Q4 2023 Arch Resources Inc Earnings Call

Speaker Change: [music].

Good day and welcome to the Archer resources incorporated fourth quarter 2023 earnings call. All participants will be in a listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your Touchtone phone.

Paul A. Lang: As a result of these factors, we remain constructive in the seaboard coking coal market and expect to continue to be in an excellent position to capitalize on this environment going forward. Looking ahead, we remain sharply focused on pursuing operational excellence and meeting our volume and cost targets. Extending the reach of our high-quality coking coal products into the fastest-growing global market, continue to reward shareholders through our capital return program as it evolves towards a heavier share repurchase model, and maintain our strong financial position by capitalizing on the optionality it affords during periods of market pullbacks and advancing our industry-leading sustainability practices. We believe we're well positioned to drive forward with all these objectives in 2024 and beyond and, in doing so, continue to generate significant value for our shareholders. With that, I'll now turn the call over to John Drexler for further discussion of our operational performance and Sue Ford. John?

And to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Mr. Deck Slone Vice President of strategy. Please go ahead Sir.

Deck S. Slone: Good morning from St. Louis and thanks for joining us today before we begin let me remind you that certain statements made during this call including statements relating to our expected future business and financial performance may be considered forward looking statements. According to the private Securities Litigation Reform Act.

Deck S. Slone: We're looking statements by their nature address matters that are to different degrees uncertain.

Deck S. Slone: These uncertainties, which are described in more detail in the annual and quarterly reports filed with the SEC may cause our actual future results to be materially different from those expressed in our forward looking statements 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.

Deck S. Slone: Find a reconciliation of non-GAAP financial measures, 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.

Deck S. Slone: RFC Dot com.

Deck S. Slone: Also participating on this morning's call will be Paul Lang CEO, John Drexler, Our C O O Matic Youll, 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.

John T. Drexler: Thanks, Paul, and good morning everyone. As Paul just discussed, the Arch team executed at a high level during Q4, delivering significant improvements against numerous operating metrics while turning in another outstanding performance in the critically important area of sustainability. In our core metallurgical segment, the team's strong execution contributed to significantly higher realization, significantly lower unit costs, and much improved operating margins. In our thermal segment, the team achieved a return to form at West Elk, as well as a solid contribution from the Potta River Basin assets, despite a softening thermal market environment. The upshot was a greater than 50% sequential increase in discretionary cash flow, which, as Paul Let's take a closer look at the performance of the metallurgical cycle.

Paul A. Lang: Thanks, Derek and good morning, everyone. We appreciate your interest in arch and are glad you could call us on the call. This morning.

Paul A. Lang: I'm pleased to report that during the fourth quarter arch continued to drive forward with our simple consistent improvement plans for long term value creation and growth.

Paul A. Lang: During the quarter just ended the team achieved adjusted EBITDA of one.

Paul A. Lang: $180 million.

Paul A. Lang: Generated $127 million and discretionary cash.

Paul A. Lang: Bolstered our cash position by $107 million.

Paul A. Lang: Consistent with our stated objective of building additional optionality for potential future stock repurchases.

Paul A. Lang: Plans unwind chat call instrument associated with now retired convertible secure.

Paul A. Lang: Declared a quarterly cash dividend of $32 million.

Paul A. Lang: Our $1 65 per share increasing the total capital deployed in our shareholder return program since its re launch two years ago, well over $1 2 billion and achieved independent level a verification at the Leer mine under the globally recognized towards sustainable mining framework.

Paul A. Lang: Coming in the first U S mines anytime to do so.

John T. Drexler: During Q4, the Metallurgical team delivered on one of its highest priorities, reducing its average cash cost by more than $10 per ton, or more than 10% when compared to Q3. That's a significant achievement, and one that serves to further solidify the metallurgical portfolio's position in the first quartile of the U.S. Costco. Importantly, the improved performance at LearSouth contributes markedly to these stronger results

Paul A. Lang: In short we demonstrated strong progress against many of our strategic priorities spanning numerous critical areas of performance, including financial positioning shareholder value creation and sustainability.

Paul A. Lang: Critically the team maintained a sharp focus on driving productivity improvements across the operating platform as well.

Paul A. Lang: We made significant positive headway as we achieved a 10% quarter over quarter reduction in the average cost per ton in our metallurgical segment.

Paul A. Lang: Secured a nearly 25% improvement our average coking coal realization.

Paul A. Lang: And delivered an increase of more than 50% of our operating margin.

Paul A. Lang: Overall, the team delivered improved productivity.

Paul A. Lang: Capitalized on the strong market environment and continue to lay the foundation for still stronger execution in future periods.

John T. Drexler: As anticipated, LearSouth experienced slower-than-normal advance rates and lower-than-normal yields in the first two months of the quarter as the operation completed mining in Panel 5, where, as you will recall, the coal seam was appreciably thinner due to its position at the outer edge of the reserve line. However, the mine made up for lost time once it transitioned to Panel 6 in early December, resulting in a nearly 20% increase in output in Q4 versus Q3. Looking ahead to 2024, we expect continued productivity increases for the portfolio as a whole, as well as continued improvements at Lear South over the course of the year. As you will have noted, we are guiding coking coal volumes of 8.8 million tons at the midpoint for the full year 2025. In addition, we are guiding to an average cost for the metallurgical segment of $89.50 per ton, which is essentially flat versus 2023, despite inflationary pressure.

Paul A. Lang: Before moving on let me make a few additional comments about our highly successful capital return program.

Paul A. Lang: As we've stated many times in the past the cap return program is the centerpiece of our value proposition and the central Tenet of that program is a return to shareholders well secured 100% of the company's discretionary cash flow.

Paul A. Lang: In any given quarter of course, the amount of capitalized deployed with program can and will vary based on several factors, including upcoming cash requirements are.

Our minimum liquidity target, we're a lot.

Paul A. Lang: But those are just timing issues and do not change the fact that over time effectively all of the discretionary cash we returned to shareholders.

Paul A. Lang: On the Q3 call as most of you will have noted we signaled our intention of increasing our cash balance by $100 million what's.

Paul A. Lang: Which we believe serves to enhance the potential for opportunistic share repurchases in the event of a market for it.

Paul A. Lang: During Q4, we accomplish that objective.

Paul A. Lang: <unk> hundred $7 million to our cash position.

Paul A. Lang: With that completed we believe we've now effectively positioning the company.

Paul A. Lang: The evolution of our capital allocation.

The heavier share repurchases in the future.

Paul A. Lang: Matt will comment on the subject further in his remarks, but a major step in this regard with the planned settlement the cap call it that.

John T. Drexler: More noteworthy in my view is the expectation of still further improvements in the metallurgical segment's performance as Lear South transitions to the 2nd Longwall District in late 2024. As previously discussed, we expect better mining conditions and a materially thicker coal seam as the Lear South Longwall advances into District 2 based on our significantly expanded drilling program. At a time when many of our competitors are wrestling with the migration to less advantageous and higher cost reserves, we are fortunate to be moving in the opposite direction. Looking ahead, we currently expect a less than routable shipping schedule for our metallurgical segment here at the outset of 2024. The constraint in sales volume relates to weather-related disruptions as well as unplanned and accelerated maintenance requirements at Curtis Bay, including a force majeure event that will affect vessel loadings in Q1.

Paul A. Lang: That we expect to complete in the near future.

Paul A. Lang: Settlement of the capped call and of itself should result in the retirement of nearly 2% of our outstanding shares.

Paul A. Lang: Turning our attention to the market dynamics, despite somewhat lackluster steel market fundamentals.

Paul A. Lang: And coal markets appear reasonably well support presence.

<unk> primary product high vol. A coking coal is currently being assessed at $262 per metric ton on the U S East coast, which while a step downs and the average price that prevailed last quarter, it's still highly advantageous, particularly in light of heart just first quartile cost profile.

Moreover, the Australian premium low Vol index is currently trading at $63 per metric ton higher than the U S East coast problems, which has created an attractive arbitrage opportunity for <unk>.

Paul A. Lang: Select U S volumes moving into the Asian market.

Paul A. Lang: Needless to say, we're sharply focused on trying to capitalize on that opportunity to the fullest extent possible.

Paul A. Lang: Of course that focus on these opportunities aligns perfectly well with are already well advanced objective.

Paul A. Lang: Increasing our penetration in Asian markets, we expect future steel demand to be centered.

John T. Drexler: As you know, the Curtis Bay Terminal is an important link in the seaborne logistics chain for our Lear and LearSouth operations. So this outage will have a volume and We currently expect Q1 volumes to be modestly less than radical. However, we expect the impact to be principally one of timing, that is to say, we expect to make up for the missed shipments as the year progresses. I might add that we have factored those events into our four-year sale volume guidance. Now, let's turn now to our thermal platform, which includes our West Belt Longwall mine in Colorado, with its high-quality coal and competitive access to seaborne markets, as well as our legacy Powder River Basin operation. During Q4, West Elk capitalized on the transition to a more advantageous area of the reserve base by delivering its highest quarterly production level of the year, at around 1.1 million tons.

Paul A. Lang: The primary reason that coking coal markets remain well support our estimation.

Paul A. Lang: Is it a constrained supply stemming some ongoing reserve degradation into place.

Paul A. Lang: Mounting regulatory pressures limited capital availability and persistent underinvest.

Paul A. Lang: In 2020 through according to trading Australia, coking coal exports declined nearly 6% when compared to 2022.

Paul A. Lang: That brings the total decline in the Australian exports to around 40 million metric tons or more than 20% decrease since 2016 the.

Paul A. Lang: Peak year for coking coal exports.

While the U S and Canadian coking coal exports in aggregate Outback moderately in 2023, offsetting the Australia decline to some degree protection to those two countries remains well below their respective peak levels.

Paul A. Lang: As a result of these factors we remain constructive on the seaborne coking coal market.

Paul A. Lang: We continue to be in an excellent position to capitalize on this environment going forward.

Paul A. Lang: Looking ahead, we remain sharply focused on pursuing operational excellence relentless.

Paul A. Lang: And hitting our volume and cost targets.

Paul A. Lang: Extending the reach of our high quality coking coal products. It is the fastest growing global markets continuing to reward shareholders through our capital return program as we evolve towards a heavier share repurchase model.

John T. Drexler: As most of you are aware, this is consistent with the normal run rates we have achieved at West Elk in recent years. While the line's overall financial contribution will continue to be muted to some degree by the need to make up for legacy price shipments that were missed in the second and third quarters of 2023, we expect a solid contribution in 2024 before a step-up in gas generation in 2025 when we will be transitioning into the B-scene mid-year. [inaudible] More encouraging still, in my view, as with our metallurgical platform, West Elk expects to transition to even more attractive reserves in mid-2025 when longwall mining shifts to the beyond. As we have shared in the past, the coal seam thickness is significantly greater and the coal quality appreciably better in the past, which should translate into both higher volumes and higher relative prices.

Paul A. Lang: Maintaining our strong financial position.

Paul A. Lang: Well capitalized you know the optionality it affords during periods of market pullbacks, and advancing our industry leading sustainability practices.

We believe we're well positioned to drive forward. If all of these objectives in 2024, and the App and in doing so continue to generate significant value for our shareholders.

Paul A. Lang: With that I'll now turn the call over to John <unk> for further discussion of our operational performance Q4, John.

Paul A. Lang: Okay.

John T. Drexler: Thanks, Paul and good morning, everyone as Paul just discussed the arch team executed at a high level during Q4, delivering significant improvements against numerous operating metrics, while turning in another outstanding performance in a critically important area of sustainability.

