Q2 2024 Arch Resources Inc Earnings Call

After today's remarks, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your touchtone phone. To withdraw your question, please press star then 2. Please note that this event is being recorded. I would now like to turn the conference over to Dex Sloan. Please go ahead.

Operator: To ask a question, you may press star, then 1, for all your questions. Please note that this event is being recorded. I would now like to turn the conference over to Dex Sloan. Please go ahead.

Unknown Executive: Matthew question, you may press star then one on your touch-tone phone. To withdraw your question, please press star, then two.

Unknown Executive: Please note this event is being recorded.

Deck Slone: Now I'd like to turn the conference over to Deck Slone. Please go ahead.

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 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: Good morning from St. Louis, and thanks for joining us today.

Deck S. Slone: 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 the reconciliation of the non-GAAP financial measures we plan to discuss this morning at the end of our press release, a copy of which we have posted in the investor section of our website at archrse.com. Also participating on this morning's call will be Paul Lang, our CEO; John Drexler, our President; and Matt Dilgem, our CFO. After our formal remarks, we'll be happy to take questions. With that, I'll now turn the call over to Paul. Thanks, Dex, and good morning, everyone.

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

Deck Slone: Before we begin, let me remind you that certain statements made during this call, including statements relating to our expected future of business of financial performance, making considered forward-looking statements according to the fact of security litigation performance. While we're living, statements by their nature, aggress matters that are to different degrees uncertain. These uncertainties, which are described in more detail, with annual and quarterly reports we filed with the SEC, may cause their actual future results to be materially different from those expressed in our forward-looking statements. We did not undertake to update our forward-looking statements, whether as a result of new information, future events or otherwise, except as made me required by law.

Speaker Change: 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 Product Security Litigation Reform Act.

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

Deck Slone: I'd also like to remind you that you can find the reconciliation and the non-depth financial measures we claim in this step of sorting. We had about press release, a copy of which we opposed to the investor section of our website at archrsc.com.

Deck Slone: Also, participating on this morning's call will be Paul Lang, our CEO, John Drex, our President, and Matt Gilgames, our CSO. After our formal remarks, we'll be happy to take questions, but that I'll now turn to call over as well.

Paul A. Lang: We appreciate you being here so much, and I'm glad you could join us on the call this morning. I'm pleased to report that during the second quarter, Arch continued to drive forward with our clear and consistent plan for long-term value creation growth. David Carter, Jess Edmonds, and the team achieved adjusted EBITDA of $60,000,000, set a quarterly production record in our coal metallurgical segment while grinding ahead with the development of a second longwall district in North-South, where we expect substantially more savings on commission, and shipped two million tons of coking coal despite significant logistical challenges.

Paul Lang: Thanks for that to a good morning with me. I appreciate you here at St. Louis and I'd like to enjoy this on the call on St. Louis. I'm pleased to report that during the second quarter, Arch continued right forward with our clear and consistent plan for long-term value critical results. During the quarter of this year, the team achieved the just at E.M. at the E.M. at 16.0. Instead of quality production, we are calling the logical segment of writing ahead with the development of a second-long-one district itself, where we expect substantially more stable contributions. Two million times of the COVID-19 problem, despite significant logistical challenges, stemming from the tragic collapse and the threats of Scott T.

Speaker Change: I'm pleased to report that during the second quarter, Arch continued to drive forward with our clear and consistent plan for long-term value creation growth.

Speaker Change: and Carter Just-Edmund, the team achieved adjusted EBITDA of $60,000,000.

Speaker Change: Set a quarterly production record in our coal metallurgical segment while grinding ahead with the development of a second longwall district in the first cell, where we expect substantially more favorable conditions.

Paul A. Lang: Stemming from the Tragic Collapse of the Francis Scott Key Bridge, we paid down an incremental $13 million in debt, giving us a debt-to-cash positive position of $36 million, and worked to right-size the operating activities in our thermal setting, setting the stage for cast generation at these operations in the Backlash of the Union. In addition, on a particular note, we deployed an incremental $19.6 million in our capital return program during the second quarter, even in the face of the just-discussed logistical challenges in a subdued near-term market environment.

Paul Lang: Wood. Eight down an incremental $13 million of that, giving us a net-to-to-to-positive position for 40-60 million. And work the right-size, the operating activities in our global setting, setting the stage for cash generations, like these operations in the back last and a year. In addition, in a particular though, we deployed an incremental $19.6 million in our capital return program during the second quarter, even in the face of the justice cuts with justical challenges, and as subdued in the U.T., the market environment. We returned this capital through the repurchase of an additional $94,000 shares in common stock, with an investment of $50 million.

Speaker Change: paid down an incremental $13 million in debt, giving us a debt cash positive position of $46 million.

Speaker Change: and work to right-size the operating activities in our thermal segment, setting the stage for cash generation at these operations in the backlash of the year.

Speaker Change: In addition, in a particular note, we deployed incremental $19.6 million in our capital return program during the second quarter, even in the face of the just-discussed logistical challenges.

Paul A. Lang: We will return this capital through the repurchase of an additional 94,000 shares of common stock with an investment of $15 million in the declaration of a quarterly cash dividend of $0.25 per share, payable in September, with a total projected payment of $4.6 million to shareholders. In aggregate, we've now deployed well over $1.3 billion in our capital return program since its relaunch in February 2022, which we hope you'll agree represents a substantial amount of value generation in a relatively brief period of time. This total includes $732 million.

Speaker Change: and a subdued, near-term market revival.

Speaker Change: We return this capital through the repurchase of an additional 94,000 shares of common stock with an investment of $15 million in the declaration of a quarterly cash dividend of $0.25 per share.

Paul Lang: In the declaration of a quarterly cash dividend of $25 per year, paying up in September, with a total projected payment of $4.6 billion to share workers. In average, we've now deployed level over $1.3 million that our capital return program since its relaunch in February of 2022, which we hope you'll agree with. That's a substantial amount of value generation, when in a relatively brief period of time. This total includes 732 million dollars, a 38-dollar and 78 cents per share in dividend payments, and the shares are more than 15% compared to the level of May of 2022.

Speaker Change: Pay them all in September with a total projected payment of $4.6 million to shareholders.

Speaker Change: In aggregate, we've now deployed well over $1.3 billion in our capital return program since its relaunch in February 2022, which, we hope you'll agree, represents a substantial amount of value generation in a relatively brief period of time.

Paul A. Lang: $38.78 per share in dividend payments and the repurchase of $615 million in common stock as well as the repurchase and retirement of our convertible net. It's worth pointing out that, including the Q2 re-purchase... We've now reduced our diluted share count by well over 3.5 million shares, or more than 16% when compared to the level in May 2022. Looking ahead, we remain sharply focused on driving that share count down even further. As you know, a central tenet of our value proposition is to return 100% of the company's discretionary cash flow to shareholders, with a strong emphasis on share repurchase.

Speaker Change: This total includes $732 million, or $38.78 per share in dividend payments, and the repurchase of $615 million in common stock, as well as the repurchase and retirement of our convertible rents.

Speaker Change: Since we're pointing out that, including the Q2 repurchases, we've now reduced our diluted share count by well over 3.5 million shares, or more than 16%, when compared to the level of May 2022.

Paul Lang: Looking ahead, we remain shortly focused on driving that share count down in the fruit. As you know, a simple tenant of our value proposition is to return 100% for the company's discretionary task for the shareables. With a strong emphasis on sharing purchases, we believe that this framework has created substantial value for a shareholder in the past, and we still expect it to continue to do so in the future.

Speaker Change: Looking ahead, we remain sharply focused on driving that share count down even further.

Speaker Change: As you know, a central tenet of our value proposition is to return 100% for the company's discretionary cash flow to shareholders, with a strong emphasis on share repurchases.

Paul A. Lang: We believe that this framework has created substantial value for our shareholders in the past, and we fully expect it to continue to do so in the future. Let's now switch to some brief commentary on the steel, coke, and coal markets, before turning the call over to John for additional color on our operating performance during Q2. As you're no doubt aware, seaborne coke and coal demand remains tepid, due principally, in our estimation, to a challenging global macroeconomic environment related, in part, to weak infrastructure and property market spending in China.

Speaker Change: We believe that this framework has created substantial value for our shareholders in the past and we fully expect it to continue to do so in the future.

Paul A. Lang: That's how switched to some great commentary on the steel, the token called Markets, before turning the call over to John's additional covenant on the operating proposal of the story of C&T. As you know now aware, C&T will encode the ban or lanes tax to principally our estimation, to a challenging global macroeconomic environment related to Park, the weekend for structure and property market spending in China. The predictable, but nonetheless, time to question what facts, the remonstments he's in and in, and the slowing time-ups and months before there's an economic stagnation in Europe. These factors are coalesced away on global steel demand, as evidenced by the recent erosion of steel pressures.

Speaker Change: Let's now switch to some brief commentary on the steel and coking coal markets before turning the call over to John for additional color on our operating performance during Q2.

John: As you're no doubt aware, seaborne coke and coal demand remains tethered to principally our estimation to a challenging global macroeconomic environment related in part to weak infrastructure and property market spending in China.

Paul A. Lang: The predictable, but nonetheless consequential effects of the monsoon season in India and the Sloan Climax from Multiple Quotas and Economic Stagnation in Europe. These factors have coalesced around global steel demands, as evidenced by the recent erosion of steel.

John: The predictable but nonetheless consequential effects of the monsoon season in India and the slow climbout from multiple quarters of economic stagnation in Europe .

John: These factors have coalesced away on global steel demands, as evidenced by the recent erosion of steel presses.

Paul Lang: On all coal prices and the latest new producing regions are down approximately 50% versus the peak seen in 2014. As part of this, the European steel markets are under pressure, with the average capacity factor of less than a since, standing around 65% according to our estimates. The steel market weakness has had to predict it now, not on effect on global growth in the whole markets. Even with these pressures, however, customer interested archers high quality coping contracts, particularly in Asia, can change the supply. Asian steel makers appear increasingly focused on identifying strong, consistent, and long-lived sources for their long-term, broken coal required.

Paul A. Lang: Hot roll coil prices in major steel producing regions are down approximately 50% versus the peak seen in 2021. As part of this, European steel markets are under pressure, with the average capacity factor of blast standing around 65%, according to RSP. The Steel Market Weakness has had the predictable knock-on effect on global coal markets.

John: As part of this, European steel markets are under pressure with the average capacity factor of glass furnaces. As part of this, European steel markets are under pressure with the average capacity factor

John: standing around 65% according to our estimates.

John: The steel market weakness has had the predictable knock-on effect on global coal markets.

Paul A. Lang: Even with these pressures, however, customer interest in Archer's high-quality coping coal products, particularly in Asia, continues to thrive. Asian steelmakers appear increasingly focused on identifying strong, consistent, and long-lived sources for their long-term coking coal requirements, given their own expansion plans, in order to buffer themselves from the lack of new investment in the coking coal supply chain. Given the number of customer inquiries over the last couple of months, we expect to have ample opportunity to continue to build on our global customer base with a strong Asian emphasis on the Asian market, which represents a good strategic fit with our high-crawling West.

John: Asian steelmakers appear increasingly focused on identifying strong, consistent, and long-lived sources for their long-term coking coal requirements, given their own expansion plans, in order to buffer themselves from a lack of new investment in the coking coal supply chain.

Paul Lang: Given their own expansion plan, in order to buffer themselves from a lack of new investment into the coaxing cost of ice, given an under of customer inquiries over the last couple of months, we expect ample opportunity to continue to build on our global customer base, with a strong Asian effort of emphasis that represents a good strategic fit of our high quality lessons. Meanwhile, the coaxing cost of ice on the story remains new, reflecting degradation and depletion of a resource base in major suppliers. Only modest investment in new, the replace of mine could best. We set my out of just that of a little 2% to 3% of supply from the global seed growing up and an increasingly fragile supply.

