Q3 2024 Arch Resources Inc Earnings Call
The
The
Speaker Change: Good day and welcome to the Arch Resources, third quarter, 2024 earnings conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your telephone keypad. To withdraw your question, please press star, then 2. Please note, this event is being recorded.
Speaker Change: I would now like to turn the conference over to Deck Sloan, Senior Vice President of Strategy and Public Policy. Please go ahead.
Deck Sloan: Good morning from St. Louis, and thanks for joining us today.
Deck Sloan: Before we begin, let me remind you that certain statements made during this call, including statements relating to our expected future business and financial performance, may be considered forward-looking statements according to the Private Securities Litigation Reform Act. Forward-looking statements, by their nature, address matters that are, to different degrees, uncertain.
These uncertainties, which are described in more detail in the annual and quarterly reports that we file with the FDC, may cause our actual future results to be materially different than those expressed in our forward-looking statement.
Deck Sloan: 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.
Deck Sloan: Joining me on this morning's call will be Paul Lang, our CEO. After Paul's formal remarks, we'll be happy to take questions.
Deck Sloan: With that, I'll now turn the call over to Paul. Paul?
Paul Lang: Thanks, Beck, and good morning, everyone. We appreciate your interest in ARC and are glad you could join us on the call this morning.
Deck Sloan: The third quarter marked a period of significant transition and change for ARCH.
Since Q3 of 2018, we've positioned the company for long-term value creation and growth in two fundamental ways.
Deck Sloan: to the announcement of our transformational merger with Consolidated.
And second, through the near completion of a multi-quarter transmission in a more favorable geology in both of our metallurgical longwall lines.
We expect the culmination of these two processes in Q1 2025 for the merger at mid-November of this year for the operational transitions to both drive tremendous value for our shareholders going forward.
Deck Sloan: During Q3, the company also continued to make strong progress in the development of the favorable BC reserves in our West Elk mine.
Deck Sloan: where we produce a high-ranked thermal coil focused on the seaborne market.
managed through a three-week outage of the shiploader at Curtis Bay Terminal that reduced our coking coal shipments by approximately 200,000 pounds.
Deck Sloan: and declaring $0.25 per share, fixed dividends, for a total payment of $4.6 million, payable on November 26th.
Speaker Change: While I plan to devote a large portion of my prepared remarks to the pending merger, given the transformative nature of the deal, let me start with some color on our Q3 results, as well as our views on the current state of the global coal market.
Speaker Change: As you know, we spent much of 2024 transitioning through difficult reserve areas at Lear and Lear South.
Speaker Change: During 2-3, both of the Medical Segment's long walls were throttled back while the development work was completed in the more favorable reserve areas.
Speaker Change: which depressed production volumes and led to slightly even higher normal operating costs.
Speaker Change: We expect Bulk Loan will start back up within the next several days after extended moves that were needed to complete this work.
Speaker Change: These extended booths will in turn temper the results in the fourth quarter, but we still expect a positive step change in execution from these operations after that and continuing well into 2025.
Speaker Change: Turning to the thermal assets, the segment saw a significant turnaround during C3.
Speaker Change: Here, the results benefitted from an improved performance from the legacy of earth-based operations, where cost-cutting measures and a better alignment between stripping activities and sale volumes contributed to stronger results.
Speaker Change: And so I felt the mine operated well, although its results were again dampened by lower realizations related to legacy contracts.
Speaker Change: The vast majority of which will expire at the end of this year.
Speaker Change: Also, as noted before, we're still seeing higher costs of the mine associated with additional continuous miner work required for the development of the BC reserves.
Speaker Change: Like the metallurgical segment, we're anticipating a significant step-up in the physical segment's performance in the coming year. At West Elk, we expect the benefit for the roll-off of low-priced contracts previously noted.
Speaker Change: In addition to this, we expect a further strengthening of our operating results to mine, with the completion of the development work in the D.C. and the transition into those thicker and lower-cost reserves in mid-2025.
Speaker Change: In the Powder River Basin, we expect the improved performance stemming from our recent efforts to right-size the operation to also continue in the new year.
Speaker Change: As for global cooking coal markets, we continue to believe that supply and demand are closer to balance than current pricing seems to suggest. I say that for several reasons.
Speaker Change: Our global customers continue to want their committed bodies on a timely basis, and we've even been asked to accelerate shipments and flight instances.
Speaker Change: Second, global hot metal production, excluding China, remains close to flat during the day.
Speaker Change: Third, global coking coal supply remains constrained, as evidenced by flat production levels and high quality supply mix.
Speaker Change: Fourth, China's seaborne imports of coking coal are up nearly 30% year-to-date, with most of that growth in supply coming from high-quality regions.
Speaker Change: And finally, we're starting to see the closure of smaller token coal operations as pricing has started to impact marginal lines.