John T. Drexler: In our core metallurgical segment, the team's strong execution contributed to significantly higher realizations significantly lower unit costs and much improved operating margins.

John T. Drexler: And our thermal segment the team achieved a return to form at West Elm as well as a solid contribution from the powder River basin assets, Despite a softening thermal market environment.

John T. Drexler: The upshot was it greater than 50% sequential increase in discretionary cash flow.

John T. Drexler: This positive trajectory, coupled with the mine's access to seaboard markets and its durable domestic industrial customer base, underscores West Elk's significant ongoing potential and further supports our belief that the mine will remain a value-generating component of our operating portfolio for the next decade, if not longer. In the Powder River Basin, the team made a solid financial contribution despite weakening market dynamics that resulted in a number of negotiated shipment deferrals based on customer requests. As always, we took steps to ensure that we preserved the value of our contract book with these negotiated agreements and parlayed the deferrals into additional sales and outer years.

John T. Drexler: As Paul noted is the engine for our robust capital return program.

John T. Drexler: Let's take a closer look at the performance of the metallurgical segment.

John T. Drexler: During Q4, the metallurgical team delivered on one of its highest priorities, reducing its average cash costs by more than $10 per ton or more than 10% when compared to Q3.

John T. Drexler: That's a significant achievement and one that serves to further solidify the metallurgical portfolio position in the first quartile of the U S cost curve.

John T. Drexler: Importantly, the improved performance at Leer, south contribute markedly to these stronger results.

John T. Drexler: As anticipated Leer, south experienced slower than normal advance rates and lower than normal yields in the first two months of the quarter as the operation completed mining in panel five where as you will recall the colosseum was appreciably better due to his position at the outer edge of the reserve block.

John T. Drexler: However, the mine made up for lost time once the transition to panel six in early December resulting in a nearly 20% increase in output in Q4 versus Q3.

John T. Drexler: But those deferrals still resulted in lighter volumes and... Looking ahead to full year 2024, we have commitments in place for approximately 50 million tons of PRB coal at a price generally in line with our average realized price in 2023. As we have demonstrated repeatedly in recent years, we believe we can maintain our cost structure and preserve our ability to generate cash, even at step-down production levels, should that prove necessary. Finally, let me emphasize once again that our harvest strategy, which is to say our focus on optimizing cash generation from our thermal assets, remains very much intact.

John T. Drexler: Looking ahead to 2024, we expect continued productivity increases for the portfolio as a whole as well as continuing improvements at Leer south over the course of the year.

John T. Drexler: As you will have noted we are guiding to coking coal volumes of $8 8 million tons at the midpoint for full year 2024.

John T. Drexler: In addition, we are guiding to an average cost for the metallurgical segment of $89 50 per ton, which is essentially flat versus 2023, despite inflationary pressures.

John T. Drexler: One noteworthy in my view is the expectation still further improvements in the metallurgical segment's performance as Leer South transitions to the second Longwall district in late 2024.

John T. Drexler: Since the fourth quarter of 2016, the thermal segment has generated a total of nearly $1.4 billion in adjusted EBITDA while expending just $172 million in capital. Before passing the baton to Matt, let me now spend a few minutes discussing our efforts in sustainability, which remains the very foundation of our company. During 2023, the company achieved an aggregate total lost time incident rate of 0.55 incidents for 200,000 hours worked, which is nearly four times better than the industry average. Perhaps even more impressively, the Lear and Lear South Mines completed 519 and 329 consecutive days, respectively, without a single lost time incident.

John T. Drexler: As previously discussed we expect better mining conditions and a materially different closing as the Leer South longwall advances into district, two based on our significantly expanded drilling program.

John T. Drexler: At a time when many of our competitors are wrestling with the migration to less advantageous and higher cost reserves, we are fortunate to be moving in the opposite direction.

Looking ahead, we currently expect a less than radical shipping schedule for our metallurgical segment here at the outset of 2024.

John T. Drexler: The constraint and sales volume relates to weather related disruptions as well as unplanned and accelerated maintenance requirements at Curtis Bay, including a force majeure event that will affect vessel loadings in Q1.

John T. Drexler: As you know the Curtis Bay terminal is an important link in the seaborne logistics chain for Alere and Leer South operations. So this outage will have a volume impact.

John T. Drexler: We are currently we currently expect Q1 volumes to be modestly less than random.

John T. Drexler: However, we expect the impact to be principally want a tiny which is to say we expect to make up for the missed shipments as the year progresses.

John T. Drexler: Those stringencies are nearly unprecedented for underground mines of their size and complexity and further underscore our progress towards our ultimate goal of zero incidents at every one of our mines every single year. On the environmental front, the company received zero environmental violations under SMACRA versus an average of 11 by 10 of our large coal people and recorded zero water quality exceedances for the third year in a row. Again, an impressive achievement by the team. Finally, and as Paul noted, our LEAR operation became the first U.S. mine of any kind to achieve Level A verification under the globally recognized Towards Sustainable Mining Framework. That accomplishment is further evidence of our deeply ingrained culture of continuous improvement and of our intense focus on raising the bar in all areas of our operations. With that, I will now turn the call over to Matt for some additional color on our financial results. Matt

John T. Drexler: I might add that we have factored those events into our full year sales volume guidance.

John T. Drexler: Let's turn now to our thermal platform, which includes our west belt Longwall mine in Colorado with its high quality coal and competitive access to seaborne markets as well as our legacy powder River Basin operations.

John T. Drexler: During Q4, West Elk capitalized on the transition to a more advantageous area of the reserve base by delivering its highest quarterly production level of the year at around $1 1 million tonnes.

John T. Drexler: As most of you are aware this is consistent with the normal run rates, we have achieved at west Elk in recent years.

John T. Drexler: While the lines overall financial contribution will continue to be muted to some degree by the need to make up for legacy price shipments that were missed in the second and third quarters of 2023.

John T. Drexler: We expect a solid contribution in 2024 before a step up in cash generation in 2025, when we will be transitioning into the BC mid year.

John T. Drexler: More encouraging still in my view as with our metallurgical platform.

John T. Drexler: Thanks, John, and good morning, everyone. As usual, I'll begin with a discussion of cash flows and our liquidity position. For the fourth quarter, operating cash flow totaled $182 million, a sequential increase of nearly 40% to three levels. As expected, we had a small working capital benefit in the quarter, contributing $7 million. Capital spending for the quarter totaled $55 million, and discretionary cash flow was $127 million.

John T. Drexler: <unk> expects to transition even more attractive reserves in mid 2025, when longwall mining shifts to be seen as we have shared in the past the coal seam thickness is significantly greater than the coal quality appreciably better in the BC, which should translate into both higher volumes and stronger relative pricing.

John T. Drexler: This positive trajectory coupled with the mines access to seaborne markets and it's durable domestic industrial customer base underscores west Elk significant ongoing potential and further supports our belief that the mine will remain a value generating components of our operating portfolio for the next decade, if not longer.

Matthew C. Giljum: As planned, we grew our cash balance over the course of the quarter with an increase of $107 million. We ended the quarter with cash and short-term investments of $321 million and total liquidity of $444 million, including availability under our credit facility. Net cash at year end was $142 million, resulting in a net cash position of $178 million.

John T. Drexler: In the powder River basin. The team made a solid financial contribution despite weakening market dynamics that resulted in a number of negotiated shipment deferrals based on customer requests.

John T. Drexler: And as always we took steps to ensure that we preserve the value of our contract book with these negotiated agreements and parlayed the deferrals into additional sales in outer years, but those deferrals still resulted in lighter volumes in Q4.

John T. Drexler: Looking ahead to full year 2024, we have commitments in place for approximately 50 million tons of CRB coal at a price generally in line with our average realized price in 2023.

Matthew C. Giljum: We have achieved our objective of enhancing our financial flexibility and do not anticipate needing to materially add to the cash balance in 2024. Before moving on, I wanted to note a recent development in our outstanding debt that we completed shortly after year-end. As you will recall, we paid down the vast majority of Arch's term loan in early 2022, leaving a small stub outstanding because of the interaction between the loan and other parts of our debt structure.

John T. Drexler: As we have demonstrated repeatedly in recent years, we believe we can maintain our cost structure and preserve our ability to generate cash even if stepped down production levels should that prove necessary.

John T. Drexler: Finally, let me emphasize once again that our harvest strategy, which is to say our focus on optimizing cash generation from our thermal assets remains very much intact.

John T. Drexler: Since the fourth quarter of 2016, the thermal segment has generated a total of nearly $1 4 billion and adjusted EBITDA, while expanding just $172 million in cap.

John T. Drexler: Before passing the baton to Matt Let me now spend a few minutes discussing our efforts in sustainability, which remains the very foundation of our corporate culture.

Matthew C. Giljum: Earlier this month, we refinanced that stub with a new $20 million terminal. While a small transaction, the refinancing allows us to maintain the financial flexibility that we have grown accustomed to over the past several years without any material change in our ongoing debt service outlook. Next, I want to highlight a couple of notable financial accomplishments from 2023, starting with the Capital Return Program. For the year, we deployed $355 million under the program, representing nearly 80% of the year's discretionary cash flow.

John T. Drexler: During 2023, the company achieved an aggregate total lost time incident rate of 0.55 incidents per 200000 hours worked which is nearly four times better than the industry average.

John T. Drexler: Perhaps even more impressively the alere in Leer, South mines completed 519, and 329 consecutive days, respectively without a single lost time incident.

John T. Drexler: Those strengths are nearly unprecedented for underground mines at their size and complexity and further underscore our progress towards our ultimate goal of zero incidents and every one of our mines every single year.

John T. Drexler: On the environmental front the company received zero environmental violations under spectrum versus an average of 11 10 of our large school peers.

Matthew C. Giljum: That total includes dividends declared of $171 million, or $9.20 per share, and repurchases of common stock and dilutive securities of $184 million. As for the remainder of the discretionary cash flow, we expect to deploy that opportunistically in future quarters. The second accomplishment is the ongoing reduction of our diluted share count and the simplification of our capital structure. Going back to the beginning of 2023, our diluted share count totaled approximately 20 million shares, with more than 11% of that comprised of Duluth security. Primarily the Remaining Convertible Bonds and Warrants. By the end of the year, the diluted share count was below 19 million shares, with the Libby Securities representing just 3% of the total.

John T. Drexler: And recorded zero water quality exceedances for the third year in a row again, an impressive achievement by the team.

John T. Drexler: Finally, and as Paul noted our Leer operation became the first U S mine of any kind to achieve lovely verification under the globally recognized towards sustainable mining framework.

John T. Drexler: That accomplishment is further evidence of our deeply ingrained culture of continuous improvement.

John T. Drexler: Our intense focus on raising the bar in all areas of our operating execution.

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

Thanks, John and good morning, everyone.

Matt: As usual I'll begin with a discussion of cash flows and our liquidity position.

Matt: For the fourth quarter operating cash flow totaled $182 million sequential increase of nearly 40% from Q3 levels.

Matt: As expected, we had a small working capital benefit in the quarter contributing $7 million.

Matt: Capital spending for the quarter totaled $55 million and discretionary cash flow was $127 million.

As planned we grew our cash balance over the course of the quarter, an increase of $107 million.