Speaker Change: Given the number of customer inquiries over the last couple of months, we expect to have ample opportunity to continue to build on our global customer base with a strong Asian emphasis that represents a good strategic fit with our high-calling assets.

Paul A. Lang: Meanwhile, the Coal to Coal Supply side of the story remains muted, reflecting degradation and depletion of a resource base and major supply... Only modest investment in new and replacement mine capacity, recent mine outages that have removed 2-3% of supply from the global seaboard, and an increasingly fragile supply chain. Moreover, we believe that the current cooking coal prices are below the marginal cost of production on a global basis.

John: Meanwhile, the Coal to Coal Supply side of the story remains muted, reflecting degradation and depletion of a resource base and major supply regions, only modest investment in new and replacement mine capacity.

John: recent mine outages that have removed 2-3% of supply from the Global Seaboard Lock and an increasingly fragile supply chain.

Paul A. Lang: Moreover, we believe that the current coaxing corporations have the low and marginal cost production on one another. in the United States. When it should be accurate, we'll take a predictable call on production models over time, assuming such prices persist. As a result of these various cycles, we expect Seabro and Coca-Cola markets to balance quick run, once the global economy begins to strain, and global sealment starts to reassert themselves.

John: Moreover, we believe that the current cooking coal prices are below the marginal cost of production on a global basis.

Paul A. Lang: We at Chief Accurate will take a predictable poll on production models over time, assuming such prices persist. As a result of these various factors, we expect seaborne coal markets to balance quickly once the global economy begins to straighten and global steel demand starts to reassert itself. Looking ahead, we remain sharply focused on driving continuous improvement and execution across our entire operating platform and supporting strong, value-generating capital returns for our stockholders, even in today's soft market environment, with our cost-competitive coastal portfolio.

Chief Accurate: We at Chief Accurate will take a predictable poll on production models over time, assuming such crisis persists.

John: As a result of these various factors, we expect seaboard and coast-to-coast markets to balance quickly once the global economy begins to straighten and global steel demand starts to reassert itself.

Paul Lang: Looking ahead, we remain shortly focused on driving continuous improvement. We have an extension across our entire operating platforms for the strong value generating capital returns for our stock market. Even its base stock market development. For our cost-effective company called Torso, high quality products, we rapidly expand the credit for today's markets and recognize the sustainability leadership. We believe we are exceptional involved position in the capital markets, as well as the steel of the bank's table, and then returns to its anticipated efforts.

Speaker Change: Looking ahead, we remain sharply focused on driving continuous improvement and execution across our entire operating platform to support strong, value-generating capital returns for our stockholders, even in today's soft market environment.

Paul A. Lang: High-Quality Products, rapidly expanding the presence of Asian markets, and Recognized Sustainability Leadership, we believe we are exceptionally well-positioned to capitalize on this opportunity. Let's go over and see what the band stage looks like, and then return to its anticipated upward growth. With that, I'll turn the call over to John for further discussion on Operation 40632. John?

Speaker Change: with our cost-competitive coke and coke portfolio, high-quality products for you.

John: rapidly expanding presence in Asian markets and recognized sustainability leadership, we believe we are exceptionally well-positioned to capitalize as global steel demand stabilizes and then returns to its anticipated upward growth.

Paul Lang: With that, I'll turn the call over to John for further discussion on our operational components in between. John.

John: With that, I'll turn the call over to John for further discussion on our Operation Corporal 632. John ?

John T. Drexler: Thanks, Paul, and good morning, everyone. As Paul just discussed, the ARCH team navigated through the extreme disruptions to the logistics chain in an effective manner in Q2, shipping more than 2 million tons of coking coal, even as we were forced to direct virtually all our seaborne volumes to an already busy DTA during April and May. I want to congratulate the ARCH team for that excellent work, and I also want to extend our appreciation to our rail and other logistics providers for their great support during that challenging time.

John Drexler: Thanks for following me. Morning, everyone. As Paul Justice Scott, we are team navigated through extreme disruptions to logistics chain and effective manner in Q2, shipping more than 2 million times of co-equal, even as we were forced to direct virtually all our C-borne volumes to have already been the DTA during April and May. I want to commend the arch team for that excellent work, and I also want to extend our appreciation to our rail and other logistics providers for their great support during that challenging time.

John: Thanks, Paul, and good morning, everyone. As Paul just discussed, the ARCH team navigated through the extreme disruptions to the logistics chain in an effective manner in Q2.

John: shipping more than 2 million tons of coking coal, even as we were forced to direct virtually all our seaborne volumes to an already busy DTA during April and May.

Speaker Change: I want to commend the ARCH team for that excellent work, and I also want to extend our appreciation to our rail and other logistics providers for their great support during that challenging time.

John Drexler: I would also point out that we had two additional vessels representing more than 160,000 times that just slipped in the Q3, due to the extremely busy June shipping schedule, after all these co-struments. While we were disappointed that those vessels fell out to you too, those early July loadings provide a jumpstart to the year's back cap when we anticipate moving substantially more about it. Given the strong performance of the overall logistics chain and with base of two-two difficulties, as well as our positive operating momentum, we are confident we could achieve the step-up necessary to deliver on our own years sales guidance of between 8.6 to 9 million times.

John T. Drexler: I would also point out that we had two additional vessels, representing more than 160,000 tons, that just slipped into Q3 due to the extremely busy June shipping schedule at both East Coast terminals. We were disappointed that those vessels fell out of Q2.

John: I would also point out that we had two additional vessels, representing more than 160,000 tons, that just slipped into Q3 due to the extremely busy June shipping schedule at both East Coast Terminus.

Speaker Change: While we were disappointed that those vessels fell out of Q2, those early July loadings provide a jump start to the year's back half when we anticipate moving substantially more bombs.

John T. Drexler: Those early July loadings provide a jumpstart to the year's back half, when we anticipate moving substantially more volume. Given the strong performance of the overall logistics chain in the face of Q2's difficulties, as well as our positive operating momentum, We are confident we can achieve the step-up necessary to deliver on our 40-year sales guidance of between $8.6 and $9 million. Bolstering that confidence further is our continuing operational progress. As Paul indicated, the metallurgical team delivered a record performance during Q2, producing more than 2.5 million tons in total for the first time.

John: Given the strong performance of the overall logistics chain in the face of Q2's difficulties,

John: As well as our positive operating momentum, we are confident we can achieve the step-up necessary to deliver on our 20-year sales guidance of between 8.6 and 9 million pounds.

John Drexler: Both during that happen as further is our continuing operational products. And as fall indicated, the metallurgy of the theme delivered a record performance during Q2, producing more than 2.5 million times in total for the first time. Just as importantly, leadership progresses in the final panel in District 1 in early July and is achieving strong advance rates there, even as the mine prepares for the transition to District 2 in late September, early October. As you will recall, our data shows that the cold scene is 15 to 20% thicker in District 2, and that the overall mining profile is more advantageous, which should drive a step-up in production models in future periods.

Paul: Bolstering that confidence further is our continuing operational progress. As Paul indicated, the metallurgical team delivered a record performance during Q2, producing more than 2.5 million tons in total for the first time.

John T. Drexler: Just as importantly, Lear South progressed into the final panel in District 1 in early July and is achieving strong advance rates there even as the mine prepares for the transition to District 2 in late September or early October. As you will recall, our data shows that the coal seam is 15-20% thicker in District 2.

Paul: Just as importantly, Lear South progressed into the final panel in District 1 in early July and is achieving strong advance rates there even as the mine prepares for the transition to District 2 in late September or early October .

Speaker Change: As you will recall, our data shows that the coal seam is 15 to 20 percent thicker in District 2, and that the overall mining profile is more advantageous, which should drive a step up in production levels in future periods.

John T. Drexler: And that the overall mining profile is more advantageous, which should drive a step-up in production levels in the future. Now, let's spend a few minutes on the metallurgical segment's operating margins, which were compressed in Q2 due to the challenging logistical environment. In total, logistical disruptions had an estimated impact of greater than $12 million in Q2 related to vessel demerge, retimed vessel movements, increased rail fees, and mid-streaming activity, which, in aggregate, acted to lower our average sale-left-back appreciation.

John Drexler: Now let's spend a few minutes on the metallurgy of the site that's operating on, which we're compressing Q2 due to the challenging resistical environments. In total, resistical disruptions had an estimated impact of greater than 12 million dollars in Q2. Related to vessel to merge, re-time to vessel movements, increased rail fees, and midstreaming action. which in aggregate lasted to lower our average sale net back of Christian. Out of the side, it may also be worth noting that we had a higher than roundable percentage of high-moving ship history, which also acted in the land of the average net.

Paul: Now let's spend a few minutes on the Metallurgical Segment's operating margins, which were compressed in Q2 due to the challenging logistical environment.

Paul: In total, logistical disruptions had an estimated impact of greater than $12 million in Q2.

John: related to vessel demerge, re-timed vessel movements, increased rail fees, and mid-streaming activities.

John: which, in aggregate, acted to lower our average sale-left-back appreciation.

John T. Drexler: As an aside, it may also be worth noting that we had a higher-than-normal percentage of high-volume shipments during Q2, which also actively dampened the average. The metallurgical segment's cash costs were also pressured due to the difficult logistical environment during Q2 as we directed every possible loading slot to coking coolers. As a result, we deferred the shipment of nearly 150,000 tons of thermal byproducts during this war

John: As an aside, it may also be worth noting that we had a higher than ratable percentage of high-volume shipments during Q2, which also actively dampened the average net worth.

John Drexler: The metallurgical segments cast-poss were also pressures due to the difficult logistical environment during Q2, as we directed every possible loading spot to cooking progress. As a result, we defer the shipment of nearly 150,000 tons of thermal bifons during the quarter. Given that the thermal bifot of inventory value is immaterial, the reduced shipping schedule for this product served to increase the metallurgical segment's unit costs by an estimated $6 per ton. We expect these unit costs to reverse in the year's second half. We are also expecting an appreciably stronger performance from the thermal segments in the year's back end.

John: The metallurgical segment's cash costs were also pressured due to the difficult logistical environment during Q2, as we directed every possible loading slot to coking coolers.

John: As a result, we deferred the shipment of nearly 150,000 tons of thermal byproducts during the course.

John T. Drexler: Given that the thermal byproduct inventory value is immaterial, the reduced shipping schedule for this product served to increase the metallurgical segment's unit cost by an estimated $6 per ton. We expect these unit costs to reverse in the year's second half. We are also expecting an appreciably stronger performance from the thermal segment in the years ahead. That positive outlook is driven principally by the expectation of an improving contribution from our Colorado River Basin operations in Q3 and Q4.

John: Given that the thermal byproduct inventory value is immaterial, the reduced shipping schedule for this product served to increase the metallurgical segment's unit costs by an estimated $6 per ton.

John: We expect these unit costs to reverse in the year's second half.

John: We are also expecting an appreciably stronger performance from the thermal segment in the years back.

John Drexler: That positive outlook is driven principally by the expectation of an improving contribution from our final irreversible base in operation.

John: That positive outlook is driven principally by the expectation of an improving contribution from our Colorado River Basin operations in Q3 and Q4.

John Drexler: Thank you, 3 and 2 for us. As you will recall, we entered 2024 in an annual production rate of close to 55 million tons. Based on the expectation that we would ship 50 million tons of all-estimated volumes, and an incremental 5 million tons were so related to entry year's sales. Unfortunately, unit power to be encoupled with the press natural gas prices, well virtually all new buying activity while sparing an influx of requests for the firm. As a result, we spent the first 6 months of the year re-aligning operating activities and stripping rings, with the much-for-is shipping performance.

John T. Drexler: As you will recall, we entered 2024 at an annual production rate of close to 55 million tons, based on the expectation that we would ship 50 million tons of already submitted volumes plus an incremental 5 million tons or so related to intra-year sales. Unfortunately, muted power demand coupled with depressed natural gas prices quelled virtually all new buying activity while spurring an influx of requests for the program.

