Q1 2024 Arch Resources Inc Earnings Call

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Good morning, ladies and gentlemen, and welcome to the arch resources incorporated.

Operator: Good morning, ladies and gentlemen, and welcome to the Arch Resources Incorporated first quarter 2024 earnings call conference call. At this time, all lines are in listen only mode.

Operator: First quarter 2024 earnings call Conference call at this time all lines are in listen only mode.

Operator: Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the option. This call is being recorded on Thursday, April 25, 2021. I would like to turn the conference over to Dex Sloan, Senior Vice President of Strategy. Please go ahead.

Operator: Following the presentation, we will conduct a question and answer session.

Speaker Change: At any time during this call you require assistance. Please press star zero for the operator.

Operator: This call is being recorded on Thursday April 25 2024.

Deck S. Slone: I would like to turn the conference over to deck Slone.

Deck S. Slone: Senior Vice President of strategy. Please go ahead.

Operator: Yeah.

Deck S. Slone: Good morning from St. Louis and thanks for joining us today.

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. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. These uncertainties, which are described in more detail in the annual and quarterly reports that we file with the SEC, may cause our actual future results to be materially different from those expressed in our forward-looking statements.

Deck S. Slone: We began let me remind you that certain statements made during this call.

Deck S. Slone: Statements relating to our expected future business and financial performance, maybe considered forward looking statements. According to the private Securities Litigation Reform Act.

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

Deck S. Slone: Certain days, which are described in more detail annual and quarterly reports to be filed.

Deck S. Slone: They may cause our actual future results to be materially different than those expressed in our forward looking statements. We do not undertake to update our forward looking statements whether as a result of new information future events or otherwise, except as may be required by law.

Paul A. Lang: We do not undertake to update our forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required by law. I'd also like to remind you that you can find a reconciliation of the non-GAAP financial measures that we plan to discuss this morning at the end of our press release, a copy of which we have posted in the investor section of our website at archrsc.com. Also participating on this morning's call will be Paul Lang, our CEO; John Drexler, our COO; and Matt Giljum, 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 A. Lang: I also like to remind you that you can find a reconciliation of the non-GAAP financial measures that we plan to discuss this morning at the end of our press release, a copy of which we have posted in the investors section of our website at arch our S. C. Dot com also participating on this call will be Paul Lang.

Paul A. Lang: John Drexler I see Oh.

Paul A. Lang: I see I sought after our formal remarks, we'll be happy to take questions and I'll turn the call over to Paul.

Paul A. Lang: Thanks, Nick, and good morning, everyone. We appreciate your interest in ARCH and are glad you could join us on the call. I am pleased to report that during the first quarter, ARCH Continued Drive Forms are a consistent and proven plan for long-term value creation. (Inaudible) They're in the corner just in.

Paul A. Lang: Thanks, Beth and good morning, everyone.

Paul A. Lang: We appreciate your interest in March and I'm glad you could join us on the call. This morning.

Paul A. Lang: Pleased to report that during the first quarter arch continued to drive forward, our consistent and proven plan for long term value creation and growth. Despite some headwinds during the quarter just ended.

Paul A. Lang: The team achieved an adjusted EPA of $103 million and generated $83 million in discretionary tax revenue, delivered a $56 per ton cash margin, and our core metallurgical segment, underscoring the durability of our cash-generating capabilities across a wide range of market products, reduced our outstanding share count by 3%, which included $315,000. Associated with the unwinding of the capped column and the repurchase of an additional $95,000, declared a quarterly cash dividend of nearly $21 million, or $1.11 per share, and perhaps most importantly, extended our industry leadership and sustainability, and from the state of West Virginia named Lear and Lear South co-recipients of the state's top safety award and Honored Lear South with the state's top environmentalists. As we've noted many times in the past, a capital return program is the centerpiece of a valued property. We've now deployed more than 1.3 billion dollars to this program since its relaunch.

Speaker Change: I'm, a cheap because it doesn't exist.

Paul A. Lang: $103 million and generated $3 million of discretionary cash flow.

Paul A. Lang: <unk> delivered a $56 per ton cash margin.

Paul A. Lang: Our core metallurgical segment.

Paul A. Lang: Underscoring the durability of our cash generating capabilities across a wide range of market presence.

Paul A. Lang: Reduced our outstanding share count by 3%, which included 315000 shares associated with the unwinding of the Cats College students and the repurchase of an additional 95000 shares.

Paul A. Lang: The card a quarterly cash dividend with nearly $21 million or 11 cents per share.

Paul A. Lang: Perhaps most importantly <unk>.

Paul A. Lang: Extended our industry leadership in sustainability.

Paul A. Lang: State of West Virginia, they were in their south cone recipients the state's top safety.

Paul A. Lang: In all at Leer, South state's top environmental.

Paul A. Lang: As we've noted many times in the past our capital return program was the centerpiece of how your proposition.

Paul A. Lang: Detroit three.

Paul A. Lang: $3 billion through this program since its re launch in February 2022, a figure equivalent to 46%.

Paul A. Lang: [inaudible] A figure equivalent to 46% of our current market capitalization in a period of just over two years. Breaking that down further, we've paid $727 million for nearly $39 per share in dividends over that time, and are reducing our share count by 3.5%, and are roughly 16% versus the peak level in May 2000. As indicated, this last component, the systematic reduction in our share..., has taken center stage and is receiving our intense focus. We've already made significant progress on this front over the last two years. Producing a share count of 21.9 million shares in May 2022, from 18.4 million shares.

Paul A. Lang: Capitalization at parity with just over two years.

Paul A. Lang: Breaking that down further we paid $727 million or they only $39 per share of dividends over that timeframe.

Paul A. Lang: Our share count by three 5 million shares.

Paul A. Lang: Roughly six 2% versus the fourth well.

Paul A. Lang: 2022.

Paul A. Lang: As indicated this last component a systematic reduction in our share count.

Paul A. Lang: Center stage.

Paul A. Lang: Our intense focus.

Paul A. Lang: We've already made significant progress on this front over the last few years, reducing the share count from 21 9 million shares.

Paul A. Lang: 2022.

Paul A. Lang: 244 million shares.

Paul A. Lang: Along with this we believe will position the company to drive even greater progress in the quarters ahead.

Paul A. Lang: Along with this, we believe we've positioned the company to drive even greater progress in the quarters ahead through our efforts to streamline the capital structure over the last two years, including the retirement of our convertible debt, the elimination of our warrants, and the recent liquidation of our cap costs, and our decision to build a substantial cash balance to facilitate the opportunistic buying of our shares during market cooldowns. In short, we believe the stage is set for ongoing investment in Arch's compelling long-term prospects for a strong and sustainable Sheridan. Turning to the cold market dynamics, after declining steadily throughout the first quarter, Seaborne Coking Corp. [inaudible] At present, splats and assessing, eyeballing. $220 per record.

Paul A. Lang: Through our efforts to streamline our capital structure over the last two years.

Paul A. Lang: The retirement of our convertible debt.

Paul A. Lang: Elimination of all at once and a recent liquidation of our cat.

Paul A. Lang: And our decision to build a substantial cash balance.

Paul A. Lang: So let's take the opportunistic buy.

Paul A. Lang: It's very market.

Paul A. Lang: In short we believe we can stay with the wrong person.

Paul A. Lang: Just compelling long term prospects.

Paul A. Lang: Strong sustainable share repurchase program.

Paul A. Lang: Turning to the coal market dynamics have climbed steadily throughout the first quarter seaborne coking coal prices appear to have found a base in the last two weeks and are beginning to show signs of a rebound.

Paul A. Lang: At present lapses assessing high vol a cookie.

Paul A. Lang: $20 per metric ton, that's what would be the U S. East coast persons have averaged $285 per metric ton on the same basis just last December.

Paul A. Lang: FOB, the U.S. East Coast, persons of an average of $285, on the same basis, just last week. It's worth noting that despite the relative market softness of the U.S. economy, the U.S., and certain demand from are generally supportive. Global hot metal output for the world, excluding China, was up 2% during the first three months. However, China's imports of high-quality seaboard coking coal continue to trend high, counterbalancing those positives. The supply side has recovered moderately.

Paul A. Lang: It's worth noting that despite the relative market softness year to day certain demand fundamentals appear Galloway supporters for instance, global hot metal output for the world, Excluding China was up 2% during the first three months of the year, while China's imports of high quality seaborne coking coal continued to trend higher.

Paul A. Lang: Counterbalancing those positivity.

Paul A. Lang: Lifestyle has recovered modestly year to date with.

Paul A. Lang: Australian and U.S. coking coal exports rebounded somewhat, albeit to levels significantly below. It's important to point out, as a world-class competitor with a first quartile cost... Arch is exceptionally welcome, and is still driving value for sure. In fact, periods of market weakness can be healthier by differentiating the stronger operators and reinforcing the fact that this is a commodity business. Cycles, and Evan Foote, And being a low-cost producer does that.

Paul A. Lang: Aliens and U S coking coal exports rebounded somewhat albeit at levels significantly below their respective groups.

Paul A. Lang: It's important to point out is a world class competitor with a first quartile costs.

Paul A. Lang: <unk> is exceptionally well positioned to manage through extended periods of market, while still driving value for sure.

Paul A. Lang: In fact periods of market weakness can be healthy at ardent by differentiating the stronger operate reinforcing the fact that this is a commodity cycle.

Paul A. Lang: The cycles have ebb and flows and being a low cost producer desktop.

Paul A. Lang: We also continue to believe that our long standing cases.

Paul A. Lang: But we also continue to believe in our long-standing peace, that investment and ESG-related constraints will continue to support a constructive, long-term supply-demand balance in the global coking coal market. In fact, those dynamics could spur a quick recovery in such markets if global economic conditions start to strengthen or major economies begin to increase their steel-intensive stimulus spending. It's also worth noting that recent price declines may already be taking a toll on high-cost U.S. operations. In recent weeks, several small coke and coal mines have idled sections, which has seen production entirely, according to Martin Teller. Turning now to the thermal markets, and U.S. fundamentals-related challenges.

Paul A. Lang: Under investments, we asked you related constraints will continue to support constructive long term supply demand balance the global coking coal market.

Paul A. Lang: Those dynamics could spur a quick recovery in such markets as global economic conditions start to strengthen.

Paul A. Lang: Major economies.

Paul A. Lang: They're still in person soon.

Paul A. Lang: I'm going to spend it.

Paul A. Lang: It's also worth noting that recent price declines they are and we've taken a pause and high high cost U S operation.

Paul A. Lang: Recently, several small coking coal mines bridal section.

Paul A. Lang: Reduction in time, according to market intelligence.

Paul A. Lang: Turning now to the thermal markets U S fundamentals remained challenged.

Paul A. Lang: Natural gas trading below $2 Henry hub.