Matthew C. Giljum: So we reduced the total share count by 5% while greatly simplifying the capital structure. As a final step in that simplification process, and another significant step in reducing the share count, we intend to unwind the CAP call. By unwinding in the near term, we will receive shares representing the current fair value of the instrument, and we estimate that could be as much as 2% of the fully diluted shares outstanding. While we are accepting a discount on the dollar value of the cap call, we believe that retiring the shares now, in advance of expected future capital return, will prove more value-creating than delaying the retirement until the maturity date in late 2025. Before turning the call over to her for questions...

Matt: We ended the quarter with cash and short term investments of $321 million and total liquidity of $444 million, including availability under our credit facilities.

Matt: Debt at year end was $142 million, resulting in a net cash position of $178 million.

Matt: We have achieved our objective of enhancing our financial flexibility and do not anticipate needing to materially add to the cash balance in 2024.

Speaker Change: Before moving on I wanted to note a recent development in our outstanding debt, we completed shortly after year end.

Speaker Change: As you will recall, we paid down the vast majority of our just term loan in early 2022.

Speaker Change: A small stub outstanding because of the interaction between the loan and other parts of our debt structure.

Speaker Change: Earlier this month, we refinance that stuff with the new $20 million term loan.

Speaker Change: All of a small transaction the refinancing allows us to maintain the financial flexibility that we have grown accustomed to over the past several years without any material change in our ongoing debt service obligations.

Matthew C. Giljum: I would like to cover a few cash flow guidance and modeling items for 2024. First, we expect capital expenditures to be in the range of $160 million to $170 million, representing maintenance-level spending. We currently expect that to be spread fairly radically over the course of... Second, we expect R2's share of additional maintenance and improvements at DTA, over and above the normal operating costs, to be approximately $10 million. This is not included in our CapEx guidance but is accounted for as an equity investment. I would also note that we expect this to be offset by additional income that we will generate from selling our excess capacity in the terminal to third parties. Third, with respect to cash taxes, at current metallurgical prices, we would expect our cash taxes for the year to be near the bottom end of our guidance range, as we continue to utilize our net operating loss curve. Lastly, as we look at working capital trends, we typically see a cash outflow in the first quarter, and we expect that to be the case in this quarter as well, with an outflow of as much as $40 million.

Speaker Change: Actually I want to highlight a couple of notable financial accomplishments from 2023, starting with the capital return program.

Speaker Change: What a year, we deployed $355 million under the program, representing nearly 80% of the year's discretionary cash flow.

Speaker Change: That total includes dividends declared of $171 million or $9 20 per share.

Speaker Change: And repurchases of common stock and dilutive securities of $184 million.

Speaker Change: As for the remainder of the discretionary cash flow, we expect to deploy that opportunistically in future quarters.

Speaker Change: The second accomplishment is the ongoing reduction of our diluted share count and the simplification of our capital structure.

Speaker Change: Going back to the beginning of 2023, our diluted share count totaled approximately 20 million shares.

Speaker Change: With more than 11% of that comprised the dilutive securities primarily the remaining convertible bonds and warrants.

Speaker Change: By the end of the year the diluted share count was below 19 billion shares with dilutive securities representing just 3% of the total.

Speaker Change: So we reduced our total share count by 5% while greatly simplifying the capital structure.

Speaker Change: As a final step in that simplification process and another significant step in reducing the share count.

Speaker Change: The unwind the capped call.

Speaker Change: Alright unwinding in the near term, we will receive shares representing the current fair value of the instrument.

Speaker Change: And estimate that could be as much as 2% of our fully diluted shares outstanding.

Speaker Change: While we were accepting a discount on the dollar value of the capped call. We believe that retiring the shares now in advance of expected future capital returns will prove more value, creating the delaying their retirement until the maturity date in late 2025.

Matthew C. Giljum: As we look at the full year, we currently expect to see a modest working capital benefit, which represents a tailwind of more than $80 million as compared to the working capital build we experienced in 2023. To wrap up, Arch enters 2024 in a great position to continue to deliver robust capital returns, with only maintenance capital spending, minimal debt service obligations, the ability to utilize NOL carry forwards to minimize cash tax, and a more favorable working capital trend. As we look at how we execute the capital return program, the combination of a streamlined capital structure.

Speaker Change: Before turning the call over for questions.

Speaker Change: I'd like to cover a few cash flow guidance and modeling items for 2024.

Speaker Change: First we expect capital expenditures to be in the range of $160 million to $170 million representing maintenance level spending.

Speaker Change: We currently expect that to be spread fairly ratably over the course of the year.

Speaker Change: Second we expect Archer share of additional maintenance and improvements of DTA over and above the normal operating cost to be approximately $10 million.

Speaker Change: This is not included in our Capex guidance is accounted for as an equity investment.

Speaker Change: I would also note that we expect this to be offset by additional income we will generate from selling our excess capacity of the terminal to third parties.

Speaker Change: Third with respect to cash taxes at current metal.

Speaker Change: Prices, we would expect our cash tax taxes for the year to be near the bottom end of our guidance range as we continued to utilize our net operating loss carry forwards.

Operator: The reweighting of the program towards share repurchases and the additional cash we currently have on hand positions us nicely to substantially reduce the share count this year. With that, we are ready to take questions. Operator, I'll turn the call back over to you.

Speaker Change: Lastly, as we look at working capital trends, we typically see a cash outflow in the first quarter and would expect that to be the case in this quarter as well with an outflow of as much as $40 million.

Speaker Change: But as we look at the full year, we currently expect to see a modest working capital benefit.

Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone.

Speaker Change: Represents a tailwind with more than $80 million as compared to the working capital build we experienced in 2023.

Speaker Change: To wrap up arch enters 2024 in a great position to continue to deliver robust capital returns.

Operator: If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed, and you would like to withdraw your question, please press, then. And at this time, we'll pause momentarily to assemble our roster. And the first question will come from Lucas Pipes with B. Reilly. Please go ahead. Thank you very much. Good morning.

Speaker Change: The only maintenance capital spending minimal debt service obligations.

Speaker Change: The ability to utilize NOL carryforwards to minimize cash taxes, and a more favorable working capital trend.

Speaker Change: As we look at how we execute the capital return program.

Speaker Change: The combination of a three line capital structure.

Speaker Change: The weighting of the program towards share repurchases and the additional cash we currently have on hand.

Speaker Change: This nicely to substantially reduce the share count this year.

Operator: With that we're ready to take questions operator, I'll turn the call back over SKU.

Lucas Nathaniel Pipes: I first wanted to ask about the Met Coal guide for 2024. And when I think about the midpoint of 8.8 million tons, and I compare that to 2023 sales, 8.6 million tons, kind of called a delta there of 200,000 tons at the midpoint. Little surprise given the transition at Lear South. And so I just wondered if you could maybe walk us through maybe some puts and takes across the Met portfolio. I would appreciate your, Thank you. Hey Lucas, John Drexler.

Speaker Change: We will now begin the question and answer session.

Speaker Change: To ask a question you May press Star then one on you touched on phone.

Speaker Change: If you're using a speakerphone please pick up your handset before pressing the keys.

SKU: Anytime you question has been addressed and you would like to withdraw your question. Please press Star then two.

SKU: At this time, we'll pause momentarily to assemble our roster.

SKU: And the first question will come from Lucas pipes with B Riley. Please go ahead.

Lucas N. Pipes: Thank you very much operator, good morning, everyone.

Lucas N. Pipes: Good morning.

Lucas N. Pipes: I first wanted to ask about the met coal guide for 2024 and when.

Lucas N. Pipes: When I think about the midpoint eight 8 million tons.

Lucas N. Pipes: And I compare that to 2023 sales of $8 6 million tonnes kind of call. It a delta there of 200000 tons at the midpoint.

Lucas N. Pipes: Little surprised given the transition at Leer, South and so I just wondered if you could maybe walk us through.

John T. Drexler: You know, as we look at the volume guidance for 24, we're comfortable with what we have out there. We, as we've discussed, expect a continued opportunity to ramp up at Lear South over the course of 24. District 2 for us, which we've been talking about and sharing with you guys as well, is something that we'll be getting to towards the end of 24.

Maybe some puts and takes across the portfolio would appreciate your perspective on that thank you.

Speaker Change: Hey, Lucas John Drexler.

Speaker Change: You know as we look at the volume guidance for 'twenty four.

Speaker Change: We're comfortable with.

Speaker Change: With what we have out there we as we've discussed expected continued opportunity to ramp at Leer South.

Over the course of 'twenty four.

Speaker Change: District, two for us, which we've been talking about and sharing with you guys as well is something that we'll be getting to towards the end of 'twenty. Four so that transition is continuing the expectation for leer South is around 3 million tons. This year.

John T. Drexler: So that transition is continuing. The expectation for Lear South is around 3 million tons this year. And so that, for us, is kind of comfortable. As you look at the rest of the portfolio, there's lots of things that happen operationally between long-wall moves at each of our long-wall operations over the course of the year, et cetera, timing. But we're comfortable with that 8.8.

So that for US is kind of a comfortable as you look at the rest of the portfolio Theres a lots of things that happen operationally between longwall moves at each of our our longwall operations over the course of the year et cetera timing, but we're comfortable with that $8 eight I'll share with you. The team is very focused on.

John T. Drexler: I'll share with you, the team is very focused on being higher than that number as we work over the course of the year. But as we kick the year off here, we wanted to make sure we were all in a range that we were comfortable with. But we're very focused on improving that number as we work over the course of the year. That's helpful. I appreciate the color.

Speaker Change: Being higher than that number as we work over the course of the year, but as we kicked the year off here wanted to make sure. We're all in a range that we were comfortable with but we're very focused on improving that number is as we work over the course of the year.

That's that's helpful.

Speaker Change: I appreciate the color.

John T. Drexler: I'll turn over to the thermal side for a moment, and first, I wondered if you could maybe provide a mix expectation between West Elk and PRB and also where you kind of see PRB pricing contracted for 2024. Thank you. Yeah, Lucas, as we look at the thermal portfolio, you know, we're excited about what we've seen and the progress we've made at West Elk. As we reported, we've gotten back essentially to expected run rates for that operation. You know, as we got through the fourth quarter, we were at a million tons. That's kind of where we expect to be as we work through 2024, so a million tons a quarter, four million tons for the year. The balance then comes over to the PRB. At West Elk, I'll note, you know, the real excitement is, you know, we're back to normal levels, but we're also going to be in a position where we're transitioning to B-Sync. So development is occurring there.

Speaker Change: I'll turn it over to the thermal side for a moment.

Thermal: First I wonder if you could maybe provide a mix.

Thermal: Expectation between West Elk in the PRP and then also where are you kind of see <unk> pricing contracted.

Speaker Change: For 2024, thank you.

Speaker Change: Yeah Lucas is as we look at it are at the final portfolio. We're excited about what we've seen in the progress we've made at west Elk.

Speaker Change: As we reported we've gotten back essentially to expected run rates for that operation.

Speaker Change: <unk>.

Speaker Change: As we got through the fourth quarter, we were at a million tons, that's kind of where we expect to be as as we worked through.

Speaker Change: 2024, so a million tons a quarter of 4 million tons for the year the balance then.

It comes over to to the P. R B.

Speaker Change: No.

Speaker Change: Real excitement is we're back to normal levels, but we're also going to be in a position where we're transitioning to the BC. So development is occurring there.

John T. Drexler: By the time we get to mid-2025, we're going to be, you know, in an even thicker coal seam, better quality. So we're excited about that. In the PRB, the rest then spills back into the PRB.

Speaker Change: By the time, we get to mid 2025, we're going to be and then even thicker coal seam better quality. So we're excited about that.

