Q3 2024 Alliance Resource Partners LP Earnings Call
Speaker Change: Greetings and welcome to a Lyons Resource Partners LP, Sir Quatter 2024 earnings conference call.
Speaker Change: At this time participants are no listen only mode. A question and answer session will follow the formal presentation. If anyone's required operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Cary Marshall.
Speaker Change: Senior Vice President and Chief Financial Officer. Thank you, you may begin.
Cary Marshall: Thank you. Good morning and welcome everyone. Earlier this morning, Alliance Resource Partners released its third quarter, 2024 financial and operating results. And we will now discuss those results as well as our perspective on current market conditions and outlet for 2024.
Cary Marshall: Following our prepared remarks, we will open the call to answer your questions.
Cary Marshall: Before beginning, a reminder that some of our remarks today may include forward-looking statements, subject to a variety of risks, uncertainties in assumptions, contained in our filings from time to time with the Securities and Exchange Commission, and are also reflected in this morning's press release.
Cary Marshall: While these forward-looking statements are based on information currently available to us, if one or more of these risks are uncertainties materialized, or if our underlying assumptions prove incorrect, actual results may vary materially from those we projected or expected.
Cary Marshall: In providing these remarks, the partnership has no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, unless required by law to do so.
Cary Marshall: Finally, we will also be discussing certain non-gap financial measures.
Cary Marshall: Definitions and Reconciliation of the differences between these non-gap financial measures. And the most directly comparable gap financial measures are contained at the end of this morning's press release, which has been posted on our website and furnished to the SEC on Form 8K.
Cary Marshall: With the required preliminarys out of the way, I will begin with a review of our results for the third quarter, touch on our guidance for the year, and then turn the call over to Joe Craft, our chairman, president, and chief executive officer for his comments.
Cary Marshall: Starting with our coal operations, our performers during the third quarter of 2024, which we refer to as our 2024 quarter, continued to be impacted by persistently low natural gas prices, low export market activity, and difficult mining conditions that are Apple Action Operations.
Cary Marshall: However, our total and domestic wholesale shipments did improve from the previous quarter, increasing 6.7 and 11.9% respectively.
Cary Marshall: Additionally, and in response to the soft market conditions, we took proactive steps during the third quarter to more closely aligned production with shipments.
Cary Marshall: The increased shipments and adjustments to production resulted in a reduction of our calling inventory by over 500,000 tons.
Cary Marshall: which we expect will continue to decline over the coming months to an end of your target range of 500,000 to 1 million tons.
Cary Marshall: Colt sales volumes of 8.4 million tons were essentially in line with the 2023 quarter and increased 6.7% sequentially. While coal production of 7.8 million tons declined 7.2% year over year and 8.1% sequentially.
Cary Marshall: In the Illinois Basin, tons sold increased by 3.1% sequentially due to higher sales volumes from our Riverview and Hamilton mines.
Cary Marshall: in Apilacia, 10 sold increased by 16.9% in the 2020 Ford quarter compared to this sequential quarter. Primarily due to improved conditions on the Ohio River allowing for higher shipments from our 10-year-old ridge operation.
Cary Marshall: for the 2024 quarter. Colseale's price pretends sold at $63.57.
Cary Marshall: was down 2.1% year over year and 2.6% sequentially.
Cary Marshall: Primarily due to lower apple latch volumes and pricing related to our export sales from our MC mining and Medtiki operations.
Cary Marshall: Appalachia Colseals Price Pertone declined 5.8 and 7.7% compared to the prior year and sequential quarters respectively.
Cary Marshall: The segment adjusted EBITDA expense pretends sold was $46 in 11 cents during the 2024 quarter, increasing 11.9% year over year and 1.6% sequentially.
Cary Marshall: and Appalachia segment adjusted evidox spends pretend sold increased 19.3% versus the 2023 quarter, but declined 1.3% versus the sequential quarter.
Cary Marshall: The increase in year over year costs was due to a long-long move at our tunnel ridge operation, higher subsidence costs, and challenging mining conditions at all three Apple latch operations that lower recoveries and increased costs related to rift control and maintenance.
Cary Marshall: In the Illinois Basin, segment adjusted EBITDA expense per ton sold was $37.79. An increase of 7.2% year over year and 1.2% sequentially.
Cary Marshall: The increase versus the 2023 quarter was due primarily to lower shipments and extended long-all move at our Hamilton operation due to high inventories at the mine.
Cary Marshall: and the Cary Marshall.
Cary Marshall: Turning to our only gas royalty segment, our third quarter volumes reached 864,000 barrels of oily equivalent or BOE, representing an 11.9% increase year over year, and a 5.8% increase sequentially, driven by new well-activity on our roti acres in the Permian Basin.
Cary Marshall: Higher volumes were largely offset by lower commodity pricing for crude natural gas and in Gails.
Cary Marshall: Average Realized Sales Prices per B O E were down 9.8% versus the 2023 quarter and down 10.6% sequentially.
Cary Marshall: During the 2024 quarter, our co-wrotees segment reported at 2.3% increase in co-wrote volumes and a 3% decrease in co-wrote revenue per time compared to the prior year. Sequentially, co-wrotees times were up 2.7%.