John: As you will recall, we entered 2024 at an annual production rate of close to 55 million tons.

John: Based on the expectation that we would ship 50 million tons of all our estimated volumes in an incremental 5 million tons or so related to intra-year sales.

Speaker Change: Unfortunately, muted power demand coupled with depressed natural gas prices quelled virtually all new buying activity while spurring an influx of requests for their products.

John T. Drexler: As a result, we spent the first six months of the year realigning operating activities and stripping rates with the much-produced shipping force. On a more positive note, the excess stripping that we completed during Q1 and Q2 resulted in a significant build in pit inventory in the year's first half of our PRB month. As most of you are aware, pit inventory is full and is still sitting in the pit post the removal of the overblown.

John: As a result, we spent the first six months of the year realigning operating activities and stripping rates with the much-produced shipping portals.

John Drexler: On a more positive note, the excess stripping that we completed during Q1 and Q2 resulted in a significant build and pit inventory in the year's first half copy RV month. As most of you are aware, pit inventory is formed and is still sitting in the pit, close to removal of the overload, a step we constitute the lion's share of production cuts. Consequently, these cuts, when they do ship, will have a positive impact on our first-time cash margins, since most of the operating costs have already been incurred. We are currently sitting on more than 8 million tons of pit inventory in Wyoming, which is twice as much as we would typically do.

John: On a more positive note, the excess stripping that we completed during Q1 and Q2 resulted in a significant build in pit inventory in the year's first half of our PRB month.

John: As most of you are aware, pit inventory is full and is still sitting in the pit post the removal of the overbloom, a step that constitutes the lion's share of the production cost.

John T. Drexler: A step that constitutes the lion's share of the production. Consequently, these tons, when they do ship, will have a positive impact on our per-ton cash market since most of the operating cost has already been incurred. We are currently sitting on more than 8 million tons of pit inventory in Wyoming, which is twice as much as we would typically. During the year's back gap, we expect shipments to exceed production, which will allow us to monetize some of this pit inventory value. Meanwhile, West Elk again operated efficiently and generated solid adjusted EBITDA, even as it continued to shift under several legacy contracts.

John: Consequently, these tons, when they do ship, will have a positive impact on our per ton cash margins.

John: Since most of the operating cost has already been incurred.

John: We are currently sitting on more than eight million tons of pit inventory in Wyoming, which is twice as much as we would typically kill.

John Drexler: During the year back gap, we expect shipments to exceed production, which will allow us to modify some of this pit inventory them.

John: During the year's back gap, we expect shipments to exceed production, which will allow us to monetize some of this pit inventory balance.

John Drexler: Meanwhile, let's self-again, operate as efficiently and generate and solid adjusts to EVCO. Even as it continues to ship under several legacy contracts, they've damped nestbacks.

John: Meanwhile, West Delk again operated efficiently and generated solid adjusted E-58 even as it continued to ship under several legacy contracts that dampened nest access.

John Drexler: More importantly, the longer-term outlook of left-belt remains compelling. During Q2, the marketing team continued to build out Left-Belt's book of industrial business in the outer years, at 5th crisis in excess of $70 per tonne. $25 to $35 per tonne above the legacy contracts they're expanding. At the same time, the mind continues to drive ahead with the development of the beast, where the coal is significantly thicker. The quality is markedly better, and the birth-on cash boss should be substantially worse.

John T. Drexler: More importantly, the longer-term outlook at West Elk remains compelling. During Q2, the marketing team continued to build out West Elk's Book of Industrial Business in the Outer East at fixed prices in excess of $70 per ton, $25 to $35 per tonne above the legacy contracts that are expiring.

John: More importantly, the longer-term outlook at West Elk remains compelling.

John: During Q2, the marketing team continued to build out West Elk's Book of Industrial Business in the Outer Years at fixed prices in excess of $70 per ton.

John: $25 to $35 per ton above the legacy contracts that are expiring.

John T. Drexler: At the same time, the mine continued to drive ahead with the development of the.. where the coal is significantly thicker, the quality is markedly better, and the first-time cash costs should be substantially lower. Those factors, in aggregate, should translate into a step change in profitability for West Elk across a wide range of market conditions once the longwall transitions to v-seam in mid-2020. Before passing the baton to Matt, let's spend a few minutes discussing the team's exemplary achievements in the sustainability arena.

John: At the same time, the mine continued to drive ahead with the development of the BCP.

John: where the coal is significantly thicker, the quality is markedly better, and the first-time cash costs should be substantially lower.

John: Those factors, in aggregate, should translate into a step change in profitability for West Delphi across a wide range of market conditions once the Longwall transitions to BC in mid-2025.

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

John T. Drexler: As you know, we firmly believe that a culture of safety and environmental stewardship is essential for the long-term success of our business. During the first half of 2024, Arch's subsidiary operations achieved an aggregate total lost time in service of 0.47 incidents per 200,000 employee hours worked, more than four times better than the industry average. On the environmental front, the company recorded zero environmental violations under the SMAP law as a result, as well as zero water quality exceedances across all its subsidiary operations.

Speaker Change: As you know, we firmly believe that a culture of safety and environmental stewardship is essential for long-term success of our business.

Speaker Change: During the first half of 2024, Arch's subsidiary operations achieved an aggregate total lost time incident rate of 0.47 incidents per 200,000 employee hours worked, or more than four times better than the industry average.

Speaker Change: On the environmental front, the company recorded zero environmental violations under SMAP law as a result.

John: as well as zero water quality exceedances across all our subsidiary operations.

Matthew C. Giljum: Further highlighting the team's excellent work, the State of Colorado recognized West Delphi Q2 with an Outstanding Safety Award, an Excellence in Innovative Safety Technology Award, and an Excellence in Mining Reclamation, and the state of Wyoming honored Coal Creek with a surface mine safety award. On behalf of the board and the senior management team, I want to once again commend the entire workforce for their deep commitment to excellence in these essential areas of procurement.

John: Further highlighting the team's excellent work, the state of Colorado recognized West Delphi Q2 with an Outstanding Safety Award, an Excellence in Innovative Safety Technology Award, and an Excellence in Mining Reclamation Award.

John: And the state of Wyoming honored Coal Creek with the Surface Mine Safety Award.

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

Matthew C. Giljum: With that, I will now turn the call over to Matt for some additional color on our financial results. Thanks, John, and good morning, everyone. Let's begin with a discussion of second quarter cash flows and liquidity. Operating cash flow totaled $59 million, which was negatively impacted by a working capital increase of $15 million. In April, we discussed the likelihood of a significant working capital increase in the quarter in light of the tragic bridge collapse in Baltimore and the impact it would have on shipment time, with the ability to quickly pivot through alternative shipping methods resulting in a much smaller than anticipated bill. Capital spending for the quarter totaled $47 million, and discretionary cash flow was $12 million.

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

Matthew C. Giljum: This is the balance sheet. We ended June with cash and short-term investments of $279 million. We reduced debt levels by $13 million during the quarter, ending June with total debt of $133 million, a net cash position of $146 million, and liquidity of $366 million. Turning now to the Capital Return Program, as Paul detailed, we remain active in the program in the second... Despite the challenging logistical and soft market environment. While cash flows for the quarter do not support a variable dividend, our goal is to declare a fixed dividend. $0.25 per share. May 1st, September 13th; the Stockholm was erected on August 30th.

Matt: Thanks, John , and good morning, everyone.

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

Matt: Operating cash flow totals $59 million in Q2.

Matt: which was negatively impacted by a working capital increase of $15 million.

Speaker Change: In April , we had discussed the likelihood of a significant working capital increase in the quarter in light of the tragic bridge collapse in Baltimore and the impact it would have on shipment time.

Matt: The ability to quickly pivot through alternative shipping methods resulted in a much smaller than anticipated build.

Matt: Capital spending for the quarter totaled $47 million, and discretionary cash flow was $12 million.

Matt: This is the balance sheet. We ended June with cash and short-term investments of $279 million.

Matt: We reduced debt levels by $13 million during the quarter, ending June with total debt of $133 million, a net cash position of $146 million, and liquidity of $366 million.

Matt: Turning now to the Capital Return Program. As Paul detailed, we remain active in the program in the second quarter.

Speaker Change: despite the challenging logistical and soft market environment.

Speaker Change: While cash flows for the quarter do not support a variable dividend, our board has declared a fixed dividend of $0.25 per share, available on September 13th to stockholders of record on August 30th.

Matthew C. Giljum: I'll discuss our guidance in more detail shortly, but with the expectation of increased volumes and segments in the back half of the year, we would anticipate cash flows to support more significant returns in Q3 and Q4. We would expect sharing purposes to be the primary vehicle for those returns. Next, I'm going to spend a few minutes expanding on the severance tax rebate that we received from the state of West Virginia in the past.

Speaker Change: I'll discuss our guidance in more detail shortly, but with the expectation of increased volumes and segments in the back half of the year.

Speaker Change: We would anticipate cash flows to support more significant returns in Q3 and Q4.

Speaker Change: We would expect sharing purchases to be the primary vehicle for those returns.

Speaker Change: Next, I'm going to spend a few minutes expanding on the severance tax rebate that we received from the state of West Virginia in the quarter.

Matthew C. Giljum: The rebate stems from visionary legislation put in place by the state to encourage coal-related investment and employment. As you may recall, the incentives that the state created in that legislation were an important consideration in our ultimate decision to move forward with the $400 million build-out from Lear South. We're now pleased to report that the legislation has proved highly beneficial to both parties.

Matt: Rebate stems from visionary legislation put in place by the state to encourage coal-related investment and employment.

Matt: As you may recall, the incentives that the state created in that legislation were an important consideration in our ultimate decision to move forward with the $400 million buildout from Lear South.

Matt: We're now pleased to report that the legislation has proved highly beneficial to both parties.

Matthew C. Giljum: On the art side of the equation, we have a new world-class token coal mine that we expect to remain the centerpiece of our operations for decades. For the state, that investment is translating into 600 well-paying direct jobs and a significantly higher number of indirect jobs. Substantial Incremental Stubbornness Tax, as well as a host of other state and local tax revenues. The rebate earned in the second quarter was the result of a long process requiring a block.

Speaker Change: On the art side of the equation, we have a new world-class token coal mine that we expect to remain centerpiece of our operations for decades.

Speaker Change: For the state, that investment is translating into 600 well-paying direct jobs.

Matt: A significantly higher number of indirect jobs and substantial incremental severance tax receipts.

Matt: as well as a host of other state and local tax revenues.

Matt: The rebate earned in the second quarter was the result of a long process requiring the law, not only documenting the investments that were made, but also demonstrating the benefits to the state from increases in coal production, employment, and severance tax payments over a baseline period.

Matthew C. Giljum: This study not only documents the investments that were made but also demonstrates the benefits to the state from increases in coal production, employment, and severance tax payments over a baseline period. Looking at it, we expect to qualify for additional rebates in the future. Although the extent and timeframe of this potential sea shore coverage will be driven by a host of factors. [inaudible] Finally, I'll conclude my remarks with some comments on the guidance for the rest of the year. In the metallurgical segment, we have maintained our four-year guidance for cooking both sales volumes and castings. However, all volumes for the first half of the year were less than readable, particularly in April.

Matt: Looking at it, we expect to qualify for additional rebates in the future.

Matt: Although the extent and timing of those potential future recoveries will be driven by a host of factors.

Matt: including Market Diamonds.

Matt: Finally, I'll conclude my remarks with some comments on the guidance for the rest of the year.

Matt: In the metallurgical segment, we have maintained our four-year guidance for crooking both sales volumes and gas pipes.

Matt: All volumes for the first half of the year were less than readable, particularly in April .

Matthew C. Giljum: Shipments in May and June were at an annual pace of more than 9 million tons. For cash costs, our guidance excludes the Q2 benefit and any potential future incremental benefits of a severance tax rebate while anticipating a meaningful reduction in the thermal byproduct inventory by year. Additionally, we have adjusted several other items in line with the weaker operating results thus far this year. Federal spending is now expected to be in the range of $155 million to $165 million, a reduction of $10 million at the mid- Total SG&A guidance is now approximately $92 million at the Mississippi State Board of Education, including both cash and non-cash expense. Representing a reduction of $5 million. Finally, we now expect that we will not pay any cash taxes in 2024.