Speaker Change: In the <unk>. The rest then spilled back to the P. R B.

John T. Drexler: You know, we've indicated that we're at, you know, kind of that 50 million ton level. But if you look at our guidance, the midpoint of that guidance, you know, our commitments are actually slightly higher where we sit today because of where natural gas prices are.

Speaker Change: We've indicated that that we're.

Speaker Change: Kind of that 50 million ton level.

Speaker Change: If you look at our guidance.

Mid point of that guidance, you know our commitments are actually slightly higher where we sit today, you see where natural gas prices is that.

John T. Drexler: You know, as we reported, we took advantage of the opportunity of some of our customers in 2023 that needed to look at their commitments and their inventories, and we were able to parlay that into additional volumes with some rollovers. In 2024, it was about 5 million tons. So as we sit here today, we don't think it'd be unreasonable to think of something else in that magnitude, 5 million tons-ish, that could be impacted as we work through 2024. And Lucas, this is Zach.

Speaker Change: As we reported we took advantage of the opportunity of some of our customers.

Speaker Change: In 'twenty three that needed to look at their commitments and their inventories and we were able to parlay that into additional volumes with some rollovers in 'twenty four it was about 5 million tons. So as we sit here today.

Speaker Change: I don't think it'd be unreasonable to think of something else in that magnitude 5 million tons as are they.

Speaker Change: That could be impacted as we worked through 2000.

Speaker Change: Look at this is that I was just.

John T. Drexler: You know, I'm just, I would add this, that with the West out, we expect volumes to be higher. That's for sure. Volumes were only around 3 million tons in 2023.

I would add this that or the west we expect volumes to be higher that's for sure volumes.

Speaker Change: Probably around 3 million tons in 2023, so we expect a meaningful step up to between four and $4 5 million tons in 2024, but prices are likely to be lower. So you know obviously the seaborne pricing has come down we have some legacy contracts that we still need to service. So that's sort of sideways contribution despite the bad.

Paul A. Lang: So we expect a meaningful step up to between 4 and 4.5 million tons in 2024, but prices are likely to be lower. So, you know, obviously, seaborne pricing has come down. We have some legacy contracts that we still need to service.

Paul A. Lang: So, you know, sort of a sideways contribution, despite the better results at West out from a production perspective, the better operations. Then the Power River Basin, you know, that pricing is, you know, around $15 is kind of where we're committed to right now. We still think that creates the opportunity for us to generate $1 to $1.50 margin. So look, overall, for the thermal contribution, perhaps a small step down given the volumes are likely to be lower, but still a substantial contribution from the thermal segment. I know that doesn't necessarily come across from the guidance table because things like export tons are missing, etc. But, you know, we still think the thermal segment is going to contribute a significant amount of cash in 2021. Lucas, Paul, and I will do it one more time.

Are the better results at west out from a production perspective, the better operations in the powder River basin.

Speaker Change: Pricing is now around $15 is kind of where we're committed to right now we still think that create the opportunity for us to generate a dollar to $1 50 margin. So overall for the thermo contribution, perhaps a small step down going into the volumes are likely to be lower but still a substantial contribution from there.

Speaker Change: Thermal segment, I know that doesn't necessarily come approximately guidance table because it seems like export tons are missing et cetera, but we still think the thermal segment is going to contribute a significant amount of cash in 'twenty one.

Speaker Change: Yes.

Paul A. Lang: One thing I think I'd like to just kind of touch on again, and then John will finish. I know it's a little odd that we're gagging below what was sold by about a million or a million and a half tons. I think it's just plain and simple recognition that natural gas has fallen so much in the last couple of weeks. We're expecting pretty hard pushback.

Speaker Change: One thing I think I'd like to just kind of touch on again, another a second job.

Speaker Change: I know, it's a little odd we're guiding below sold by about $1 million million tons. I think is just plain and simple the recognition.

Speaker Change: Natural gas has fallen so much in the last couple of weeks.

Speaker Change: We're expecting pretty hard pushback now, we'll get that value.

Paul A. Lang: We'll get that value. I think it's the reality, and I think we wanted to show it in our guidance. Yeah, thank you.

Speaker Change: I think gets the reality and I think we wanted to show it in our guidance.

Speaker Change: Yeah. Thank you that's it.

Lucas Nathaniel Pipes: That's exactly what I wanted to get at. If you look at the guidance table, you're committed to call it 17 bucks, and cash cost guidance is 16 to 17, so maybe to help us understand this better, in today's Newcastle price environment and what you have left to sell at West Elk, maybe domestically as well, where would you expect that $1,709 to trend in today's market environment? So Lucas, maybe we'll punch him on that.

Speaker Change: Exactly what I wanted to get at if you look at the guidance table committed at.

Speaker Change: 17 box.

Speaker Change: Cash cost guidance is 60.

Speaker Change: 16 to 17, so so maybe two to help.

Speaker Change: Just to understand this better in today's Newcastle price environment, and what you have left to sell at west Elk, maybe domestically as well.

Speaker Change: What would you expect that 17 O $9 to trend in today's market environment.

So look it may well times on that I mean, right now you can look at it as you know the net backs could be sort of in the in the 40 sort of 40, plus dollar range, but look there are a lot of moving parts with west Alpha and again, we grant you that theres, a little that guidance table might cause a little confusion, but you know.

John T. Drexler: I mean, right now, you can look at it as, you know, the net VACs could be sort of in the 40s, sort of, you know, 40 plus dollar range. But look, there are a lot of moving parts at West Elk. And again, we grant you that there's a little, you know, that guidance table might cause a little confusion. But, you know, the reality is there are so many moving parts at West Elk, given, you know, in the wake of some of the quality issues we had in 2023. That, you know, we do think there is a meaningful margin still to be gained. And even with, you know, what I just described, you know, in that sort of mid $40 range of net VAC, we still believe that when you sort of factor in some of the volumes that aren't priced, again, you're going to see a widening out of a solid margin from the thermal segment as a whole.

Speaker Change: The reality is there's so many moving parts at west Elk in the wake of some of the quality issues. We had in 2023 that that you know we do think there is a meaningful margins still to be gained and even with what I. Just described and that sort of mid $40 range of net backs, we still believe that when you sort of factor in some.

Speaker Change: The volumes that are priced again, youre going to see a widening out in a solid margin from the thermal cycle. Those all Lukas I mean, you're hitting on it that you hit on it with.

Speaker Change: With that additional export volume even in these cast at prices that are down from where they have been.

Speaker Change: We'll move that number up it's in the guidance table over the course of the year I think that's kind of been the historical practice you would have seen from us as well if you go back to the previous quarters, beginning of the year et cetera.

Speaker Change: Thank you and sorry, if I missed it how many westfeldt tons are uncommitted on price today.

Speaker Change: And with that I'll go into the export market with that 40 something dollars netback.

Speaker Change: So it would be if it's close to a million times that wouldn't be that would not be priced as yet.

Speaker Change: Got it alright.

This is very helpful gentlemen, I really appreciate all the color and I'll turn it over best of luck.

John T. Drexler: Lucas, I mean, you're hitting on it, you know, with that additional export volume, even at Newcastle prices that are down from where they have been, that will move that number up that's in the guidance table over the course of the year. I think that's kind of the historical practice you would have seen from us as well. If you go back to the previous quarters, the beginning of the year, et cetera. Thank you, and sorry if I missed it.

Speaker Change: Thank you Lucas.

Speaker Change: The next question will come from catcher Atlantic with BMO capital markets. Please go ahead.

Catcher Atlantic: Hi, Thank you for taking my question.

Speaker Change: Hang on west.

Much to the west all contribute in 'twenty three.

Atlantic: So Scott you once again, where we are as we've indicated this past year in 'twenty three west Elk.

Atlantic: While it was constrained and had issues. It produced 3 million tons, we expect that to grow in the 4 million tons. So we do see an enhancement there given where the international markets. We're in with some of the challenges we had we still had.

Lucas Nathaniel Pipes: How many West Elk pounds are uncommitted on price today? And would they all go into the export market with that $40-something dollar net back? So it would be, it's close to a million times more expensive than it would be, it would not be priced as yet. Got it.

Atlantic: Nice margin that at West Elm now you've got as we just talked about some pressures in the markets themselves as we step into 24 of left out, but you see a very meaningful increase in bottles. So the contribution as we see it is probably flattish between 'twenty three and 'twenty four and still resulted in a.

Lucas Nathaniel Pipes: All right. This is very helpful, gentlemen. I really appreciate all the color, and I'll turn it over.

Atlantic: And a nice cash flow for the for that complex contributing to the thermal segment.

Lucas Nathaniel Pipes: Best of luck. Thank you, Lucas. The next question will come from Katja Jancic of BMO Capital Markets. Please go ahead.

Atlantic: Maybe just a little bit more granularity deck again, probably trying to 15 dollar margin is how do we think about that for the 3 million tons.

Atlantic: Think about that 10 to $15 margin kind of what we're saying is look you can see that volume that John just described the 3 million ton step up to four plus maybe that margin gets compressed a little bit in the current environment. So maybe that's maybe that's helpful.

Katja Jancic: Hi, thank you for taking my question. Staying on West Elk, how much does West Elk contribute in 23? So Katja, you know, once again, we're as we've indicated this past year in 23 West Elk, while it was constrained and had issues that produced 3 million tons, we expect that to grow to 4 million tons. So we do see an enhancement there, given where the international markets were and with some of the challenges we had, we still had a nice margin at West Elk. Now, you've got, as we just talked about, some pressures in the markets themselves as we step into 24 West Elk, but you see a very meaningful increase in volume. So the contribution, as we see it, is probably flattish between 23 and 24 and still results in a nice cash flow for that complex contributing to the thermal cycle.

Speaker Change: No. That's super helpful. Thank you and then on the met side.

Speaker Change: Youre guiding eight six to nine do you still overtime expect you can get to 10 million tons.

Speaker Change: So katja.

Speaker Change: I think yes, we've continued to have discussions around the met portfolio.

Speaker Change: We are comfortable, especially as leer, south transitions into district, too that we're going to see volumes.

Katja: 90 plus million ton level.

Speaker Change: We will continue to do everything to.

Speaker Change: Our focus on on getting that to the highest amount of production that we can out of that portfolio.

Speaker Change: We do expect it to be well north of nine.

Speaker Change: And you know that.

Speaker Change: That will be a great.

Speaker Change: That portfolio and if we can push it up the debt will be working to do that as well, but it's it's too early for that far out to really solidify some of that guidance.

Speaker Change: Paul One thing I'd add is I'll give John and see them a lot of credit.

Paul A. Lang: As he noted in his remarks, we came through October November as expected.

John T. Drexler: And maybe just a little bit more granularity back again, probably 10 to 15 dollars of margin is how you would think about that for the 3 million tons. If you think about that 10 to 15 dollar margin, kind of what we're saying is, if you could see that volume that John just described, the 3 million tons step up to 4 plus, maybe that margin gets compressed a little bit in the current environment. So maybe that's maybe that's helpful. No, that's super helpful.

Paul A. Lang: Through some bad conditions, we hit December and the new panel the mine ran as well as we've seen them wrong.

Paul A. Lang: No we could run the volumes.

Paul A. Lang: Getting a lot of confidence in what I saw and why.

Paul A. Lang: So the team produced so I still remain fairly optimistic.

Speaker Change: Okay. Thank you I'll hop back into the queue.

Speaker Change: Great question.

Speaker Change: The next question will come from Nathan Martin with the Benchmark Company. Please go ahead.