Paul A. Lang: Natural gas trading below $2 per million at Henry Hub and utility stockpiles at a historically high level after the mild winter, these natural factors, in turn, revealed an estimated 10% decline in domestic thermal coal production by quarter over quarter basis. On a more positive note, the Seaborne Thermal Market has rebounded somewhat, with Park Newcastle Price standing at $130 per metric ton and API2 at $119. As a part of this improvement in the price environment, U.S. thermal coal exports were up roughly 26% for the first two months of 2024 when compared to 2020.

Paul A. Lang: It's already stockpiles at historically high levels.

Paul A. Lang: Mild weather.

Paul A. Lang: These macro factors in turn drove an estimated 10% decline in domestic thermal coal production quarter over quarter basis.

Paul A. Lang: On a more positive note the seaborne thermal market has rebounded somewhat.

Paul A. Lang: New castle price standing at $130 per metric ton and API to $19 per metric ton.

Paul A. Lang: We are a part of this improvement in the price environment.

Paul A. Lang: Thermal coal exports were up roughly 26% for the first two months of 2024, when compared with 2023.

Paul A. Lang: Looking ahead, we're sharply focused on driving continuous improvement across our operating platform.

Paul A. Lang: Looking ahead, we're sharply focused on driving continuous improvement across our operating platforms in support of ongoing and value-generating capital returns for sure. At the same time, we'll continue to capitalize on the strategic optionality afforded to us by our ownership interest in the DTA terminal as we navigate through the tragedy of the Francis Scott Key Bridge Collapse at the Port of Baltimore. While the closure of the port should not have any impact on production or life.

Paul A. Lang: <unk> are ongoing and value generating capital expense Cheryl.

Paul A. Lang: At the same time, we're continuing to capitalize on the strategic optionality afforded by our own.

Paul A. Lang: Interestingly the <unk> terminal.

Paul A. Lang: We've had to get through the tragedy of the Francis Scott Key bridge collapse at the Port of Baltimore.

Paul A. Lang: Well the close of the fourth should not have any impact on production or not.

Paul A. Lang: It's likely to constrain second quarter coal shipment somewhat and, in turn, dampen Q2 capital return. However, we expect the impacts to be timing-related only if the Port of Baltimore reopens as anticipated. Thus, the effect on cash flow is merely delay rather than loss.

Paul A. Lang: Likely constrain second quarter culture somewhat and in turn they have.

Paul A. Lang: Q2 capital returns.

Paul A. Lang: However, we expect the impacts to be timing related at all.

Paul A. Lang: Yes, the port of Baltimore reopened RASM.

Paul A. Lang: Okay effective cash flow is really the way rather than launch.

Paul A. Lang: In closing, let me say, in many respects, Arch was built for periods such as this, where our low-cost positions and high-quality products afford us the ability to generate substantial cash flows despite softer market climates. At the same time, we believe we're equally well positioned to capitalize on the situation and return even more robust amounts to our shareholders when the markets recover. With that, I'll turn the call over to John Drexler for further discussion on operational performance in Q1. John?

John T. Drexler: So in closing, let me say in many respects arches built for periods such as this we're a low cost position and high quality products afford us the ability is there.

John T. Drexler: <unk> substantial cash flows despite the softer market.

John T. Drexler: At the same time, we believe we are equally well positioned to capitalize on the situation and then for even more robust about fast short shuttle markets recover.

Paul A. Lang: With that I'll turn the call over to John Drexler for further discussion of our operational performance in Q1.

John T. Drexler: Thanks, Paul, and good morning, everyone. As Paul just discussed, the ARC's team successfully navigated through significant disruptions to logistics, supply chain, and a weakening market environment during Q1, while still delivering substantial amounts of discretionary cash. While production levels from a core metallurgical segment were less than ratable from an annual guidance perspective, the portfolio is currently transitioning into increasingly favorable geologic conditions, and we expect good momentum as we progress through the year. In the first quarter, our core metallurgical segment once again delivered a first quartile cost performance and generated nearly $130 million in adjusted EBITDA, despite less-than-radical outputs stemming from long wall moves at both rear and rear sides, typical geologic variability, and issues I would characterize as just mine.

John T. Drexler: Thanks, Paul and good morning, everyone basketball just discussed we are seeing successfully navigated through significant disruptions.

John T. Drexler: True weakening market environment during Q1, while still delivering substantial amounts of discretionary cash.

John T. Drexler: While production levels from our core metallurgical segment were less than.

John T. Drexler: All guidance perspective.

John T. Drexler: Colorado is currently transitioning an increasingly favorable geologic conditions.

John T. Drexler: The momentum as we progressed through the board.

John T. Drexler: In the first quarter, our core metallurgical segment. Once again delivered a first quartile cost performance and generated nearly $130 million and adjusted EBITDA.

John T. Drexler: Less than radical output stemming from longwall moves at both.

John T. Drexler: Lisa.

John T. Drexler: Typical geologic variability.

Speaker Change: I wouldn't characterize it as just Mike.

John T. Drexler: Included in this latter category, we lost seven days of longwall production at the Lear Mine during Q1 at an estimated impact of around $70,000 due to our efforts to coordinate the Longwall startup with the local utility's relocation of power lines that were to be underway. However, the steps we took on that front resulted in our receipt of a $9.1 million payment, which was recorded as other income. We estimate that the lost tonnage inflated our Q1 metallurgical segment costs by close to $2 per ton. Even with that impact, the segment's average cash cost came in at $94 per ton, which was modestly above the high end of our 40-year guidance but still top tier when compared to other U.S. cocaine corporations.

John T. Drexler: Included in this latter category, we lost seven days of longwall production at Leer.

John T. Drexler: During Q1, but an estimated impact of around 70000 tonnes due to our efforts to coordinate the longwall start up with the local utilities relocation Apollo yes.

John T. Drexler: If we were to be younger.

John T. Drexler: While the steps we took on the upfront resulted in I would say from a $9 1 million dollar payment, which was recorded as other income.

John T. Drexler: We estimate that the law strategy inflated our Q1 metallurgical segment cost by close to $2 per ton.

John T. Drexler: Even with that impact the segment's average cash costs came in at $94 per ton.

John T. Drexler: Was modestly above the high end of our full year guidance range, but still top tier when compared to other U S coking coal producers.

John T. Drexler: As indicated, our coking coal mines are transitioning into increasingly favorable geology, and as a result, we remain comfortable with our 4-year guidance and the cash cost midpoint of $89.50 per ton. In the thermal segment, the West Elk Mine continued to operate efficiently and generate solid adjusted EPCAs even as it continued to ship under several legacy contracts that dampened NETVAP's merits. The Potta River Basin assets also operated efficiently, but they lost cash in spite of that fact due to the rapidly cooling domestic thermal demand environment.

John T. Drexler: As indicated our coking coal mines are transitioning increasingly favorable geology and as a result, we remain comfortable with our full year guidance.

John T. Drexler: Cash cost midpoint of $89 56 per tonne.

John T. Drexler: In the thermal segment the West Elk mine continued to operate efficiently and generated solid adjusted EBITDA, even as they continue to ship under several legacy contracts with Dampens net backs there.

John T. Drexler: How do we Rebase on assets also operated efficiently.

John T. Drexler: <unk> cash in spite of that fact due to the rapidly cooling domestic thermal demand environment.

John T. Drexler: In short we ended the year stripping at a pace consistent with the 55 million tons per year sales volume level.

John T. Drexler: In short, we ended the year stripping at a pace consistent with a 55 million ton per year sales volume level but are currently anticipating 2024 shipments that could be as much as 10 million tons. As a result, the PRB operated in the red in QWARM, counterbalancing the solid performance at Westbrook. On a more positive note, we expect to capitalize on the excess stripping completed in the PRB in the gears back half and, as in the past, to preserve value by negotiating additional out-year commitments in exchange for any customer request and deferral.

John T. Drexler: We are currently anticipating 'twenty 'twenty four shipments that could be as much as 10 million tons.

John T. Drexler: As a result the PLD.

John T. Drexler: We operated in the Red in Q warm counterbalancing, the solid performance at Watsco.

John T. Drexler: On a more positive note, we expect to capitalize on the excess stripping completed in the PRP and the year's back half.

John T. Drexler: As in the past to preserve value by negotiating additional out your commitments in exchange for any customer requested deferrals.

John T. Drexler: Looking ahead, we continue to be encouraged by the general progression of our coking coal operations.

John T. Drexler: Looking ahead, we continue to be encouraged by the general progression of our coking coal operation. Lear South is currently operating at a good, productive pace and is well on track, in our view, to achieve the 3 million ton annual production figure we have targeted for the mine in 2024. Moreover, the development work we are currently doing in District 2 is serving to reinforce our confidence in the much-enhanced geologic conditions we expect to encounter there.

John T. Drexler: <unk> is currently operating in a good productive pace and is well on track and argued to achieve the 3 million ton annual production and you're we are targeting for the mine for 2024.

John T. Drexler: Moreover, the development work. We are currently doing in district, two is serving to reinforce our confidence in a much enhanced geologic conditions, we expect to encounter.

John T. Drexler: As previously discussed our drilling data as well as our experience in the early development work in that district suggests a materially bigger coffee and more favorable profitability overall in district.

John T. Drexler: As previously discussed, our drilling data, as well as our experience from the early development work in that district, suggests a materially thicker coal seam and more favorable credibility overall in District 2, which would prove beneficial when we begin longwall mining there in the fourth quarter. I will say again, at a time when many other operations are wrestling with the migration to less advantageous and higher cost reserves, we are fortunate to be moving in the opposite direction of risk.

John T. Drexler: Let's look pretty beneficial when we begin longwall mining there in the fourth quarter.

John T. Drexler: Yes.

John T. Drexler: I will say again at a time when many other operations are wrestling with the migration to Leslie I'm asking just some higher cost reserves, we are fortunate to be moving in the opposite direction that we are selling.

John T. Drexler: Now, let's spend a few minutes discussing the closing of the shifting channel in Baltimore following the tragic bridge collapses.

John T. Drexler: Now let's spend a few minutes discussing the closing of the shipping channel in Baltimore following the tragic bridge collapse. As we have discussed, we typically ship the majority of our later and later South export volumes for roughly half of our cooking full volumes overall via the Curtis Bay Terminal in Baltimore.

John T. Drexler: As we have discussed we typically shows the majority of our Leer south export volumes.

John T. Drexler: The half of our coking coal volumes overall via the Curtis Bay terminal in Baltimore.

John T. Drexler: With the channel closed we are having a direct volumes elsewhere and I'm pleased to report that the team is doing a terrific job on that front and we remain focused on maximizing our shipments using alternative routes.

John T. Drexler: With the channel closed, we are having to direct volumes elsewhere, and I'm pleased to report that the team is doing a terrific job on that front and remains focused on maximizing our shipments using alternative routes. Of course, our strategic investment in Dominion Terminal Associates and Newport News has been pivotal to our success on that term, as has been the great support we have received from our mail partners. While we continue to work around capacity constraints and DTA, we believe we will be able to achieve sales volumes in the range of 1.9 to 2.2 million tons in Q2, depending on the exact timing of the channel reopening that is currently projected for the end of May according to the U.S. Army Corps of Engineers.

