camp is mined out and idled, which completed our transition to a pure play metallurgical coal company.
Much of the workforce at slab can't transitioned to our new Rolling Thunder mine.
It provided a seamless transition for the workforce and that mine has now fully staffed.
Additionally in late October we celebrated the first development cuts at Checkmate are.
Our newest mine.
<unk> is located in Boone County, West, Virginia, and produces high volatile coal within our mid West Virginia Underground region.
We're looking forward to getting this mine up to a full run rate and completing enhancements on the Elk run preparation plant, which is currently undergoing renovations and will come online to service. This mine likely near the end of the year or early in January of 2024.
As we look ahead to 2024 with issued issue guidance today Youll see that anticipated cost of coal sales come in between 110 to $116 per ton.
Which reflects the recently implemented investments, we made in employee wages and benefits.
As well as some lingering inflationary pressure and supplies and maintenance.
We've discussed most of these areas on prior calls and while we're no longer seeing such significant spikes in material costs like we did in the last 18 months or so.
We are still experiencing some inflation as contracts renew and we secure supplies for the coming year on materials and services such as repairs roof support and mine supplies.
Okay.
Despite the tight labor market challenging our ability to achieve planned level volumes. We have continued to perform at or above planned levels of clean tons per labor hour at our operations.
We have budgeted to maintain the higher levels of investment in our workforce through wages and benefits as we navigate this extremely tight labor market and work hard to retain and attract the best and brightest monitors to the alpha team.
Late in August, we made wage and incentive adjustments to achieve competitive compensation packages.
Since such adjustments, we've made large strides towards fully staff levels and I'm seeing measurable improvement in our staffing data with a reverse reduce turnover rate and increased hiring figures.
Lastly, I'm excited to provide a preview of our Kingston. So underground mine that is and has been in our planning stages for quite some time.
Budgeted funds and the development section of our Capex guidance to start laying the groundwork for this mine throughout the 2024 calendar year.
In consumer will be located in Fayette County, West Virginia.
As part of part of our mid West Virginia surface region.
And we will produce a low volatile product with surplus sites development anticipated to begin early in 2024 and slope excavation to start in late 2024, we expect demand diverse development production cuts in late 2025.
We will share additional information about so as the work progresses.
I will turn the call over to Dan now for some additional information on the coal markets.
Thanks, Jason and good morning, everyone.
Recent months have brought about continued economic pressures in many areas of the world as well as intensified geopolitical conflicts all of which includes metallurgical coal markets.
Continued effects of the Russian War recessionary pressures and high interest environments have resulted in muted world manufacturing output, new orders and employment levels and in the case of Europe, specifically worsening conditions for regions already stalled in cig.
A difficult downturn.
The uncertainty around the depth of China's economic challenges and the escalating conflict and violence in the middle east or additional challenges affecting the stability of the global economic landscape.
Despite these factors metallurgical coal indices have strengthened in recent months amid tight supply conditions globally, and the expectation of slow, but increasing steel demand.
According to World Steel Association's latest short range outlook 2020 for steel demand is expected to rise by roughly 2% over 2023 levels with developing economies are projected to increase growth at a faster pace than advanced economies, especially developed nations hindered by high interest rates and geopolitical impacts.
After a slight softening of metallurgical coal indices in the early part of the third quarter 2023, each of the foreign disease Alpha closely monitors began moving upward in mid August and have continued to show strength through the rest of the quarter and through October.
The Australian premium low vol index jumped from $233 per metric ton at the start of the quarter to $333 per ton on September 30th the.
The U S East Coast Global Index increased from $2 27 per metric ton at the beginning of July to $258 per metric ton at the end of the quarter.
The U S East Coast Highboy index moved up from $216 per metric ton at the start of the third quarter to $288 per metric ton at the end of September last week. The U S. East Coast High will be index increased from 206 per metric ton on July 122 hundred $38 per metric ton on September.
<unk>.
As of October 31, the U S East coast indices of global High Boy and I will be in disease measured to $62 80, and $238 per ton respectively. The Australian premium low vol index has increased from its quarter close level to $350 per metric ton on the same day.
The thermal coal market. The API two index moved from $119 five per metric ton on July one to $128 five.
Per metric ton as of the end of the third quarter most.
The most recent reports show the index remained roughly flat against third quarter closed levels with the API two at $119 80 as of October 31.
Turning to our outlook for next year, we previously announced the outcome of our successful domestic negotiations and the commitment of roughly a quarter of our 2020 for business to domestic customers for delivery next year.
