Q4 2023 NACCO Industries Inc Earnings Call
Operator: Thank you. Thank you. Good morning, ladies and gentlemen, and welcome to the NACCO Industries fourth quarter and full year 2023 earnings conference call. At this time, all lines are in a listen-only mode.
Yeah.
Yeah.
Good morning, ladies and gentlemen, and welcome to the Nacco industries fourth quarter and full year 2020 earnings conference call. At this time all lines are in a listen only mode.
Operator: Following the presentation, we welcome back a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, March 7, 2024. I would now like to turn the conference over to Christina Kmetko, Investor Relations. Please go ahead.
Following the presentation, we will conduct a question and answer session.
But any time during this call you acquired them you get this escape the special Star zero by the operator. This call is being recorded on Thursday March seven 2024, I would now like to turn the conference over to Christina <unk> Investor Relations. Please go ahead.
Christina Kmetko: Thank you. Good morning, everyone. And welcome to our fourth quarter and full year 2023 earnings call. Thank you for joining us this morning. I'm Christina Kmetko, and I'm responsible for investor relations at NACCO. Joining me today are JC Butler, President and Chief Executive Officer, and Elizabeth Loveman, Senior Vice President and Controller. Yesterday, we published our 2023 fourth quarter and full year results and filed our 10-K. This information is available on our website. Today's call is also being webcast.
Thank you.
Good morning, everyone and welcome to our fourth quarter and full year 2023 earnings call. Thank you for joining us. This morning, I'm, Christina Cameco and I'm responsible for Investor Relations at Nacco. Joining me today are J C Butler, President and Chief Executive Officer, and Elizabeth Loveland, Senior Vice President and controller.
Yesterday, we published our 2023 fourth quarter and full year results and filed our 10-K.
Information is available on our website today's call is also being webcast. The webcast will be on our website. Later this afternoon and available for approximately 12 months.
Christina Kmetko: The webcast will be on our website later this afternoon and available for approximately 12 months. The remarks that follow, including answers to your questions, contain forward-looking statements. These statements are subject to several risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements made here today. These risks include, among others, matters that we've described in our earnings release, 10-K, and other SEC filings. We may not update these forward-looking statements until our next quarterly conference call, and we will also be discussing non-GAAP information that we believe is useful in evaluating the company's operating performance. With the formalities out of the way, I'll turn the call over to J.C. for some opening remarks. Thank you, Christine. Good morning, everyone.
Remarks that follow including answers to your questions contain forward looking statements.
These statements are subject to several risks and uncertainties that could cause actual results to differ materially from those expressed in the forward looking statements made here today.
Risks include among others matters that we described in our earnings release 10-K, another SEC filings, we may not update these forward looking statements until our next quarterly conference call.
Well also be discussing non-GAAP information that we believe is useful in evaluating the company's operating performance.
Conciliations for these non-GAAP measures can be found in our earnings release and on our website with the formalities out of the way I'll turn the call over to JC for some opening remarks JC.
Thank you Christine and good morning, everyone. As we put 2023 behind us I'm pleased to be looking forward to 'twenty 'twenty four we expected 2023 to be challenging and it ended up being more difficult than we expected.
John C. Butler: As we put 2023 behind us, I'm pleased to be looking forward to 2024. We expected 2023 to be challenging, and it ended up being more difficult than we expected. That said, challenges are what make us stronger, and I definitely believe that we are entering 2024 in a very strong position. Our teams have delivered on our two key strategies to protect the core and grow and diversify, and we emerged from 2023 with a solid foundation for future growth. The unfavorable comparisons we experienced throughout 2023 should turn favorable in 2024 and lead to continuing improvement in the future. Before I get into our fourth quarter highlights, I'd like to recognize our outstanding employees.
That said challenges are what make us stronger and I definitely believe that we are entering 2024 and a very strong position.
Our teams have delivered on our two key strategies to protect the core and grow and diversify and we emerged from 2023 with a solid foundation for future growth.
Favorable comparisons we experienced throughout 2023 should turned favorable in 2024 and lead to continuing improvement in the future.
Before I get into our fourth quarter highlights I'd like to recognize our outstanding employees I'm extremely proud of the way. These talented dedicated and motivated individuals have worked to make our operations run efficiently. Despite any challenges. They may face they continue to find new and exciting ways support to support our existing customers while growing.
John C. Butler: I'm extremely proud of the way these talented, dedicated, and motivated individuals have worked to make our operations run efficiently, despite any challenges they may face. They continue to find new and exciting ways to support our existing customers while growing and diversifying our company. I want to thank each of them for the hard work and many contributions that they have put forth to strengthen us today and to secure new opportunities for our future.
And diversifying our company I want to thank each of them for the hard work and many contributions that they put forth to strengthen us today and to secure new opportunities for our future I'm honored each and every day to work alongside such an amazing team.
John C. Butler: I am honored each and every day to work alongside such an amazing team. The most notable item this quarter is the impairment at Mississippi Lignite Mining Company. In mid-December, MLMC received a force majeure notice from its customer.
The most notable item this quarter is the impairment at Mississippi Lignite mining company in mid December M. L. M. C received a force majeure notice from this customer. This notice was the result of an issue affecting one of the two boilers at the Red Hills power plant. This one unit is still not functioning and the timeline for resolution is unsure.