Cary Marshall: Overall, consolidated revenue with 613.6 million down 3.6% from 636.5 million in the yeargo period.
Speaker Change: So, coincidentally, consolidated revenue was up 3.4% due to higher coal sales tons.
Speaker Change: Our net income for the 2024 quarter attributable to ARLP was 86.3 million or 66 cents per unit, which compares to 153.7 million or a dollar and 18 cents per unit in the year ago period.
Speaker Change: and Joseph Ivitt Don, the 2024 quarter, was a 170.4 million, which compares to 227.6 million in the prior year period.
Speaker Change: These decreases reflect the lower revenues and higher total operating costs previously disclosed.
Speaker Change: Now turning to our balance sheet and uses of cash. Alliance generated 29.3 million cash flow from operating activities in the 2024 quarter, compared to 215.8 million in the sequential quarter.
Speaker Change: Invested 110.3 million in capital expenditures and paid our quarterly distribution of 70 cents per unit.
Speaker Change: At quarter-in, our total in net leverage ratios were 0.64 and 0.39 times total debt to trailing 12 months adjusted EBITDA and liquidity was 657.7 million, which included approximately $9.4 million of cash on the balance sheet.
Speaker Change: During the 2024 quarter, we continue to make good progress on all of the capital and infrastructure projects at our operations that we have discussed throughout previous earnings call.
Speaker Change: The new portal at our Warrior Operations should be occupied by the beginning of 2025, which will consolidate three portals into one in generating meaningful expense savings.
Speaker Change: The West Alexander portal at Tunnel Ridge is anticipated to be fully completed by the beginning of 2025. And we will allow us to access better mining conditions than the current panel and reduce over time and other expenses next year.
Speaker Change: We are beginning to receive shipments of the new Long Wall Shields that are Hamilton Operation and anticipate all of the shields to be delivered in in place in mid 2025, which we expect low enhanced productivity and generate considerable maintenance related savings for Hamilton at that time.
Speaker Change: at that time.
Speaker Change: and Filing at the Riverview Complex, the Henderson County Mine Intersting Slow is approaching completion one month ahead of schedule. The first unit is now scheduled to start December 1st.
Speaker Change: by September of 2025, we expect the production mix at the Riverview Complex will be three units at the Riverview Mine and six units at the Henderson County Mine.
Speaker Change: This project, when completed, should also contribute to lower operating costs per time beginning next year from our Riverview complex with the full benefit of the investment occurring in 2026.
Speaker Change: Now turning to our guidance, based on our results year to day, current visibility into our order book, and outlook from markets through year and. We are maintaining our full year guidance for close sales volumes, close sales price potential, segment adjusted to EBITDA expense potential, roll T's volumes and roll T's unit expenses.
Speaker Change: We now expect total coal volumes and realize coal sales prices to be closer to the bottom of their respective ranges and for segment adjusted EBITDA expense for time to be at the high end of their range.
Speaker Change: For modeling purposes, the two long-long moves previously scheduled for the fourth quarter of this year at Tunnel Ridge and MetTechie are now planned to occur in the first quarter of 2025, leaving one in the fourth quarter at our Hamilton mine.
Speaker Change: We made some minor adjustments to our 2024 committed in price sales funds to reflect modest net contracting activity and movement in the timing of customer shipments that occurred during the 2024 quarter.
Speaker Change: At the end of the 2024 quarter, our committed tenage for 2024 was 33.4 million tons.
Speaker Change: of that total 28.2 million tons are currently committed to the domestic market, while 5.2 million tons are committed to the export markets.
Speaker Change: More notably, we increased our committed tenies for 2025 by 5.9 million tons with significant contracting activity from our domestic customers.
Speaker Change: In total, we are in the process of finalizing new contract commitments for approximately 21.7 million tons over the 2025 to 2030 timeframe.
Speaker Change: We are also in active discussions with our customers to add to future commitments that if secure will lift our 2025 domestic sales order vote to a level near our historical contractive positions heading into the new year.
Speaker Change: The remainder of our guidance ranges remain the same.
Speaker Change: and with that I will turn the call over to Joe for comments on the market and his outlook for ARLP. Joe.
Joe Craft: Thank you, Cary, and good morning, everyone. I went to begin Maccomment, but thanking the entire Alliance Organization for their resilience, continued artwork and dedication.
Joe Craft: At our co-operations, we had our lowest injury rate for a quarter, since the fourth quarter of 2017.
Joe Craft: for excluding the 2020 COVID impact quarters.
Joe Craft: Every operations, safety statistics have improved from 2023 to 2024.
Joe Craft: Results here today are currently 32% below the AROP 2023 year and comparable incident rate.
Joe Craft: and addition to the X1 and the safety results, the Alliance had two national champions from the National Main Rescue Contest in August.
Joe Craft: Jake Saehr from Tunnel Ridge and the Bench Competition in James Forrest for more year in the free ship competition.
Joe Craft: and Gradulations to Jake and James.
Speaker Change: and Cary did an excellent job summarizing challenging near-term market conditions in adverse mining conditions that impacted our third quarter, 20, 24 results.
Speaker Change: and fortunately the hotter the normal weather we saw at the start of the summer in several regions of the country, they'll take care of the back half of the 2024 quarter.