John T. Drexler: Of course, our strategic investment and Dominion terminal Associates and Newport News.

John T. Drexler: Pivotal pivotal to our success on that front.

John T. Drexler: This has been a great support we have received from our railcar.

John T. Drexler: While we continue to work around capacity constraints.

John T. Drexler: We believe we will be able to achieve sales volumes in the range of one point to 2.2 million tonnes in Q2.

John T. Drexler: Depending on the exact timing of the channel reopening. It is currently projected for the end of the day. According to the U S Army Corps of engineers.

John T. Drexler: That volume level would put us at around 4 million tons in the first two quarters, suggesting a little over a 2.4 million ton quarterly run rate in the past. Given our available alternative logistics and stockpile capacity, we do not expect any impact to our production levels at the mines due to the port outage and continue to view our prior volume guidance of 8.6 to 9 million tons as achievable.

John T. Drexler: That's volume level would put us at around 4 million tons in the first few quarters, suggesting a little over two 4 million ton quarterly run rate for the year.

John T. Drexler: <unk> background.

John T. Drexler: Given our available alternative logistics and stockpile capacity, we do not expect any impact to our production levels at the mines detour due to the port outage and continue to view our prior volume guidance of $8 six to 9 million tonnes is achievable.

Speaker Change: Before passing the baton to Matt, let's spend a few minutes discussing the team's exemplary achievements in our sustainability arena.

John T. Drexler: Before passing the baton to Matt, let's spend a few minutes discussing the team's exemplary achievements in the sustainability arena. As you know, we firmly believe that a culture of safety and environmental stewardship is essential for long-term success in our business. During Q1, Arch's subsidiary operations achieved an aggregate total lost time incident rate of 0.62 incidents per 200,000 employee hours worked, which was more than three times better than the industry average. On the environmental front, the company again reported zero environmental violations, as well as zero water quality exceedances across all of our subsidiary operations.

John T. Drexler: As you know we firmly believe that a culture of safety and environmental stewardship is essential for long term success in our business.

John T. Drexler: During Q1 arches subsidiary operations achieved an aggregate total loss I Miss it weighs 0.62 incidents per 200000 employee hours worked.

Matt: So it's more than three times better than the industry.

John T. Drexler: On the environmental front the company again recorded zero environmental violations other snack growth as well as zero water quality experiences across all of our subsidiary operations.

Matt: Highlighting the teams excellent work at the state of West, Virginia recently named a leader in the near South mines co recipients of the Governor's milestone of Safety award the state's highest safety.

John T. Drexler: Highlighting the team's excellent work, the state of West Virginia recently named Lear and Lear South, co-recipients of the Governor's Milestone of Safety Award, the state's highest safety award. In addition, the Mt. Laurel line and the Lear, Lear South, and Mt. Laurel preparation, were each honored with a Mountaineer Guardian Award for receiving. In the environmental arena, Learsoft claimed the Greenlands Award, the state's highest honor for environmental.., and Leer & Leer South were honored with additional environmental. On behalf of the board and the senior management team, I want to commend the entire workforce for their deep commitment to the mission. With that, I will now turn the call over to Matt for some additional color on our financial results.

Matt: In addition, the mountain Laurel and Leer.

Matt: Alere Leer South mountain more preparation.

John T. Drexler: With each honored with the Mountaineer Guardian award for safety.

Matt: In the environmental Arena Leer, South claim the Greenland, the state's highest honor for environmental or cheaper.

Matt: Leer, South we're honored with additional environmental excellence.

Matt: On behalf of the board and the senior management team I want to commend the entire workforce for their deep commitment to excellence in these essential areas of performance.

John T. Drexler: Okay.

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

Matthew C. Giljum: Thanks, John. Good morning, everyone. Let's begin with a discussion of First Quart.

Matt: Thanks, John Good morning, everyone.

Matt: Let's begin with a discussion of first quarter cash flows and liquidity.

Matthew C. Giljum: 1st Quarter Cash Flow and Liquidity.

Matt: Operating cash flow totaled $128 million in Q1, which included a working capital benefit of $19 7 million.

Matthew C. Giljum: Operating cash flow totaled $128 million in Q1, which included a working capital benefit of $19.7 million. All we have anticipated working capital

Matt: While we had anticipated working capital to building a pyramid.

Matthew C. Giljum: While we had anticipated working capital to build in the period, the decline in metallurgical prices over the course of the quarter combined with lower thermal shipment volumes resulted in a meaningful drawdown of accounts receivable. Capital spending totaled $45 million, and discretionary cash flow was $83 million. Turning to the balance sheet, we ended March with cash and short-term investments of $340 million, essentially flat with 1231 levels. As we discussed in last quarter's call, we closed on a new $20 million term loan in Q1 and largely used those proceeds to retire the old loan and make other debt amortization payments, resulting in end-of-quarter debt of $146 million, which is only modestly higher than year-end levels. Our net cash position was $174 million, and our liquidity was $442 million, both of which remain above target levels.

Matthew C. Giljum: Client metallurgical prices over the course of the quarter combined with lower thermal shipment volumes resulted in a meaningful drawdown with accounts receivable.

Matthew C. Giljum: Capital spending was almost $45 million and discretionary cash flow was $83 million.

Matthew C. Giljum: Turning to the balance sheet, we ended March with cash and short term investments of $340 million essentially flat with Q1 levels.

Matthew C. Giljum: As we discussed on last quarter's call, we closed on a new $20 million term loan in Q1, the margin to use those proceeds to retire the old one and make other debt amortization payments.

Matthew C. Giljum: Having an end of quarter debt $146 million, which was only modestly higher than year end levels.

Matthew C. Giljum: Our net cash position was $174 million at March 31, and.

Matthew C. Giljum: And our liquidity was $443 million, both of which remain above target levels.

Matthew C. Giljum: Turning now to the Capital Return Program, we continue to execute on our two-pronged approach: Systematically Reducing the Share

Matthew C. Giljum: Turning now to the capital return program.

Matthew C. Giljum: To execute on our two pronged approach systematically reducing the share count are also paying a meaningful dividend.

Matthew C. Giljum: Systematically reducing the share count while also paying a meaningful dividend. Starting with the share count, through a combination of the Caps Call Unwind and share repurchases, we retired 410,000 shares during the quarter. The capital unwind, which made up over 75% of that total, is equivalent to a share we purchased at nearly $53 million without any cash outlay in the court. We also repurchased 95,000 shares in the open market in Q1, and in total, we have now retired over 2.5 million shares at an average price of $139 since we relaunched the program.

Matthew C. Giljum: Starting with the share count through a combination of the capped call unwind and share repurchases. We retired 410000 shares during the quarter.

Matthew C. Giljum: The cap call unwind, which made up almost 75% of that total.

Matthew C. Giljum: <unk> went through a share repurchase of nearly $53 million and without any cash outlay in the quarter.

Matthew C. Giljum: We also repurchased 95000 shares in the open market in Q1 and in total and now retired over two 5 million shares at an average price of $130 million since we relaunched the program.

Matthew C. Giljum: That, combined with the retirement of the convertible debt, has reduced our fully diluted share count by 3.5 million shares since its recent high point in 2022. And while share count reductions are a clear priority, the dividend remains a significant component of ARTS' value process. The Board has approved a quarterly dividend of $1.11 per share today, bringing the total dividends to nearly $1,000,000.

Matthew C. Giljum: That combined with the retirement of the convertible debt has reduced our fully diluted share count by $3 5 million shares since its recent high point in 2022.

Matthew C. Giljum: And I'll share count reduction is our clear priority the dividend remains a significant component of our value proposition.

Matthew C. Giljum: What has approved the quarterly dividend of $1 11 per share today, bringing the total dividends to nearly $39 per share since the beginning of 2022.

Matthew C. Giljum: All limited to nearly $39 per share since the beginning of 2022. The upcoming dividend will be paid on June 14th.

Speaker Change: Yes, I'll cover your dividend when we paid on June 14th to stockholders of record as of May may 31.

Matthew C. Giljum: The upcoming dividend will be paid on June 14th to stockholders of record as of May 31st. Next, I wanted to provide some additional detail on Paul's comment on Q2 Capital Returns. John just provided an excellent overview of our approach to managing our export metallurgical shipments while Baltimore Harbor remains closed. From a timing standpoint, as you would expect, much of April to date has been focused on redirecting activity away from Curtis Bay into DTA and other alternatives.

Matthew C. Giljum: Actually I wanted to provide some additional detail around pulse comment on Q2 capital returns.

Matthew C. Giljum: John just provided an excellent overview of our approach to managing our export metallurgical shipments ballpark Baltimore Harbor remains closed.

Matthew C. Giljum: From a timing standpoint that you wouldn't expect much of April to date has been focused on redirecting activity away from Curtis Bay.

Matthew C. Giljum: Your DTA and other alternatives.

Matthew C. Giljum: Additionally, we expect a further seasonal step down in thermal volumes in Q2, foreseeing modest improvement.

Matthew C. Giljum: But the net result, being export shipments heavily weighted towards the latter half of the quarter.

Matthew C. Giljum: Additionally, we expect a further seasonal step down in thermal volumes in Q2.

Matthew C. Giljum: We're seeing modest improvement as we get into the summer.

Matthew C. Giljum: As a result, we currently expect a significant working capital increased in Q2.

Matthew C. Giljum: As a result, we currently expect a significant working capital increase in 2020 and that operating cash flows and discretionary cash flows will be at levels that won't allow for significant share repurchases in the quarter. We view this strictly as a timing issue, and we anticipate cash flows and capital returns to normalize as we get to Q3. As a final point, while we expect second-quarter volumes in both segments to be lower than RADL as compared to Guide Slone, we expect stronger performance in the second half of the year and are maintaining our full-year operating influence. With that, we are ready to take questions, operator. I will turn the call back over to you.

Matthew C. Giljum: And the operating cash flows and discretionary cash flows will be at levels that will allow for significant share repurchases in the quarter.

Matthew C. Giljum: We view this strictly as a timing issue and we anticipate cash flows and capital returns to normalized as we get to Q3.

Matthew C. Giljum: As a final point, while we expect second quarter volumes in both segments to be lower than revenue as compared to guidance levels. We.

Matthew C. Giljum: We expect stronger performance in the second half of the year and are maintaining our full year operating and financial guidance.

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

Operator: 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 touchtone phone. 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 are using a speakerphone, please lift the handset before pressing any button.

Speaker Change: Ladies and gentlemen, I will now begin the question and answer session should you have a question. Please press the star followed by the number one on your Touchtone phone.

Operator: We'll hear of problems that you had has been reached should you wish to decline from the polling process. Please press the star followed by the number too.

Operator: If you are using a speaker phone please lift the handset before pressing and Keith.

Operator: One moment, please, for our first question. Your first question comes from Lucas Pipes from Be Riser Security. Please ask your question. Thank you.

Operator: One moment please for our first question.

Operator: Yeah.

Operator: Your first question comes from Lucas pipes from B Riley the security. Please ask your question.