John C. Butler: This notice was the result of an issue affecting one of the two boilers at the Red Hills Power Plant. This one unit is still not functioning, and the timeline for resolution is uncertain. This issue is expected to result in a significant decline in customer demand during 2024, while the power plant is running on just one unit. Without getting into all the accounting details, I'll just say it was this anticipated reduction in demand that contributed to the company taking a non-cash impairment charge of $65.9 million during the 2023 fourth quarter. The combination of this non-cash impairment charge and substantially lower operating results at our coal mining and minerals management segments resulted in substantial consolidated operating and net losses for the fourth quarter and full year. Christy will go into more detail about our fourth quarter earnings and provide an overview of our outlook in a minute, but first, let me talk about some of our accomplishments during the year. I'll start with the coal mining segment.
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This issue is expected to result in a significant decline in customer demand during 2024, while the power plant is running on just one unit.
Without getting into all the accounting details I'll just say it was this anticipated reduction in demand that contributed to the company, taking a noncash impairment charge of $65 $9 million during the 2023 fourth quarter.
The combination of this noncash impairment charge and substantially lower operating results at our coal mining and minerals management segment resulted in substantial consolidated operating and net losses for the fourth quarter and full year Chris.
Christie will go into more detail about our fourth quarter earnings and provide an overview of our outlook in a minute, but first let me talk about some of our accomplishments during the year.
I'll start with the coal mining segment.
John C. Butler: During 2023, MLMC successfully completed the move to a new mine area and overcame unfavorable mining conditions to remove the last remaining coal from the prior mine area. This move to a new mine area was a multi-year project. We've known that a move to a new mine area would be required since the mine was built back in the late 1990s, so this was no surprise. The new mine area is just across the state highway from the prior mine area, so it will not change the economics of hauling the coal in a meaningful way. But we did have to get equipment to the new mine area. You'll see a photo of the drag line walking across the state highway in our upcoming annual report.
During 2023 M O M. C successfully completed the move to a new mine area and overcame unfair favorable mining conditions to remove the last remaining coal from the prior mine area.
Move to a new mine area was a multiyear project, we've known that a move to a new mine area would be required since the mine was built back in the late 19 nineties. So this was no surprise there.
New mine area is just across the state highway from the prior mine area. So it will not change the economics of hauling Nicole in a meaningful way, but we did have to get equipment to the new mine area, you'll see a photo of the dragline walking across the state highway and our upcoming annual report.
John C. Butler: As anticipated, MLMC's costs began to improve after the move to the new mine area, which contributed to improved fourth-quarter results compared to the third quarter. While this move was challenging and expensive, it sets us up nicely for the future. We expect production costs at MLMC to decline significantly in 2024 from recent levels.
As anticipated M. O M sees costs began to improve after the move to the new mine area, which contributed to improved fourth quarter results compared to the third quarter.
While this move was challenging and expensive it sets us up nicely for the future. We expect production costs that M. O M. C to decline significantly in 2024 from recent levels. These costs. However are expected to remain above historical levels through 2024 until the boiler issue at the power plant is resolved and the pit extension.
John C. Butler: These costs, however, are expected to remain above historical levels through 2024 until the boiler issue at the power plant is resolved and a pit extension in the new mine area is complete. Shifting to minerals management, the Catapult Mineral Partners team, which oversees our minerals management segment, successfully negotiated and closed on a $37 million acquisition in the Midland section of the Permian Basin. This acquisition of oil and gas mineral interests is Catapult's largest acquisition to date.
And the new mine area is complete.
Shifting the minerals management, the catapult mineral partners team, which oversees our minerals management segment successfully negotiated and closed on a $37 million acquisition in the Midland section of the Permian Basin. This acquisition of oil and gas mineral interests is caterpillar its largest acquisition to date okay.
John C. Butler: The Catapult team has done a great job of growing and diversifying our portfolio of mineral interests over the last few years. Prior to 2020, our income related to oil and gas mineral interests was highly concentrated in the Appalachian Basin, largely focused on natural gas. We still have these legacy interests and profit from owning them, but we now own oil and gas interests in other major basins across the country as well.
The team has done a great job of growing and diversifying our portfolio of mineral interest over the last few years.
Prior to 2020, our income related to oil and gas mineral interests was highly concentrated in the Appalachian basin largely focused on natural gas. We still have these legacy interest and profit from owning them, but we now own oil and gas interests and other major basins across the country as well. We're also now more diversified.
John C. Butler: We're also now more diversified in terms of operators and stages of development, ranging from producing wells to undeveloped mineral intakes. We think this business is well-positioned for the future based on the work done thus far, and we continue to invest. In 2024, Minerals Management is targeting additional investments of up to $20 million.
In terms of operators and stages of development, ranging from reducing well producing wells to undeveloped mineral interest. We think this business is well positioned for the future based on work done thus far and we continue to invest in 2020 for minerals management is targeting additional investments of up to $20 million.
John C. Butler: Future investments, as well as the development of new wells on existing owned reserves beyond those included in our current forecast, would be accretive to future results. In 2023, North American Mining made significant progress on operational and strategic projects to improve profitability. While its fourth-quarter operating results were down from the prior year, full-year operating profit was up 52 percent compared with 2022.