Speaker Change: Limiting spot domestic sales opportunities and caused shifments on some of our higher contract it co-sales to be deferred.
Speaker Change: This coupled with export pricing, keeping us out of the market led to our sales volumes being below expectations for the 2024 quarter.
Speaker Change: During the 2024 quarter, our co-sagman operating team focused on improving the safe operation of our facilities, providing reliable service to our customers, managing through difficult operating conditions and adjusting production lower to meet demand.
Speaker Change: During the quarter, we advanced major capital and infrastructure projects at our Tunnel Ridge Hamilton Warrior and Riverview Complexes.
Speaker Change: is part of our stated long-term commitment to our customers and our operations.
Speaker Change: These assessments will make our operations more productive and prove their future cost structure beginning in early 2025 and extend their mind lives, allowing us to remain the most reliable, low-cost producer in our operating regions for many years to come.
Speaker Change: The overall mild summer that followed a mild winter last year continues to impact prop codependent.
Speaker Change: However, looking at the intermediate and longer term, the underlying cold demand fundamentals.
Speaker Change: of non-traditional demand growth from data centers AI and on-shoring of manufacturing capacity are accelerating, particularly in the market's we serve in the Midwest, mid-Atlantic and Southeast United States.
Speaker Change: On October 16, the Federal Energy Regulatory Commission hosted a major conference focused on electric reliability.
Speaker Change: Participants discussed the urgent need to preserve base load generation to meet the growing demand for electricity.
Speaker Change: Recent Integrated Resource Plans filed by utilities also support the views that power demand will exceed generating supply, increasing dangers to grid reliability.
Speaker Change: The harsh reality is that the push to electrify many aspects of our economy.
Speaker Change: Coupled with accelerating computation and storage speed demand requires more generation capacity than our current renewable space energy policy can provide.
Speaker Change: The sources of this new demand require 24-7 reliability, which we believe only fossil fuel and nuclear generation sources can provide.
Speaker Change: A recent report on the Closkey echoes this.
Speaker Change: Colleen for a doubling of data center electric demand from 17 year goats to 20 22 to 35 year goats by the end of the decade.
Speaker Change: which they asked to make represents 74 million times of incremental utility co-burn.
Speaker Change: During that time period, additional 170 mts, excuse me, 179 mts across the next decade.
Speaker Change: Day plus other third party sources also importantly point out that over 40% of previously announced nationwide cold plant retirements have pushed back their plant closure dates. Some indefinitely. Well, new announcements of co-unit retirements have virtually stopped.
Speaker Change: The chronic under the investment in fossil fuel and nuclear generation became readily visible in the results of the recent PGM capacity auction.
Speaker Change: Capacity payments, which are the market signal mechanism used to incentivize the construction and new generation sources increased almost 10 volt.
Speaker Change: This is a clear market signal that our power grid continues to become more unreliable in a time of rising demand forecast.
Speaker Change: The situation is not limited to PJN, but extends to all regions we market to and we believe it will continue.
Speaker Change: Many of our largest customers have been in the market recently with solicitations for significant tonnage to serve their plants in 2020, 5 and beyond.
Speaker Change: with some looking for volume can then miss through 2030.
Speaker Change: [inaudible]
Speaker Change: Before I wrap up, I would like to highlight a few points related to our oil and gas royalty's business.
Speaker Change: As Cary mentioned, we realized another solid quarter of year over year volumetric growth.
Speaker Change: We continue to reap the benefits of a mineral support foe of that is heavily weighted towards the Permian Basin.
Speaker Change: We're top tier upstream operators are actively drilling and completing new wells on our minerals.
Speaker Change: Additionally, we continue to enhance our position in the Permian.
Speaker Change: successfully closing $10.5 million of ground game acquisitions during the 2024 quarter.
Speaker Change: As we previously mentioned, the value and prospects for our oil and gas royalty segment was a major contributor to this successful completion of our June 2024 senior notes offering.
Speaker Change: We remain committed to growing this segment as a complementary cold excuse me to our core cold operations.
Speaker Change: and as we scale the business we believe investors will continue to recognize the intrinsic value this segment possesses as a growth vehicle.
Speaker Change: In closing, while our 2024 quarter results reflect the difficult market in operating conditions.
Speaker Change: I would repeat what I said on our last quarterly call.
Speaker Change: We believe the fundamentals for electricity demand over the next five years and beyond are poised for rapid growth.
Speaker Change: We also believe reliable, affordable, base load generation is a cornerstone of our nation's economy.
Speaker Change: With our well-capitalized and strategically located coal mines and growing minerals acreage portfolio.
Speaker Change: We are well positioned to benefit from the anticipated increase demand for many years to come.
Speaker Change: That concludes our prepared comments and I will now ask the operator to open the call for questions. Operator.
Speaker Change: Thank you.
Speaker Change: If you would like to ask a question, please press star 1 on your telephone keypad, a confirmation total, indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue and for a participant choosing speaker equipment, it may be necessary to pick up your hands set before pressing the star keys.
Speaker Change: Our first question is from Nathan Martin with the venture company, please proceed.
Nathan Martin: Thanks, operator, good morning, Joe, good morning, Cary.
Speaker Change: Morning light
Nathan Martin: Cary, you gave some updates on the four year guidance ranges. Maybe starting on the ship in front. I believe you said the expectation is now to be towards the lower end of that range.