Nathan Martin: Yeah. Thanks, operator, good morning, everyone. Thanks for taking my questions.

Nathan Martin: Good morning.

Nathan Martin: Maybe just a follow up on the most recent question as we think about the met operations.

In General again, I think you guys said in the past eventually get to that 10 million ton run rate.

Nathan Martin: But just to be clear does that include the thermal byproduct tons, because I know some people I think have likely assume that that was just coking coal. So if that does include the byproduct tons.

Katja Jancic: Thank you. And then on the MET side... You know, you're guiding 8.6 to 9. Do you still, over time, expect to get to 10 million tons? So Katja, you know, I think as we continue to have discussions around the MET portfolio, we are comfortable, especially as LearSouth transitions into District 2, that we're going to see volumes at that nine plus million ton level. You know, we'll continue to do everything to focus on getting that to the highest amount of production that we can out of that portfolio. And, you know, we do expect it to be well north of nine.

Nathan Martin: Then in theory or coking coal tons more likely in the low 9 million kind of range just would be great to get your thoughts on the right way to think about that.

Nathan Martin: So Nathan when we're talking about Matt and these numbers, we're using in the goal of ultimately maximizing the met sales that's just the math and it excludes the thermal byproduct.

Nathan Martin: We mine across our portfolio as part of the production and processing.

Nathan Martin: You are left with that product.

Speaker Change: So that's incremental to the to the <unk>.

Speaker Change: Volume the net volume that you have there so.

Speaker Change: If you add in the midst product then yes, we.

Speaker Change: We will be over 10 million tons, when you add back the impact of the.

Speaker Change: Of the Miss.

Speaker Change: We look longer term absolutely.

Speaker Change: Okay. John just wanted to make sure that was clear for everyone. I appreciate that and then maybe sticking with met for a second.

John T. Drexler: And, you know, that will be a great MET portfolio. And if we can push it up to 10, we'll be working to do that as well. But it's too early for that far out to really solidify some of that guidance. That is Paul.

Speaker Change: Thoughts guys on on this historically widespread between U S East coast met coal, but high volt and you're also met coals, especially given your high portion of mix too.

Speaker Change: Production and then.

Speaker Change: How do you see that possibly affecting your realized price per ton in 'twenty four and what do you think it takes for.

Paul A. Lang: The one thing I'd add is, you know, I'll give John and his team a lot of credit. As he noted in his remarks, we came through October-November as expected through some bad conditions. We hit December in the new panel. The mine ran as well as we've seen it run, and we know we can run the volume.

Speaker Change: The spread to kind of return closer to normal.

Speaker Change: Yeah, Nathan it's back and let me, let me take a shot at that and others can join in and obviously, we don't have a perfect answer. This is a very wide differential historically, we think it's too why we think it will close over time, because it creates a significant arbitrage opportunity, but as you noted the average over the past seven years between.

Speaker Change: Average differential over the past seven years has been.

Speaker Change: 10 dollar or sub premium for premium low vol.

Paul A. Lang: I gained a lot of confidence in what I saw and what I saw the team produce, so I still remain fairly optimistic. Okay, thank you. I'll hop back into the queue.

Speaker Change: Well, if you can make the argument that the spread could could reasonably be assumed to be around $20. That's the that's the transportation differential between moving tons from the Australia into Japan versus the U S East coast and in Japan.

Nathan Pierson Martin: See you next time. Take one, John. The next question will come from Nathan Martin with the Benchmark Company. Please go ahead. Yeah, thanks, Operator. Good morning, everyone. Thanks for taking my question. Good morning, everyone.

Speaker Change: The fact is it's more than $50. Today, you know one of the things I would point to as you know different products play different roles in coking coal blends and so you know right now as we discussed and as Paul noted coking coal exports out of Australia are down 40 million tonnes 40 million metric tons since 2016.

Speaker Change: We continue to see operational challenges there. So there's real pressure on availability of premium low vol and premium level does have a very specific role that it plays in blend and so look I think you're scarcity. There I would add the fact that with costs and royalties moving up in Australia and that also is supporting that.

Operator: Maybe just to follow up on that most recent question, you know, as we think about the Met operations in general, again, I think you guys have done in the past, eventually get to that 10 million ton run rate, but just to be clear, does that include the thermal byproduct tons? Because I know some people, I think, have likely assumed that that was just coking coal. So if that does include the byproduct tons, then in theory, or coking coal tons, you know, more likely in the low 9 million kind of range, would be great to get your thoughts on the right way to think about that. So Nathan, when we're talking about MET and these numbers, we're using it as the goal of ultimately maximizing MET sales. You know, that's just the MET that excludes the thermal byproduct.

Speaker Change: Higher premium low vol price.

Speaker Change: Not to say that's justification because again, we think this creates a significant arbitrage opportunity for us to sell our times in the Asian market rather than into the Atlantic market and for the Asian buyers to reach them onto the U S East coast to pick up a ton and so look we still expect that that spread to two contracts.

Speaker Change: I do believe the fact that there are fewer U S producers, who really have a lot of experience and exposure in Asia is more U S producers get that exposure now I do think that creates more of an opportunity to see that you know that.

Speaker Change: Equilibration of that of those two those two prices and then look we're glad to see the higher PLD price, we absolutely believe that H b any of the other U S East coast prices should be pulled up over time by the scarcity there.

Speaker Change: I think probably interesting things Vegas.

Speaker Change: With Leer.

Operator: You know, as we mine across our portfolio as part of the production and processing, you are left with that MIDS product, you know, so that's incremental to the volume, the MET volume that you have there. So, you know, if you add in the MIDS product, then yes, we will be over 10 million tons when you add back the impact of the MIDS as we look longer term, absolutely. Okay, John, just wanted to make sure that was clear for everyone. I appreciate that. And maybe stick with MET for a second.

Speaker Change: We have that.

Speaker Change: Unusual ability for the U S that we can compete closer to a purely because of the CSR plastic.

Speaker Change: Copies of the coal.

Speaker Change: Because of that we do get an.

Speaker Change: The opportunity to participate in that arbitrage.

Speaker Change: Well, it's a little odd that in.

Speaker Change: I think that did a good summer.

Speaker Change: Summary of all of those things that are going on that are create.

Speaker Change: No right now we have that ability to compete head to head and we will take advantage of it.

Speaker Change: Yes.

Speaker Change: And then we are selling and we are taking advantage of it in certain instances. So there are times where selling.

Speaker Change: E L D and other instances.

Speaker Change: It may be that we there are buyers in Asia, who are quite willing to pay that price because they don't need that full quality. So we can we can sell a lower quality product with a little more ash and take advantage of a blend between P. L D and some of the other indices and still get a premium U S East coast price. So we absolutely are tapping.

Nathan Pierson Martin: Any thoughts guys on this historically wide spread between US East Coast MET coals like high volet and the Aussie MET coals, especially given your high portion of mix to HVA production? And then, you know, how do you see that possibly affecting your realized price return in 24? And what do you think it takes for the spread to kind of return closer to normal? Yeah, Nate, it's Beck.

And of that and taking advantage, but it would be nice to see the entire east coast.

Speaker Change: Get lift and I think again that would take some of our competitors following suit and being able to sort of penetrate into Asia and the way we have.

I appreciate those comments guys and then maybe one final question, Paul or maybe Matt just as it relates to the discretionary cash flow again, you guys mentioned in your decision to increase your cash position quarter over quarter.

Paul A. Lang: And let me take a shot at that, and others can join in. Obviously, we don't have a perfect answer. This is a very wide differential historically, but we think it's too wide.

Speaker Change: The effect of share repurchases I think you only spent about $3 million in the fourth quarter. There now talk is moving to heavier more opportunistic share repurchases. So I guess first can.

Paul A. Lang: We think it will close over time because it creates a significant arbitrage opportunity. But as you noted, the average differential over the past seven years has been a $10 or so premium for premium low ball. Look, you could make the argument that the spread could reasonably be assumed to be around $20. That's the transportation differential between moving tons from, say, Australia into Japan versus the U.S. East Coast into Japan.

Speaker Change: Can you provide maybe just some more details behind your decision to build that cash stream <unk> I think the average share price was below where it has been to start the year here and then second you know should we expect the return of discretionary cash flow, obviously other than the dividend to.

Speaker Change: To continue to kind of be lumpy and then finally would you expect to increase your buyback authorization as you shift to buying back more stock.

Speaker Change: Well, Dan I think I'll start this but I think that's probably a group effort.

Paul A. Lang: But the fact is, it's more than $50 today. One of the things I would point to is that different products play different roles in coal blends. And so, right now, as we discussed, as Paul noted, coking coal exports out of Australia are down 40 million metric tons since 2016. And we continue to see operational challenges there. So, there's real pressure on the availability of premium low ball, and premium low ball does have a very specific role that it plays in blends.

Speaker Change: Look back over the counter drug program last few years.

Speaker Change: In fact, there was very little unchanged arguably arch took the lead in this area.

Speaker Change: Set the standard for colder.

Speaker Change: The fundamental premise of our shareholder return program is really pretty simple we live by it and this is the shareholders' money and we're going to return.

Speaker Change: And we have shareholders that preferred dividends or shareholders prefer buybacks and we've tried to be responsive.

The decision to build the $100 million on the balance sheet, it's really good responses from some of our shareholders.

Speaker Change: We should really hold onto some dry powder, when we see pullbacks in the market.

Speaker Change: You know like everybody in the commodities business, we experienced significant volatility.

Speaker Change: And I would expect that to be the case in the future as well.

Speaker Change: Well, we remain very constructive on the current seaborne coking coal market our story in general.

Paul A. Lang: And so, look, I think there's a scarcity there. I would add the fact that with costs and royalties moving up in Australia, that also is supporting that higher premium low ball price, not to say that's justification, but again, we think this creates a significant arbitrage opportunity for us to sell our tons into the Asian market rather than into the Atlantic market and for Asian buyers to reach onto the U.S. East Coast to pick up tons. So, look, we still expect that spread to contract. I do believe the fact that there are fewer U.S. producers who really have a lot of experience in exposure in Asia, and as more U.S. producers get that exposure, I do think that creates more of an opportunity to see that equilibration of those two prices.

Story in General also yeah, I'd say, if you see that by our willingness to exercise the capped call.

Speaker Change: Problem is with Jeff when we see pullbacks generally coincides with lower cash balances on the balance sheet and that's exactly what we're trying to take advantage.

Speaker Change: So I looked at it I look at our buybacks.

Speaker Change: The history of it and as I say, it's been pretty good stewards of shareholder money.

Speaker Change: 12 million shares we've bought back over the last six or seven years, we've averaged about $90.

I think in this pricing environment, its a pretty good story.

Speaker Change: We're clearly not better at picking the timing on buying and selling to our investors.

Speaker Change: We wanted to be prudent on how we deal with the buyback program and building cash towards the upper end of our target.

Speaker Change: Don't want to go trying to be a little more responsive.

Speaker Change: And then maybe just add a little bit to that.

Just to give you a specific example, if you go back to the middle of last summer when we saw the stock price dip when the met prices.

We were in the call it $110 a share maybe a little lower and you know as we entered Q3 of that year, we were at minimum liquidity levels. So we had.

Paul A. Lang: But look, we're glad to see the higher POV price. We absolutely believe that HVA and the other U.S. East Coast prices should be pulled up over time by the scarcity. Yeah, I think one of the interesting things, Nate, is that with LEAR, we have that unusual ability for the U.S. in that we can compete closer to a PLV because of the CSR plastic properties of the coal. And because of that, we do get an opportunity to participate in that arbitrage. Look, it's a little odd, but I think Jack did a good kind of summary of all the things that are going on that are great.