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

Lucas Nathaniel Pipes: Thank you very much, Operator. Good morning, everyone.

Lucas Nathaniel Pipes: Alright, I wonder.

Lucas Nathaniel Pipes: I wanted to ask.

Lucas Nathaniel Pipes: I wanted to start with a.

Lucas Nathaniel Pipes: I want to start with a strategic question. So when I kind of think back over the last couple of years, the number of unexpected issues, the Curtis Bay Disruption, West Elk Geology, Lear South Geology, and obviously the recent tragedy in Baltimore. Your strategy has been focused on large, productive mines, and you've focused on these core assets. I would expect mean reversion from the events of recent years, but is there a case to be made, and how do you think about adding more geographic or other diversification to the portfolio?

Lucas Nathaniel Pipes: Strategic question, so when I when I kind of think back over the last couple of years.

Lucas Nathaniel Pipes: It works.

Lucas Nathaniel Pipes: Number of kind of unexpected issues the Curtis Bay.

Lucas Nathaniel Pipes: Disruption West Elk geology yourself geology, and then obviously, though.

Lucas Nathaniel Pipes: The recent tragedy in Baltimore.

Lucas Nathaniel Pipes: Your strategy has been focused on kind of large productive mines.

Lucas Nathaniel Pipes: And you're focused on.

Lucas Nathaniel Pipes: These core assets.

Lucas Nathaniel Pipes: I would expect mean reversion.

Lucas Nathaniel Pipes: Kind of from Dot com.

Lucas Nathaniel Pipes: The events of recent years, but.

Lucas Nathaniel Pipes: Is there a case to be made and how do you think about adding.

Lucas Nathaniel Pipes: Adding more geographic diversification to the portfolio. Thank you.

Paul A. Lang: I don't know. I think it's a leftist question.

Speaker Change: I think it's an interesting question Lucas.

Paul A. Lang: You know, I think I've told people many times. I think back to 2012 when we were operating 38 mines. Now, for us, we found it was not the easiest thing to do. I think there are others that do it well. But, you know, where we have found our sweet spot, I think, is operating very large, very efficient, very low-cost mines, and it does come with a certain degree of exposure. But, by and large, I think, as quickly as we continue to improve things for the South, I think we really will be set up well going into the future. I think more importantly, what you'll see is that, you know, if you look at our maintenance capex, you know, being status quo in the next 10 years, our Catholics are going to be much lower.

Paul A. Lang: And I think I've talked with them for many times over.

Paul A. Lang: Okay.

Paul A. Lang: I think back.

Paul A. Lang: 2012, operating 38 bonds.

Paul A. Lang: For us we felt it was not the easiest thing I think theres other et cetera.

Paul A. Lang: Well, where.

Paul A. Lang: We have found our sweet spot I think was operating in very large very efficient very low cost mines.

Speaker Change: Thanks Carlo.

Speaker Change: We agree.

Paul A. Lang: Extraordinary.

Paul A. Lang: But by and large I think.

Paul A. Lang: Correctly and this quarter, we got approved.

Paul A. Lang: I think when you're ruling will be set up well.

Paul A. Lang: Sure.

Paul A. Lang: Certainly what youll see is that right.

Paul A. Lang: We look at our maintenance Capex.

Paul A. Lang: Let's call it the next 10 years.

Paul A. Lang: Our capex is going to be much lower.

Paul A. Lang: Some of our peers on operating lines smaller.

Paul A. Lang: Some of our peers have been doing a lot of smelly things. And that's, you know, that's kind of a little bit of the offset to the very issue you're talking about, about being more spread out. So with that, I don't know if any of the others have any thoughts on that, or not.

Paul A. Lang: Well, that's kind of a little bit of the offset.

Paul A. Lang: Betting issue you're talking about.

Paul A. Lang: And more spread out so with that I don't think so.

Paul A. Lang: Any thoughts on that or.

Deck S. Slone: So this is with the stack, and so with the addition of LearSouth, obviously, you know, we were endeavoring to address just that, and I think we've done that to a meaningful degree. Of course, it's not, you know, it's not going to be perfect diversification, but to a meaningful degree. And I think DTA, you know, underscores what you just described, which is that the investment we made to expand our investment actually at DTA several years ago is really paying dividends today.

Speaker Change: So that goes with that is back in service with the addition of Leer South obviously, we are endeavoring to address just that I think we've done that meaningful degree of course is not.

Deck S. Slone: Not going to be perfect diversification thats, a meaningful degree and I think DTA underscores what you just described which is the.

Deck S. Slone: The investment, we made and expand our investment actually a DTA several years ago is really paying dividends. Today. So we certainly are aware of that need to make sure that we have flexibility that we can be nimble that we do have alternate routes and and and.

Deck S. Slone: So we certainly are aware of that need to make sure that, you know, we have flexibility, that we can be nimble, that we do have alternate routes and, you know, and multiple production sources that are consequential. We have two big horses now, rather than just one, as an example. So we have taken meaningful strides, and again, I think that's paying dividends significantly right now when you think about how much volume we expect to move in Q2, despite the fact, you know, that Curtis Bay is right now, you know, out of the market. But, good comments.

Deck S. Slone: And in multiple production sources that are consequential, we have two big horses now rather than just one and it doesn't cost segment. As an example, so we have taken meaningful strides.

Deck S. Slone: I think that's paying dividends significantly right now when we think about how much volume we expect to move in Q2. Despite the fact that they have.

Deck S. Slone: Curtis Bay.

Deck S. Slone: Right now out in the market so.

Speaker Change: A good cause.

Deck S. Slone: Okay.

Speaker Change: Thank you very much for those comments.

Lucas Nathaniel Pipes: Thank you very much for those comments. On the thermal side, it looked like you resteripped quite a bit in the PRB given the market conditions. So for Q2, what would you expect this to mean on the cost side? I'd assume there'd be a pretty sharp reversal. So if you could kind of walk through the implications on the cost side, also on the volume side, for Q2, I would appreciate that. And then Matt, I think you mentioned at the end of your comments that working capital would be used in Q2 and you'd expect that to reverse later in the year.

Lucas Nathaniel Pipes: On the thermal side it looks like you.

Lucas Nathaniel Pipes: We stripped out.

Lucas Nathaniel Pipes: A bit in the PRP given given the market conditions so for Q2.

Lucas Nathaniel Pipes: What would you expect.

Lucas Nathaniel Pipes: This to me on the call today, I would assume there to be a pretty sharp reversal.

Lucas Nathaniel Pipes: So if you could kind of walk through the implications on that on the cost side also on the volume side for Q2.

Lucas Nathaniel Pipes: Would appreciate that and then Matt I think you mentioned there at the end of your comments that working capital will be.

Lucas Nathaniel Pipes: Using Q2.

Lucas Nathaniel Pipes: And do you expect that to reverse later in the year.

Lucas Nathaniel Pipes: You have been very tactical in the past with.

Lucas Nathaniel Pipes: You have been very tactical in the past with the pursuit of share repurchases. Could this be a period right now where even though cash flows may be temporarily restricted, you continue to lean in, giving a very bullish long-term outlook on Metco prices?

Lucas Nathaniel Pipes: The pursuit of share repurchases could.

Lucas Nathaniel Pipes: Could this be a period right now where even even though cashless may be temporarily restricted.

Lucas Nathaniel Pipes: You continue to two two to lean in given giving you very bullish long term outlook on met coal prices. Thank you very much.

Lucas Nathaniel Pipes: Thank you very much.

John T. Drexler: Lucas, John Drexler here. I'll start out with a discussion on the thermal side. You know, in the PRB, as we described in our prepared remarks, the team there is prepared for a stripping level that is meaningfully above what we've seen here start to play out at the beginning of the year. Obviously, the winter was less than ideal. We've seen, you know, gas prices that are displacing electric generation from coal, you know, just a lot of pressures, and everybody has been feeling it there. What I'm really proud of is the team out at NPRB does a fabulous job. They've been through this before. They know what to do.

John T. Drexler: Lucas John Drexler here I'll start out with a discussion on the on the thermal side.

John T. Drexler: The <unk> as we described in our prepared remarks.

John T. Drexler: The team there is prepared for stripping level that was meaningfully above what we've seen here is starting to play out at the beginning of the year obviously.

John T. Drexler: The winter was less than ideal.

John T. Drexler: We've seen gas prices that are displacing electric generation from coal.

John T. Drexler: Just a lot of pressures and everybody has been feeling it what I'm real proud of is the team.

John T. Drexler: <unk> does a fabulous job they've been through this before.

John T. Drexler: No one can do unfortunately, it's not something that just happens overnight, but they are in the process right now of adjusting schedules eliminating overtime.

John T. Drexler: Unfortunately, it's not something that just happens overnight, but they're in the process right now of adjusting schedules, eliminating overtime, managing headcount, laying down equipment, you know, doing all of the things that we've done and we've done successfully in the past. But it typically takes several quarters. You know, as we discussed, we have created some pit inventory. We stripped higher than what was shipped.

John T. Drexler: Managing head count laying down equipment doing all of the things that we've done and we've done successfully in the past.

John T. Drexler: Typically take several quarters.

John T. Drexler: <unk> discussed.

John T. Drexler: We have created.

John T. Drexler: We stripped higher than what was shipped.

John T. Drexler: As we realign the operation moving forward, we'll get that benefit. You know, we've seen 50% growth, essentially, in our pit inventory that we'll benefit from in future quarters. But as you look at the second quarter from a seasonality perspective, there's typically a lot of pressure on that historically in Q2 anyway because of spring and the shorter season. So Q2 may be another challenging one as well, but the team right now is actively implementing all of the measures that we've done successfully in the past.

John T. Drexler: As we realign the operation moving forward, we'll get that benefit we've seen.

John T. Drexler: 50% growth essentially in our inventory that we'll benefit from in future quarters.

John T. Drexler: If you look at the second quarter from a seasonality perspective, theres typically a lot of pressure in that historically in Q2 anyway, because it's bringing in the sugar. So Q2, maybe another challenging one as well, but the team right now is actively implementing all of the measures that we have.

John T. Drexler: Done successfully in the past, we will be working to control those costs minimizing.

John T. Drexler: We'll be working to control those costs, minimizing the negative impact in Q2, and we'll expect to benefit from that and get back to cash positive here as we work through the remainder of the year in 2020 growth. And Lucas, in the past, if you look back, you can certainly see those periods when we do sort of flip over to shipping more than we strip, you can see the margin expansion. Now, obviously, there are some headwinds out there on the thermal side.

John T. Drexler: The negative impact in Q2, and we will expect to benefit from that and get back to cash positive here as we work through the remainder of the year in two.

John T. Drexler: 2020.

John T. Drexler: In the past liquidity. If you look back you can certainly see those periods when we do sort of flip over to shipping more than we strip you can see the margin expansion now obviously there are some headwinds out there on the thermal side stockpiles are very high gas prices are low so we'll see how that manifests itself, but that can be pretty powerful when we do move to that point, where we're <unk>.