Future investments as well as development of new wells on existing owned reserves beyond those included in our current forecast would be accretive to future results.
In 2023, North American mining made significant progress on operational and strategic projects to improve profitability, while it's fourth quarter operating results were down from the prior year full year operating profit was up 52% compared with 2022 I think there's improvement in results as a very positive.
John C. Butler: I think this improvement in results is a very positive sign that the team is making meaningful progress toward building North American Mining into a very successful business platform for us. North American Mining continues to grow. Our North American Mining team succeeded in winning a bid for a six-year contract extension with its largest customer and secured a new 15-year contract to mine phosphate, building on its goal to diversify into additional minerals. Wrapping up my North American mining comments, let me mention Sawtooth Mining, which is the exclusive contract miner for Lithium America's Thacker Pass Lithium Project in Northern Nevada. Construction at Thacker Pass commenced in the first quarter of 2023.
<unk> side and that the team is making meaningful progress toward building North American mining into a very successful business platform for us.
North American mining continues to grow our North American mining team succeeded in winning a bid for a six year contract extension with its largest customer.
And secured a new 15 year contract to mine phosphate phosphates building on its goal to diversify into additional minerals.
Wrapping up my North American mining comments, let me mentioned saw tooth mining, which is the exclusive contract miner for lithium Americas Stacker passed with the project in Northern Nevada.
Construction attacker past commenced in the 2023 first quarter with that we began requiring equipment for the project and have acquired $23 million of equipment to date, we expect to continue to recognize moderate income prior to the commencement of phase one lithium production.
John C. Butler: With that, we began requiring equipment for the project and have acquired $23 million of equipment to date. We expect to continue to recognize moderate income prior to the commencement of phase one lithium production. Moving to our mitigation resources of North America business, this team continues to advance existing mitigation projects and build on the substantial foundation established over the past several years. I'm very pleased with the level of growth mitigation resources has achieved since first starting five years ago, and I'm very enthusiastic about their prospects.
Moving to our mitigation resources of North America business. This team continues to advance existing mitigation projects and build on the substantial foundation established over the past several years I'm very pleased with the level of growth mitigation resources has achieved since first starting five years ago and I'm very enthusiastic about it they're priced Prost.
John C. Butler: During 2023, this business invested in people and data analytics to make even more informed decisions about which markets to target. We anticipate that Mitigation Resources will further expand and develop its business model in 2024, with a focus on generating a modest operating profit by 2025 and achieving sustainable profitability in future years. Our team continues to look for ways to create additional value by utilizing our core mining competencies, including reclamation and permitting. Among the ways we are doing that is through the development of utility-scale solar projects on reclaimed mining properties. In 2023, we formed Regen Resources to pursue such projects, including the potential development of a solar farm on reclaimed land at Mississippi Lignite Mining Company. I continue to be very optimistic about our outlook as we look past 2023.
Specs during.
During 2023 this business invested in people and data analytics to make even more informed decisions about which markets to target.
We anticipate that mitigation resources will further expand and develop its business model in 2024 with a focus on generating a modest operating profit by 2025.
And achieving sustainable profitability in future years.
Our team continues to look for ways to create additional value by utilizing our core mining companys competencies, including reclamation and permitting.
Among the ways, we're doing that is through development of utility scale solar projects on reclaim mining properties. In 2023, we formed re gen resources to pursue such projects, including the Prudential to potential development of a solar farm on reclaimed land at Mississippi Lignite mining company.
I continue to be very optimistic about our outlook as we look past 2023, I have a lot of confidence in our team and I'm pleased with the way all of these businesses continue to advance their strategies, including efforts to protect our coal mining business with that I'll turn the call back over to Christie to cover our results for the quarter and our outlook in more detail.
Christina Kmetko: I have a lot of confidence in our team, and I'm pleased with the way all of these businesses continue to advance their strategies, including efforts to protect our coal mining business. With that, I'll turn the call back over to Christy to cover our results for the quarter and our outlook in more detail. Trustee.
I think.
Christina Kmetko: Thank you, JC. I'll start with some high-level comments on our consolidated fourth-quarter financial results and then add detail on our individual segments. We reported a consolidated net loss of $44 million, or a $5.88 per share loss compared with net income of $13.8 million or $1.84 per share last year. As J.C. mentioned, our fourth quarter results include a $65.9 million pre-tax asset impairment charge. I'd note that while the impairment relates solely to Mississippi Lignite Mining Company, we recorded $60.9 million in the coal segment and $5.1 million at Minerals Management because certain land assets were included within that budget. We generated consolidated adjusted EBITDA of $7.1 million compared with $23.6 million in 2020. Adjusted EBITDA excludes impairment.
Jaycee.
Start with some high level comments on our consolidated fourth quarter financial results and then add detail on our individual segments.
We reported a consolidated net loss of $44 million or $5 88 per share loss compared with net income of $13 $8 million or one dollar and 84 cents per share last year.
As J P mentioned, our fourth quarter results included $65 $9 million pretax asset impairment charge.
Note that while the impairment relates solely to Mississippi lignite mining company, we recorded $60 9 million in the coal segment and $5 1 million at minerals management, because certain land assets were included within that business.
We generated consolidated adjusted EBITDA of $7 $1 million compared with $23 6 million in 2022, adjusted EBITDA excludes the impairment charge.