Speaker Change: Clearly, you know what transpired with the mild summer low gas prices, you know, likely.
Speaker Change: because of three cue shittens to be a little bit shorter than you planned as Joe mentioned.
Speaker Change: I'm thinking about the export side, right? So, prompt API 2 I think was around $1,115 for look their quarter, it's close to $1,220 today.
Speaker Change: which I think is kind of your target level. But there are any opportunities for you guys to ramp up export sales in the fourth quarter and could that determine ultimately where you end in that four year shipment range?
Speaker Change: Yeah, I mean, I do think...
Speaker Change: That is fair that we do have opportunities in the fourth quarter to be able to.
Speaker Change: Disappayed in the export market. We have been in active discussions with our partners on the export market to commit to volumes.
Speaker Change: Some in the fourth quarter and we are obviously having discussions as we move into the new year given where the pricing range is right now.
Speaker Change: The Young.
Speaker Change: The discounts are still a little bit higher than what we have.
Speaker Change: Typically seen.
Speaker Change: in terms of participating in the export market, but you know, certainly with where the API2 pricing is today, you are certainly getting within that range, particularly for our lower software Gibson product.
Speaker Change: to be able to have some conversations to where we can participate in that export market in the fourth quarter and into the new year as well. Joe, I don't know if he's like to add to that as well.
Joe Craft: Yeah, the only other thing that I would add is that we do have one customer that of contract at times at the Claire Force Measure in the...
Joe Craft: Third quarter and we're trying to determine whether that will be lifted or not.
Joe Craft: I think we'll not forgive the times but it may impact the timing of the times.
Joe Craft: So even if we do pick up some volume it could be offset by timing or this one customer that is declared a force measure for
Joe Craft: the Mauporation's difficulties that they have that they use our product as a blend into their shipments.
Joe Craft: I think that's our midpoint still, very poor, we'd love to get to that.
Joe Craft: You know, right at this ten seconds I think it's a little bit less than that, but there is that potential, you know, just based on how the market times out.
Speaker Change: Okay, thanks. Thank you for this all, Scott. And then maybe just related on the inventory front. What amount of inventory draw down? You know, it's kind of assumed and getting to that range. I think Cary, you mentioned you wanted to get down to half a million to a million times by year. And where are you today?
Speaker Change: Today, you know, at quarter end we were right at 2 million tons at quarter end. So as we look into the fourth quarter we do anticipate that inventory level coming down to being within that range here within the fourth quarter.
Speaker Change: You got it, thank you. And then maybe on the car side, as you guys talked about, Apple Latin Cross.
Speaker Change: Well above the high end of four-year guidance, I think that second quarter of the row, right? So on one move, challenge in mind in conditions that all three operations.
Speaker Change: You know, looks like...
Speaker Change: and Paulson's particular will need to improve kind of meaningfully in the fourth quarter if you want to get within your full year guidance of 57, the 60 for that segment. I care you said, thanks overall, I'm assuming that overall company costs will be at the higher end of the range.
Speaker Change: is there any risk to not hitting that range or through those challenging mining conditions by any other color there would be great.
Speaker Change: Yeah, I do think, as you look at the range, when I made the comment of being toward the higher end of the range that was specifically meant to be in total for the cost.
Speaker Change: So when you combine both Illinois Basin and Appalachia Regions, you know, Illinois Basin cost have been pretty, you know, fairly consistent.
Speaker Change: You know, it's within that range, the apologic cost as you point out is on the higher end of the range. So, you know, it could very well be, you know, as we move into the fourth quarter, as you mentioned, it could be a little challenging to...
Speaker Change: to get to the upper end of that range just as it relates to Apple latches. So, you know, we could have Apple latches fall outside the range for the total year, but we do think within the range toward the upper end when you combine them both makes sense.
Speaker Change: It relates to conditions. Through October, we have started to see some improvement toward the end of October, particularly at Town of Ridge in terms of those conditions.
Speaker Change: Come down slightly within the Apple Attra region within the fourth quarter, but that'll be what impacts the numbers overall, but to your point on.
Speaker Change: Have we started to see improvements? Yes, we have started to see improvements as we move into November
Speaker Change: I'm glad to hear Cary Cary Cary that maybe just one last question as we look out the 2025. Looks like you guys added 5.9 million tons of our community in Christ.
Speaker Change: I can even price 5 million tons since last quarter. 5.5 of that domestic, it's like 400,000 export. Can you give us an idea on the pricing for those tons?
Speaker Change: I think when he looked at 25 I would just say that you know we're
Speaker Change: Target to have sales.
Speaker Change: I know as I have sales we're back at the 35 million and back to the.
Speaker Change: 30 million domestic 5 million export.
Speaker Change: Right now, or if you look at this year, if we would hit what our bill would be, we would be basically, if we would need another million tons of market next year onto the mystics eye. When we look at the cost savings that Cary talked about.
Speaker Change: Relative, the various projects, and I also mentioned, and then we look at the revenue just in total that we think we can maintain margins, so our target is 30%. So, uh...
Speaker Change: and we believe we should be able to achieve that this year.
Speaker Change: and then going forward when you are going expectations will be at that same 30% margin. So we will see some reduction in average sales price but we'll also see.