Speaker Change: In summary, intermediate and long-term coking coal market fundamentals remain constructive in our view. We believe that even a modest improvement in economic activity in key steel-producing regions has the potential to lift coking coal markets quickly.
Speaker Change: Meanwhile, the high-ranked seaboard thermal market continues to appear tight, benefiting from many of the same dynamics, such as years of underinvestment in new and replacement supply that underpin the coping cold storm.
Speaker Change: With that, I'll shift my remaining remarks to our merger with Consolidated Energy.
Speaker Change: First, I'm pleased to report that we're making excellent progress in bringing the transaction to completion.
Speaker Change: In recent weeks, we've seen the expiration of the Hart-Scott-Rodino waiting period, while also securing all the needed international antitrust approvals. Clearly, these were significant steps.
Speaker Change: It's also important to note that since the announcement of the merger, the teams have been driving forward with efforts to deliver an efficient integration process.
Speaker Change: following the completion of the merger that should, in turn, unlock significant synergistic value in the combination.
Speaker Change: Basically, we plan to hit the ground running, following quotes.
Speaker Change: The next step in the merger process is stockholder votes for both companies.
Speaker Change: In preparation for this, we're currently working to finalize the Form S-IV document.
Speaker Change: The closing of the merger remains subject to approval by both stockholders, by stockholders of both companies, and the satisfaction will remain in customary closing conditions.
Speaker Change: We expect to complete the merger in the first quarter of 2025 and then to move full speed into the integration.
Speaker Change: To reiterate many of the projected benefits of this tremendous merger, we expect combinational joy invested in sector operating platforms.
Speaker Change: anchored by world-class, high-quality, low-cost, and long-life long-law mines.
Speaker Change: Create a bold, broad, diverse portfolio of co-qualities and blends capable of serving multiple growth markets and geographies.
Speaker Change: expanding North American logistics and export capabilities, including ownership of two East Coast terminals, and long-standing relationships with West Coast and Gulf Coast ports.
Speaker Change: Create a visible revenue stream with no meaningful upside opportunities, balancing the consolidated seaboard industrial business with arches exposure to higher value metallurgical coals and associated demand dynamics.
Speaker Change: Enable robust, adjusted EFDA and pre-tax load generation.
Speaker Change: Unlock additional value creation from $110 million to $140 million of annual cost savings and synergies.
Speaker Change: And create the potential for robust capital returns and investment in innovation and growth, underpinned by industry-leading cash generation and a strong balance sheet.
Speaker Change: Once the transaction closes, we'll turn our full attention to realize the potential of the combined company.
Speaker Change: With a strong focus on capturing the significant quantifiable synergies we've identified in the areas of logistics, blending, marketing, procurement, and streamlining of the corporate structure.
Speaker Change: as well as aggressively pursuing the harder-to-qualify but equally compelling opportunities in areas such as sharing best practices across an extensive long-lost link.
Speaker Change: Thank you.
Speaker Change: And, Cole, do you want to say again how enthusiastic we are about the excellent progress the two companies are making to bring the merger to a successful close in the way in which the arch operations are aligning themselves for a strong 2025.
Speaker Change: One more time, remember that the pending merger will create a global industry leader, well-equipped to capitalize on promising market dynamics in both of its core lines of business, global metallurgical and high-ranked seaborne thermal companies.
Speaker Change: With that, we'd be happy to take your questions, operator.
Speaker Change: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your headset before pressing the keys.
Speaker Change: If at any time your question has been addressed and you would like to withdraw your question, please press star then 2.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: And our first question comes from Lucas Pipes with B Riley Securities. Please go ahead.
Lucas Pipes: Thank you very much, Operator. Good morning, everyone. Happy Election Day.
Lucas Pipes: On the thermal coal side, would you be able to provide an update as it relates to the PRB and West Elk and pricing expectations for those operations as well? Thank you very much.
Speaker Change: I think I'll repeat the same thing I've probably said the last five years, which is...
Speaker Change: We really appreciate the North American business. There's a lot of value to it as far as logistics and that, but we've been quite willing to walk away from it if the pricing is too low compared to what we think the international markets will be. And I think what you're going to see in 2025 is that very thing.
Speaker Change: If I think back six years ago, we did about 50% of our
Speaker Change: coking coal business in North America. If I look at 2025, I think that number could be down much lower. Right now, we have committed about a half million tons, and we're just under 150 on that price.
Speaker Change: So, if that's where we end up, that's where we end up. I'm fine with it.
Speaker Change: Thank you for joining us.
Speaker Change: I just want to add one final point to that. That includes about 20% Mount Marl, so about 20% Highball B, which weighs on that a little bit. So, you know, given that fact, you know, we thought that that $150 price was a fair price given today's current, you know, soft market environment for, you know, that small amount of tonnage.