Matt: Shipments in May and June were at an annual pace of more than 9 million tons.

Matt: For cash costs, our guidance excludes the Q2 benefit and any potential future incremental benefits of a severance tax rebate while anticipating a meaningful reduction in the thermal by-product inventory by year-end.

Matt: Additionally, we have adjusted several other items in line with weaker operating results thus far this year.

Speaker Change: Federal spending is now expected to be in the range of $155 million to $165 million.

Matt: A reduction of $10 million at the midpoint.

Matt: Total SG&A guidance is now approximately $92 million at the minute.

Matt: including both cash and non-cash expense.

Matt: Representing a reduction of $5 million.

Matt: Finally, we now expect that we will not pay any cash taxes in 2024, and will carry federal NOL carry forward totaling approximately $250 million in 2025.

Operator: O.L. Carey Federal and O.L. Carey Forward, totaling approximately $250,000,000. With that, we are ready to take questions. Operator, I will turn the call back over to you.

Speaker Change: With that, we are ready to take questions. Operator, I will turn the call back over to you.

Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1.

Speaker Change: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we'll pause momentarily to assemble a roster.

Operator: If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star. At this time, we'll pause for our first question. This is Lucas Pipes from B Riley.

Lucas Nathaniel Pipes: Thank you very much, operator. Good morning, everyone. [inaudible] My first question is kind of on the margin outlook for the Metco business. There were a few moving pieces on the cost side in Q2, and I wondered if you could maybe speak to Q3. I assume there's a $6 benefit from the thermal byproduct, but then there's not the severance rebate, and I would anticipate much higher volume.

Speaker Change: speak to Q3, I assume that, you know, there's a $6.00 benefit from...

John T. Drexler: And then on the realization front, you spoke to a somewhat higher contribution from high vol B in Q2, so wondering how that, as well as maybe lower rail rates, might impact realization. So broadly, kind of coking coal margins in Q3 versus Q2. Thank you very much. Hey, Lucas, John Drexler.

John T. Drexler: I'll start off here, and I think you hit on a couple of the key themes. Obviously, the second quarter was impacted significantly by what happened at the Port of Baltimore and the bridge collapse. And, you know, as a reminder, 50 percent of our metallurgical exports go under that bridge on an annual basis. So the logistics team did a fantastic job of managing that. You know, we talked through the impact of the reduced margins there.

John T. Drexler: Hey Lucas, John Drexler, I'll start off here and I think you hit on a couple of the key themes. Obviously, the second quarter was impacted significantly with what happened at the Port of Baltimore and the bridge collapse.

Speaker Change: As a reminder, 50% of our metallurgical exports go under that bridge on an annual basis, so the logistics team did a fantastic job of managing that.

Speaker Change: You know, we talked through the impact of the reduced margins there.

John T. Drexler: You know, there was a component of us having to redirect a lot of rail transportation. It was a longer transport to our DTA facility as a result. So there are rail surcharge impacts, but the team did a fantastic job of working to get that coal flow redirected. We got creative as well.

Speaker Change: You know, there was a component of us having to redirect.

Speaker Change: A lot of rail transportation. It was a longer transport to our DTA facility as a result. So there's rail surcharge impacts, but the team did a fantastic job of working.

John T. Drexler: We talked a little bit about it on the first quarter call as well, where we had an opportunity to go midstream. So when there was an opportunity to load some barges and get them through some lower draft openings of that bridge early in the recovery process, we took advantage of that and loaded several vessels that way as well. Once again, though, some incremental charges are coming through there also. You know, again, you also got to merge.

Speaker Change: to get that coal flow redirected.

Speaker Change: We got creative as well. We talked a little bit about it on the first quarter call as well, where we had an opportunity to midstream. So when there was an opportunity...

Speaker Change: to load some barges and get them through some lower draft openings of that bridge early in the recovery process. We took advantage of that and loaded several vessels that way as well, once again though some incremental charges.

John T. Drexler: You've got vessels that are getting tied up, and getting delayed. So we had all of those costs coming through. So about $12 million of impact and reduced margin as a result of that. On the cost side, you hit on it as well.

Speaker Change: coming through there also. You know, again, you've also got diverged, you've got vessels that are getting tied up, getting delayed, so we had all of those costs coming through. So about 12 million dollars of impact and reduced margin as a result of that.

John T. Drexler: Typically, the byproduct that we produce and have forever in the MET segment is the Midlands project, the thermal byproduct. It's about 10% of our production. Typically, that's on a standard cadence of shipments. As we indicated in our remarks, the inventory value of that product is extremely low.

Speaker Change: Typical byproduct that we produce and have forever in the MET segment is the Midlands project, the thermal byproduct. It's about 10% of our production. Typically that's on a standard cadence of shipments as we indicated in our remarks.

Speaker Change: Inventory value of that product is extremely low, so as a result of reduced shipments from what we had planned, there's a pretty significant impact in the unit cost.

Speaker Change: The opportunity, though, is those are going to be recovered in the back half of the year as we ship that middling product.

Speaker Change: And so, you know, we've got a lot of confidence here. We came operationally through a program where the MET segment produced at a record level. We expect more going forward.

Speaker Change: We are self-continuing its progress and ongoing improvement. In the District 2, we feel good about our ability to continue to produce at those higher levels.

Speaker Change: And then we'll work very hard and have confidence we can achieve the shipment levels that we've projected as well.

John T. Drexler: So as a result of reduced shipments from what we had planned, there's a pretty significant impact on the unit. The opportunity, though, is that those are going to be recovered in the back half of the year as we ship that middling product. And so, you know, we've got a lot of confidence here. We operationally went through a quarter where the MET segment produced at a record level. We expect more going forward, but with Clear South continuing its progress and ongoing improvement into District 2, we feel good about our ability to continue to produce at those higher levels, and then we'll work very hard and have confidence we can achieve the shipment levels that we've projected as well. Lucas, it's Jack.

John T. Drexler: I might just add, look, you know, we wouldn't expect, you know, that $6 sort of, you know, pressure on netbacks that we incurred in Q2 as a result of the bridge collapse for all the reasons that John just articulated, but also, you know, look, the pricing today on the U.S. East Coast is down around $10. I think, you know, the positive side of that is that if you look at the average pricing in Q2, which was around $218 for HVA, you know, that implies a rail rate that might be $10 lower as well, so, you know, you take those two pieces and you sort of, they kind of net out right now, again, assuming prices hold up, but we don't have those additional costs that we're weighing, you know, on netbacks, so, you know, I think that those are important components.

Speaker Change: Lucas, it's Jack. I might just add, look, you know, we wouldn't expect...

Lucas: You know, that $6 sort of...

Lucas: You know, pressure on netbacks that we...

Jack: incurred in Q2 as a result of the bridge collapse for all the reasons that John just articulated. But also, look, the pricing today on the U.S. East Coast is down around $10. I think, you know, the positive side of that is that if you look at the average pricing in Q2, which was around $218 for HVA, you know, that implies a rail rate that might be $10 lower as well. So, you know, you take those two pieces and they kind of net out right now, again, assuming prices hold up, we don't have those additional costs that we're weighing, you know, on net back. So, you know, I think that those are important components. Certainly suggest right now that we could see a step up in an expansion of margins where we are.

John T. Drexler: Certainly suggest right now that we could see a step up and an expansion of margins where we are today. I would also add the fact that, as you point out, you know, volumes are, you know, we would anticipate stronger volumes, which should also result in, you know, lower unit costs. So, all those pieces in aggregate, you know, really should deliver a stronger future. And maybe one of the details on your question, yes, about the impact of Type LB, you know, during Q2, our typical splits on shipments are 70% high vol A, 15% high vol B, 15% low vol. You know, we were 20-plus percent high vol B during Q2 on the shipment front.

Speaker Change: Thank you all for joining us on the show today, certainly would add the fact that, as you point out, you know, volumes are, you know, we would anticipate stronger volumes, which should also result in, you know, lower unit costs. So, all those pieces in aggregate, you know, really should deliver a stronger future. Maybe one of the details on your question, yes, about the impact of TIE Vol B, you know, during Q2, our typical splits on shipments are 70% TIE Vol A, 15%.

Jack: High Vol B, 15% roll vol. You know, we were 20-plus percent High Vol B during Q2 on the shipment front. You know, over all of the quarters, that ends up evening out. You know, it had a modest impact on the realization, but one we did want to note in our commentary.

John T. Drexler: You know, over all of the quarters, that ends up even out, you know; it had a modest impact on the realization, but one we did want to note in our comments. Yeah, I think, you know, because as I look at this sort of... standing back and taking a longer view, the bridge collapse affected 2-2 in a lot of strange ways.

Speaker Change: Yeah, I think, you know, okay, let me look at this, okay.

Lucas: and standing back and taking a longer view. The bridge collapse affected Q2 and a lot of strange roads. But Q2 is messy for reasons outside the company.

John T. Drexler: But 2-2 is messy for reasons outside the company. I think John pointed out very well the team, you know, an outstanding job of reacting, considering what we were able to do to divert all that time, and Brandon DeBarkin for the late. We touched on the very big issues, which are the left backs were affected, and the truss was affected. But, you know, as I look at it, we were still able to produce some capital returns.

Lucas: I think John pointed out very well, the team did an outstanding job of reacting.

John: Considering what we were able to do to divert all those tons and bring them to market was amazing.

Speaker Change: We touched on the very big issues, which are the left backs were affected, the toss were affected.

Speaker Change: But, you know, as I look at it, you know, we were still able to do some capital returns. And I think probably the most important of all of this is it's behind us, it was outside of us, and we're moving on, and things should revert to normal. And at the end of the day, that's why we're optimistic about the back half of the year.

John T. Drexler: And I think probably the most important of all of this is... It's behind us, it was outside of us, and we're moving on, and things should revert to normal, and at the end of the day, that's why we're optimistic about the second half. Thank you very much for all that detail. My second question is about West Elk. You mentioned $70 in the prepared remarks, and I wondered if that kind of a good number to use for the entire output of West Elk going forward, or is that maybe more specifically for export tons, and so if you could maybe comment on the opportunity from higher prices at West Elk, I would appreciate it. Thank you very much. Yeah, Lucas, a great question.

Speaker Change: Thank you very much for all that detail. My second question is on West Elk.

Speaker Change: You mentioned $70 in the prepared remarks, and I wondered, is that kind of a good number to use on the entire output of West Elk going forward, or is that maybe more specifically

Speaker Change: for Export Tons, and so if you could maybe comment on the opportunity from higher prices at West Elk, I would appreciate the additional time.

John T. Drexler: I'll start off. I'm sure others will have some thoughts as well. The opportunity at West Elk is that it produces a relatively low cost, great, high quality product sought after in the export thermal markets, and it plays incredibly well in the industrial market as well. As we've been discussing, we are transitioning to the B-scene, from where we have been producing for some time and producing very successfully and at a low cost; we're going to see an improvement in the quality of the coal, a higher BTU, a higher quality product that we think will be even more sought after, so, you know, expansion on the top line.

Speaker Change: detail. Thank you very much.

Speaker Change: Yeah, Lucas, great question. I'll start off on trailers. I'll have some thoughts as well. You know, the opportunity at West Elk.

Speaker Change: is that, you know, it produces at a relatively low cost, a great high quality product.

Speaker Change: sought after in the export thermal markets. It plays incredibly well in the industrial

Speaker Change: market as well. As we've been discussing, we are transitioning to the v-scene.

Speaker Change: where from where we have been producing for some time and producing very successfully and at low cost, we're going to see an improvement in the quality of the coal, a higher BTU, a higher quality product that we think will be even more sought after. So, you know, expansion on the top line.