Christina Kmetko: These lower results were primarily due to significant decreases in our coal mining and minerals management. Our coal mining segment reported an operating loss of $62.3 million, which included an impairment charge of $60.8 million. This compares to a loss of $4.7 million in Q3 2023 and an operating profit of $3.7 million in Q4 2023. We generated segment-adjusted EBITDA of $3.2 million this past quarter compared to $8.1 million last quarter. The decrease in segment-adjusted EBITDA was primarily due to a substantial decline in Mississippi Lignite Mining Company results, as well as a decrease in earnings at our unconsolidated operations because of lower customer requirements. Higher employee-related expenses also contributed to the decline. The decrease in Mississippi Lignite Mining Company results was primarily the result of fewer tons delivered, in part due to the issue affecting the power plant.
These lower results were primarily due to significant decreases in our coal mining and minerals minerals management earnings.
Coal mining segment reported an operating loss of $62 $3 million, which includes the impairment charge of $68 million.
This compares to a loss of $4 7 million in third quarter, 2023, and operating profit of $3 $7 million in fourth quarter 2000, and trying to you.
We generated segment adjusted EBITDA of $3 $2 million, this past quarter compared to $8 $1 million last year.
The decrease in segment adjusted EBITDA was primarily due to the substantial decline in Mississippi Lignite mining company results as well as a decrease in earnings at our unconsolidated operations because of lower customer requirement.
Employee related expenses also contributed to the decline.
The decrease in Mississippi Lignite mining company results was primarily the result of fewer tons delivered in part due to the issue affecting the power plant. The decrease in tons delivered contributed to an increase in the cost per ton sold and a $900000 write down of coal inventory to net realizable value.
Christina Kmetko: Decreased tons delivered contributed to an increase in the cost per ton sold and a $900,000 write-down of coal inventory to net realizable value. Excluding the impairment, the primary reason behind the decline in minerals management results was significantly lower natural gas and oil prices. To put this more in context, current natural gas prices as measured by the Henry Hub Average Natural Gas Spot Price declined 51%, and oil prices as measured by the West Texas Intermediate Average Crude Oil Spot Price decreased 5% from the prior year.
Excluding the impairment the primary reason behind the decline in minerals management should result in significantly lower natural gas and oil prices.
Put this morning context current natural gas prices as measured by the Henry hub average natural gas spot price declined 51% from 2022 and oil prices as measured by the West, Texas Intermediate average crude oil spot price decreased 5% from the prior year.
At North American mining improved fourth quarter 2023 earnings at Saatchi, and North American mining after Corey.
Christina Kmetko: At North American Mining, improved fourth-quarter 2023 earnings at Sawtooth and North American Mining's active quarry were more than offset by a $500,000 loss on the sale of a dragway and $400,000 of higher outside service costs compared with 2022 related to business development activities and the impact of the substantial completion of services at Caddo Creek in 2022. As a result, North American Mining's fourth quarter 2023 operating loss of $600,000 increased over the prior year. However, segment adjusted EBITDA was positive and comparable to 2022 despite the higher operating loss because results at the mining operations improved when the impact of depreciation expense was excluded. Looking forward, we expect strong 2024 operating profit compared with a significant 2023 loss and substantially higher segment adjusted EBITDA. These anticipated increases are primarily We are expecting MLMC to incur a loss in 2024, but it is expected to be significantly less than in 2020.
Were more than offset by a $500000 loss on sale of a dragline.
$100000 of higher outside service costs, compared with 2022 related to business development activities and the impact of the substantial completion of services Caddo Creek in 2022.
As a result, North American Mining's fourth quarter 2023 operating loss of 600000 increased over the prior year.
Adjusted EBITDA was positive and comparable to 2022, despite the higher operating loss because the results of the mining operations improved when the impact of depreciation expense was excluded.
Looking forward at our coal mining segment, we expect strong 2020 for operating profit compared with the significant 2023 loss and substantially higher segment adjusted EBITDA.
These anticipated increases are primarily due to an improvement in results at Mississippi, Lignite mining company and higher earnings at Falkirk and Courteau.
We're expecting them on SEDAR incur a loss in 2024, but it is expected to be significantly less than in 2023.
J P mentioned, we are anticipating lower production costs. However, while production costs are projected to decline significantly from recent levels. They are expected to remain above historical levels through 2024, when a pit extension and the new mine area is complete.
Christina Kmetko: As J.C. mentioned, we are anticipating lower production costs. However, while production costs are projected to decline significantly from recent levels, they are expected to remain above historical levels through 2024 when a pit extension in the new mine area is complete. Lower depreciation and amortization expense as a result of the lower depreciable value of MLMC's assets after the impairment is expected to contribute to the improved results; an extended delay in repairs to the Red Hills Power Plant could significantly affect the company's 2024 outlook. An anticipated increase in 2024 earnings at the unconsolidated coal mining operation is driven primarily by an expectation of increased customer requirements at Cotillon Falkirk as well as a higher We expect operating profit to be higher in the second half of 24 compared with the first half due to anticipated improvements at MLMC, increased demand at the unconsolidated coal mining operation, and the end of the Falkirk price concessions in June.
Lower depreciation and amortization expense as a result of the lower depreciable value of them all of them seize assets.
After the impairment is expected to contribute to the improved results in.