Speaker Change: Corresponding savings on the car side that our expectation is still a little early because we don't have all the sales contracts completed. They really want to get into actual pricing on ranges because we're still in negotiations with folks.
Speaker Change: but we do anticipate that our margins will be at that 30% level in the coal segment.
Speaker Change: Next year as well as this year and hopefully we'll have an extra million times of sales next year.
Speaker Change: Appreciate that show. Thank you both for your time and that's the lock here in the fourth court.
Speaker Change: Thanks for watching.
Speaker Change: Our next question is from Mark Richmond with Noble Capital Markets, please proceed.
Mark Richmond: Just focusing on Appalachia for a moment, Ruth Control and Maintenance expenses were an issue in the second, third quarters.
Mark Richmond: and then the second quarter of 2023 when there was a roof fall in July of 2023. So what steps is the partnership taking to cure this issue? And then what factors will have the biggest impact on improving Appalachia's segment that just that EBITDA expense going forward?
Speaker Change: The impact is large part has been geologic so as we look to the future mind plans
Speaker Change: as we indicated with the tunnel ridge long-long move.
Speaker Change: the first part of the next year, right in the beginning of January, we're getting into a new district, new reserve area that is going to be better conditions than what we experienced. I mean, town of red has been a very consistent mind for us ever since we've opened it.
Speaker Change: and fortunately this last panel that we have in this district has been the worst conditions we've seen.
Speaker Change: Unfortunately, we're moving out of this district and into the new district that we've already planned for, we are in the process of developing.
Speaker Change: and so we know the conditions are going to be better there than they have been in this panel that we're currently in.
Speaker Change: and as we look at the Matiki, we've got a similar situation. We knew that the long-await panel that we were in, this particular quarter, for this past quarter, had some challenging geology.
Speaker Change: and we don't anticipate to have the same situation in the next panel as we had in the one that we are currently in. So I think those are two observations that give us hope that our costs will improve.
Speaker Change: Next year at Boatmeteen and Tom Ridge.
Speaker Change: and C is just top. It's a dancing, it's just a band.
Speaker Change: It's really driven more by the fact that it is such a thin-same in order to mine that same. We do have higher recoveries or lower recoveries just because of it.
Speaker Change: The amount of overburnt we have to take to cut that coal same so there's not much we can do there's geology, geology is what it is but we do believe that both that mettee he and tunnel ridge and brighter days are ahead starting next year.
Speaker Change: I'm going to allow you to experience an equity method investment loss of 2.3 million in the third quarter and I was just kind of curious what your expectations are for that line item, doing forward and does it cause you to rethink any of your investments.
Speaker Change: I think as it relates to the number going forward, we don't anticipate any of those on a going forward basis. It was related to one of the investments that we made historically where
Speaker Change: You know, related to the EV charging side of it, our Francis Energy investment was related to, you know, some adjustments we made for that particular investment we've made where we marked market on that.
Speaker Change: And just one last question considering the pending merger between the arch and console, do you think there are any more consolidation opportunities within the US coal industry and then what is your outlook for the US versus the international market?
Speaker Change: I don't know that there would be any other major consolidation on.
Speaker Change: Don't anticipate any myself. I think that.
Speaker Change: is the impact of that on the markets.
Speaker Change: I don't believe there'll have any impact on the domestic market. It may, in fact, improve the domestic market opportunity for others because I think with that merger.
Speaker Change: There will be some...
Speaker Change: The efficiencies that may enhance their export.
Speaker Change: Opportunities in that.
Speaker Change: Good mean that they would ship more export than they are domestic but I don't.
Speaker Change: You know, they're going to have to speak to that, but as far as impacts to us, we see no impact relative to that merger impacting our current market competitiveness.
Speaker Change: Thank you very much, it's very helpful.
Mark Richmond: Thank you, Mark.
Speaker Change: and our next question is from David Marsh with C. Miller Research, please proceed.
David Marsh: Thanks for taking the questions. First, just let's touch on the...
David Marsh: The cryptone briefly if we could, you know, suits that
David Marsh: Having is behind us, give us that update on your cost, mind Bitcoin, or you continue to do that.
Speaker Change: We are continuing to have mine Bitcoin at quarter-end. We don't really provide too much guidance as it relates to the cost out of that.
Speaker Change: You know, as we look at quarter-end, total holdings of Bitcoin was a little bit over 457, or 457 coins.
Speaker Change: which at quarter-end price was $63,330, it was $29 million in total.
Speaker Change: of Coins that we owned at the end of the quarter. To net addition of about five coins for us over the quarter.
Speaker Change: As we mentioned in previous quarters talking about those operations we do. So are on a monthly basis to cover our operating costs.
Speaker Change: So that is a net edition of, as I mentioned, five coins during the quarter.
Speaker Change: During the quarter we did buy some miners in retire some of our older miners.
Speaker Change: and so that one third of the fleet and we think that we'll improve our efficiency going forward.
Speaker Change: and we should be in position there.
Speaker Change: Mind, you know, end up realizing the retaining, the liar.
Speaker Change: Bipcoins are a quarterly basis in what we've done most recently.