John T. Drexler: Stockpiles are very high, and gas prices are low. So we'll see how that manifests itself. But that can be pretty powerful when we do move to that point where we're shipping more than we strip as opposed to the headwind we've had in Q1 and we'll have again in Q2, which is stripping more than we ship. So we certainly are feeling optimistic about the second half, but we'll also have to watch and see what happens with thermal demand overall. Lucas, are there any questions?

John T. Drexler: And even when we strip as opposed to the headwind. We've had in Q1 will happen again in Q2, which is stripping more than we shipped so certainly our feeling.

John T. Drexler: Optimistic about the second half, but we will also have to watch and see what happens with thermal demand overall.

Lucas: Lucas Thanks for question.

Matthew C. Giljum: Regarding the share repurchases, you know, we

Speaker Change: The share repurchases.

Lucas: But we are.

Matthew C. Giljum: Clearly, expect a working capital build this quarter. Harder to predict this quarter probably than most, just given all the uncertainty.

Matthew C. Giljum: Clearly expect a working capital build this quarter.

Matthew C. Giljum: Hard to predict this quarter, probably been most just given all the uncertainties around how the <unk>.

Matthew C. Giljum: And we'll be talking about some of the ideas around how the export shipments will be diverted and where those will end up.

Matthew C. Giljum: Export shipments will be diverted and more negotiable Linda.

Matthew C. Giljum: But safe to say, given the shift in volumes to the latter half of the quarter, that we'll see that build as it relates to the share repurchase program. We clearly

Matthew C. Giljum: Safe to say given the shift in volumes to the latter half of the quarter that we will see that bill as it relates to the share repurchase program. We clearly last quarter built up a nice bit of cash on our balance sheet to be opportunistic.

Matthew C. Giljum: Last quarter we built up a nice bit of cash on our balance sheet to be opportunistic. And if the share price moves in a way that we think it's very opportunistic to be in the market this quarter, I think you'll see that, but clearly that was meant to be for times when the cycle really moved against us, when the long-term fundamentals didn't necessarily do so.

Matthew C. Giljum: And if the share price moves in a way that we think it's very opportunistic to be in the market. This quarter I think you'll see that.

Matthew C. Giljum: But clearly that was meant to be four times when the cycle really moved against us when the long term fundamentals didn't necessarily do so.

Matthew C. Giljum: I think we'd probably be more likely to continue to hold that cash, absent a particularly good opportunity for a buyback. Thank you very much.

Matthew C. Giljum: I think we'd probably be more likely to continue to hold that cash absent.

Matthew C. Giljum: A particularly good opportunity for buybacks.

Speaker Change: Thank you very much for all of your color.

Lucas Nathaniel Pipes: Thank you very much for all of your color. Continue to best of luck. Thank you.

Lucas Nathaniel Pipes: Continued best of luck. Thank you.

Lucas Nathaniel Pipes: Okay.

Lucas Nathaniel Pipes: Your next question comes from the line of Nathan Martin from Benchmark Company. Please ask your question.

Operator: Your next question comes from the line of Nathan Martin from Benchmark Company. Please ask your question.

Nathan Pierson Martin: Hey, good morning, guys. Thanks, operator.

Nathan Pierson Martin: Hey, good morning, guys. Thanks, Operator.

Nathan Pierson Martin: Sure.

Nathan Pierson Martin: Just maybe sticking with the thermal segment just real quick I mean, obviously you guys just highlighted the high stockpiles low Nat gas prices mild winter for the most part.

Nathan Pierson Martin: Just maybe sticking with the thermal segment just real quick, I mean obviously you guys just highlighted the high stockpiles, low net gas prices, and a mild winter for the most part. So what gives you the confidence that you can still hit your full year thermal shipment guidance targets? How are conversations going with customers, maybe? I think previously you mentioned we could see another five to ten percent of those contracted tons roll over into 2025.

Nathan Pierson Martin: So what gives you the confidence that you can still hit your full year thermal shipment guidance.

Nathan Pierson Martin: <unk>, how are conversations going with customers maybe.

Nathan Pierson Martin: I think previously you mentioned, we could see another 5% to 10% of those contracted tons rollover into 2025, and then maybe separately you highlighted another negative contribution in the PRP likely for the second quarter, but is there an opportunity to have.

Nathan Pierson Martin: And then, you know, maybe separately, you highlighted another negative contribution in the PRB likely for the second quarter, but is there an opportunity to have, you know, an overall positive contribution from this segment, that thermal segment, based on how you think West Elk will perform?

Nathan Pierson Martin: Overall positive comp contribution from the segment that thermal segments.

Nathan Pierson Martin: Based on how you think west Elk will perform.

Speaker Change: Yes, Nathan the.

John T. Drexler: Nathan, the goal here, and obviously, we believe over the course of the year, we're going to have a thermal segment cash positive position, both West Elk and in the PRB as we move forward. You know, we talked about this on the last call. We talked about it in prepared remarks.

Nathan Pierson Martin: The goal here and obviously, we believe over the course of the year, we're going to have a thermal segment a cash positive position.

John T. Drexler: Both <unk> and <unk> as we move forward.

John T. Drexler: We talked about this on the last call we talked about in the prepared remarks.

John T. Drexler: You know, we're essentially committed in the PRB to higher levels than what we're indicating in the thermal shipment levels. And, you know, the expectation is that we're going to continue to see push. I applaud the marketing team and their efforts to manage that when you have essentially, you know, significantly high stockpiles and the inability of utilities to take any more coal. You know, we've found ways and opportunities here to roll over tons, not just to preserve the value of those tons that are rolling over, but to actually create value as well. We did that successfully in 2023, and the team's already focused on that and working through those types of opportunities as we move forward here.

John T. Drexler: We're essentially committed.

John T. Drexler: In the PRP to higher levels for what we're indicating in the.

John T. Drexler: Sample shipments.

John T. Drexler: Shipment levels and the expectation is that we're going to continue to see pushback.

John T. Drexler: I applaud.

John T. Drexler: The marketing team and their efforts to manage that.

John T. Drexler: When you have essentially significantly high stockpiles, the inability of utilities to take any more.

John T. Drexler: We've found ways and opportunities here.

John T. Drexler: So rollover times.

John T. Drexler: Not just to preserve value on those tons that are rolling over but to actually create value as well we did that successfully in 2023.

John T. Drexler: The team is already focused on that and working through those types of opportunities as we move forward here. So yes, we could see you know ongoing pressure, we could see shipments.

John T. Drexler: So, yeah, we can see, you know, ongoing pressure. We can see, you know, shipments continue to be challenged. But once again, with the work that's being done at the operation to realign for the expected shipment levels moving forward and the work that the marketing team's doing, we do expect to get it back to cash positive as we get to the back end. Hey, wait, this is Paul.

John T. Drexler: <unk> to be challenged but once again with the work that's being done.

John T. Drexler: Operation to realign for the expected shipment levels moving forward and the work that the marketing team is doing we do expect to get it back to cash positive.

Paul: Get to the back half.

Paul: Hey, great.

Paul A. Lang: Quick! I think one thing that gives me comfort is that I look back, you know, John and the team at the Petaluma Basin have just done an amazing job, you know, the last five seasons of responding to the market up and down. That was a big buy, https://www.youtube.com.uk. And if, you know, of all the locations that would have to do it, Black Thumb would be the one I would pick, and I think they'll do a good job.

John T. Drexler: Paul.

Paul A. Lang: I think one thing that gives me comfort as I look back on that.

Paul A. Lang: John in the tune of the Powder River basin.

Speaker Change: Thank you John.

Paul A. Lang: Last five six years of responding to the market up and down.

Paul A. Lang: Goodbye.

Paul A. Lang: 60 billion, you're talking to your buying doesn't change overnight.

Paul A. Lang: In this case, we've done a very good job over the years responding to these changes in market.

Paul A. Lang: Of all the locations would have to do it right in.

Paul A. Lang: Probably the one I would fit in I think both of them.

Paul A. Lang: John.

Paul A. Lang: And then just on the granularity of the numbers, right now we could foresee potentially shipping as low as 45 million tons out of the PRB, and you add 4 million tons of West Elk and the thermal byproduct in the East, and you're looking at 50 million, which is the low end of that range. And again, we may ship more than that, but right now, we continue to see value in working with customers, delaying shipments if they need to defer them, and then using that to get some length.

Paul A. Lang: And then just on the granularity of the numbers looked at.

Paul A. Lang: Right now we are seeing potentially shipping as low as 45 million tons on the PRT.

Paul A. Lang: 1 million tonnes at west Elk in the thermal byproduct niche and you look at the $50 million, which is around in that range again, we may ship more than that but right now we continue to see value in working with customers deferring shipments.

Paul A. Lang: I need to defer them and then using that to get some linked.

Paul A. Lang: In an environment where stockpiles are very high out there, getting sort of business here could be challenging, but using this opportunity to work with customers to get length and maybe multiples of volumes in terms of if we defer one ton, potentially getting additional volume beyond that one ton out here is a real opportunity. So we're going to be strategic about it. But I do think the 50 to 56 million tons is a reasonable range for what we'd expect, you know, in almost any sense.

Paul A. Lang: Correlate where stockpiles are very high out there getting sort of.

Paul A. Lang: Our business can be challenging, but using this opportunity to work with customers.

Paul A. Lang: Length of named multiples of volumes in terms of if we look for a lifetime essentially getting additional volume beyond that one time in out years Theres, a real opportunity. So we're going to be strategic about it but I do think the 50 to 56 million times encompasses.

Paul A. Lang: Well range for what we would expect.

Paul A. Lang: And almost anything.

Speaker Change: I appreciate all the color there guys.

Nathan Pierson Martin: Appreciate all the color there, guys. Maybe I'll shift over to the MET segment, John. I know you touched on some of this in your prepared remarks, but clearly, LEAR had a weak production quarter, I think one of the weakest in five-plus years. So do you expect that to kind of return to the typical, call it 1 million ton per quarter kind of run rate post the power line relocation you mentioned? I believe you also previously said the mine should be moving into thicker seams.

Nathan Pierson Martin: Shifting over to the met segment, John I know you touched on this.

Nathan Pierson Martin: In your prepared remarks, but clearly Lear had a weak production quarter I think one of the weakest in five plus years. So do you expect that to kind of return to the typical call. It 1 million ton per quarter kind of run rate post the power line relocation you mentioned.

Nathan Pierson Martin: I believe you also previously said the mine should be moving into <unk>, so great to be a little more color there and then related to your house.

Nathan Pierson Martin: So great to get a little more color there. And then, related, how should we think about the second quarter MET segment cost per ton? At least directionally from the first quarter, it seems like if we remove that $2 per ton from the power line relocation that you called out, maybe things should improve, but it would be great to get your thoughts.

Nathan Pierson Martin: Should we think about the second quarter met segment cost per ton at least directionally from the first quarter. It seems like if we remove that $2 per ton from the power line relocation that you called out maybe things should improve but would be great to get your thoughts.

Nathan Pierson Martin: Yes.