An extended delay and repairs to the Red Hills power plant could significantly affect the company's 2020 for outlook and anticipated increase in 2024 earnings at the unconsolidated coal mining operations is driven primarily by an expectation for increased customer requirements at Katanga fall Kirk as well as a higher profit per ton.
Management fee at Falkirk beginning in June 2024, when temporary price concessions and.
We expect operating profit to be higher in the second half of 'twenty four compared with the first half due to anticipated improvements at Omolon see increased demand at the unconsolidated coal mining operations and the end of the fault current price concessions in June of 'twenty four.
As it was all the impact of the new and modified contracts JC mentioned, we expect north American mining to achieve consecutive quarterly growth in operating profit and segment adjusted EBITDA in 2024, leading to significantly improved full year results.
Over 23.
Finally, our minerals management, we expect 2020 for operating profit and segment adjusted EBITDA decreased moderately compared with the prior year, excluding the 2023 impairment charge.
Christina Kmetko: As a result of the impact of the new and modified contracts, J.C. We expect North American Mining to achieve consecutive quarterly growth in operating profit and segment adjusted EBITDA in 2024, leading to significantly improved full year results over 20. Finally, at Minerals Management, we expect 2024 operating profit and segment adjusted EBITDA to decrease moderately compared with the prior year, excluding the 2023 impairment. The forecast of reduction in profitability is primarily driven by current market expectations for natural gas and oil prices and modest expectations for the development of additional new wells by third-party levy. Lower operating expenses are expected to partially offset the anticipated profit. Overall, at a consolidated level, we expect to generate net income in 24 versus the 23 net loss.
<unk> forecast a reduction in profitability is primarily driven by current market expectations for natural gas and oil prices and modest expectations for development of additional new wells by third party lessees.
Operating expenses are expected to partially offset the anticipated profit decline.
At a consolidated level, we expect to generate net income and 24 versus the 23 net loss. Adjusted EBITDA is also expected to increase significantly over 2023.
Yeah.
Improvements are primarily due to increased profitability at the coal mining segment from improved results at Mississippi Lignite mining company Volcker, Ken can tell.
Growth at North American mining is also expected to contribute to the higher 24 net income.
Lastly from a liquidity standpoint.
<unk> ended the quarter with consolidated cash of $85 million and debt of 36 million, we had availability of $105 million under our revolving credit facility. During the fourth quarter, we repurchased approximately 66000 shares for $2 $3 million under an existing share repurchase program in 'twenty four we expect cash.
Operator: Adjusted EBITDA is also expected to increase significantly over 2019. These improvements are primarily due to increased profitability at the coal mining segment due to improved results at Mississippi Lignite Mining Company, Falkirk, and Cato. Growth at North American Mining is also expected to contribute to the higher 24.9%. Lastly, from a liquidity standpoint, we ended the quarter with consolidated cash of $85 million and debt of $35 million. We had availability of $105 million under our revolving credit facility. During the fourth quarter, we repurchased approximately 66,000 shares for $2.3 million under an existing share repurchase program. Twenty-four weeks of cash flow before financing activity, to be a moderate use of cash, and NACCA, www.NACCO.com. Thank you.
Before financing activities to be a moderate use of cash we will now turn to any questions you may have.
Thank you and ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the number one on your telephone keypad.
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Your first question comes from the line of Doug Weiss from DSW investments. Your line is open.
Hey, good morning.
Good morning, Doug.
Okay.
Is it possible to say how much.
Sort of additional costs are per quarter.
Operator: And ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star, followed by the number 1 on your telephone keypad. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star, followed by the number 2. If you're using a speakerphone, please lift the handset before pressing any.
For the the work Youre doing on the call I'm on.
The Mississippi lignite coal mine.
Yeah.
I'm not sure I understand the question.
So in other words as you were sort of operating dual mines and moving the equipment and so forth.
Once that process is completed how much.
How much cost will just drop out of the quarters.
Hum.
Yeah.
Well, it's I'll give this a shot and see what you think.
So I mean, I'm not going to give you an exact dollar amount, but I would say that our costs.
Doug Wise: One moment, please for your first question. Your first question comes from the line of Doug Wise from DSW Investments. Your line is open. Hey, good morning. Good morning.
Are going to return to where they were.
Prior to <unk>.
So incurring these additional costs to move into their new mine area.
Doug Wise: Hi, Is it possible to say how much these sorts of additional costs are per quarter? for the work you're doing on the coma on, the Mississippi Lake Night Coal Mine. I'm not sure I understand the question. So, in other words, you know, as you're sort of operating dual mines and moving the equipment and so forth, you know, once that process is completed, how much cost will just drop out of the corridors? Liz, I'll give this a shot and see what you think.
<unk> doubled up on cost and it was less efficient while we were doing this.
But I think once we get established over there and obviously are delivering full volumes meaningful volumes when the plants up and running again I think we will return to historical cost levels.
Is that fair.
I would agree I would also say you mentioned we are operating at two main areas. We've already moved over to the New mine area, we're not operating at the previous mine area.
John C. Butler: I mean, I'm not going to give you an exact dollar amount, but I would say that our costs are going to return to where they were prior to, you know, us incurring these additional costs to move into the new mine area. We'd sort of doubled up on costs, and it was less efficient while we were doing this, but I think, you know, once we get established over there and obviously are delivering full volumes, and mining full volumes when the plant's up and running again, I think we'll return to historical cost levels. Liz, is that fair?