The balance of our shipments will be available for export into international markets.
Despite some signs of instability and economic weakness across the globe metallurgical coal indices remains strong likely due to demand expectations and sustained tight supply conditions.
Lastly, you've heard a lot about the capital needs at DTA. When I'm also pleased to say that is performing very well in October was a record month of throughput for alpha at the facility. We are grateful to the team there for safely achieving this new record.
Looking ahead, we are excited about the capital improvement plan being developed by the partners and DTA leadership.
Over the coming years, we expect to invest in the strategic asset to solidify its important role in our sales and logistics framework and enhances our ability to maximize future efficiency and throughput.
And with that operator, we are now ready to open the call for questions.
Thank you.
At this time, we'll be conducting a question and answer session.
If you'd like to ask a question. Please press star one on your telephone keypad one moment, please while we poll for questions.
Our first question comes from Lucas pipes with B Riley Securities. Please proceed with your question.
Hey, Thank you so much operator, good morning, everyone.
Andy for a different time I wanted to ask you. How you came up with the name checkmate, but.
But to turn to more serious questions to start.
Can you can you tell us a little bit maybe maybe Dan is best for you.
What drives the split between Australian linked and other pricing mechanisms.
Is that kind of determined at this time as you as you commit tons for next year or is that something that evolves over the course of the year and to what extent and has your outlook for 2024 shapes up where would you where would you expect that that split to be thank you.
Hey, good morning Lucas.
Yes, I think.
The short answer to your question is the demand will drive it as well as the price will follow the best well look.
For the best economic opportunities for off of but we have a lot of demand from long term customers in.
Asia, South Asia, and East Asia markets that are linked to the <unk> and we will.
To pursue those opportunities.
And as you know, that's where a lot of the metallurgical coal demand is expected to be.
In the future so.
Okay.
Obvious why we're there.
And where we expect the growth.
Got it got it so as it as it relates to 2024.
So that split off.
<unk> linked.
In the Cisco go up relative to this year.
At the moment, that's tough to say, but if Europe. This remains a little bit slower than it's probably likely that debt that splits roughly a third a third a third.
I suppose it's reasonable to think that the Aussie linked price percentage would increase.
That's very helpful. Thank you. Thank you Dan for that for that color and then maybe to stay.
With you for another question.
Couple of a couple of cross currents in the market today, you comment on that in your prepared remarks, but.
If you look at your Crystal ball for met coal pricing and the level of interest you're seeing.
What would you say of some of the puts and takes here into into year end. Thank you.
Well I think youll supply remains tight.
Variety of reasons.
You will see vessels used in Australia is starting to grow slightly you see some here in the U S. Growing so that will probably keep the supply side a little tight.
Demand in Asia is good, particularly in India, we still see new opportunities there.
From the outset I'll speak to the Alpha perspective were still shipping our contract business.
Q4.
High levels and as we mentioned we had a strong October at DTA, we're seeing good demand and good shipment levels.
Yeah.
Very helpful. Thank you Dan and then.
My final question on the Capex and DTA side. So it's the first.
On DTA.
The simplest way to think about it correct me if I'm wrong is $150 million in capital spend split over over six years that $150 million, that's really what's what's incremental.
That's question one and then.
Question two.
In terms of the capital guidance for 2024, the $210 million to $240 million should we think of that amount is a.
Reasonable.
Baseline.
Going forward or is it maybe a little bit more lumpy capital.
In there as well thank you very much.
Hey, Lukas, it's Andy I'll ask I'll answer your second question first as far as capital.
Unless unless we see some significant changes in.
The cost of materials, I think our $10 per ton on sustaining will probably stay in that ZIP code. So.
170 to 180 ish.
For that portion over the next in the near term the question on.
<unk>.
On any additional development capital. So we're going to have the first half roughly of first half of Kingston stool in 'twenty for the back half will be in 25. So over the next couple of years probably looks.
A relatively similar to this year plus or minus the inclusion of any carryover capital does not stand, but if youre looking at it in the totality of two or three year view, yes, it's probably going to be in the Zip code.
Until we get through the development.
<unk>, there and I think getting back to DTA, yes.
I think your math is correct and again, let me let me be clear the DTA is not approved its budget yet for 2024. So there's there's still some some movement that could happen. There. This is kind of what alphas estimate of what's going on what will need to be spent and in concert with the DTA leadership and what they have.
The engineering they've been working through so I think.
Quantum wise is definitely that ZIP code, but we'll have to as we get further into the process. We'll see more specifically in precision is not what were going for but I think the accuracy is probably in line with that.