John T. Drexler: Yes, good questions, you know, and we'll start with Lear and some of the commentary around that. You know, we have the right to subsidise the panels that we mine. There was a power line tower that came across that the local utility requested that they wanted a little more time to shore up those towers. We were compensated for that nine point one million dollars that we recorded in other income.

Speaker Change: Good questions.

John T. Drexler: We'll start with Leer at kind of some of the commentary around that.

John T. Drexler: Yes.

John T. Drexler: Power line relocation came at the end of the longwall move we have the right to subside.

John T. Drexler: The panels that we mine there was a power line towers that came across.

John T. Drexler: Vascular local utility requested that they wanted a little more time to shore up.

John T. Drexler: Those towers, we were compensated for that $9 $1 million that we recorded in other income.

John T. Drexler: But, you know, clearly delaying the startup of the long wall is impactful. Seventy thousand tons, two dollars a ton impact for us as we move forward. You know, we describe other things as well.

John T. Drexler: But clearly delaying the startup of <unk>.

John T. Drexler: One ball is impactful 70000 tons $2 a ton impact.

John T. Drexler: For us as we move.

John T. Drexler: Forward, we describe other things as well you know you can have geologic variability.

John T. Drexler: You know, you can have geologic variability, you know, this is the end of the day, immaterial in the grand scheme of things. So you might have had an impact or two, a few things there. Those are all things that we manage each and every day and don't expect any longer-term impact. So, absolutely.

John T. Drexler: This is the end of the day immaterial in the Grand scheme of things. So you might have had an impact there too but a few things there those are all things that we manage each and every day and don't expect any longer term impact. So yes, absolutely. We are confident leader is going to get back on track. It is gonna be heading into some difficult.

John T. Drexler: We are confident it is going to get back on track. It is going to be heading into some difficult panels that it's going to continue to mine here for the remainder of twenty four. You know, we touched on their south as well. It went through a move.

John T. Drexler: Panels that it's going to continue to mine here for the remainder of 'twenty four.

John T. Drexler: We touched on Leer, south as well it went through a move so all of the teams do a fantastic job with the longwall moves we don't typically end up talking much about them, but it was a little bit of an impact for leer, south but once again the opportunity there south is as we transition out of this strict one.

John T. Drexler: So all of the teams do a fantastic job with the long wall moves. We don't typically end up talking much about them, but it had a little bit of an impact on their south. But once again, the opportunity that their south has is as we transition out of district one and into district two in the beginning of the fourth quarter of this year, we're going to see a meaningfully improved coal seam thickness somewhere in the range of 15 to 20 percent thicker than what we've experienced here since the long wall started in district one.

John T. Drexler: And in the district, two and the beginning of the fourth quarter of this year, we're going to see a meaningfully proved costly thickness.

John T. Drexler: Somewhere in the range of 15% to 20% thicker than what we've experienced here since the longwall started and district, one so we feel real good about.

John T. Drexler: So we feel real good about that moving forward. So, you know, once again, we'll manage through that and expect volumes to improve as we go forward, as related to costs. Obviously, you're impacted by the volume, so we expect improvement in the cost as we move forward into Q2. You know, we would expect somewhere, you know, getting back into the mid 80s, like eighty six dollars a ton type range as we go forward, according to our plans moving forward.

John T. Drexler: That moving forward. So once again, we will manage through that and expect volumes to improve.

John T. Drexler: As we go forward is related to costs obviously.

John T. Drexler: You are impacted by the volumes that we expect improvement in the cost as we move forward into.

John T. Drexler: Into Q2, we would expect somewhere getting back into the mid 80% $86 per ton type range as we go forward. According to our plans moving forward.

Speaker Change: Very helpful. John I appreciate that and then maybe just one more if I may Paul you mentioned I think according to some market sources. Some small coking coal mines may have idle.

Nathan Pierson Martin: Very helpful, John. I appreciate that.

Nathan Pierson Martin: And then maybe just one more, if I may, Paul, you mentioned that, according to some market sources, some small coking coal mines, you know, may have idled. Do you think we need more of this to support or even drive U.S. met coal prices higher? Maybe, where do you guys peg the marginal cost of met coal per ton these days?

Nathan Pierson Martin: Or do you think we need more of this to support or even drive U S met coal prices higher maybe where do you guys pegged the marginal cost met coal ton.

Paul A. Lang: [inaudible]

Nathan Pierson Martin: Dave.

Speaker Change: Hello, Nate I think.

Paul A. Lang: You know, Nate, I think the source of our statement is... We're getting a lot of people showing up to go in with some jobs, so it's a pretty direct... Good evening, everybody. You know, if I look at the marginal cost, and I think we've talked about this many times, if you look at, you know, most of our peers are in, call it, the 110 to 120 range; we've got mines that are probably plus or minus 10 or 15 of that.

Paul A. Lang: The source of our state where it is.

Paul A. Lang: We're getting a lot of people showing up.

Paul A. Lang: So.

Paul A. Lang: Thats a pretty direct.

Paul A. Lang: Great.

Speaker Change: Well, if I look at the marginal cost, but I think we've talked about the spending.

Paul A. Lang: Yes.

Paul A. Lang: Most of our peers or even call. It about 110 to 120 range, you've got buying for the product plus or minus 10, or 15 of that where we are right at the marginal cost to our economy.

Paul A. Lang: You know, we are right at the marginal cost at this $220. $30,000 Highvol A price, and we have to remember that some of those mines are not producing highvol A; they are producing highvol B or lesser met products, so I think that's what you're seeing. The marginal lines right on the edge are starting to drop out, so it's just a general slowdown across the East. (inaudible) I don't wish harm on anybody, but...

Paul A. Lang: Our high volume products.

Paul A. Lang: Let's remember that some of those bonds are not producing.

Paul A. Lang: They are producing high bar.

Paul A. Lang: Restaurant products. So I think that's what you're seeing as things.

Paul A. Lang: Part of it Brian is right on the edge or starting to drop out.

Speaker Change: Got it.

Paul A. Lang: General slowdown across the.

Paul A. Lang: <unk>.

Paul A. Lang: Well frankly.

Paul A. Lang: I don't wish harm on anybody.

Paul A. Lang: It is good for the industry. I think it's keeping things in check. And we're built for this. I think we're low cost. We have a high quality product. I think another quarter or two of this would not be bad. So Nate, look, we're looking at $195 right now, high vol B, you know, and that's per metric in the vessel on the U.S. East Coast, you know, if you, if you, you know, agree with our assertion that the marginal cost of production might be in that sort of $135, even $140 range, you know, $195 high vol B per metric, that's down to, you know, once you include the rail rate, something, you know, something that makes that marginal producer cash negative at this point.

Paul A. Lang: It is good for the industry I think it's keeping things in check.

Paul A. Lang: We're built for US I think we're low cost we have a high quality product.

Paul A. Lang: Okay.

Paul A. Lang: I think another quarter or two and this would not be back.

Nate: So Nathan Youre looking at $195 right now high Vol B.

Paul A. Lang: Perhaps for matrix, that's on Usg's close.

Paul A. Lang: Yes.

Paul A. Lang: I agree with our assertion that the marginal cost of production might be in that sort of $1 35, and $1 40 range with 195 high vol. B per metric back down to once you include the railways something.

Paul A. Lang: Something that makes that marginal producer cash negative at this point and well look we've only seen some very small indications of rationalization and the prices have been at these levels. We're very brief time. So certainly we believe this is going to be weighing on some of this high cost operations.

Paul A. Lang: And while we've only seen, you know, some very small indications of rationalization, you know, the prices have been at these levels for a very brief time. So, you know, certainly we believe this is going to be weighing on some of this high cost operation. I would also add that if you're seeing the same thing in Australia, as we continue to see news out of Australia, the way in which the mine costs continue to increase, the pressure related to the royalties, the significant sustaining capex you're seeing, I would say PLV, it's sort of the same issue, and PLV is sitting at $2.40 today, and if you're getting straight PLV, and you're a premier producer, you're making some cash, but I would say the marginal cost producers are struggling, and an awful lot of them are not producing premium oil ball, they're producing mid-ball product, or they're producing a semi-hard or a semi-soft, so these do feel, these current prices feel very supportive, and the good news for us is, as a first quartile producer, we make good cash in this environment, and so, you know, but as we look further out, you know, we do believe there's potential for some work.

Paul A. Lang: I would also add that Youre seeing the same thing in Australia as we continue to see news out of Australia the language.

Paul A. Lang: The mining costs continue to increase the pressure related to the royalty the significant sustaining capex youre seeing I.

Paul A. Lang: I would say, it's sort of the same same issue with PLD staying at $2 40 today.

Paul A. Lang: We're getting straight PLD.

Paul A. Lang: And you are a premier producer Youre, making some cash, but I would say the marginal cost producers are struggling and awful lot of them are not producing premium.

Paul A. Lang: Producing nepal crowd out where they're producing a semi hardware semi soft so but these do you feel these current prices still very supportive and the good news for US there was a first quartile producer related cash in this environment.

Paul A. Lang: But as we look further out we do believe there is potential for some work.

Speaker Change: Very helpful guys I appreciate the time best of luck in the second quarter.

Nathan Pierson Martin: Very helpful, guys. I appreciate your time. Best of luck in the second quarter.

Speaker Change: Thank you Dave.

Nathan Pierson Martin: Yes.

Operator: Your next question comes from the line of Katja Jancic from BMO Capital Markets. Please ask your question.

Speaker Change: Your next question comes from the line of catcher Gen sick from BMO capital markets. Please ask your question.

Operator: Yeah.

Katja Jancic: Hello, thank you for taking my questions. Hi. Hi. On the MEDPO guide for the second quarter, can you talk a bit more about what would bring you to the lower versus the higher end?

Katja Jancic: Hello, Thank you for taking my questions.

Speaker Change: Got it first.

Katja Jancic: On the <unk>.

Katja Jancic: Nicole Guide for second quarter can you talk a bit more what would bring you to the lower versus the higher end.

John T. Drexler: At Katja, you know, if you look at volumes in the MET segment, they're very dependent on vessels, right? So short tons, 80,000 tons of vessels, very quickly, three or four vessels, you know, essentially cover that range and that spread that we have. Clearly, the impact of the Baltimore Bridge and the collapse and the lack of access through Curtis Bay is significant. However, as we've indicated, the logistics team, working with our partners, utilizing the strategic investment at DTA, have done a fantastic job of redirecting the coal flows. So far, things are going very well.

Speaker Change: Okay Gotcha.

John T. Drexler: If you look at volumes in the met segment, they're very dependent on vessels right. So short.

John T. Drexler: Short tons 80000 ton of vessel very quickly three or four vessels.

John T. Drexler: Essentially covers that range of that spread that we have here.

John T. Drexler: Clearly the impact of the Baltimore bridge, and the collapse and the lack of access and Curtis Bay is significant.

John T. Drexler: We've indicated the logistics team working with our partners Utah.

John T. Drexler: Utilizing the strategic investment in <unk> have done a fantastic job of redirecting the floats.

John T. Drexler: So far those are going very well.