Okay great.
We're working on the pit extension.
Yeah just to.
Clarify the prior mine area, which we call mine area one.
It is now in reclamation and you know the cost when when reclamation is really more of a balance sheet exercise than it is a income statement exercise because we've accumulated.
Reserves to cover reclamation of that mine area. So as we expand costs those really just come out of that reserve. So at this point the costs are really all attributable to normal operations and the new mining area Theyre just not at the efficiency levels, we expect because we're delivering it we're mining at half right because.
Elizabeth I. Loveman: I would agree. I would also say, as you mentioned, we were operating at two mine areas. We've already moved over to the new mine area. We're not operating at the previous mine area.
John C. Butler: Okay, okay, great. Yeah, just to clarify, the prior mine area, which we call mine area one, is now in reclamation. And you know, the cost when we're in reclamation is really more of a balance sheet exercise than it is an income statement exercise because we've accumulated, you know, reserves to cover the reclamation of that mine area.
The power plant is only running on one unit and we're getting this initial pit extended to the linked we want it to be.
Okay.
Okay.
Then.
Have you do you have any visibility on when that second boiler will come up.
John C. Butler: So as we expend costs, those really just come out of that reserve. So at this point, the costs are really all attributable to normal operations in the new mine area. They're just not at the efficiency levels we expect because we're delivering it, you know, we're mining at half rate because the power plant's only running on one unit.
Uh huh.
Our our guys at the mine site are in regular communication with the power plant.
Pickle at all of our operations.
You know they are.
John C. Butler: And we're, you know, getting this initial pit extended to the length we want it to be. Okay. Then, do you have any visibility on when that second boiler will come on?
They are certainly discussing the timeline, it's really entirely in our customer's control but.
John C. Butler: Our guys at the mine site are in regular communication with the power plant, as is typical in all of our operations. They are certainly discussing the timeline. It's really entirely in our customers' control, but I would say I think they are, from everything we can tell, handling this very professionally. And, you know, I expect they're going to get this thing back up and running during the year. But I'm not going to put any dates out there.
But I would say I think they are.
You know from everything we can tell are handling this very professionally.
And.
You know I expect they're going to get this thing back up and running during the year, but I'm not going to put any data out there I think it's really up to our customer to decide if they're going to.
Talk about that publicly but it is expected to be during during the course of 2024.
Okay.
John C. Butler: I think it's really up to our customer to decide if they're going to... you know, talk about that publicly, but it's expected to be during the course of 2024. Okay, okay. And in the coal division, the SG&A expense, does that... Should I think about that being applied to all your coal operations or just the consolidated coal operations? In other words, do the unconsolidated already include SG&A that's off the income statement, or is it not? Or does it all flow into your income statement? Well, it's kind of a combination of the two.
In the coal division the SG&A expense does that.
Should I think about that being applied to all your coal operations or just the consolidated coal operations in other words to the unconsolidated already include SG&A.
Income statement or is it.
Where does it all flow into your income statement, well, it's kind of a combination of it too.
With respect to the unconsolidated mines, which you know is really a majority of the coal mining segment.
The way the contracts work is we do receive some compensation in our fees.
John C. Butler: With respect to the unconsolidated mines, which you know is really a majority of the coal mining segment, the way the contracts work is we do receive some compensation in our fees to cover some overhead costs that we incur. You can't really see that split out because it's all a part of the fee, but the fees that we receive are some of those that are targeted directly towards SG&A costs that we incur in that segment. And so there's, you know, internally, we can see that there's netting, you know, that covers a lot of those expenses, but externally, you can't really see that. Now, some of the coal segment SG&A is related to our consolidated operations at Red Hills as well. So I'd really say you kind of have to just spread it across and think of the coal segment as a unit, think of it as a business, and those SG&A costs, you know, are all attributable to that segment. However, some of those are by contract. You know, we're doing the work as if we're providing I.T. platforms and, you know, H.H.R.
To cover some overhead costs that we incur you can't really see that split out because it's all just a part of the fee.
But the fees that we receive are.
Some of those are targeted directly towards SG&A cost that we incur in that segment and so there is.
Internally, we can see that there is a netting.
You know that covers a lot of those expenses.
Externally you can't really see that now some of the some of the coal segment.
SG&A is related to our consolidated operations at Red Hills as well. So I'd really say you kind of have to just spread it across thank you think of the cold segment as a unit think of it as a business and those SG&A costs.
Are all attributable to that segment. However, some of those are by contract you know we're doing that work like we're providing it.
It platforms.
H HR and benefits backbone and we're getting a G&A fee to cover that.
John C. Butler: and benefits backbone, and we're getting a G.N.A. fee to cover that. Okay, okay, makes sense. And, you know, just in terms of while the other boilers is offline, you know how do you think about the volume in those quarters is it because it looked like they're already operating sub-capacity so, You know, is it actually a 50% reduction or is it less than that because they were already not at full capacity? Um... Well, I mean, it's, you know, the two units are similar in size, they're the same size, right? It's a 50-50 kind of proposition, you know. I think, well I know, that the plant is operating at 50% of the level that it would probably be operating if both boilers were operating, okay okay you know it's because if the plant's going to be dispatched they're going to probably dispatch it fully and if it's not going to be dispatched it's not so i think it's kind of i think it's for the most part a 50-50 proposition, Okay, okay, got it.