Thank you Andy and for the avoidance of doubt that $150 million would be kind of separate from.
The capital needs that you just discussed.
But in addition to rather.
It's it's quote unquote Capex book, because it goes through our equity earnings in JV. It's a separate line item. So we try to keep guidance and actual reported numbers on similar basis. So we don't we don't confuse buckets.
Perfect perfect in that.
Guidance of $40 million to $50 million for capital contribution to affiliates.
That just really includes the opex that you pay year in year out as you shipped through the terminal rate.
That's correct and that's just been at the standard thing Thats been in the numbers.
Since we've been in DTA, it's always a challenge trying to get that presented in a way that makes it more apparent to the public but I think we've we've got a pretty good handle on it now as far as how we are disclosing it.
Very clear.
I really appreciate all the color and Andy to you and to team continued best of luck.
Thank you Lucas.
As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad, one moment, while we poll for questions.
Our next question comes from Nathan Martin with Benchmark Company. Please proceed with your question.
Thanks, operator, good morning, guys and thanks for taking my questions, maybe just one more on the DTA.
Money you guys are going to be spending over the next several years is that mainly just to refurbish or is there also an opportunity there to kind of improve operations or throughput capacity.
Yes.
How's that for an answer Nate.
Perfect.
The.
So you start with the nameplate capacity, what we're talking about wouldn't necessarily increase true capacity, but thinking of it more from capacity that's been lost by the various mechanical interruptions and issues over the past couple of years, that's how we're thinking of it because.
It's simply not is not able to run at its at its potential right now so the money spent while it is not expanding nameplate capacity I think it will allow us to recover some capacity that has been lost over the past.
A couple of years, just because of the different issues that have come up.
Can you put numbers around around that Andy like remind me what nameplate is and that's kind of where you are today then.
Well.
I hate to I can't throw numbers added again, because we don't have the plans completely nail down we do have several processes, we have to work through on how exactly you're approaching it and also it varies depending on how how stockpiles are utilized whether you are just pushing.
Coal out straight out of railcars into a boat whether youre, yes, any whether you got.
Any kind of deviation between met or thermal coal. So there are a lot of variables go into play as to what the true throughput capacity could be.
But suffice it to say getting all the pieces refurb and repair it will make it run much more effectively and efficiently than it currently is.
Got it Okay, that's fair and maybe just one other question on the near term I think Andy you mentioned in your prepared remarks.
The expectation of carry over some time for the 2024, so how should we think about fourth quarter met coal shipments maybe at least directionally from the third quarter or maybe another way to look at it what what kind of gets you back to the high end or the low end of our full year guidance.
Gone at night, you hit me with this question at least every other quarter and always struggled to answer it because we hate to deal with the unknown. We just saw a quarter, where we ran into some issues. It didnt allow us to hit our potential right now we're off to a really good start for the fourth quarter.
I think I'll, probably just have to guide you to look at our year to date numbers and take that off of where we landed on guidance. Our revised guidance number I mean, I think we have a pretty high confidence level in kind of hitting down the fairway of of that delta for the fourth quarter.
Okay got it and then kind of down the midpoint, we'll get some maybe roughly flattish quarter over quarter. If my math is closed so alright.
Maybe then just shifting to <unk>.
24 guidance.
Yes, starting again on the shipment side of thing 16 million tons in the mid point I think that's up about a half a million tons versus your original 23 guidance.
You talked about another mine coming online right now, maybe that's driving a little bit of that maybe improve logistics.
Are you guys comfortable maintaining that roughly 16 million ton level of sales you know kind of looking farther out assuming market demand remains supportive and then are you having any success entering some new markets or sending initial cargoes to new customers at this point.
Yeah, I'll defer to Dan on the second part of that Nate, but on the first part, yes, I think we're pretty comfortable and again this will vacillate.
We're not locked into <unk>.
16 million tons, or 15 million tons or 17 million tons, it'll it'll move as the portfolio develops over time.
But I think we're pretty comfortable in this area that we're in plus or minus.
Half a million tons, either any direction for the for the time being but.
The second part Dan Yes sure.
I'll just add that yes.
The increase is do we have to run with two new coal mines effectively we have the rolling Thunder Bayou, which started earlier this year now the checkmate. So we've added high vol met production and.
We've eliminated that and now we don't produce the slab capp thermal so some of that is just a switch from.
Thermal and met and yes, we're comfortable with this call worldwide markets.
Primarily the new markets would be in Europe, we're still.