John T. Drexler: A lot of what is encompassed in that range is going to be dependent on when the Army Corps of Engineers is able to get that deep channel reopened and get the flow of coal going again. That range is based on our assumption that, based on what they're saying, that this opens back up sometime towards the end of May. Clearly, there will be a lot of additional logistic considerations whenever it reopens, and we'll continue to manage that. That's why we've got a little bit of a wider range. Once again, it's just going to be dependent on timing.

John T. Drexler: A lot of what is encompassed in that range is going to be dependent on when the Army Corps of engineers is able to get.

John T. Drexler: Would that be.

John T. Drexler: Channel reopen and get the flow of oil going again.

John T. Drexler: That range encompasses our assumption based on what they're saying this opens back up sometime towards the end of May.

John T. Drexler: Clearly there'll be a lot of additional logistic consideration whenever it reopens.

John T. Drexler: We will continue to manage that but thats why we got a little bit of a wider range.

John T. Drexler: Once again, it's just going to be dependent on timing, but as we sit here right now we feel good that given.

John T. Drexler: But as we sit here right now, we feel good that, given the good start we've had managing everything since the bridge did collapse, we're going to be able to hit within that range. The fact that it's 1.9 to 2.2, I think underscores just how well the team is moving to redirect the bowling.

John T. Drexler: Right.

John T. Drexler: Good start we've had managing everything since the Brexit collapsed, but we're going to be able to hit within that range.

John T. Drexler: As Matt referenced it as a heavy gene scheduled so some of it can just come down to that last leg can that last Sunday Logan window, and what gets in and when it gets out in.

John T. Drexler: In fact, it was $1 92 to I think underscores.

John T. Drexler: Just how well the team is moving to redirect the volumes.

Paul A. Lang: Newport News is about 300 miles further than Curtis Bay. So if you think about it, we have got to send it, six trains, a vessel, plus or minus. That's 300 miles. That gives you a sense of its initial..., real capacity and the strain that it's under. The timing of the Curtis Bay reopening is pretty significant, isn't it? A week or two will matter either way with Curtis Bay as far as our volumes are concerned.

John T. Drexler: And I think the simple answer.

Paul A. Lang: Think about this.

Paul A. Lang: The important news is about 300 private stronger right Curtis Bay.

Paul A. Lang: So if you think about when you got a sense of it.

Paul A. Lang: Trading for vessel plus or minus.

Paul A. Lang: 300 miles.

Paul A. Lang: The additional one.

Paul A. Lang: Rail capacity in Australia that it's under so.

Paul A. Lang: The timing of the Curtis Bay reopening is pretty significant.

Speaker Change: A week or two will matter either way with Curtis Bay as far as our borrowings Howdy I'll add to that just to kind of wrap up that discussion.

John T. Drexler: Katja, I'll add to that, you know, just to kind of wrap up that discussion, working with our rail Service Provider, they've done a wonderful job. That's a big shift for them in realigning, you know, kind of their flows of trains and power and people. So they've done a great job working to support and be responsive to everything that's happened with the tragic collapse.

John T. Drexler: Working with our rail service providers and they've done a wonderful job.

John T. Drexler: <unk> shift for them.

John T. Drexler: Realigning kind of their flows of trains and power in the morning before so they've done a great job working to support and be responsive to everything that's happened with the dredging kind of collapse of the brick and finally, maybe one one final point on this which is with the fact is as Paul said, it's a much it's a meaningfully longer haul the rain is not back yet.

John T. Drexler: And finally, maybe one final point on this, which is the fact that, as Paul said, it's a much, it's a meaningfully longer haul. The rate is not that different. Now, we do get, I mean, the rate's fairly equivalent, I will say, through Curtis Bay. You know, included in the rate is the transload. If we go to DTA, we're, you know, we're charging ourselves there. So maybe you could say it's a $3 differential, but it's not that significant.

John T. Drexler: Now, we do get the rates fairly equivalent I will say from Curtis Bay are included in the rate.

John T. Drexler: Transplant, if we go to BTA ware.

John T. Drexler: We're charging ourselves they are.

John T. Drexler: So maybe we could say, it's a $3 differential but it's not that significant we actually have some advantages when you lose the GTA.

John T. Drexler: We actually have some advantages when you move to DTA, some opportunities, blending, storage, etc. that are useful to us. So it actually ends up being a move that, you know, we're quite comfortable with, you know, but it is, it is a change.

John T. Drexler: Some opportunities blending storage that satellite that useful to ourselves it actually ends up being.

Speaker Change: I move that.

John T. Drexler: We're quite comfortable with.

John T. Drexler: But it is it is a change.

Katja Jancic: And then let's say I know you mentioned maybe a week or two delays or in reopening doesn't make a difference, but what if we see further delays, potentially? What happens? What are your options?

John T. Drexler: And then let's say I know you mentioned, maybe a week or two delays or in reopening it does make a difference, but what if we see.

Katja Jancic: Are there delays potentially what happens what are your options.

John T. Drexler: Yeah, Katja, clearly we would continue to execute on the opportunity to continue to move coal through DTF, primary, and that can be extended and extended meaningfully if there is a longer delay on the bridge. The team's also doing a fantastic job of looking at other alternatives and ways to move the coal. You know, we can midstream; we can get coal to the river and take it south down to the gulf. They're evaluating opportunities to get coal on barges and through the port and the shallow draft of the Port of Baltimore and midstreaming there as well.

Katja Jancic: Yes.

Katja Jancic: Clearly, we will continue to execute on the opportunity to continue to move calls through Etfs, So that yes.

John T. Drexler: Primary and that can be extended and extended meaningfully if it is a longer delay on the bridge. The team is also doing a fantastic job of looking at other alternatives and ways to move the call.

John T. Drexler: Reaching mid stream, we can get closer to the river and take it south down to the Gulf.

John T. Drexler: They are evaluating opportunities actually.

John T. Drexler: Cool.

John T. Drexler: Barges in.

John T. Drexler: <unk> court in the shallow draft of the product.

John T. Drexler: More than mid streaming there as well so they are evaluating those types of opportunities now where hopefully we don't have to lean on any of those in a meaningful way, but clearly we can we can continue to manage if this is an extended impact I'll share with you every update we get through the Army Corps of Engineers has has remained confident.

John T. Drexler: So, you know, they're evaluating those types of opportunities now. We're hoping we don't have to lean on any of them in a meeting to play, but clearly, we can continue to manage if this is an extended impact. I'll share with you every update we get from the Army Corps of Engineers, which remains confident in that opening date. Some of the shallow channel work that they've done actually appears to be opening a little bit earlier than what they had been indicating, and so we feel confident that they're going to continue to work to hit those schedules, and we'll be hitting them. But clearly, if something else happens, we're prepared and ready and actively looking at how, if it does get extended, we're going to

John T. Drexler: On that opening date some of the shallow channel work that they've done is actually abused the opening a little bit earlier than what they had been indicating and so we.

John T. Drexler: Confident that theyre going to continue to work to hit those schedules and we will be hitting the <unk>.

John T. Drexler: Clearly if something else happens, we're prepared and ready and actively looking at if it does get extended how we're going to manage.

Speaker Change: Okay, and then maybe just to confirm did you say the costs on the met side in the second quarter are going to be $86 per tonne, let's call. It let's call it somewhere in the mid to high 80 range.

Katja Jancic: Okay, and then maybe just to confirm, did you say that costs on the MET side in the second quarter are going to be $86? Let's call it somewhere in the mid to high 80 range, Katja. That's all going to be dependent on volumes and shipment levels and will be impacted even with the range of the shipment levels we've described, the 1.9 to the 2.2. But I think, Katja, the key here is, look, the 87 to 92 guidance that we provide for the year still feels very comfortable.

Katja Jancic: You know that it is.

Katja Jancic: That's all going to be dependent on volumes in shipment levels and will be impacted even even with the range of the shipment levels. We can describe the one nine to $2. Two so is that the Italian key areas like the 80 792 guidance that we provide to me it feels kind of we're still still feels very comfortable obviously to 94 one.

Katja Jancic: Obviously, the 94 was a little high for Q1. We do believe, as we go through the year, that you're going to see us sort of move towards the middle of that range and perform a little better. But we still feel very comfortable with that.

Katja Jancic: <unk> was a little high for Q1, we do believe as we go through the year, you're going to see us sort of move towards that sort of the middle of that range in a little better about it.

Katja Jancic: We still feel very comfortable with that range.

Katja Jancic: And then just one more. On Lear South, are you still expecting around 3 million tons this year and then? higher next year? Is that still fair?

Katja Jancic: And then just one more on Leer South are you still expecting around 3 million tons. This year and then <unk>.

Katja Jancic: Higher next year is that still fair.

John T. Drexler: Yeah, Katja, as we, you know, as we described, Lear South, we are very confident this year that we're going to be at 3 million tons, and then, once again, the real benefit occurs in the fourth quarter when we move to District 2, where the coal is, you know, 15 to 20 percent thicker. That's going to allow additional production and volume that will carry over into 25 clearly and beyond. So, and so, Katja, the way to think about it would be from a sort of a, you know, cadence perspective.

Katja Jancic: Gotcha.

Katja Jancic: As we described Leer South we are very confident this year that we're going to be a 3 million tonnes and then once again the real benefit occurs in the fourth quarter win when we move the district to.

John T. Drexler: Where the call as well.

John T. Drexler: 15% to 20% of.

John T. Drexler: That's been a while additional production volume that will carry over into 'twenty, five clearly and beyond.

Katja Jancic: Scott the way to think about it would be from a sort of a cadence perspective look we were lower than ratable in Q1, Q2, Q3, and we would expect to be around ratable understanding there's always variability here and then Q4 higher than rate or bring us into that 3 million ton per year range based on that cadence.

John T. Drexler: If we were lower than rateable in Q1, Q2, Q3, we would expect to be around rateable, understanding there's always variability here, and then Q4, higher than rateable, which would bring us into that sort of 3 million ton per year range based on that cadence. Perfect. Thank you so much.

John T. Drexler: <unk>.

Speaker Change: Perfect. Thank you so much.

Katja Jancic: Thank you for having me.

Speaker Change: Thank you Carlos.

Operator: Your next question comes from the line of Michael Dudas from Vertical Research. Please answer.

Operator: Okay.

Operator: Your next question comes from the line of Michael Dudas from vertical research. Please ask your question.

Michael Stephan Dudas: Hey, good morning, gentlemen.

Michael Stephan Dudas: I appreciate your thoughts on the global MET call and the tightness you're seeing some because of the difficulty of supply coming out of the U.S. You're a little light; I don't know if there's a way to bump up that volume. Can you hear me better now? Okay, great. Thank you.

Michael Stephan Dudas: Thank you Michael.

Michael Stephan Dudas:

Michael Stephan Dudas: I appreciate your thoughts on the global met coal in the tightness and Youre seeing some out of this.

Michael Stephan Dudas: This kobe supply coming out of the U S also.

Michael Stephan Dudas: Sure.

Michael Stephan Dudas: Yes.