Speaker Change: The Cary Marshall's
Speaker Change: Okay, that's good. And then just kind of a bigger picture question, you know, with the election from us, and obviously it's, you know, tells you predict where things end up, but, you know, if we were to have an election result that was...
Speaker Change: You know, kind of law.
Speaker Change: Do you have a blue heavy fuel? You know, what do you see on the legislative landscape that?
Speaker Change: You know, could be, you know, for potentially adverse to the company and what do you think that, you know, the timing would be of enacting any type of legislation that would.
Speaker Change: Be a harmful to the company in the industry overall.
Speaker Change: I think we're in a unique situation with the growth of AI, which is a national security issue.
Speaker Change: and the primary investors in that space, the hyperscaler is all.
Speaker Change: Historically, leaning towards warning their power generated by renewables as opposed to the basalow generation.
Speaker Change: Generating by fossil fuels.
Speaker Change: So we are seeing that growth significantly right now they want to grow.
Speaker Change: and right now, 25.6.728 and then into the future.
Speaker Change: that the growth numbers are pre-staggering.
Speaker Change: So when you look at those growth numbers, you know, as I mentioned the work conference that they had just recently.
Speaker Change: and they are emphasizing the need to maintain what we have and continue to warn.
Speaker Change: and we will be short capacity because of delays in replacing and or even meeting the demand of AI. So I think the economic aspect and national security aspect.
Speaker Change: Will limit any adverse legislation to try to restrict any type of generation.
Speaker Change: just because of the demand that's going to be here.
Speaker Change: and you expected.
Speaker Change: Advocated for by the hyperscalers. And when you look at that growth, almost a lot of it's in the Washington DC area.
Speaker Change: and it's being instigated by the Department of Defense and other aspects of government. And that's one reason why you see that growth in.
Speaker Change: PGM and in the Washington DC area. So I don't anticipate any adverse legislation. Now the regulatory environment.
Speaker Change: We'll continue to have debates on what the timing of transition is. We've been very clear.
Speaker Change: repeatedly that the transition that the hair Biden administration has been pushing is way too fast.
Speaker Change: It's a total conflict with their goal to try to electrify America.
Speaker Change: So there will be reality that comes to bear there. I think also.
Speaker Change: You know, as those regulations that are already being advocated for political reason and not, then you're not environmental reasons.
Speaker Change: That is, I was making their ways through the core. We don't believe they'll be overturned.
Speaker Change: So I think the reality of what the demand picture is.
Speaker Change: to maintain power reliable, low-cost power is going to...
Speaker Change: Medigate or potentially negate any political desires to...
Speaker Change: Advanced the premature closing of co-fired generation.
Speaker Change: So...
Speaker Change: Elections matter for a lot of other reasons I haven't been glad to get into that, but probably something appropriate to time for me to.
Speaker Change: Share what my view is, I think most people have heard that in the past, but I think back to if it goes the other way, how impactful could it be.
Speaker Change: You know, I still believe that we're in great shape, people are going to need our generation, you know, one of our largest customers just came out with their IRP.
Speaker Change: and October and May.
Speaker Change: said that they're expecting low growth.
Speaker Change: by 232, and many where from 30 to 45% compared to 2024.
Speaker Change: and they backed off of closing plants that were in their last IRP in 2022.
Speaker Change: Recognizing that they're going to need those plants to 23,35, 20,40 something.
Speaker Change: and we're hearing that consistently. Bye.
Speaker Change: I'm domestic customer, so.
Speaker Change: It would be nice if our energy policy would track our domestic policy for on-shoring for growth in electrification.
Speaker Change: and the Cary Marshall, so it would be nice if that was clear to the markets.
Speaker Change: but like I said, even if there is political motivation to continue down a path that is cross-currence or cross.
Speaker Change: and the purpose of that objective, I think that the demand for the AI is going to actually rule the science is going to rule over the politics. That's my view.
Speaker Change: Thank you very much for sharing it.
Speaker Change: Our next question is from Dave Storms with Don't Keep Please Proceeds.
Speaker Change: Good morning.
Speaker Change: can we can start with outside purchases, more a little bit above expectations. It's bad just to fill in your challenges or how to rethink the back-back home forward.
Speaker Change: I think going forward for the quarter I think you're referring to, we came in outside purchases were about 8.2 million.
Speaker Change: Dollars for the corner as we've talked in the past.
Speaker Change: We do purchase some Blanko at our METEEKE operation for our metallurgical exports.
Speaker Change: and so that's what those purchases are related to. That is a little bit higher than where I would anticipate the fourth quarter number to come in. We do anticipate continuing to purchase some coal in the fourth quarter, I think, in the past.
Speaker Change: Range anywhere from 2 to 2.5 million per month, 2 to 2.5 million dollars per month of purchase call. I would imagine somewhere within that range is a good estimate in terms of where we would anticipate the fourth quarter number to come in this year.
Speaker Change: Thank you. I'm just looking forward to the contract negotiations and you know increased order book. How would you classify some of that order book pick up? Is that new customers coming into the fold? Or is that current customers increase in their demand?
Cary Marshall: It's Cary Customers
Speaker Change: Basically, the filling there book for contracts that are expiring. So in most cases maintaining market share.
Speaker Change: with those customers.
Speaker Change: and some cases were actually increasing.