Speaker Change: Welcome to PRV, Lucas. We haven't given a lot of detail, but we're still plus $15 on our average price. We call it the low 40s or 40s.
Speaker Change: And we've been able to maintain that, Lucas, at that level. But right now, that market is pretty soft. But because of the way we've managed deferrals with customers and been willing to sort of blend and expand, we've been able to keep that pricing at that higher level for 2025 and beyond. And so really managing the book carefully, despite the fact that right now, the published prices are lower.
Speaker Change: And then when you look at West Elk, I think we've done a really nice job there as the existing legacy contracts that are scheduled to roll off start to come due.
Speaker Change: So we've got legacy contracts in the industrial space.
Speaker Change: at around $40 on average that roll off at the end of this year, and those are getting replaced with prices that are as much as $30 higher. Now we haven't committed all the volume yet, but so far that's where it's shaking out. That's a scarce product. We're able to capture really good value. So that's that first step up we would expect to see in terms of West Elk's contribution in 2025 is the roll off of the legacy contracts and then sort of these newer commitments kicking in. And then mid-year 2025, again, would reiterate the fact that we also then see cost set down and development work on the B-steam, as well as our transition to thicker coal in the B-steam.
Speaker Change: of Xnotrade in a little bit about the equality call, so an additional step up in mid 2025 related to the copy right, if you think about it from a margin perspective. So, enthusiastic about how things are shaking up and what's up for next year.
Speaker Change: I appreciate all the detail.
Speaker Change: Thank you.
Speaker Change: Question on the high volume markets.
Speaker Change: few of your peers noted that the high volume markets are oversupplied. What's your take on that, any ability to quantify?
Speaker Change: the oversupply, if you agree with that take, and for a product like Lear in today's market environment, what are good netbacks to kind of think about? Thank you very much for your color.
Speaker Change: Yeah, Lucas is back and I, you know, what I would say about the high-volume market is...
Speaker Change: You know obviously right now it's generally a little soft out there overall. Look, I think the high volume market is not different than the market for other products.
Speaker Change: As Paul said, at this moment, the market seems fairly finely calibrated. Now, maybe it's a little bit oversupplied and a little soft, but it doesn't seem like we're far from balance, and so it's not going to take much.
Speaker Change: I think to tip things into a sort of a more virtuous...
Speaker Change: sort of segment of the cycle. So if you think about, as Paul indicated, look, hot metal production globally for the world, including China, relatively flat. You've got aggregate supply from Australia, the U.S. and Canada, relatively flat right now, so no change on that front.
Speaker Change: Chinese steel exports are up so that's a negative on the flip side. Chinese seaborne token gold imports
Speaker Change: are up as well. So again, relatively finely calibrated here, we continue to see significant appetite for all our products in the marketplace. There's not urgency in terms of buying. It's not like we're seeing pricing being lifted by that, but Asian buyers are very focused on finding where the supply is going to come from for next year and very interested in our products. We've had really good uptake.
Speaker Change: for all of our products in the Asian market. And I would say for HiVOLA in particular, and that's because...
Speaker Change: Look, we're providing that. Your brand is providing both a very high CSR quality, so a CSR of around 70, but also all those plastics properties that make it such a good blend stock. So, you know, the high fluidity, the wide temperature range, the strong RNA. So, all those things that also mean that when you put it into a blend, the result is more homogeneous Coke at the back end of the Coke oven. So, I would say that the Asian buyers buy our high-volume product for lots of reasons. It's not necessarily just the fluidity. It's also for the high CSR. We couldn't be more happy in terms of the uptake there. We continue to build new customers in places like Malaysia. Indonesian demand continues to climb.
Speaker Change: Merchant Co. Production there. The big Chinese buyers are very eager to increase.
Speaker Change: the amount of Lear volume that they're able to access. And we can only talk about so much because we only have so much volume, but we're pleased with that. And we think the high-voltage dynamics are really, again, not dissimilar to the other products.
Speaker Change: So for our New York product in particular, we think there's a really strong enthusiasm out there.
Speaker Change: There's two other small points I think we should make, and that is one of my best indications I think of the market is...
Speaker Change: The customers are pushing back on volumes. And as I said in my prepared remarks, we're not seeing any of that. We're still seeing what I would call normal demand. And, you know, I was also surprised that we had some customers try and accelerate shipments.
Speaker Change: I think the other point I'd like to make is, you know, we, as I noted in my prepared remarks, we were, had to suffer through about 200,000 tons of lost shipments because of the shiploader incident at Curtis Bay.
Speaker Change: As I look at it, we ended up the quarter with about a half million tons of hydrogen charge.
Speaker Change: And I just don't feel a lot of necessary means to just go out and push that cola out in the market right now either.
Speaker Change: Look, I think the market...