Michael Stephan Dudas: Might I don't know if theres, a way to bump up that volume.

Speaker Change: It can be better now yes.

Speaker Change: Perfect Yep, Okay great.

Michael Stephan Dudas: Just wondering how youre your global customer base is feeling relative to some of the dynamics going on globally on the demand front.

Deck S. Slone: I'm just wondering how your global customer base is feeling relative to some of the dynamics going on globally on a demand front and maybe even kind of towards the high-volume market and how you see that playing out, especially maybe going into next year or so, given the tightness that could occur in your high-quality product. Are you shifting some of the interest levels to certain other regions or countries? Everybody's talking about India being very aggressive, and it has some opportunities relative to China. Maybe give a little sense of how that's flowing through from your marketing book.

Deck S. Slone: And maybe even 'twenty towards like the Hive high vol, a market and how you see that playing out, especially maybe going into next year or so given the tightness that could occur in your high quality product.

Deck S. Slone: Is there a continuing or are you shifting some of the interest levels to certain other regions or countries are you know everybody's talking about India being very aggressive and it has some opportunity for us to try to maybe give a little sense of how that's flowing through from your from your marketing book.

Speaker Change: Yes, Mike.

Deck S. Slone: Yeah, Mike, it's Dak. And thanks for that. You know, we've talked a lot about this, you know, continuing shift towards Asia. And absolutely, we are seeing interest continuing to grow from new customers, new projects in Asia. Look, it's not like they're buying with great urgency right now, or you see that in the price.

Speaker Change: And thanks for that.

Deck S. Slone: We've talked a lot about this continuing shift towards Asia and absolutely. We are seeing interest continuing to grow from new customers new projects in Asia look it's not like they're buying with great urgency right. Now you can see that in the price, but in terms of the outreach and the engagement that continues to grow.

Deck S. Slone: But in terms of outreach and engagement, that continues to grow. And we're talking to, you know, multiple potential new customers right now who are interested in not just the spot deal but are interested in in-term business. So, you know, we do feel good about that. And so, when you look at the overall fundamentals, the fact is that hot metal production, as Paul referenced, in the world, especially China, is up about 2% year-to-date. That's nothing, you know; heroic, certainly.

Deck S. Slone: So we're talking to multiple sort of potential new customers right now who are interested in not just.

Deck S. Slone: The spot deal that are interested in term business. So we do feel good about that and so when you look at the overall fundamentals.

Deck S. Slone: We in fact is that hot metal production as Paul referenced in the World. Excluding China is up about 2% year to date, that's nothing heroic certainly but relative to where we were last year bumping along the bottom in terms of heart in that loss with globally.

Deck S. Slone: But relative to where we were last year, bumping along the bottom in terms of hot metal output globally, relative to where we were in 2022, it was down, you know, 10% or so. But we do see signs of life. We do feel like there are some positive indications. Chinese imports are, you know, continuing to be strong. And Chinese imports of particularly high quality seaborne cooking coal. So, we've seen China, China was up 10 million times in terms of imports of seaborne coal last year. And really stepping it up again through the first few months of 2024.

Deck S. Slone: Where we were in 2022 and was down 10% or so we do see signs of life. We do feel like there are some positive indications Chinese imports are.

Deck S. Slone: Continuing to be strong Chinese imports.

Deck S. Slone: Particularly high quality seaborne coking coal so.

Deck S. Slone: So we have savings through China, China was about 10 million times in terms of imports of seaborne coal last year.

Deck S. Slone: And really stepping up again through the first few months of 2020 for I would say there too.

Deck S. Slone: And I would say there, too, that we're growing interest from, you know, some of the world's largest steelmakers in U.S. volumes and our volumes in particular. And when you ask about high vol A, we certainly think there's a unique role for high vol A to play out there in a way that it facilitates, you know, a better, you know, a better Coke product when you're, when you're, you know, using a lot of disparate products.

Deck S. Slone: Growing interest from some of the world's largest steelmakers and less volumes in our volumes in particular, when we asked about high volume. We certainly think there's a unique growth for high vol. A to play out there.

Deck S. Slone: Facilitates better I've ever close product when you're when you're using a lot of disparate products, but the fact is a lot of these customers. Obviously just wasn't for high CSR, Poland and we can give them high CSR costs. So high vol. A right now is is continuing.

Deck S. Slone: But the fact is a lot of these customers are also just looking for high PSR coal, and we can give them high PSR coal. So, you know, high vol A right now is, you know, continuing to be, you know, sort of in meaningful demand, recognizing again that the buyers at this moment aren't feeling urgency, but the level of interest, you know, is significant. So, yeah, I think most importantly, we do continue to see those new blast furnaces that are being built in Asia actually come online and reach out to us about supplying those either in the immediate or the longer term.

Deck S. Slone: Continuing to the soybean meal.

Deck S. Slone: The meaningful demand recognizing again that the buyers at this moment I feel encouraged to see that the level of interest.

Deck S. Slone: Significant so I think most importantly, we do continue to see it go.

Deck S. Slone: There is new glass furnaces are being built in Asia actually come online.

Deck S. Slone: And outreach to us about supplying those either in EMEA with a longer time and Michael I'll add to that just specifically with customers and the high vol a product.

Deck S. Slone: And Michael, I'll add to that, just specifically with customers in the high-vol A product, you know, they, the marketing team does a fantastic job of developing the relationships and then technically marketing that product, right? It's relatively new to the region, and they've done a fantastic job of getting it introduced.

Deck S. Slone: The marketing team does a fantastic job of developing relationships and then technically marketing that product right.

Deck S. Slone: Relatively new into the region.

Deck S. Slone: They've done a fantastic job of getting it introduced.

John T. Drexler: Once customers start using it there, they view it as a very favorable product. It's something that then brings out repeat buyers for that specific product. And so we feel really good about the portfolio, that product, how it continues to get introduced and accepted and how we expect it to continue to grow as we move forward in that fast-developing region. Absolutely.

Deck S. Slone: Once customers start using it there.

John T. Drexler: They view it as a very favorable product, it's something that then brings out repeat buyers for that specific.

John T. Drexler: And so we feel really good about the portfolio of that product our continues to get introduced and accepted.

John T. Drexler: We expect it to continue to grow as we move forward in that fast developing regions for Epsilon.

Speaker Change: <unk> got it.

John T. Drexler: Simple answer is.

Paul A. Lang: Year over year, we've added a significant number of new customers. The marketing team has done a great job. But what I really judge it on is these are quality customers, too. These are large steel mills. They're ones being built, you know, between Indonesia, Vietnam, and Malaysia.

John T. Drexler: I looked year over here, we've added a significant number of new customers in Asia.

Paul A. Lang: The marketing team has done a great job.

Paul A. Lang: What I really in charge of all of those things are quality customers also use our large steel melrose.

Paul A. Lang: One is being built.

Paul A. Lang: And the thing is Europe.

Paul A. Lang: And Malaysia.

Paul A. Lang: And, you know, we're not selling to brokers, so I feel very strong about the position we're taking in Asia, and we're really building that business. You're seeing it in the quality of customer service. And my just one final point just on the supply side, which you sort of, you know, alluded to as to where the coal is going to come from. Look, if you look back sort of, you know, the three big suppliers into the seaboard market, Australia, the U.S., and Canada, three big suppliers of high-quality coking coal, in aggregate peaked in 2014; we're down 45 million tons; those three countries, in aggregate, are down 45 million tons since 2014.

Paul A. Lang: We're not selling the brokers so I feel very strong about the position were taking into Asia, We're really building out that business that youre seeing it by the quality of customers from <unk>.

Paul A. Lang: One final point, just on the supply side, which you sort of.

Paul A. Lang: Related to where you can cogan I'm from.

Paul A. Lang: Look back sort of the three big suppliers in the seaborne market, Australia, the U S and Canada moving supplies high quality coking coal.

Paul A. Lang: Aggregate peaked in 2014.

Paul A. Lang: Down 45 million times those three countries in aggregate are down 45 million times since 2014. So certainly the demand is there and I think when we see demand grow and we see the supply constraints continued leader named manifest themselves. So again pretty constructive on a long term view, even though as we always say we don't we don't.

Paul A. Lang: So certainly, the demand is there; not only do we see demand grow, but we see the supply constraints, you know, continue to manifest themselves. So again, pretty constructive on a long-term view, even though, as we always say, we don't need a great long-term sort of demand story because the fact is, we are our first quartile cost producer, but that is what we see playing out. Nike might be on mute right now.

Paul A. Lang: Need a great long term sort of the main story is the fact is we are first quartile cost producer, but what is what we see playing out.

Paul A. Lang: Okay.

Speaker Change: Mike you may be on mute right now.

Deck S. Slone: Thanks for that, Doug. I just mentioned that the investment you guys made into Salesforce and the marketing team in that region is certainly going to pay benefits, as we're seeing right now. Thanks, guys. Thank you. Thank you, Bible.

Paul A. Lang: Operator, you may now.

Speaker Change: I'm sorry, no. Thanks for thanks for that I, just mentioned that there.

Speaker Change: The investment you guys made into the sales force and the marketing team in that region, certainly going to pay benefits and that's where we're seeing it right now thanks guys.

Operator: There are no further questions at this time. I would like to turn the call over back to Mr. Paul Lang, CEO. Please continue.

Speaker Change: Thank you thank you Michael.

Operator: Yeah.

Operator: So there are no further questions at this time I would like to turn the call over back to Mr. Paul Lang CEO. Please continue.

Paul A. Lang: I want to thank you again for your interest and knowledge. As I noted earlier, we're sharply focused on driving continuous improvement across our operating platforms for value-generated capital returns, especially as we lean towards greater emphasis on shared resources. We believe that current market softness is acting to highlight the value of our low-cost coking coal portfolio, as evidenced by our substantial discretionary cash flow.

Paul A. Lang: I want to thank you again for VIX.

Paul A. Lang: Got it earlier, we're sharply focused on driving continuous improvement across our operating platform for the value generating capital returns, especially as we lean towards further emphasis on chairman.

Paul A. Lang: We believe the current market softness impacting the highlights.

Paul A. Lang: Cost coking coal portfolio.

Paul A. Lang: Five substantial discretionary cash flow in Q1.

Paul A. Lang: All at the same time, the tragedy in Baltimore is showcased. Thank you for your nimbleness as well as the capabilities of our people in addressing such serious situations on the Kailua Peninsula. With that, Operator, we'll conclude the call. We look forward to reporting to the group in July. Stay safe and healthy, everyone.

Paul A. Lang: While at the same time the tragedy in Baltimore showcase.

Paul A. Lang: Nimbleness as well as the capabilities.

Paul A. Lang: In addressing such scenario situations.

Paul A. Lang: With Macy's.

Paul A. Lang: Operator, we'll conclude the call and we look forward to reporting the growth in July.

Paul A. Lang: Health care.

Speaker Change: That concludes today's conference call. Thank you for your participation you may now disconnect.

Operator: That concludes today's conference call. Thank you for your participation. You may now disconnect.

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