Delivering trial shipments to several new customers in Asia and expect to do more in 2024.
That's great Yeah, So Dan I appreciate that appreciate that and maybe with those two new mines.
Could you talk about whats your quality mix might look like if it if it differs much from the chart I think you guys. It seems that you have in your in your deck.
Just broadly speaking is just feel a little more eyeball.
I guess you have to call it an a or b, it's probably more on the <unk> side, so you'd be increasing the eyeball piece of that pie, a little bit and I think as Nate as a percentage if youre looking at the Pie chart that we have in our investor deck. When when it's time to get squared away for 23 ish numbers I don't think its going to look very differently to Dan's point.
It may flex up one or 1% or 2% and total have all but it is going to look really similar with no I don't think there'll be any commentary you'll changes until we do get closer to 25 win Kingston Sue will brings more low vol and the mix.
Got it perfect guys and then one more if I could.
Going back to 2000 and for guidance and specifically the met segment cost per ton guidance I think the implication there is up about $2.50 year over year, just using guidance mid points.
Thank you Jason color in the prepared remarks, there I think some of it's the labor with your new agreements put in place in August anything else kind of driving that uptick and then maybe what met prices are you guys assuming for that 110 to $116 range.
I'll do the second part first and then I'll, let let Jason give you his thoughts on cost movement.
As usual when we go through the budget, we'd like to inform.
The what we what we plug in for cost is usually a kind of an amalgam of.
What the the market research folks show for the 2024.
And we like that we also kind of outside again, where the futures are of this year. There is there is a pretty sizable disconnect between where those are at least for the front half of it or the excuse me the back half of the year.
So we've kind of had to use a little bit of judgment, there, but we do tend to a bit more towards the conservative.
When we set up our budget. So I would say we're closer to the the market research folks numbers, then the futures as far as your utilization for budget purposes.
But Jason if you got some more thoughts on cost.
At the mine sites you I think you said you understood the labor.
It's just a function of shoring up our ability to make the volume.
As we mentioned.
We've been productive with the labor, we had but it's just about low demands up and.
And produced 16 million tonnes.
On the other side I mean, we're still in the middle of contract negotiations with various vendors.
Some are complete some are ongoing.
<unk> by the end of the year. So I think you know.
The escalators that we used in our budget year over years, just kind of a weighted average of all of those.
Materials prices.
Great I appreciate all the color and the time guys I'll leave it there best of luck in the fourth quarter.
Thank you.
Our next question is from Lucas pipes with B Riley Security. Please proceed with your question.
Okay.
Lucas you live with our speakers.
Lucas you mute, sorry, sorry about that I was muted.
Thank you very much operator, thank you for taking my <unk>.
Follow up question.
So my my first one is on the transportation side.
Theres typically like a one quarter lag in terms of price adjustment, sorry, rather cost adjustments to to the transportation costs.
With the index. So I wonder if you could speak to two that for Q4, and then more broadly with where prices are today.
Where would you expect transportation costs to be.
Any any any other considerations to take into account for 2024.
Inflationary pressures.
Et cetera. Thank you.
Well Lucas you are correct on.
What you said about there's a component the transportation rates due largely move for the seaborne shipments they move with the.
Indices, so and they do have a lag so that's right. So as the market moves up right behind it are real costs move up.
Going forward, we are still in negotiations for next year's rail.
Rail providers, so I really don't want to comment any more about next year at this time.
Got it got it so maybe a little bit of a benefit Q4.
And then.
With the stronger pricing today that would then.
Lead to high transportation costs early 2024, and then the broader discussion will just have to stay tuned.
Yeah, that's directionally correct Lucas yes.
Okay. Thank you for that and then.
A follow up to that the volume discussion.
For 2025 should we should we expect higher volumes with the new mines coming online.
Well Lucas.
How about we table that question until this time next year and I'll have a budget to talk to you.
If I'll start condo paddle lead and possible Smack me so.
We'll just.
Because we do we've got we've got depletion of other mines, we got other actions, we need to take into consideration so I'd hate to give guidance to anything.
When it's when it's premature.
Got it got it okay, well I appreciate it.
Probably try asking it again before this time next year.
Yeah.
I know I appreciate it and again best of luck.
Thank you Lucas.
We have reached the end of the question and answer session I will now turn the call back over to Andy Hudson for closing remarks.
Well, thanks again for joining us today and for your interest in an alpha and we are we hope you have a great rest of the rest of the day rest of the weekend everyone. Please take care.
This concludes today's conference you may disconnect your lines at this time and we thank you for your participation.
Okay.