John T. Drexler: As we continue to build out at West Elk, you know, we have deployed additional continuous miner units to get the B-scene developed, so, as a result of that, we've seen a temporary step-up in unit costs at West Elk here as we are finishing out the build-out. We expect to be producing from the long wall in the B-scene in mid-2025.

Speaker Change: As we continue to build out that West Elk, you know, we have deployed additional continuous miner units.

Speaker Change: to get the bee theme developed. So as a result of that...

Speaker Change: We've seen a temporary step-up in unit costs at West Elk Here as we are finishing out the build-out.

Speaker Change: We expect to be producing from the long haul in the BC in mid-2025. At that time, we're going to see a step down in cost. So even as we sit here today, you know, with a lower realization product, you know, we indicated legacy products.

John T. Drexler: At that time, we're going to see a step-down in cost, so, even as we sit here today, you know, with a lower realization product, we indicated legacy products, core products, products at $25 to $35 below on a carryover basis into this year from last year, where we struggled a little bit. But we're still generating EBITDA there and feel very good about where West Elk is going as we move forward.

Speaker Change: products at $25 to $35 below on a carryover basis into this year from last year, where we struggled a little bit. But we're still generating EBITDA there and feel very good about where West Elk is going as we move forward.

John T. Drexler: And look at that, you know, that pricing really pertains to, you know, about 2 million tons of North American industrial business. And so, you know, as those legacy contracts roll off, and they're really averaging around $40.

Speaker Change: And look at that, you know, that pricing really pertains to, you know, about 2 million tons of North American industrial business. And so, you know, as those legacy contracts roll off, and really they're averaging around $40.

John T. Drexler: And, you know, as the new contracts sort of kick in, and they're averaging above $70, then that's a significant step up on that increment. And we do, of course, expect to have additional volumes as we move into the seaboard market. And, you know, the netbacks there will be determined by where the seaboard market trends, but clearly, that base of North American business is significant for West Elk. It provides visibility and is obviously a great step up.

Speaker Change: You know, as the new contracts sort of kick in and they're averaging above 70, that's a significant step up on that increment.

Speaker Change: We do, of course, expect to have additional volumes that we will move into the seaboard market. The netbacks there will be determined by where the seaboard market trends. But clearly, that base of North American business is significant for West Elk. It provides visibility and obviously a great step up. So, when you get into mid-2025, we'll get into the thicker coal in the BC. Costs could come down $15 to $20. We're talking about very substantial margin expansion. And West Elk really becomes a much greater contributor, even as we progress into 2025 period.

John T. Drexler: So, when you get into mid-2025, we'll get into the thicker coal and the B seam, you know, costs could come down $15 to $20. And we're talking about very substantial margin expansion. And West Elk really becomes a much greater contributor, you know, even as we progress into the 2025 period, but certainly as we get into mid-2025 and we have that further step down in costs that comes with the much thicker coal and the B seam, the 400 to 500 BTUs of higher quality. So West Elk is becoming, again, increasingly sinusoidal. This is very helpful.

Speaker Change: But certainly as we get into mid-2025 and we have that further step down in cost that comes with the much thicker coal in the BC and the 400 to 500 BQs of higher quality. So West Elk is becoming, again, an increasingly cytosaurian.

Lucas Nathaniel Pipes: I appreciate all the color and detail and wish you all the best of luck. Thank you. Thank you. What's the next question? This is Lucas LaFemina from... Hi guys, thanks for taking my question.

Speaker Change: This is very helpful. I appreciate all the color and detail and all the best of luck. Thank you.

Speaker Change: Thank you.

Speaker Change: The next question comes from Chris LaFemina from Jefferies. Please go ahead.

Lucas LaFemina: I just wanted to ask about the capital allocations, and the balance sheet is obviously very strong. The outlook for the second half is that you should be highly cash generative, but let's assume we have some kind of nasty macro downturn. Should we assume, in that case, that the accumulation of cash on the balance sheet would then be used... For buybacks, let's assume that you're in a situation where free cash flow is negative because coal prices have gone down.

Christopher LaFemina: Hi guys, thanks for taking my question. I just wanted to ask about the capital allocation framework.

Christopher LaFemina: I mean, the balance sheet is obviously very strong. The outlook for the second half is that you should be highly cash-generative, but let's assume we have some kind of nasty macro downturn.

Speaker Change: Should we assume in that case that the accumulation of cash on the balance sheet would then be used?

Speaker Change: for buybacks. Let's assume that you're in a situation where free cash flow is negative because coal prices have gone down a lot.

Paul A. Lang: Is that, would that be the strategy then, to deploy that capital on the balance sheet to fund buybacks? Or, in that scenario, do you want to maintain a very strong balance sheet because of... at www. TheBusinessProfessor.com

Speaker Change: Would that be the strategy then, to deploy that capital on the balance sheet to fund buybacks, or in that scenario, do you want to maintain a very strong balance sheet because of...

Speaker Change: The risks of further weakness in prices and weaker cash flow. I'm just trying to understand how you use that cash in a downturn. I mean, obviously in an upturn...

Speaker Change: The issue is your share price goes higher, which is a nice problem to have, but, you know, in a higher share price environment, it seems like the strategy is to not really aggressively buy back shares, so I'm trying to understand what happens in a downturn. Thanks.

Paul A. Lang: Hey Chris, this is Paul, and I'll probably give you my thoughts in a minute. Thanks for watching. You know, I'll start out by saying several tenants of our CalPERS program were to effectively return 100% of discretionary cash on... Yeah, this hasn't changed. On the other hand, as we've said many times in the past, the allocation plan, which is to say the split between dividends and share repurchase, has always been flexible and dynamic, as it should be.

Speaker Change: Hey Chris, this is Paul, and I'll probably give you my thoughts with Matt and I'll start.

Speaker Change: [inaudible]

Speaker Change: I'll start out, several tenets of our CalPERS program is to effectively return 100% of discretionary cash on shareholders.

Speaker Change: Now, let's have a chance.

Speaker Change: You know, conversely, as we've said many times in the past, the allocation formula, which is to say the split between dividends and share purchases, has always been as flexible and dynamic as it should be.

Paul A. Lang: You know, as we look ahead, I think there are three reasons we've seen for heavier share repurchase going forward. First, the economic fundamentals, as you pointed out, the segment is, you know, especially on the supply side, remains supportive, but the global markets seem to be relatively unbalanced. Second, the ongoing improvement in operational execution in coming quarters gives us a lot of comfort knowing where we're headed. And I think probably the third piece of this is that the current phase we are in the commodity cycle, which we argue is somewhat of a trough, makes our stock a good buy.

Speaker Change: You know, as we look ahead, I think there's three reasons we've seen for heavier share repurchase going forward.

Speaker Change: First of the economic fundamentals, as you pointed out, the metallurgical segment, especially on the supply side, remains supportive, but the global markets seem to be relatively imbalanced.

Speaker Change: And second, the ongoing improvement in our operational execution in the coming quarters gives us a lot of comfort in knowing where we're headed.

Speaker Change: And I think probably the third piece of this is the current phase we are in the commodity cycle, which we argue is somewhat of a trough, makes our stock a good buy.

Paul A. Lang: So, as you would expect, the greater the pullback of equity, the more likely we'd be putting some of the cash we built on the balance sheet last year to work. That was the reason we did what we did.

Speaker Change: So, as you would expect, the greater the pullback of equity, the more likely that we'd be putting some of the cash we built on the balance sheet last year to work. That was the reason we did the June recall.

Paul A. Lang: We want it to be set up for these kinds of conditions. You know, and actually, the board's thinking on this is dynamic, so I don't want to be too specific as to what we'd like to spend in different equity... I also want to reiterate that when we built that cash balance, we always said our minimum cash level was about $200 million. That allowed us to keep a pretty robust 10-5-D-1 plan in place during blackouts. So, in the end, I think it's not quite as binary as you laid out.

Speaker Change: We want it to be set up for these kind of conditions.

Speaker Change: And actually the board's thinking on this is dynamic, so I don't want to be too specific as to what we'd likely spend at different equity levels.

Speaker Change: I also want to reiterate that when we built that cash balance, we've always said our minimum cash level was about $200 million.

Christopher LaFemina: That allowed us to keep a pretty robust 10-5-D-1 plan in place during blackouts.

Speaker Change: So here I am, and I think...

Paul A. Lang: I think this is more of a continuum, along which, you know, I'd say the use of cash as the equity goes down is probably more prevalent than if the equity goes up and you slow down. But I think the good news is, and I'm very proud of, is we set ourselves up for this very thing to occur, and there's been a downturn in the market. That's the only thing I'd add, Chris, as you look at our cost position compared to our peers. In a situation where cash flows go negative for us, it's going to be extremely painful for others. So we would probably view that as something that can't really be sustained for very long.

Speaker Change: It's not quite as binary as you laid out. I think this is more of a continuum along which, you know, I'd say the use of cash as the equity goes down is probably more prevalent than it is right now.

Speaker Change: I think the good news is, and what I'm very proud of, is we set ourselves up for this very item to occur. There's been a downturn in the market.

Christopher LaFemina: That's why we built the excess cash on the balance sheet. I guess the only thing I'd add, Chris, is you look at our cost position compared to our peers.

Christopher LaFemina: In a situation where cash flows go negative for us, it's going to be extremely painful for others, so we would probably view that as...

Paul A. Lang: And so I think we still have room to deploy some of that cash that we built up on the balance sheet last year and still maintain a very conservative profile, understanding that the conditions that are leading to negative margins are probably going to be more short-term in nature. Yeah, first I just said, you know, if we simply see a pullback in pricing and the coking coal price, we are at that point where you said that extreme point where you have negative margins, you have some compression, but we continue to believe that $200 million is sufficient, right?

Christopher LaFemina: Something that can't really be sustained for very long.

Christopher LaFemina: And so, you know, I think we still have room where we can deploy some of that cash that we built on the balance sheet last year and still maintain a very conservative profile, understanding that, you know, the conditions that are leading to negative margins are probably going to be more short-term in nature.

Christopher LaFemina: At first, I just said, you know, if we simply see a pullback in pricing, in coking coal prices,

Speaker Change: We aren't at that point where you said that extreme point where you have negative margins you set some compression Well, we continue to believe the 200 million dollars is sufficient, right? If we're generating a margin and the solid margin where prices are today, even with a little further weakness Really comfortable with the idea of 200 million dollars, you know being sufficient amounts of cash, you know Given very low debt levels, you know, very low low capital requirements and capex requirements So, you know feel really pretty positively about the fact that that dry powder really will be available to us You

Paul A. Lang: If we're generating a margin and a solid margin where prices are today, even with a little further weakness, really comfortable with the idea of $200 million being sufficient amounts of cash, given very low debt levels, very low capital requirements, and CapEx requirements. So we feel really pretty positively about the fact that that dry powder really will be available. Yeah, I mean, there's no question you guys are in a position of strength in a downturn with the balance sheet. And I would agree that maintaining a strong balance sheet is obviously critical. And Dec, you made a point earlier about... at www. TheBusinessProfessor.com. Some of these minds are significantly loss-making already.

Speaker Change: Yeah, I mean, there's no question, you know, you guys are in a position of strength in a downturn with the balance sheet. And I would agree, maintaining a strong balance sheet is obviously critical. And Dec, you made a point earlier about pricing being in the cost curve, right? I mean, if you look at assets in Queensland today...

Christopher LaFemina: So hopefully, you know, as you alluded to, that we're somewhere near a bottom in pricing, in which case, you guys could be sitting here generating cash flow through the cycle and maintaining a strong balance sheet and delivering capital returns, even in a weaker market. Kind of the ideal setup on paper, and if you actually deliver on that, it probably works well for your stock. So thank you for all that. Thank you, everyone. Thank you. This question comes from Nathan Martin from The Bench.