Speaker Change: and Marketsheer, but in most cases they're just maintaining their purchasing with some optionality to increase volume and anticipation of this growing demand that they see. It's going to end.
Speaker Change: Cooked the day anticipates will occur starting in 2020-06.
Speaker Change: So there's some optionality to the upside.
Speaker Change: for increased demand on their part. When we're looking at the 30 million commitment, we're just maintaining and anticipating a maintaining of the market share we've had with the existing customers. So there is potentially some outside to that.
Speaker Change: but our primary planning horizon is due.
Speaker Change: Be consistent at 35 many times production rate, 5 million exports, 30 million domestic.
Speaker Change: and I'm just so thank you and I'm just one more for me, you need to 10.5 million oil and gas closing. I understand that's an appointment, I'm trying to think, you can also be positive opposition, which is just opportunistic, maybe how all came together or anything like that.
Speaker Change: So these are several small transactions. So we have what we call a ground game, where we contract with land, and going out and buying individual tracks.
Speaker Change: and just add there for a fully old suite allocated around $25 million a year for that program.
Speaker Change: and so I would not say it's opportunistic. I'd say that we have underwriting standards and if there are people that would like to sell their metal position then we will.
Speaker Change: Make all birds at economics that are pretty much consistent to the plot.
Speaker Change: The market is, but it definitely consistent with what our normal underwriting standards are to get a tract of returns. So we do anticipate that
Speaker Change: that there will be opportunities for us on a year and year out of basis in that range.
Speaker Change: and we feel that we can't execute on that.
Speaker Change: based on the normal activity in the marketplace where there's
Speaker Change: and Sellers at her friend looked at monetized their assets for whatever reason.
Speaker Change: I'm Mr. Thank you for taking my questions and good luck in the fourth quarter.
Speaker Change: Thank you.
Speaker Change: Our next question is from East Cigl with Cigl I Set Management, please proceed.
Speaker Change: Thank you. Hey, good morning. Thanks, guys. Can you just update more broadly your thinking on capital allocation?
Speaker Change: and then also within that context, how you think about the new ventures investments going forward?
Speaker Change: Yes, I think it's from a capital allocations stand-volume we've indicated that first priority will be maintaining our co-operations.
Speaker Change: So we've done that over the last two to three years with the major projects we've talked about in addition to their normal maintenance.
Speaker Change: So starting in 25, we expect the Capitol for maintenance capital or the actual capital expenditures and our co-operations will decrease.
Speaker Change: and the neighborhood of 675 to 775 for a ton produced is kind of what the current thinking is right now somewhere within that range. So that's a decrease of them.
Speaker Change: 100 million from what in terms of total capital. Yeah, this year. That's right. So then the next...
Speaker Change: Allocation goes to our mental group, which we take in position historically that.
Speaker Change: and whatever cash flow they generate that they could reinvest within the minerals of group.
Speaker Change: and in the third would be for other type investments that could include what we're doing at our matrix subsidiary that we discussed in the past.
Speaker Change: that most of their growth is organic and nature but does take some working capital.
Speaker Change: and then as far as looking at participating in the transition.
Speaker Change: We've continued.
Speaker Change: to be active in that area to evaluate.
Speaker Change: the last gate and yes you know we've made some investments in battery recycling with a sand we've made investments within the item on their innovative motor design we've got the joint development agreement
Speaker Change: with Empanidum that's going well. We expect to see some benefit in that in 25 and 26 for sure.
Speaker Change: as we think through the rest of the transition, I think the election may matter, so we're trying to wait and see what happens.
Speaker Change: and Cary Marshall, if the Cary and Cary was in a stay in place.
Speaker Change: Investor, excuse me, I had.
Speaker Change: Customers, the man, more EVs, etc., trying to understand what the...
Speaker Change: The man for batteries are continuing to look in the battery space where the
Speaker Change: but we're waiting to see what happens with the election.
Speaker Change: Trump wins, you know, there's been some indication he'll look at some of the tax credits in the inflation reduction act.
Speaker Change: I think this.
Speaker Change: Investment in that space is all trying to anticipate what.
Speaker Change: What the policy of the new administration is going to be before they take any major steps in making investments.
Speaker Change: We're still very interested in looking at opportunities we're very focused on trying to.
Speaker Change: Continue to grow here after year and then we do believe because of our relationships with our utilities because of
Speaker Change: Our knowledge in the space and our strategic location and the human resources we have to participate in that space that there are opportunities for us to.
Speaker Change: and the two N best and add value to our shareholders over the next decade.
Speaker Change: I think exactly what that strategy is going to be in large parts going to be dependent on what the next administration is and what incentives are either continuing or discontinued and how the market reacts to that.
Speaker Change: Hey, Joe, you didn't mention distributions.
Speaker Change: So that's definitely how not to lose.
Speaker Change: Just a quick follow-up though.
Speaker Change: As you're thinking, change it all.
Speaker Change: Given that the narrative has changed in terms of, you know, I think folks are, you know, recognizing that, you know, fossil fuels and coal, I'm going to be here for a long time.
Speaker Change: Change for sex.
Speaker Change: or informed you know how you think about capital allocation going forward.
Speaker Change: I think we made significant capital investments in our own operations. We believe that...
Speaker Change: and the operations that we have invested in.