Speaker Change: Certainly we use the cash flow, we were generating at the time to buyback, but if you look at our Q3 buybacks relatively weak and if we had had a little dry powder at that time.

Speaker Change: You have done something more substantial and that's really the type of thing we're trying to build and the ability to do today is really be able to take advantage of those times, you know theres going to be volatility in this industry and we should be able to manage to take some of that volatility out of the trading for one but also to take advantage of times when we think that the.

Speaker Change: It's gotten a little lower than it really should be so.

Speaker Change: I think that's.

Speaker Change: The right way to look at the cash Bill when you think about.

Speaker Change: The part of your question regarding the Lumpiness of capital returns look for better or worse. The cash flows are fairly lumpy the way the business runs and so theres going to be some element of that but.

Paul A. Lang: You know, right now, we have that ability to compete head to head, and we'll take advantage of it while it exists. And we are selling. I mean, we are taking advantage of it in some instances. So, there are times we're selling, you know, tied to PLV. In other instances, you know, it may be that there are buyers in Asia who aren't quite willing to pay that price because they don't need that full quality.

Speaker Change: Hopefully what we've done by building some cashiers tried to smooth some of that out.

Speaker Change: Then as we look at the authorization look we'll continue to watch that I wouldn't be surprised if you are in the next quarter or so we need good potentially refresh that authorization, but that'll be a discussion with the board when the time is right.

Very helpful guys.

Speaker Change: Appreciate the time and best of luck in 'twenty four.

Speaker Change: The next question will come from Alex hacking with Citi. Please go ahead.

Speaker Change: Okay.

Alex: Yeah. Good morning can you hear me.

Alex: Yes.

Paul A. Lang: So, you know, we can sell a lower quality product with a little more ash and take advantage of a blend between PLV and some of the other indices and still get a premium over the U.S. East Coast price. So, we absolutely are tapping into that and taking advantage of it, but it would be nice to see the entire East Coast market lift. And I think, again, that would take, you know, some of our competitors following suit and being able to sort of, you know, penetrate into Asia in the way we have. Appreciate those comments, guys.

Alex: Okay. So I guess just coming back to Nate's question on H P. A.

Alex: You know pricing because your your gap's pretty wide right I think.

Alex: You know F O B, Australia H D. C was priced around $290 a short ton in the fourth quarter. You know you guys are realizing 195.

100, 100 dollar cap right and a lot of that has to do with the pricing of H B E.

Alex: I guess, how much of the issue there is with all the new supply because.

Alex: Leer South ramped up.

Alex: And it seems like mine number four in Alabama is also transition to HVA like is that the fundamental problem that we've just had a big chunk of new supply in our markets struggling to absorb it or is there something above and beyond that thank you.

Nathan Pierson Martin: And then maybe one final question, Paul, or maybe Matt, just as it relates to discretionary cash flow. Again, you guys mentioned your decision to increase your cash position quarter over quarter, obviously affecting share repurchases. I think you only spent about $3 million in the fourth quarter there.

Speaker Change: Yeah. So Alex Yeah, I mean look I think the right way to think about the spread with PLD Yeah right now it's about a $53 differential so that is simply a function of sort of market conditions and the aspects. We talked about now when you look at our average coking coal realizations the average HVA price in Q4.

Nathan Pierson Martin: You know, now the talk is moving to heavier, more opportunistic share repurchases. So I guess, first, can you provide maybe just some more details behind your decision to build that cash during 4Q? I think the average share price was below where it has been to start the year here.

Speaker Change: It was $281.

Speaker Change: When you think about sort of the art blended portfolio, we might be talking about something more like $75 would have been sort of the average price that prevails. So you take that $2 75, and you say, okay. That's shown in studies Hot dogs metric that's $250 short you assume a 50 a rail rate that's $200 and then when we think of.

Paul A. Lang: And then second, should we expect the return of discretionary cash flow, obviously other than the dividend, to continue to be lumpy? And then finally, would you expect to increase your buyback authorization as you shift to buying back more stock? I'll start this, but I think this is going to be a group effort. As I look back at the Catholic Tour Program in the last two years, in fact, there's very little I've changed.

Speaker Change: In fact, we had north American volumes committed at 182, and we're at a fixed price for about 40% of our volumes kind of lands you right on top of that $196 number. So look I would say, we're really delivering on that U S East coast HVA price or the U S East coast prices generally we're capturing that realization fully so we feel.

Speaker Change: We feel good about that.

Speaker Change: And I still believe that's the best proxy for US going forward is that U S East coast pricing, even though as indicated there'll be instances when we tried to move tons into Asia, a PLD price in instances, where we can do that or at a blended price in Asia. So look we feel good about that but I would say back to the issue of sort of what the differential.

Paul A. Lang: Arguably, ARCH took the lead in this area and really set the standard for the coal room. The fundamental premise of our shareholder return program is really pretty simple, and we live by it. This is the shareholders' money, and we're going to return it. We have shareholders that prefer dividends, and we have shareholders that prefer buybacks, and we've tried to be responsive. You know, the decision to build the $100 million on the balance sheet was really irrational from some of our shareholders, who thought we should really hold on to some dry power when we see pullbacks in the market. You know, like everybody in the commodities business, we experience significant volatility. And I'd expect that to be the case in the future as well. You know, while we remain very constructive on the currency board of the Coca-Cola market, our story in general also, and I think you see that by our willingness to exercise the cap code. The problem is that when we see pullbacks, it generally coincides with lower cash balances on the balance sheet.

Speaker Change: Was between T L D and H Yea again, some of those some of those fundamentals that we discussed certainly don't view this as a new supply issue yes.

Yes.

Speaker Change: Production did bounce back about 5 million tonnes of exports bounce back about 5 million tonnes in 2023.

Speaker Change: But Australia was down 10 million tonnes, so and.

Speaker Change: In reality the seaborne market.

Lost supply during 2023, so we certainly don't see that as the issue with suggested the 5 million tons out of the U S was really just for the most part ringing additional volumes out of the existing portfolio. There aren't a lot of shiny new assets being added so we see sort of limitations to how much.

You know the U S can can move up but again, we think the market is really quite well supported we think will continue to have opportunities to move additional volumes in Asia were shipping 40% of our times in Asia. Today, we expect that to be you know, 50% in relatively short order and probably 16 thereafter, so look where we're moving in the right direction.

Paul A. Lang: And that's exactly what we're trying to take advantage of. So, you know, I look at our buybacks. The history of it has, I think, been pretty good stewards of the shareholder money. The 12 million shares we've bought back over the last six or seven years, we've averaged about $90. I think in this price and environment, it's a pretty good story.

And to that sort of the center of all of the.

Speaker Change: The steel or steel, making future and so feel good about all of that.

Speaker Change: Okay. Thanks for the color you actually kind of answered my second question, which was going to be around.

Speaker Change: The tonnage that's going into Asia.

Speaker Change: So I guess real quick.

Speaker Change: I apologize if I missed this in terms of the shipments in the first quarter.

Paul A. Lang: We're clearly not better at picking the timing of buying and selling than our investors. You know, we wanted to be prudent in how we deal with the buyback program and build cash towards the upper end of the target, going with the goal of trying to be a little more responsive. And maybe just to add a little bit to that, you know, just to give you a specific example, if you go back to the middle of last summer, you know, we saw the stock price dip when the drug prices dipped. We were in the so-called $110 a share, maybe a little lower.

Speaker Change: They're gonna be weaker impacted by some logistical issues did you quantify that or can you quantify that thanks.

Speaker Change: We indicated they would be less than ratable for the $8 8 million tons.

Speaker Change: The word we used was modestly I think from a ratable perspective.

Speaker Change: Look to a 5% to 10%.

Speaker Change: Reduction from ratable on the 8.8, so you know that's a vessel or two Alex. So that's just the kind of timing that you're you're talking about here and we.

Speaker Change: We'll be making that up as we go forward, we don't have any concerns about that.

Matthew C. Giljum: And, you know, as we entered Q3 of that year, we were at minimum liquidity levels. So we had, you know, certainly used the cash flow we were generating at the time to buy back. But if you look at our Q3 buybacks, you know, relatively weak. And if we had had a little dry powder at that time, we really could have done something more substantial.

Speaker Change: Okay perfect. Thanks, Yes, Alan just nothing that suggests missing you know plus the two vessels. The 150000 times it doesn't it doesn't take much for for volumes to slip from one quarter to the next you know look I try.

Speaker Change: Hard to say as is moving quickly to resolve the issues.

Matthew C. Giljum: And that's really the type of thing we're trying to build in the ability to do today, to really take advantage of those times. You know, there's going to be volatility in this industry. And, you know, we should be able to take some of that volatility out of the trading for one, but also to take advantage of times when we think that the value has gotten a little lower than it really should be. So, I mean, I think that's the right way to look at the cash bill. When you think about, you know, the part of your question regarding the lumpiness of capital returns, look, for better or worse, the cash flows are fairly lumpy the way the business runs.

Speaker Change: You know when you were talking about a force majeure event in an outage that spanned multiple days that really does result in a change in kind of the efficiency and productivity of the facility and they did a great job.

Speaker Change: Getting things lined out but it was multiple days of outages. So again could have a small effect then we want to be prepared for the fact that we could see a couple of vessels slip out of Q1 into Q2.

Speaker Change: Okay. Thanks makes sense I get it every every vessel counts.

Speaker Change: Yeah.

Speaker Change: The next question will come from Michael Dudas with vertical research partners. Please go ahead.

Michael Dudas: Michael Hi, Michael.

Michael Dudas: No.

Michael Dudas: Mike, perhaps you're muted missed to do this.

Michael Dudas: Thank you very much fat fingers here.

Michael Dudas: Everyone.

Michael Dudas: So they're usually.

Michael Dudas: I don't know Rasp award cycles Alright.

Michael Dudas: Hum.

Michael Dudas: So anyway first thing on the medical front, maybe Matt you could go over.

Matthew C. Giljum: And so there's going to be some element of that, but hopefully, what we've done by building some cash here is try to smooth some of that out. And then as we look at the authorization, you know, look, we'll continue to watch that. I wouldn't be surprised if, in the next quarter or so, we need to potentially refresh that authorization. But that'll be a discussion we'll have with the board when the time is right. Very helpful guys. Appreciate the time and best of luck in 24. The next question will come from Alex Hacking with Citi. Please go ahead.

Michael Dudas: Admirable with.

Michael Dudas: Per ton costs flat, but what are you budgeting for 2024 on some of the input costs labor consumables are contracting royalties et cetera, what are moving at a better rate or higher rate than normal winter kind of contribute to help hope those costs as we move through 'twenty four and is that something similarly give.

Michael Dudas: With expected better volumes, we could think about for 2025.

Speaker Change: Preliminarily Michael no.

Michael Dudas: Good question I mean, you've hit on on everything I mean as as.

Michael Dudas: The economy recovered as supply chain issues prevail, we saw significant inflationary pressures in the industry.

Alexander Nicholas Hacking: Please see the complete disclaimer at https://sites.google.com or at www.google.com. Yeah, good morning. Can you hear me?

Michael Dudas: We saw supply chain issues pushing things out delaying.