Speaker Change: Some of these minds are significantly loss-making already. So hopefully, as you alluded to, we're somewhere near a bottom in pricing, in which case you guys could be sitting here generating cash flow through the cycle and maintaining a strong balance sheet and delivering capital returns, even in a weaker market, which is...

Speaker Change: And that's kind of the ideal setup on paper, and if you actually deliver on that, it probably works well for your stock. So thank you for all that, and best of luck.

Speaker Change: Thank you, Chris. Thank you.

Speaker Change: The next question comes from Nathan Martin from The Benchmark Company. Please go ahead.

Nathan Pierson Martin: Thanks, operator. Good morning, everyone. Hullo. Hello.

Nathan Pierson Martin: Thanks, operator. Good morning, everyone.

Nathan Pierson Martin: I wanted to come back to the Coke and Coal segment just for a second, you know, maintain full year ship and guidance there. By my math, it means you're going to need to ship roughly 2.4 million tons a quarter in the second half just to kind of reach the low end of that range. First, is that level achievable from a production perspective? Obviously, we just saw a record production quarter in 2Q. I don't know if that repeats or not, so there's a question there on the production side.

Nathan Pierson Martin: [inaudible]

Speaker Change: I'm going to come back to the Coal to Coal segment just for a second. Maintain full year shipping guidance there. By my math, it means you're going to need to ship roughly 2.4 million tons a quarter.

Speaker Change: in the second half, just to kind of reach the low end of that range. First, is that level achievable from a production perspective? Obviously, we just saw a record production quarter in 2Q. I don't know if that repeats or not, so there's a question there on the production side. I think you guys also mentioned maybe some...

Nathan Pierson Martin: Some inventory there. I think 160,000 tons slipped in the third quarter. That's already moved, but any inventory there would help that as well.

Speaker Change: Some inventory there, I think 160,000 tons, you know, slipped into the third quarter that's already moved, but any inventory there that would help that as well. And then, you know, maybe secondly, just talk to your confidence again around the logistics chain, both the rail and port, to handle that additional coal in the second half. And then

Nathan Pierson Martin: And then, you know, maybe secondly, just talk about your confidence again around the logistics chain, both the rail and port, to handle that additional coal in the second half. And then, finally, maybe really just the cadence of shipments, 3Q versus 4Q. That'd be great.

Speaker Change: And finally, maybe, really, just Cadence of Shipments, 3Q versus 4Q, that'd be great. Thank you.

John T. Drexler: Thank you. Thanks, Nathan. Yeah, you hit on a lot of different topics, so I'll touch on a few of them.

Speaker Change: Thanks, Nathan. Yeah, you hit on a lot of different items, so I'll touch on a few of them.

John T. Drexler: You know, operationally, we know, we've positioned the MET portfolio at that level where, you know, we delivered record production. We expect, you know, to be producing at those higher levels as we continue to move forward. We've talked a lot about the opportunity of Lear South transitioning and finishing the last longwall panel in District 1 and transitioning to District 2, where we're going to see an improvement in coal seam thickness of 15 to 20 percent. We expect to get there towards the beginning of the fourth quarter.

Speaker Change: You know, operationally, you know, we position the MET portfolio, you know, at that level where, you know, we delivered record production.

We expect to be producing at those higher levels as we continue to move forward.

Speaker Change: We've talked a lot about the opportunity of their south transitioning.

Nathan Pierson Martin: and finishing the last longwall panel in District 1 and transitioning to District 2 where we're going to see an improvement.

Nathan Pierson Martin: and Colstein Fitness at 15 to 20 percent. We expect to get there towards the beginning of the fourth quarter. You know, that will have an impact and benefit for us as well. So, you know, as a result of the production we saw in Q-10,

John T. Drexler: You know, that will have an impact and benefit for us as well. So, you know, as a result of the production we saw in Q2 and with the constrained shipments that we had given the Baltimore collapse, we did build inventory. I think we were around 350 or 400,000 tons of inventory built in the MET segment.

Q2, and with the constrained shipments that we had given the Port of Baltimore collapse.

We did build inventory. I think we were around 350 or 400,000 tons of inventory built in the MET segment.

John T. Drexler: We indicated that, you know, we just missed a couple of vessels at the end of Q2, so that gives us a jump start as we go into Q3 and beyond. But clearly, we've got to work very closely with our rail providers and port providers, but we have confidence that we're going to be able to achieve the levels that we've seen are going to need in the back half of the year to get to the guidance. And we've always envisioned that step up, right? This is not new.

Nathan Pierson Martin: We indicated that we just missed a couple of vessels at the end of Q2, so that gives us a jump start as we go into Q3 and beyond.

Nathan Pierson Martin: But clearly, we've got to work very closely with our rail providers and port providers, but we have confidence that we're going to be able to achieve the levels that we've seen are going to need in the back half of the year to get to the guidance levels.

And we've always envisioned that step up, right? This is not new. We've always envisioned the fact that, you know, we're going to need to step up as we get to sort of 9 million tons and perhaps beyond that 9 million ton level. And so, look, this is something we've been working on for a very long time, quite frankly, rail service.

John T. Drexler: We've always envisioned the fact that, you know, we're going to need to step up as we get to sort of 9 million tons and perhaps beyond that 9 million ton level. And so, look, this is something we've been working on for a very long time. Quite frankly, the rail service is looking good and solid, and we're, you know, we're getting the train set. When you look at production so far in Panel 8, while we haven't quite made it to District 2 and the thicker coal, you know, conditions in Panel 8 were stair-stepping towards District 2, and so far, really, very well in terms of production at Lear South.

It's looking good and solid and we're, you know, we're getting the training set.

When you look at production so far in Panel 8, while we haven't quite made it to District 2, and the thicker coal conditions in Panel 8, we're stair-stepping towards District 2, and so far really progressing very well in terms of production at Lear South. So lots of positives. So we do feel confident that, A, the coal will be there, and that, B, the rail will be there to sort of move it, and, of course, feeling very confident about the terminal side of the equation as well. And, Nate, and I'd like to hit on it. You know, we started Panel 8, and he described stair-stepping to District 2. Panel 8 is...

John T. Drexler: So, lots of positives. So, we do feel confident that A, the coal will be there, and that B, the rail will be there to sort of move it. And, of course, feeling very confident about the terminal side of the equation as well. And Nathan, I'd like to hit on that.

John T. Drexler: You know, we started Panel 8, and he described stair-stepping to District 2. Panel 8 is a close or relative proximity starting to be in the direction of where we're going for District 2. We started in that panel at the beginning of the quarter. The ramp was great in production here several weeks in, and that panel at Lear South has continued to be very positive. So, you know, once again, it's just giving us further confidence that as we get into District 2 and Q4, we're going to see that step up in the opportunity and production levels at Lear South. Appreciate that, guys. Any thoughts on the cadence of shipments in 3Q versus 4Q? Any remnants of issues with the port that would slow things down in 3Q versus 4Q?

We are starting to see relative proximity starting to be in the direction of where we are going for District 2. We started in that panel at the beginning of the quarter. The ramp was great in production here several weeks in. In that panel, at Lear South, it has continued to be very positive. So, once again, it is just giving us further confidence that as we get into District 2 and Q4, we are going to see that step up.

and the opportunity and production levels of Clear South as we go forward.

Appreciate that, guys. Any thoughts on the cadence of shipments in 3Q versus 4Q? Any remnants of issues with the port that would slow things down in 3Q versus 4Q? Anything to consider there?

John T. Drexler: Anything to consider there? Yeah, no, I think the recovery from the port has been good. I think, you know, there's no real significant or material remnant carryover, if any. So I think that cadence of that 2.4 million ton level by quarter would be a heavy focus for us as we go forward. Okay, thanks, John.

Speaker Change: Yeah, no, I think the recovery from the port has been good. I think, you know, there's no real significant or material remnant carryovers, if any. So I think that cadence of that 2.4 million ton level by quarter, you know, would be a heavy focus for us as we go forward.

Matthew C. Giljum: Matt, you made some comments in your prepared remarks on the severance rebate. Maybe we could just get a little more color there. What's the potential dollar amount there over time? You know, maybe the time period you expect those rebates to occur? I think you said some of that will depend upon market conditions. In terms of the rebate, first, I think I want to reiterate a couple things I mentioned in my comments, you know, about this being a win-win for both Arch and the state.

Okay, thanks, John .

Matt, you made some comments and prepared remarks on the severance rebate. Maybe we could just get a little more color there. What's kind of the potential dollar amount there over time? Maybe what time period do you expect those rebates to occur? I think you said some of it will depend upon market conditions.

In terms of the rebate, I think I want to reiterate a couple of things I mentioned in my comments about this being a win-win for both Arch and the state. Obviously, the benefits for us are pretty clear today with the rebate that we've gotten and with LearSouth.

Matthew C. Giljum: You know, obviously, the benefits for us are pretty clear today with the rebate that we've gotten and with LearSouth online. For the state, you know, our severance tax levels, if you look at what we've paid since... Since the time that LearSouth came up, the long haul came up there, you know, we've paid nearly $200 million in severance taxes over that time. That's about a 70% increase on an annual average compared to what we were paying back in 2019.

Speaker Change: online. For the state, you know, our severance tax levels, if you look at what we've paid since...

Since the time that LearSouth came up, the loan wall came up there, you know, we've paid nearly $200 million in severance taxes over that time. That's about a...

For our mine portfolio today, that's about a 70% increase.

On an annual average, compared to what we were paying back in 2019, so clearly we think this has been a good thing for both sides.

Matthew C. Giljum: So clearly, we think this has been a good thing for both sides. There is a lot of work that goes into this, and, you know, I want to commend the folks at our operations and our tax department for what they've done to get us to where we are today. So with all of that said, as we look ahead, you know, I think the good news is, you know, we've taken, I think, the largest part of the benefit already. What we have coming in the future will likely end up being overall smaller than what we've gotten so far. Obviously, that makes some sense.

There is a lot of work that goes into this, and I want to commend the folks at our operations and our tax department for what they've done to bring us to where we are today. So with all of that said, as we look ahead...

I think...

The good news is we've taken, I think, the largest part of the benefit already.

What we have coming in the future will likely end up being...

Overall, smaller than what we've gotten so far. Obviously, that makes some sense. We've had to qualify expenditures going back several years, so...

Matthew C. Giljum: We've had to qualify expenditures going back several years, so this first bite was going to be the biggest. As we look at the rest of this year, we think there's probably an opportunity for something along the lines of roughly half of what we got in Q2, and then as we look at next year, clearly things like what the market price is and what the ultimate level of severance tax we pay are going to weigh into this, but as we sit here today, it looks like something in the $5 to $10 million range for next year, and then, again, depending on how Okay, that's very helpful. And then I also wanted to just ask about the CapEx reduction. Matt, what kind of drive did that have?

This first bite was going to be the biggest. As we look at the rest of this year, we think there's probably an opportunity for something along the lines of...

Roughly half of what we got in Q2.

And then as we look at next year, clearly things like what the market price is and what the ultimate level of severance tax we pay is going to weigh into this.

But as we sit here today, looking like something in the college $5 to $10 million range for next year. And then, again, depending on how markets progress, there could be some additional amounts that trail into 2026 as well.

Okay, that's very helpful. And then I also wanted to just ask about the CapEx reduction. Matt, what kind of drove that?

Matthew C. Giljum: So really, just looking at what we've experienced for the first half of the year, clearly from where we set our guidance at the beginning of the year, and where pricing was at the beginning of the year, our results haven't been what we planned, quite frankly, and we're doing everything we can to defer costs and capital in order to sort of right-size the cash flows as much as possible. So really, just taking, you know, things that we thought we would be spending this year and trying to defer those to future periods wherever we can. Okay, I got it.

So really, just looking at what we've experienced for the first half of the year, clearly from where we set our guidance at the beginning of the year, where pricing was at the beginning of the year, our results haven't been what we planned, quite frankly, and we're doing everything we can to defer.