Okay, Okay makes sense and just in terms of while the other boilers is offline.
How do you think about the volume in those quarters is it because it looked like they are already operating sub capacity. So.
Is it actually a 50% reduction or is it less than that because they were already not at full capacity.
Oh.
<unk>.
Well I mean, it's you know the two the two units are similar and so they're the same size right. Its a 50 50 kind of proposition.
Hum.
No.
I think well I know that the plant is operating at 50% of the level that it would probably be operating if both if both boilers robbery.
Okay.
Because if the plant is going to be dispatched theyre going to probably dispatch it fully and if it's not going to be stretched dispatches not so I think it's I think it's for the most part a 50 50 proposition.
Okay, Okay got it.
John C. Butler: So, you know, the congratulations on that new phosphate contract. Is it possible to give some sense of how large that could be? It is not a major contract, but I think it's a very important step in our growth of that business. For years, we mined lime rock in Florida using drag lines underwater or drag lines digging lime rock that's underwater, the drag line, of course, above the surface.
So congratulations.
Congratulations on that on the new phosphate contract.
Is it possible to give some sense of how large that could be.
It is not a major contract.
But I think it's a very important step in our growth of that business.
For years.
We mined.
Lime rock in Florida, using Draglines underwater.
Draglines digging lime rock underwater to drag line of course was above the surface.
John C. Butler: So, you know, we've expanded into lithium. I think that's a very exciting development for us. We've expanded outside of Florida. We're mining other minerals. We're doing sand and gravel and other things. We've, for a long time, had our sights on trying to get into phosphate mining, and we discovered an opportunity that really was several years in the making that we think gives us a nice, you know, nice entry into mining yet another mineral. You know, Florida is a huge contributor to global phosphate production. So I think this, you know, this new contract is a pretty exciting one for us. It is a drag, it's a drag line operation, but, of course, it's dry.
The.
So you know we've expanded into lithium I think thats, a very exciting development for us.
We've expanded outside of Florida, where mining other minerals were doing sand and gravel and other things we've we've for a long time.
The sites on trying to get into phosphate mining.
And we discovered an opportunity and it really was several years in the making.
We think it gives us a nice.
This entry into mining yet another another mineral Florida is a huge.
A contributor to global <unk>.
Class eight production so I think this.
This new contract is a pretty exciting one for us. It is a it's a drag line operation but of course, it's dry.
John C. Butler: And, you know, we're very, very pleased to start it up, get that started up sometime this year. Okay, great. How much of the CapEx that you've given in your disclosures is for Thacker Pass this year? Hmm. I don't know that list. We did not call out specifically the SACRA pass, but we did last year for 2023 when it was material, so I think you can deduce from that that it's not a material amount this year. Okay, and I, you know, I'm sorry, I would just, on your CapEx question, I'd just add that there is a part of the CapEx. I'm not going to say how much, but there is a part of our 2024 CAP Act that is capital expenditures from 2023 that weren't spent. You know, we're always looking for ways that we can, you know, defer capital spending. It's, you know, it's always a smart thing to do if you can figure out how to either spend less capital or spend it later. From a present value standpoint, it makes good sense.
And we're.
We're very very pleased to startup get that started up sometime this year.
Okay great.
Yes.
How much of the Capex that you.
Given in your disclosures.
First Acker pass this year.
I don't know that please.
We did not call out specifically the soccer path, but we did last year for 2023, when it wasn't material. So I think you can deduce from that that it's not a material amount this year.
Okay and.
Alright.
Capex question I would just add that.
There is a part of the Capex.
I'm not going to say how much but there is a part of our 2020 for capex.
As Capex from 2023 that wasn't spent you know we're always looking for ways that we can.
Deferred capital spending it said, it's always a smart thing to do if you can figure out how to.
Neither spend less capital or spend it later from a present value standpoint. It makes good sense. So there's a piece of our 2020 for Capex.
John C. Butler: So there's a piece of our 2024 CapEx that's a carryover from 2023. Okay, got it. And Dr. Pass, my sense is that's the kind of new scope of work for you, is, how do you think you know... How do you kind of add the operational capabilities you need to do that? How different is it from the work you're doing, the drag line work you're doing?
Carryover from 2023.
Okay got it.
<unk> my sense is that the kind of new scope of work for you.
How do you think.
How do you kind of add the operational.
Capabilities, you need to do that how different is it from the work Youre doing the dragline work Youre doing and.
John C. Butler: And, you know, are there operational risks there that you're sort of planning for? I mean, there's, there's, it's really, very, very, very similar to the work that we do in our coal mining operations. You know, we're going to run a full fleet of equipment. It's more similar to our coal mining operations as it is to the lime rock business, where we are, you know, really operating very specific pieces of equipment in kind of a specialized sort of thing.
Are there operational risks there that you're sort of planning for.
There is it's really very very very similar to the work that we do in our coal mining operations.
We're going to run a full fleet of equipment, it's more similar charter coal mining operations as it is the law.
<unk> business, where we are.
Really operating very specific pieces of equipment.