Michael Dudas: Major pieces of equipment, what have you the team did a fantastic job of managing all of that and continues to do a great job of managing all of those things we continue to see higher inflation in certain things that are repair parts and supplies that we're acquiring we're seeing other things where inflationary has.

Alexander Nicholas Hacking: So I guess just coming back to Nate's question on HVA. You know, pricing, because your gap's pretty wide, right? I think. FOB Australia, HCC was priced around $290 a short ton in the fourth quarter.

Michael Dudas: Slowed down significantly.

Alexander Nicholas Hacking: You know, you guys are realizing $195. It's a $100 gap, right? And a lot of that has to do with the pricing of HVA. I guess how much of an issue there is with all the new supply? Because, you know, Leah South's ramped up, and it seems like mine number four in Alabama has also transitioned to HVA.

Michael Dudas: You know so that all gets factored in from a labor perspective labor stop at our industry. It really as we've talked about this at length before we're very fortunate that we have.

Michael Dudas: Got great long life low cost assets that operate incredibly safely have a great culture, our most important asset our employees and.

Michael Dudas: When they feel that way, our turnover is lower than than others.

Alexander Nicholas Hacking: Like, is that the fundamental problem that we've just had a big chunk of new supply and the market's struggling to absorb it, or is there something above and beyond that? Thank you. So Alex, yeah, I mean, look, I think the right way to think about the spread with PLV is that right now it's about a $53 differential. So, you know, that is simply a function of sort of market conditions and the aspects we talked about. Now, when you look at our average cooking coal realization, the average HPA price in Q4 was $281.

But still labor is another.

Michael Dudas: Another impact.

Michael Dudas: That is.

Michael Dudas: Affecting the cost.

Michael Dudas: As we sit here today to be able to move flat from 'twenty three to 'twenty four.

Michael Dudas: Obviously with some modest improvements in volumes, but still hard work by the team to manage costs across the board you know as we step forward into 'twenty five.

Michael Dudas: One of the wonderful things about our portfolio is our ability to continue to manage to that first top quartile cost structure. Once again high volumes great assets, great people running them and we think we're in a good position as we move forward.

Alexander Nicholas Hacking: You know, when you think about sort of the arch blended, you know, portfolio, you know, we might be talking about something more like $275. So you take that $275 and you say, okay, that's $275 metric, that's $250 short, you assume a $50 rail rate, that's $200. And then when we think about the fact that we had North American volumes committed at $182 that were at a fixed price for about 20% of our volumes, it kind of lands you right on top of that $196 number. So, look, I would say we're really delivering on that U.S. East Coast HPA price or the U.S. East Coast prices generally. We're capturing that realization fully.

Speaker Change: I appreciate that my second question, maybe for Paul John or maybe the group.

Speaker Change: Certainly there's been a pretty sizable shift in the.

Speaker Change: Thermal market in the U S gas prices be entering quite low.

Speaker Change: Maybe a sense of.

What your customers are thinking.

Thoughts on plant retirements piece or the speed up and as Youre thinking about the next several years. You know you did have a nice recovery when prices were strong because of the Ukraine issue couple of years ago.

And then the pace of maybe moderating or declining what.

Speaker Change: The P. R b assets will contribute in the marketplace, given what maybe it could be a little longer a trough in the market from a cyclical side relative to your other secular issues that face of your customers.

Speaker Change: Michael This is Paul I'll start off and let the other jump in yeah.

Paul: You know as I've said in the past when you look at this situation from pretty pragmatic point of view.

Paul: The last coal fired power plant in the United States was 10 years ago last year we.

Paul: We saw about 13 gigawatts of coal fired generation shut out of this mess.

Alexander Nicholas Hacking: So, you know, we feel good about that. And I still believe that the best proxy for us going forward is that U.S. East Coast price, even though, as indicated, there'll be instances when we try to move tons into Asia at the PLV price or instances where we can do that or at a blended price in Asia. So, look, we feel good about that. But I would say, you know, back to the issue of sort of what the differential is between PLV and HPA, again, some of those fundamentals that we discussed certainly don't view this as a new supply issue.

Paul: And there is expected to be another 7 million never spent another seven gigawatts and 24.

Paul: Yeah.

Paul: The funny thing is though at the same time in 2023 was a record year for global coal consumption.

Paul: Excuse me 2022 was in 2023 it was looking like it also is going to be another record year.

Paul: The.

Paul: Thermal market as well as the seaborne thermal art as well as seaborne coking coal market.

Paul: Still remains very strong and if you have assets in the U S that can get Colo floor. It still has a very good outlook in west Elk is a prime example of that where.

Paul: It's a KOL that sits very well in the Asian market because of its low ash and low sulfur and high C D.

Speaker Change: So you know.

Speaker Change: I think there is diminished.

Speaker Change: Diminishing role in the U S for coal.

Alexander Nicholas Hacking: Yes, you know, U.S. production did bounce back about 5 million tons, or exports bounced back about 5 million tons in 2023, but Australia was down, you know, 10 million tons. So, in reality, the seaboard market lost supply during 2023. So, we certainly don't see that as the issue, you know, suggesting that the 5 million tons out of the U.S. were really just, for the most part, bringing additional volumes out of the existing portfolio. There aren't a lot of shiny new assets being added.

Our kind of internal view is that the <unk> will continue to drop about five or 10% a year.

Speaker Change: I think what you're seeing or we could see in 2024 heading into the early part of the year is okay $1 70 natural gas, it's a pretty tough road to go forward.

Speaker Change: And Michael.

Mhm.

Speaker Change: Agree with all of that obviously, but look last year utility consumption was around 390 million tons in the U S. I'll go back to 2018 was $1 1 billion. So clearly you know theres been a pretty a pretty steep glide path here.

Speaker Change: We are absolutely prepared if we start to see a plateau.

Speaker Change: We're prepared to.

Speaker Change: Thank you to produce at higher levels had the ability to do that we will take advantage of it and I think we've been you know we've been right to prepare for that sort of decline and do all the things that you that you know we've done shrink the footprint build the thermal mine reclamation fun. The pea are being shipped about 230 million tons in total.

Alexander Nicholas Hacking: So, we see, you know, sort of limitations to how much the U.S. can move up. But again, we think the market is really quite well supported. We think we'll continue to have opportunities to move additional volumes into Asia. We're shipping 40% of our tons into Asia today.

Speaker Change: In 2023, and as Paul said right now we expect that to continue to step down 10% per year, we're still probably makes sense, we could definitely see some delayed retirements of our power plants that you know that dollar 50 or $9 70 natural gas price right. Now is the green line, saying, you're okay to close I will say this concerns.

Alexander Nicholas Hacking: We expect that to be, you know, 50% in relatively short order and probably 60% thereafter. So, look, we're moving in the right direction into that sort of the center of the steelmaking future. And so, feel good about all that. Okay, thanks for the color.

Speaker Change: Without reliability are growing and there is more discussion we'll see if we end up with some you know some some more significant delays we've seen a few here lately.

Alexander Nicholas Hacking: You actually kind of answered my second question, which was going to be around, you know, the tonnage that's going into Asia. So let me just, I guess, real quick. I apologize if I missed this. In terms of the shipments in the first quarter, they're going to be, you know, affected by some logistical issues. Did you quantify that, or can you quantify that? Thanks. We indicated they'd be less than ratable for the 8.8 million tons; the word we used was modest. I think from a ratable perspective, you could look to a 5 to 10% reduction from ratable on the 8.8.

So we're prepared to go either direction. If it continues to decline in the way that it has we're prepared to bring the plane for a soft landing in the powder River basin.

Speaker Change: If suddenly we see a plateau, we're also ready to capitalize it and Michael I'll I'll round out those comments with just the wonderful folks out at our operation that have done an incredible job through the entirety of that cycle and through the decline over many years to continue to manage the asset and it.

Speaker Change: Nimbly.

Speaker Change: And to do it in a way.

Speaker Change: Manage the cost you know you go back to the high watermark for.

Speaker Change: The powder River basin, or Black Thunder was 117 million tonnes.

Alexander Nicholas Hacking: So, you know, that's a vessel or two, Alex. So, you know, that's just the kind of timing that you're talking about here, and we'll be making that up as we go forward. We don't have any concerns about that; two vessels, 150,000 tons; it doesn't, it doesn't take much for volumes to slip from one quarter to the next. You know, look, Curtis Bay is moving quickly to resolve the issues. But, you know, when you're talking about a force majeure event and an outage that, you know, spans multiple days, that really does result in a change in the efficiency and productivity of the facility. And they did a great job of getting things lined out. But it was multiple days of outage.

Speaker Change: This year. It was 60 right now you see us guiding to 50 through the entirety of that decade of change.

Speaker Change: The team there has embraced and continue to manage.

Speaker Change: And the cost and be able to put us in a position to continue to generate cash and we've got high confidence no matter, where that goes as we go forward that we're in a position to do the same thing as well.

Speaker Change: The next question will come from Crystal of FEMA with Jefferies. Please go ahead.

Crystal: Hey, Thanks, guys, it's crystal Femina.

Crystal: Just had a question about it.

Crystal: A question about the capital return strategy. So Paul you mentioned.

Cumulated this cash as dry powder, you have talked about in the past as well you've targeted $100 million of cash build what you achieved in the quarter.

Crystal: So as we go forward from here, let's assume that you don't get the pullback in your stock price should we then assume that.

Alexander Nicholas Hacking: And so, again, could have a small effect. And we want to be prepared for the fact that we could see a couple of vessels slip out of Q1 into Q2. Okay, thanks. Makes sense. I get it. Every, every vessel counts.

All free cash flow will be returned to shareholders and it's really just a question of whether it's dividends or buybacks or do we continue to accumulate more cash waiting for that potential pull back to happen. That's my first question.

Alexander Nicholas Hacking: Thanks. And the next question will come from Michael Dudas with Vertical Research Partners. Please go ahead. Ordered, Michael. Hey, Michael.

Speaker Change: Well, Chris I think the real simple answer is that we got ourselves to where we said the kind of the upper end of our.

Speaker Change: Cash range is and were ready to move on.

Michael Stephan Dudas: Bye! All right, perhaps we'll unmute it, Mr. Dudas. Thank you very much. Fat finger here. Good morning, everyone.

Speaker Change: We've positioned ourselves very well.

Speaker Change: And I think Theres two strong arguments for moving forward with heavier share repurchase.

Chris: Yeah, I think first and foremost is the discussion here earlier.

Chris: The fundamentals for the metallurgical segment are still pretty good.

Michael Stephan Dudas: So anyway, first thing on the METCOL front, maybe Matt can go over it, you're admirable with the per ton cost flat, but what are your budgeting for 2024 on some of the input costs, labor, consumables, contracting, royalties, et cetera? What are moving at a better rate or higher rate than normal and want to kind of contribute to help those costs as we move through 2024? And is that something similarly given with expected better volumes we could think about for 2025? Good question. I mean, you hit on everything.

Speaker Change: Alright, two news.

Speaker Change: It looks pretty strong over the medium to short term.

Speaker Change: That's probably not baked in the dynamic or it's not reflected in our share price.

Speaker Change: Second as John pointed out we expect ongoing operational improvement.

Speaker Change: 'twenty four 'twenty five.

Speaker Change: I think we set ourselves up well for what's coming.

Speaker Change: And I feel good about the position we put ourselves.

Speaker Change: We don't you know one thing I'll add Chris.

Speaker Change: We're as Paul said on the cash balance were at the level. We wanted to be at I think I was pretty clear in my my prepared remarks, we don't see the need to build that here in 2024, maybe one one data point as we look at the cap call, which.