Costs and capital in order to sort of right size the cash flows as much as possible So really just taking, you know things that we thought we would be spending this year and trying to defer those to future periods wherever we can

Nathan Pierson Martin: I appreciate that. I'll leave it there. Best of luck in the third quarter. Appreciate that. The next conference call is from Katja Jancic, from BMO Capital. Hi, thank you for taking my questions. Maybe starting off on the thermal side.

Okay, got it. I appreciate that. I'll leave it there. Best of luck in the third quarter.

Thanks a lot. Appreciate it.

The next conference calls from Katja Jancic from BMO Capital Markets. Please go ahead.

Hi, thank you for taking my questions. Maybe starting off on the thermal side.

Katja Jancic: The expectation is that the contribution from the thermal side is going to... (inaudible) I guess I'll start out here, and we can have others weigh in as well. I guess we've already talked about West Elk, and even in this challenged environment that they have, they're generating EPA, and we've indicated that we see the lion's share of the improvement occurring with where we're at in the PRV. We've done a lot of work over the first half of the year, really the first three, four months of the year, where we saw a significant step down in demand.

The expectation is that...

The contribution from the thermal side is going to improve in the second half versus the first half. Can you maybe provide a little more color how much of an improvement we could see?

I guess I'll start out here. We can have others weigh in as well. I guess we've already talked about West Elk and even in this challenged environment.

that they have. They're generating USDA and we've indicated that we see the lion's share in the improvement.

occurring with where we're at in the PRV.

We've done a lot of work over the first half of the year, really the first 3-4 months of the year, where we saw the significant step down in demand.

Katja Jancic: We came into the year kind of targeting 55 million tons of shipments. We already had 50 million tons committed, but then with the challenging winter and low natural gas prices, and the rest of the basin, we've seen just a tremendous amount of pressure. The team at Black Thunder did a great job.

We came into the year, you know, kind of targeting 55 million tons of shipments. We already had 50 million tons committed, but then with the challenging winter, low natural gas prices, you know, we, and the rest of the basin, we've seen just a tremendous amount of pressure.

John T. Drexler: They've done a great job of reducing the headcount aggressively. They're doing that through attrition and furloughs. They're parking equipment, and optimizing maintenance with the parked equipment.

The team at Black Thunder did a great job. They've done a great job of reducing the headcount aggressively. They're doing that through attrition and furloughs. They're parking equipment, optimizing maintenance with the parked equipment.

John T. Drexler: But, what we did see is we had higher production and stripping than we had in shipments. And so we saw a build and pivot. That pit inventory, we've incurred the cost to uncover that coal. We have probably twice as much as we would typically have. We're at 8 million tons. We probably would run normally around 4 million tons.

But, what we did see is we had higher production and stripping than we had in shipments, and so we saw a build and pit inventory.

That pit inventory, we've incurred the cost to uncover that coal.

We have probably twice as much as we would typically have. We're at 8 million tons. We probably typically would run normally around 4 million tons. So as we get into the back half of the year, what we expect to see is an improvement in shipments compared to our production levels.

John T. Drexler: So as we get into the back half of the year, what we expect to see is an improvement in shipments compared to our production levels. And as a result, you know, we're going to get the benefit of having incurred the cost to uncover that coal that we incurred in the first half of the year. So with all that said, I think, you know, if you look at our thermal segment, we expect it to recover all the losses it had and be modestly cash positive as we step into the back half of the year. Yeah, Connie, one of the things we've said is, look, at West Elk, the die is kind of cast. We kind of, you know, for the most part, have good visibility there.

And as a result, you know, we're going to get the benefit of having incurred the cost to uncover that coal that we incurred in the first half of the year, we'll get that benefit and reduce costs in the back half of the year.

So with all that said, I think, you know, if you look at our thermal segment, we expect it to recover all the losses it had and be modestly cash positive as we step into the back half of the year.

One of the things we've said is, look, at West Elk, the die is kind of cast, we kind of...

John T. Drexler: And if you're looking at sort of high single-digit EBITDA contributions from West Elk each quarter, you know, that continues. But the very thing that was the headwind for PRB, which was, you know, stripping and incurring more costs than we otherwise would have because we were stripping more times than we were actually shipping, becomes a tailwind in the back half. So suddenly, you've got the high single digits coming from West Elk, and then on top of that, we should have a meaningfully positive contribution from the PRB.

you know for the most part have good visibility there and if you're looking at sort of high single digit even dollar contributions from West Elk each quarter you know that continues but the very thing that was the headwind for the PRB which was you know stripping and you know inducing or incurring more costs than than when we than we otherwise would have because we were stripping more times than we were actually shipping becomes a tailwind in the back half so suddenly you got the high single digits coming from West Elk and then on top of that we should have a meaningfully positive contribution from

John T. Drexler: So while that's not a lot of clarity, I would say this: it is a meaningful contribution in the back half. You know, the simple fact of shipping two to four million additional tons that we've incurred the lion's share of the cost in the back half will be very significant for PRB margins. So the two together mean that, once again, we'll be generating some pretty meaningful cash contributions from the thermocycle. But I don't know what the name of this guy is.

So, while that's not a lot of clarity, I would say this, that it is a meaningful contribution in the back half.

The simple fact of shipping 2 to 4 million additional tons that we've incurred the lion's share of the cost.

And the back half will be very significant for PRV margins. So the two together means that, once again, we'll be generating some pretty meaningful cash contributions from the thermal segment.

John T. Drexler: I have a lot of faith and confidence in QNAP Oil, and they've become very good at reacting to changes in the market within a very short period of time. I think what they've done in the last two months has set them up very well for the second half of the year. We'll have the mine right-sized, we'll have the effects of the tailwinds from the inventory change, and we will be done well, and that's a job.

[inaudible]

I have a lot of faith and comfort in the team at Wyoming. They've become very good at reacting to changes in the market on a very short-term basis.

I think what they've done in the last two months has set them up very well for the second half of the year. We'll have the mine right-sized, we'll have the effects of the tailwinds from the inventory change, and we'll do what we've done well, and that's adjust.

John T. Drexler: Whether that means we're furloughing or whatever we have to do to cut costs, converting to Reclamation, or all those other things that we've done wrong the last couple of years. But I still feel pretty good about what's going on and that the team can pull it off. And maybe quickly on Lear South, with the mine entering District 2 and the production or the seams being thicker.

Whether that means we're furloughing or whatever we have to do to cut costs.

Converting to Reclamation or all those other things that we've done well in the last couple of years will do well in the other ones. So I still feel pretty good about what's going on and that the team can pull it off.

And maybe quickly on Lear South, with the mine entering District 2 and the production or the seams being thicker, heading into next year, is it fair to assume 3.5 million tons plus is where Lear South could shake up?

John T. Drexler: Heading into next year, is it fair to assume 3.5 million tons plus is where Lear South could shake up? Katja, I think we're not providing specific guidance, but once again, with a meaningful improvement in that coal seam thickness, a 15 to 20 percent improvement from what we've experienced in District 1, we have high expectations for Lear South, and what you're describing, absolutely, from my perspective, without having provided any formal guidance yet, is absolutely within the range of expectations.

I think we're not providing specific guidance but once again with a meaningful improvement in that coal seam thickness 15 to 20 percent improvement since from what we've been incurred and

District 1. You know we have high expectations for Lear South and what you're describing absolutely from my perspective without having provided any formal guidance yet is absolutely within the range of expectations.

John T. Drexler: And the guidance we did provide, Katja, as you'll recall, is kind of 3 million tons this year, sort of, you know, or at least a 3 million ton run rate. So, look, if we go from a 3 million ton run rate, so 750,000 tons per quarter, and we get the higher yields that we anticipate in District 2, then obviously, it implies a meaningful step up from that 3 million ton level. But again, as John said, there was no formal guidance.

And the guidance we did provide, Katja, as you'll recall, is kind of 3 million tons this year, sort of, you know, on a, or at least on a 3 million ton run rate, so look, if we go from a 3 million ton run rate, so 750,000 tons per quarter, and we, and we get the higher yields that we anticipated just

[inaudible]

Okay, thank you.

John T. Drexler: Okay, thank you. The next question comes from Michael Dudas from Vertical. Good morning, gentlemen. What's up, Michael?

Thank you.

The next question comes from Michael Dudas from Vertical Research. Please go ahead.

Good morning, gentlemen.

Michael Stephan Dudas: John, maybe you could share a little bit about how Baltimore and DTA operations are, how the activity's been, you know, is it back to a more normalized level, there's still fits and starts. How do you, you know, assess that given all the tremendous work that's been done and all the logistical issues that everybody needs to overcome? Yeah, Michael, good question. I think we commented a little bit on it, but to expand further, I think, you know, post that bridge collapse, post the closure of the Port of Baltimore, for all practical purposes, that was a significant event, clearly.

What a Michael!

John , maybe you could share a little bit how, you know, Baltimore and DTA, how

operations are how the the activities been you know is it back to a more normalized level there's still fits and starts how do you how do you know assess that given all the tremendous work that's been done and all logistical issues that everybody needs to overcome

Yeah, Michael, good question. I think we commented a little bit on it, but to expand further, I think, you know, post that bridge collapse, post the closure of the Port of Baltimore, for all practical purposes, that was a significant event, clearly. We talked about it.

The logistics team working with our logistics partners did a fabulous job of reacting and responding to that event, keeping the coal flowing, adjusting the coal flows.

Our partner DTA, with 35% ownership in that, stepped up well, the CSX stepped up well. And so we're real proud of what we were able to achieve in the second quarter, despite the significant challenges.

Michael Stephan Dudas: We talked about it. The logistics team, working with our logistics partners, did a fabulous job of reacting and responding to that event, keeping the coal flowing, and adjusting the coal flows. Our partner DTA, 35% ownership in that, stepped up well. CSX also stepped up well. And so we're really proud of what we were able to achieve in the second quarter, despite the significant challenges. With all that said, you know, the port opened to flow without restriction, essentially, on June 10th. You know, since that time, I would say everything has really kind of gone back to the traditional flows.

With all that said, you know, the port opened to flow without restriction essentially, you know, June 10th.

You know, since that time, I would say everything has really kind of...

John T. Drexler: And so I don't see any residual impact going forward. And so we'll work to optimize the traditional flows. The experience that the team gained through the process, I think, you know, makes them stronger going forward as well. And so, you know, we'll take this, put it behind us, as Paul indicated in his discussion, and move forward and positively. So, no residual effects.

We've gone back to the traditional flows, and so I don't see any residual impact going forward.

and so we'll work to optimize on the conditional flows.

The experience that the team gained through the process, I think, you know, makes them stronger going forward as well. And so, you know, we'll take this, put it behind us, as Paul indicated in his discussion, and move forward and move forward positively.

So, no residual effects.

John T. Drexler: I might maybe add to the fact that DTA performed really well during those challenging times too. And, in fact, probably, we have a different appreciation for what's achievable there in terms of throughput, that we can probably achieve higher levels than we thought we could, because again, there was a really highly efficient movement out of DTA and an impressive performance by the team there. So we sorted a fair number of things and actually believe that there may be more throughput capacity at both facilities going forward.

I might maybe add to the fact that DTA performed really well during those challenging times, too. And in fact, probably, you know, we have a different appreciation for what's achievable there in terms of throughput that we can probably achieve higher levels than we thought we could because, again, there was a really highly efficient

John T. Drexler: Greetings, I'm Nathan, and this is Arch Coal Inc. I don't normally say a lot of good things about the world, but CSX did an amazing job. We ended up having to haul, I don't know the exact numbers, but roughly a million tons from Baltimore down to BTA. Now that's an extra 300 miles of haulage that the railroad, or us, were not set up to do. And they reacted very quickly.

Paul A. Lang: And they're doing an amazing job. So nothing but compliments for the people at Kurtz Bay, the Corps of Engineers that have resolved the problems and solved the tragedy as long as they're aware of it, and the people at BTW. I'm sure Joe Hendricks will appreciate that shout out from you, Paul.