And kind of a specialized sort of thing.
John C. Butler: At the Thacker Pass Project, we're going to do all the work related to mining. It is, very, very, very similar, almost identical to the work that we do. There's virtually no operating risk for us.
<unk> project, we're going to we're doing all the work related.
Related to mining.
Is.
Very very very similar almost identical to the work that we do there's virtually no operating risk for us we're operating the same types of equipment.
John C. Butler: We're operating the same types of equipment. It's a very similar contract structure. We apply the same disciplines that we do in our other operations. So we don't really see any operational risk in this operation at all, which is another reason why it's so exciting. Right, and then I know you're reimbursed for the capital equipment. Do you keep that equipment after the project is complete?
We use it as a very similar contract structure, we apply the same.
Disciplines that we do.
You know, what our and our other operation. So we don't really see any operational risk in this operation at all.
And another reason why it's so exciting.
Great and then I know Youre reimbursed for the capital equipment do you keep that equipment. After the project is completed we.
John C. Butler: We do. Okay. The EBITDA you report in your headline results of around 7-plus million is slightly different than on your subtable where you break out EBITDA, and it's sort of 6-plus million. Could you say what the link is between those two numbers? I can follow up, too, if it's not an easy one. We're looking...
We do.
Okay.
And then just.
Really quick bookkeeping question. The EBITDA you reported in your headline results of around seven plus million is slightly different than on your sub table, where you breakout EBITDA and it's sort of six plus million could.
Could you just say what the what I'm.
<unk>.
Plug is between those two numbers.
I can follow up two if it's not an easy one.
We're looking.
Christina Kmetko: I think the 6.4 is segment adjusted EBITDA. Is that the number you're referring to? Yeah. Yeah. The 7.1 is on page 10 of the release.
Okay. Thanks.
<unk> segment adjusted EBITDA.
Is that the number of your work.
Sure.
Yes.
The seven one is on page 10 of the release that's consolidated adjusted EBITDA. So we have two different EBITDA metrics one of segment adjusted in our segment adjusted.
Christina Kmetko: That's consolidated adjusted EBITDA. So we have two different EBITDA metrics. One is segment-adjusted, and our segment-adjusted stops at operating profit, whereas the consolidated-adjusted is more of a traditional EBITDA.
Operating profit, whereas the consolidated adjusted is more of a traditional EBITDA.
Christina Kmetko: Okay. All right. Well, thanks. The recommendation for 7.1 is on page 10 of the release.
Okay alright. Thanks.
Please go ahead.
One is on page 10 of the release.
Christina Kmetko: Okay, and just last question. There's no, um, do you get any insurance recovery related to the force measure at Red Hills Mine, Mississippi?
Okay, and just last question Theres no.
Did you get any insurance recovery related to the force measure.
The Red Hills mine, Mississippi.
John C. Butler: Yeah. Yeah. So, you know, that's going to be determined. I mean, we obviously have business interruption insurance, and we have a team of people that are working on that. I don't we're certainly not at the point where we want to disclose what we think we're going to receive with respect to recoveries.
Yes so.
That's that's too to be determined I mean, we obviously covered.
Interruption insurance and we have a team of people that are that are working on that.
We're certainly not at the point, we wanted to disclose what we think we're going to receive with respect to recoveries, but I will tell you that we've got a we have a team of people that are very focused on that right now.
John C. Butler: But I will tell you that we have a team of people that are very focused on that right now. Okay. All right. Great. All right. Well, thank you for all the answers. Doug, I really appreciate the questions and your interest in the company. Thanks. Thanks for calling. Okay, great.
Okay Alright, great.
Alright, well thank you for all the answers.
Dr. Doug I really appreciate the questions and your interest in our company. Thanks, Thanks for calling.
Christina Kmetko: Have a good day. Thank you. And once again, if you would like to ask a question, simply press star followed by the number one on your telephone keypad. I don't think we're going to have any more questions.
Okay, great have a good day.
Okay.
Thank you and once again, if you'd like to ask a question simply press star followed by the number one on your telephone keypad.
Yeah.
Okay.
Yeah.
I don't think we're going to have any more questions.
Operator: So thank you, everybody, for dialing in. We'll close with just a few reminders. A replay of our call will be available online later this morning. We'll also post a transcript on our website when it becomes available. If you have any questions, please reach out to me. You can reach me at the phone number on the press release. I hope you enjoy the rest of your day. And now I'll turn it back to Ludi to conclude the call. Thank you, Christy. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. The U.S. Department of the Interior The United States Department of Labor The U.S. Department of Agriculture The U.S. Department of Fisheries The U.S. Department of State The U.S. Department of Agriculture The U.S. Department of Land and Fisheries The U.S. Department of Urban Development The U.S. Department of Land The U.S. Department of Land Management The U.S. Department of Energy The U.S. Department of Food and Marine Affairs The U.S. Department of the Capitol The U.S. Department of Illegal Immigration The U.S. Department of Labor
So thank you everybody for dialing in.
I'll close with just a few reminders a replay of our call will be available online. Later. This morning, we will also post a transcript on our website when it becomes available. If you have any questions. Please reach out to me you can reach me at the phone number on the press release I Hope you enjoy the rest of your day and now I'll turn it back to Rudy to conclude the call.
Thank you Christie, ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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