Speaker Change: Do put us in a position to be the low cause producer in the regions where we operate.
Speaker Change: I think that it appears when's the...
Speaker Change: Disconnect between the enormous increase in electricity demand versus the policies and EPA rules that they continue to advocate, make it challenging to think in terms of.
Speaker Change: Wanting to do something different, I think, and answer to your question.
Speaker Change: here for...
Joseph Craft: Joseph Crafts
Joseph Craft: It's probably one of the things that I'm going to have to see.
Joseph Craft: You know how our customers react, I do believe just like the customer. I just quoted a few minutes ago with their most recent IRP, we're going to see that more and more.
Joseph Craft: and the domestic market that utilities are not going to want to close those plants, but they're not adding plants. And so, each of these...
Joseph Craft: Plants do have useful life that still mirror the 2035, 2040 time period.
Joseph Craft: So I think we'll really focus on coal being just as...
Joseph Craft: Steady and stable, but I don't see us growing in the developing capital that that area in a large amount.
Joseph Craft: That would...
Joseph Craft: The, at the expense of what we're doing in the minerals as an example. You know, we do believe the runaway for minerals is significantly longer than coal. We believe we've had success in it, but to go on studies we go year and year out adding and hitting our underwriting standards.
Joseph Craft: You know, we would not want to do anything that would...
Joseph Craft: Challenge, it will change the course we're doing there.
Joseph Craft: So, we'll...
Speaker Change: We got decisions to make, brother.
Speaker Change: Back to distributions or a ringman, Cole, I think we're all.
Speaker Change: We're pleased with where we are on the coast base so I don't see you.
Speaker Change: Wanda, invest, significant payout capital to participate in acquiring things, believing that.
Speaker Change: It goes going to be here for the next 20th hour, 30 years on these new projects.
Speaker Change: That makes sense, but...
Speaker Change: I hope you enjoyed this video. Thank you so much.
Speaker Change: Thank you.
Speaker Change: Howard Final Question is a follow up from Mark Richmond with Noble Capital Market.
Speaker Change: The Supreme Court recently turned down a request from parties seeking to put a hold on the EPA emissions rule on the litigation, move forward and federal appeals court. And what I read at least three of the justice has seen somewhat sympathetic in the states and the energy companies bringing the case.
Speaker Change: So do you think this is going to get overturned in the lower court and if not, would you prevail at the Supreme Court level or if Trump is elected, would he just undo it? Kind of your thoughts on the EPA emissions rule.
Speaker Change: I do, yeah, I think that.
Speaker Change: Pattern has been it's not going to be changed at the moment.
Speaker Change: here.
Speaker Change: Ben Friendly to...
Speaker Change: Look at these rules. They give more discretion to EPA and other federal agencies in the past.
Speaker Change: I think with the...
Speaker Change: Change by the court on the West Virginia decision as well as the Champron Preference. I do believe that it when it gets to the Supreme Court that it will be overturned. When you look at everybody that's in the energy space, file comments on the 11.D.
Speaker Change: What we call a clean power plant too, saying that
Speaker Change: is totally outside the realm of what is achievable in that space. So the evidence is overwhelming that it should be defeated in my opinion.
Speaker Change: and I think that the course decision was more focused on the procedural aspects of the, you know, what is needed for a stay versus.
Speaker Change: and I find what the underlying fundamentals of the case are.
Speaker Change: You know, spring course got a lot of heat. About.
Speaker Change: Make a decision, learn political season.
Speaker Change: Baby, that was influence. I don't really know, but I do believe that that rule and the other rules that are going to be litigated if Harris wins.
Speaker Change: They will be over term and it is sort of a...
Speaker Change: and the waste of the judicial process to have to go through it. But it is what it is. That's the way government works. So if Trump wins on the other hand, I do believe.
Speaker Change: that the EPA will look at these rules.
Speaker Change: Do what they did his first term and take a different approach.
Speaker Change: Yeah.
Speaker Change: The Biden administration has been.
Speaker Change: or subject to the congressional review act. So in the homo case, the ability for Trump to just immediately reverse them.
Speaker Change: but he can't go through the same normal regulatory process that they did to get to the position that they got to.
Speaker Change: I think that as I said earlier the hyper scalers and the demand is going to...
Speaker Change: Coinside with the National Security Entrance for America.
Speaker Change: to see as much investment on shore.
Speaker Change: for our official intelligence is possible.
Speaker Change: I think we'll be more dealt with as a policy issue under the Trump administration and a political issue like it's been managed under the Biden-Hairs Administration.
Speaker Change: Alright, well thank you very much, that's really helpful.
Speaker Change: Thank you very much.
Speaker Change: We have reached the end of our question and answer session. I would like to turn the conference back over to Cary Marshall for closing remarks.
Cary Marshall: Thank you, operator, and to everyone on the call, we appreciate your time this morning, as well as your continued support and interest in alliance.
Cary Marshall: Our next call to discuss our fourth quarter in fiscal year 2024, financial and operating results is currently expected to occur in early February and we hope everyone will join us again at that time.
Cary Marshall: This concludes our call for the day. Thank you.
Speaker Change: Thank you, you may disconnect your lines at this time and thank you for your participation.
Speaker Change: Music Music