Speaker Change: It's going to be something similar to a share repurchase the break even if you look at where we're at today from a share price perspective and.

John T. Drexler: I mean, as the economy recovered, as supply chain issues prevailed, you know, we saw significant inflationary pressures for the industry. We saw supply chain issues pushing things out, delaying, you know, major pieces of equipment, you know, what have you. The team did a fantastic job of managing all of that and continues to do a great job of managing all of that. However, we continue to see higher inflation in certain things like repair parts and supplies that we're acquiring. We're seeing other things where inflation has slown down significantly. So that all gets factored in. From the labor perspective, labor is tough in our industry. It really is.

Speaker Change: And where we would need to be in 2025 two.

Speaker Change: Make this a better best to do it today currently sits.

Speaker Change: A little less than $200 a share and then if we look at it that way.

Speaker Change: We look at our plans, we look at what where we think we'll be able to achieve in terms of capital returns over the next couple of years, we think it's better to do this today.

Speaker Change: And so you know.

Speaker Change: That in translating into share repurchases, we think we're in a position that.

Speaker Change: In today's share price environment, we've got a lot of a lot of.

Speaker Change: Actually we're going to generate to buy back shares and then if we do see a pullback in.

Speaker Change: In the.

Speaker Change: The World, where we don't have a pullback would be one of the first times I think we've seen something like that in a long time in our business but.

Speaker Change: We don't see a pull back we're going to be spending a 100% of the cash flow.

Speaker Change: As we sit here today, returning that to shareholders.

Speaker Change: And is there a kind of number on a pullback that you'd be looking for I'm not sure. If you can answer that question, but your stock's down 15% from its recent high is that enough of a pullback or does it have to be.

John T. Drexler: We've talked about this at length before. We're very fortunate that we've got great, long-lived, low-cost assets that operate incredibly safely, and have a great culture. Our most important asset are our employees. And when they feel that way, our turnover is lower than others.

Speaker Change: It's much more significant than that.

Speaker Change: But I don't think we want to get into.

Speaker Change: Where we're going to be a certain price points I think where we sit today with the stock has done a reaction to this I think we'd be fairly fairly.

Paul A. Lang: But still, labor is another impact that is affecting the cost. As we sit here today, to be able to move flat from 23 to 24, obviously with some modest improvements in volumes, but still hard work by the team to manage costs across the board. As we step forward into 25, one of the wonderful things about our portfolio is our ability to continue to manage to that first quartile cost structure. Once again, high volumes, great assets, and great people running them. We think we're in a good position as we move forward. I appreciate that. My second question, maybe for Paul, John, or maybe the group.

Speaker Change: Fairly active in the repurchase program.

Excellent. Thank you.

Yeah.

Speaker Change: Hey, Craig.

Speaker Change: Yes.

Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Mr. Paul Lang for any closing remarks. Please go ahead Sir.

Paul A. Lang: Alright. Thank you again for your interest in arch as I noted earlier, we remain focused on pursuing operational excellence.

Delivering on our volume and cost targets, while driving continuous improvement across the portfolio.

Paul A. Lang: At the same time, we continue to reward shareholders through our capital return program.

Paul A. Lang: We're intensifying our focus on share repurchase.

Paul A. Lang: And Opportunistically shrinking.

Paul A. Lang: We did share count over time.

Speaker Change: With that operator, we'll conclude the call.

Speaker Change: Look forward to reporting of the group.

Speaker Change: Stay safe and healthy with one.

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

Speaker Change: Yeah.

Speaker Change: [music].

Paul A. Lang: Certainly, there's been a pretty sizable shift in the thermal market in the U.S. where gas prices are meandering quite low, maybe a sense of what your customers are thinking, any thoughts on plant retirements, pace, you know, the speed up. And as you're thinking about the next several years, you know, we did have a nice recovery when prices were strong because of the Ukraine issue a couple years ago, and then the pace of maybe moderating or declining. The PRB assets will contribute in the marketplace given what maybe could be a little longer trough in the market, you know, from a cyclical side relative to the other secular issues that face your customers. My name is Paul.

Paul A. Lang: I'll start off and let the others jump in. You know, as I've said in the past, we look at this situation from a pretty pragmatic point of view. The last coal-fired power plant built in the United States was 10 years ago.

Speaker Change: Hum.

Speaker Change: [music].

Paul A. Lang: Last year, we saw about 13 gigawatts of coal-fired generation shut down, and there's expected to be another seven gigawatts in 2020. You know. The funny thing is, though, at the same time, 2023 was a record year for global coal consumption. And, or excuse me, 2022 was, and 2023 is looking like it also is going to be another record, thermal market as well as seaboard and thermal, or as well as seaboard and coking coal market. It still remains very strong, and if you have assets in the U.S. that can get coal offshore, it still has a very good outlook. And West Elk is a prime example of that, where, you know, it's coal that sells very well in the Asian market because it has low ash and low sulfur and high CV.

Speaker Change: Yeah.

Speaker Change: [music].

Paul A. Lang: So I think there is a diminishing role in the U.S. for coal. You know, our kind of internal view is that the PRV will continue to drop about five or ten percent a year, and I think what you're seeing, or we could see in 2024 heading into the early part of the year, is look at $1.70 natural gas. It's a pretty tough road to go forward. Yeah, and my God, yeah, I would.

Paul A. Lang: I agree with all that, obviously, but look, last year, utility consumption was around 390 million tons in the U.S. Go back to 2008, and it was 1.1 billion. So clearly, there's been a pretty steep glide path here. We are absolutely prepared. If we start to see a plateau, we're prepared to continue to produce at higher levels, have the ability to do that, and we'll take advantage of it, but I think we've been right to prepare for that sort of decline and do all the things that you know we've done, shrink the footprint, build the Thermal Mine Reclamation Fund. The PRB shipped about 230 million tons in total in 2023, as Paul said.

Paul A. Lang: Right now, we expect that to continue to step down 10% per year or so, which probably makes sense. We could definitely see some delayed retirements of power plants, but that $1.50 or that $1.70 gas price right now is a green light saying, you know, you're okay to close. I will say this: concerns about reliability are growing, and there is more discussion. We'll see if we end up with some, you know, some more significant delays. We've seen a few here lately.

John T. Drexler: So we're prepared to go either way. If it continues to decline the way that it has, we're prepared to bring the plane in for a soft landing in the Pembroke River Basin. You know, if suddenly we see a plateau, we're also, you know, ready to capitalize. And Michael, I'll round out those comments with just the wonderful folks out at our operation that have done an incredible job through the entirety of that cycle and through the decline over many years to continue to manage the asset nimbly and to do it in a way to manage the costs. You know, you go back to the high water mark for the Ponder River Basin or Black Thunder was 117 million tons. You know, this year it was 60.

Speaker Change: Yeah.

Speaker Change: [music].

John T. Drexler: You know, right now, you see us guiding to 50 through the entirety of that decade of change. The team there has embraced and continued to manage the cost and been able to put us in a position to continue to generate cash. And we've got high confidence, no matter where that goes as we go forward, that we're in a position to do the same thing. The next question will come from Chris LaFemina with Jeffries. Please go ahead. Hey, thanks guys. It's Chris LaFemina.

Speaker Change: Yeah.

[music].

Christopher LaFemina: Just had a question about the capital return strategy. So Paul, you mentioned accumulating this cash as dry powder, which you've talked about in the past as well.

Paul A. Lang: You've targeted $100 million in cash build, which you achieved in the quarter. So as we go forward from here, let's assume that you don't get the pullback in your stock price. Should we then assume that all free cash flow will be returned to shareholders, and it's really just a question of whether it's dividends or buybacks? Or do we continue to accumulate more cash waiting for that potential pullback to happen? That's my first question. Well, Chris, I think the real simple answer is that we got ourselves to where we said the kind of upper end of the Cash Range is, and we're ready to move on. I think we've positioned ourselves very well, you know, and I think there are two strong arguments for moving forward with a heavier share rate. You know, I think first and foremost the discussion here earlier. The fundamentals for biological pavement are still pretty good.

Paul A. Lang: Pricing, you know, looks pretty strong over the medium to short term. That's probably not faked in the dynamic, or it's not reflected in our share price. And second, as John pointed out, we expect ongoing operational improvement in 24 and 25. So, you know, I think we have set ourselves up well for what's coming, and I feel good about the position we have put ourselves in. You know, one thing I'll add, Chris, you know... We're, as Paul said, you know, on the cash balance, we're at the level we wanted to be at. And I think I was pretty clear in my prepared remarks. We don't see the need to build that here in 2024.

Matthew C. Giljum: Maybe one data point, you know, as we look at the cap call, which is going to be something similar to a share repurchase, you know, the break even, if you look at where we are today from a share price perspective and where we would need to be in 2025 to make this a better bet to do it today. It currently sits at a little less than $200 a share. And if we look at it that way, if we look at our plans, and we look at what we think we'll be able to achieve in terms of capital returns over the next couple of years, we think it's better to do this today. And so, you know, taking that and translating it to share repurchases, we think we're in a position that, in today's share price environment, we've got a lot of cash we're going to generate to buy back shares.

Speaker Change: Yeah.

Speaker Change: [music].

Matthew C. Giljum: And then, if we do see a pullback, and you know, in a world where we don't have a pullback would be one of the first times I think we've seen something like that in a long time in our business, but if we don't see a pullback, we're going to be spending 100% of the cash flow as we sit here today returning that to shareholders. And is there a kind of number on a pullback that you'd be looking for?

Christopher LaFemina: I'm not sure if you can answer that question. But you know, your stock's down, I don't know, 15% from its recent high. Is that enough of a pullback? Or does it have to be much more significant than that?

Speaker Change: Yeah.

Speaker Change: [music].

Paul A. Lang: I don't think we want to get into, you know, where we're going to be at certain price points. I think where we sit today, and what the stock has done in reaction to this, I think we'd be fairly active in the repurchase program. Excellent, thank you. [inaudible] This concludes our question and answer session. I would like to turn the conference back over to Mr. Paul Lang for any closing remarks. Please go ahead, sir. I want to thank you again for your interest in the arts. As I noted earlier, we remain focused on pursuing operational excellence, delivering on our volume and cost targets while driving continuous improvement across portfolios. [inaudible] We're intensifying our focus on share repurchase and opportunistically shrinking our diluted share count over time. So that, Operator, will conclude the call, and we look forward to reporting to the group in May. Stay safe and healthy, everyone. Thank you. The conference is now concluded. Thank you for attending today's presentation.

Operator: You may now disconnect. [inaudible] [inaudible] ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? © BF-WATCH TV 2021, © The Ultimate Parody Site! Copyright © 2021 Mooji Media Ltd. All Rights Reserved. No part of this recording may be reproduced without Mooji Media Ltd.'s express consent. [inaudible] © BF-WATCH TV 2021 [inaudible] ?? ?? ?? ?? ?? ?? ?? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? A film by Michael Dudas Directed by Michael Dudas Written by Michael Dudas Directed by Michael Dudas Music by Michael Dudas Edited by Michael Dudas Produced by Michael Dudas Music by Michael Dudas Edited by Michael Dudas Edited by Michael Dudas [inaudible] Cinematography by Michael Dudas Sound by Michael Dudas Editing by Michael Dudas Music by Michael Dudas Sound by Michael Dudas Music by Michael Dudas Sound by Michael Dudas Edited by Michael Dudas Sound by Michael Dudas Music by Michael Dudas, © The Ultimate Parody Site!