They're doing amazing jobs, so nothing but compliments for the people at Kirks Bay, the Corps of Engineers that, you know, resolve the problems and solve the tragedy as long as they're aware of, and the people at BQH.

I'm sure Joe Hendricks will appreciate that shout out from you, Paul. Thank you very much. Thank you.

Michael Stephan Dudas: Thank you very much. Thank you. The next question comes from Alex Hacking from, Yeah, thanks morning. I just wanted to ask about the industry out that we saw. Unfortunately, there were a couple of outages in the core due to fires. I think Grosvenor is fairly well understood, but... What's your perspective on the Longview fire? Like, how much capacity? How long has that been taken out, for how long, and does that have any effect?

The next question comes from Alex Hacking from Citi. Please go ahead.

Alexander Nicholas Hacking: impact on your end markets. Thank you. Both those events are very tough, and I feel sorry for both management teams and employees. They are difficult places to go.

Yeah, thanks morning. I just wanted to ask on the industry outages.

I think Groven is fairly well understood, but what's your perspective on the Longview fire? Like, how much capacity has that taken out and for how long, and does that have any impact on your end market? Thank you.

Both those events are very tough, and I feel sorry for both the management teams and the employees. They are difficult places to go to.

Paul A. Lang: I think you touched on the barometer; it's pretty well known. Issues at Longview or Vermont, which is about 10 miles south, rear south; they had a fire also. As we understand it, the fire is still active. You know, as you think about that mine, it's a longwall mine, somewhat in the size and capacity of our rear and rear south, so that mine, the longwall came on in December, and we were expecting it to do, you know, call it a round number, 3 million tons in 2024.

I think you touched on the dominoes. It's pretty well known. The issues that Longview, or Vermont, which is about 10 miles south, they had a fire also.

As we understand it, the fire is still active.

As you think about that mine, it's a longwall mine, somewhat in the size and capacity of our rear and rear south, so that mine, the longwall, came on in December , and we were expecting it to do, call it a round number, 3 million tons in 2024.

Paul A. Lang: Those puns are effectively out of the market. I think, you know, as you look at my comments earlier, what we think we'll see is about a 2-3% reduction in seaboard and land. I'm very grateful. Thank you. It's hard to guess for either of these minds how long these outages will occur, but you know, my rule of thumb on a mine fire in the U.S., it's a minimum of 90 days, maybe 180 days if they get it back.

Those tons are effectively out of the market, the world's grounder. I think, you know, as you look at my comments earlier, what we think we'll see is about a 2-3% reduction in seaborne production.

[inaudible]

It's hard to guess for either of these minds how long these outages will occur, but my rule of thumb on a...

Mine fire in the U.S., it's a minimum of 90 days, maybe 180 days if they get it back. That's if there's no equipment damage or residual problems.

Paul A. Lang: That's if there's no equipment damage or residual problems. Tough situation for those guys. I wish them all the best, but it's going to take some buying out of the market. And Alex gets back, hey, look, pulling back a little further. Obviously, as Paul said, those adventures are unfortunate.

Tough situation for those guys.

I wish them all the best, but it's going to take some buying out of the market.

And Alice gets back, hey, look, pulling back a little further, obviously, as Paul said, those outages are unfortunate. We talked a fair amount about kind of the subdued nature of the market right now, but we would say this, that look, the market doesn't feel, if it's imbalanced, it's not imbalanced by a significant amount.

John T. Drexler: You know, we talked a fair amount about the kind of subdued nature of the market right now, but we would say this, that look, the market doesn't feel, if it's imbalanced, it's not imbalanced by a significant amount. You know, if you look at hot metal production year-to-date in the world, including China, which is what we tend to track, it's up 1.4%. That' India continues to click along, despite the fact that they're in the middle of sort of a monsoon right now, up 2.7% year-to-date.

If you look at hot metal production year-to-date in the world, including China, which is what we tend to track, it's up 1.4%. That's obviously a positive. India continues to click along, despite the fact that they're in the middle of a monsoon right now, up 2.7% year-to-date.

John T. Drexler: The Chinese seaboard imports are on track to be up 10 million tons, and, you know, while a third of that or so is sort of lower quality volume from Russia, and they're being opportunistic, two-thirds of that is higher quality seaboard, so that's positive. On the supply side, you've got Australia, the US, and Canada in aggregate, which is, of course, where all the high-quality coal So, again, you know, that's supportive.

The Chinese Seaboard Imports.

are on track to be up 10 million tons, and, you know, while a third of that or so is sort of lower-quality, you know, volume from Russia, and they're being opportunistic, two-thirds of that is higher-quality seaborne, so that's a positive. On the supply side, you've got Australia, the U.S., and Canada in aggregate, which is, of course, you know, where all the high-quality coal comes from in the seaborne market, up only about a million tons. So again, you know, that's supportive. We talked about the mine outages.

John T. Drexler: We talked about the mine outages of, you know, 2% to 3%, which are really going to hit more in the back half of the year. So, look, the reality is that there are a lot of positives here. If, in fact, we start to see demand reassert itself, we could indeed see a pretty quick move in the markets. But if they stay down for longer, you know, we're really sanguine about that, right?

you know, two to three percent, which are really going to hit more sort of back half of the year. So, look, the reality is that there are a lot of positives here. If, in fact, we start to see demand reassert itself, we could indeed see a pretty quick move in the markets. Now, if they stay down for longer, you know, we're really sanguine about that, right? We've talked about where we are in the cost curves, you know, a little pressure, a little rationalization of high cost supply is...

John T. Drexler: We've talked about where we are on the cost curve, and a little pressure, a little rationalization of high-cost supply is good for any market environment. So, you know, that's great if it plays out that way, you know, but we are looking at an environment that feels relatively well kind of calibrated right now. I would reiterate again that we have had and continue to have great interest from Asian buyers.

is good for any market environment, so that's great if it plays out that way. But we are looking at an environment that feels relatively well kind of calibrated right now. I would reiterate again that we have had great interest, continue to have great interest from Asian buyers. We talked a lot about Vietnam, Indonesia. We're now looking at a major buyer in Malaysia, and that is progressing well in addition, so there are a lot of positives out there. I will finally say this, that while the market might be a bit subdued, we're getting no pushback.

John T. Drexler: You know, we talked a lot about Vietnam and Indonesia. We're now, you know, looking at a major buyer in Malaysia, and that is progressing well, too. So, there are a lot of positives out there. I will finally say this: while the market might be a bit subdued, we're getting no pushback on volume, which I think is always indicative of the fact the market is relatively well-balanced. Really, everyone wants their coal, is taking their coal, they're just not buying with urgency. So, I feel pretty good about what we're seeing out there in the market. Thanks.

on volume, which I think is always indicative of the fact the market is relatively well balanced. It's really, everyone wants their coal, is taking their coal. They're just not buying with urgency. So, feel pretty good about what we're seeing out there in the market, Rod.

Alexander Nicholas Hacking: And I guess just to follow up on those comments, Jack, the logical conclusion would be that Asian males are just destalking, right? Because China imports are up, India steel production is running strong, growth is out, but the coal price has been falling, you know, fairly consistently now for a few weeks. Are we effectively in a de-stalking moment?

Thanks, and I guess just to follow up on those comments, Dak, like the logical conclusion would be that the Asian males are just destalking, right? Because...

China imports are up, India steel production is running strong, growth is out.

But the Met Coal price has, you know, been falling, you know, fairly consistently now for a few weeks.

John T. Drexler: I do think that, I think that's right, Allison. Again, it doesn't mean that this can't persist for a while. Again, I think the Asian buyers aren't buying with great urgency because they see, you know, what's transpiring elsewhere. Obviously, you know, Europe has been, you know, pretty, pretty, pretty slow and continues to be.

Are we effectively in a de-stalking moment?

I do think that I think that's right, Allison. Again, it doesn't mean that this can't persist for a while. Again, I think the Asian buyers aren't buying with great urgency because they see, you know, what's transpiring elsewhere. Obviously, you know, Europe has been, you know, pretty slow and continues to be. Capacity factors, they're low.

John T. Drexler: Capacity factors, they're low. The level of interest from Asian buyers and Lu Asian buyers, who look longer term, continues to grow. And we talked about the three Southeast Asian countries where we're seeing a lot of interest. But in China as well, if you go back three years or so ago, we were mainly just selling to brokers there. Two years ago, we started to sell to sort of mid-sized producers on a spot basis. A year ago, we started to do term business with those Chinese buyers. And now we're really talking to the largest steel makers in the world, in China, who want more volume.

Yeah, the level of interest from Asian buyers and new Asian buyers, they look longer-term, you know, continues to grow and, you know, we talked about the three, you know, the three Southeast Asian countries where we're seeing a lot of interest, but

We were in China as well. If you go back three years or so ago, we were mainly just selling to brokers there. Two years ago, we started to sell to sort of mid-sized producers.

On a spot basis, a year ago we started a big term business with those Chinese buyers, and now we're really talking to the largest steel makers in the world in China who...

John T. Drexler: And really, we can agree to provide them with them because we've got to balance out our customer base. So that does all feel positive. And I don't want to suggest that there isn't this sort of subdued tone in the market. There absolutely is.

want more volume than really we can agree to provide to them because we've got to balance out our customer base.

That does all feel positive, and I don't want to suggest that there's not this...

You know, this sort of subdued tone in the market there absolutely is.

John T. Drexler: But it feels like if the market's oversupplied, it's oversupplied very modestly. And it's something I worry about and watch very carefully, and that is, when prices are down, there's no question that he's stocking you in the current. For one thing, we're not seeing this crunch.

But it feels like if the market is oversupplied, it is oversupplied very modestly. And I agree that destocking can be a component of that.

And it's something I worry about and watch very carefully, when prices are down and no question de-stocking is occurring, the one thing we're not seeing is pushback.

Paul A. Lang: Customers have taken their part. As long as customers are taking their money in, I don't like when the prices are particularly low, but at the same time, I get nervous very quickly when customers start pushing back. We're not seeing that.

Customers are taking their products.

As long as customers take their money in, I don't like where the prices are particularly, but at the same time, I get nervous very quickly when customers start pushing back. We're not seeing that.

Paul A. Lang: I think, as I said, I don't want to be overly optimistic, but I don't think what's going on is bad. Thanks, I appreciate the color. Thank you, y'all. This concludes our question and answer session. Back over to Paul Lang for any closing remarks. I want to thank you again for your interest in art. I hope you will agree that the challenges of the past few months have served to underscore the key aspects of our value proposition, including our low-cost asset, our exceptionally strong balance sheet, and our ability to act quickly and liberally in changing circumstances, particularly in the marketing and logistics arena.

I think, as Vic said, I don't want to be overly optimistic, but I don't think what's going on is bad.

Bye.

Thanks, I appreciate the color.

Thank you all.

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

I want to thank you again for your interest in our arts. I hope you will agree that the challenges of the past few months have served to underscore the key aspects of our value proposition.

including our low-cost asset base.

Our exceptionally strong balance sheet, and our ability to act quickly and liberally for changing circumstances, particularly in the marketing and logistics arena. I want to again commend the Arch team for rising to the challenge of Team 3.

Paul A. Lang: I want to again commend the Arch team for rising to the challenge. So far, we plan to build on this positive momentum and maintain our focus on continuous improvement in operations while simultaneously driving costs across the entire platform. I have great faith in our team and fully expect that the current period of market softness will set the stage for an even stronger season. With that, Operator, we'll conclude the call, and we look forward to reporting to the group in October. Stay safe and healthy. The conference is now over. Thank you for attending.

So far, we plan to build on this positive momentum and maintain our focus on continuous improvement of the operations while simultaneously driving costs on the entire platform.

I have great faith in our team and fully expect that the current period of Martin's office will set the stage for an even stronger future.

With that, Operator, we'll conclude the call, and we look forward to reporting to the group in October . Stay safe and healthy, everybody.

Unknown Executive: The conference has now concluded. Thank you for attending today's presentation.

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

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