Speaker Change: It's fine work, Dad. I think another quarter or two of being flat like this should help things in general on the supply-demand balance. And, you know, I think we're going to be patient heading into the new year.
Lucas Pipes: Thank you for all the color. I'll try a quick one, and sorry if I missed it. Is there a date for the shareholder vote?
Speaker Change: Not yet.
Speaker Change: All right, well, thank you very much for all the color. Best of luck and, yeah, look forward to the merger. Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Nathan Martin with The Benchmark Company. Please go ahead.
Nathan Martin: Thanks, Operator. Good morning, guys.
Speaker Change: Thank you.
Nathan Martin: Maybe just to follow up on the second part of one of Lucas's questions regarding a net back deck, I don't know if you could give us kind of an idea of what that looks like right now. Again, it seems like some of the price realizations that you and your peers are seeing are maybe reflecting higher than normal discounts, so that might be helpful.
Speaker Change: Yeah, Nate, so I would say that, look, you know, I understand how you get there when you look at the average price of HVA during Q3, it looks a little light from a netback perspective, but I would say, look, there are a couple of reasons for that. You know, the first is
Nathan Martin: that during Q2, you know, we shipped a fair amount of volume, particularly in June, that ended up getting priced in Q3 in a declining, you know, market environment. So, you know, even though you look at the average realization in Q3 as being somewhat higher, you know, some of the provisional pricing that we had committed to in Q2 ended up coming in lower. So, you know, that did weigh a little bit on the, you know, on those netbacks. It would also point to the convergence of premium low volume HVA pricing.
Nathan Martin: As you know, as we ship tons into Asia, there is a transportation differential.
Nathan Martin: In recent quarters, that stronger pricing for premium low vol had really served to counterbalance that transportation differential for those tons that were committed based on PLV prices.
Nathan Martin: So both those things weighed somewhat on our average netback. I would say that the good news is that, you know, all that will right itself over time. But, you know, the good news is we're not having to discount. The good news is, as discussed, there's really good appetite out there for our products. We're, you know, there are lots of different structures that we use without a doubt, but in terms of going out there and having to discount our products just to move them, you know, even in this off-market environment, we're simply not having to go there, which I think really does bode well for the future and further underscores the great success we're having in getting these suns placed in Asia.
Speaker Change: Thanks for that, Deck.
Speaker Change: Maybe maybe kind of shifting over, you know to the fourth quarter I mean, I appreciate you guys don't want to give updated for your guidance to the merger
Speaker Change: But, you know, given some of the challenges in the third quarter, obviously the shiploader outage, we called out, lost about 200,000 tons of shipments there.
Nathan Martin: Is it reasonable to assume that METCOL shipments could increase sequentially in the fourth quarter? Or do you think other headwinds, such as the extended long-haul moves you guys called out, as well as the weaker markets we're talking about, might make that not the case?
Speaker Change: I think the way to look at Q4 is, you know...
Speaker Change: We're coming through what I would call one of the roughest couple months that I've had in a long time. It was a difficult period for lots of reasons.
Nathan Martin: And the good news is that we set ourselves up very well, both rear to rear south and come through some very difficult areas.
Nathan Martin: And the Lear South Longwall is expected to start up later this week in District 1, or excuse me, in District 2, and we still believe that that panel looks very good and have a lot of optimism.
Nathan Martin: And we also had a stretch here in the last couple of weeks where we had an extended long haul boat due to some of the conditions we were encountering.
Nathan Martin: Look, I've got huge faith in the team at Lear, and they've delivered constantly year after year. And, you know, if you look back at the history of Lear the last 13, 14 years, you know, about every couple of years we'll hit a bad quarter, and that's pretty well what we did in Q3.
Nathan Martin: As I look at Q4, some of those residual pains carried on into October.
Nathan Martin: As I said in my prepared remarks, I am expecting a step up in performance in the back half starting really later this week or next week.
Nathan Martin: And the way I would look at Q4, just for simplicity, and just kind of in general is, you know, I would start with kind of a very similar quarter to what we had in Q3.
Nathan Martin: It's volume-wise, and part of that is, you know, if the market doesn't respond, we're just not going to push a lot of coal into it.
Nathan Martin: And second, I think we can come up better than I anticipate, but I want to be relatively cautious in what we're saying on the startup in both panels.
Nathan Martin: And I think in just in general, you know,
Nathan Martin: If you look at the rest, we didn't give explicit guidance on the rest of the quarter. I think you can infer from the silence on everything else that we're going to be pretty much as we've said before.
Speaker Change: Thanks for that, Paul. And then maybe just one one final one. You guys gave, you know, a pretty thorough discussion and prepared remarks about your thermal coal business.
Speaker Change: I guess, you know, just how do you think about the role of those thermal assets kind of heading into the closing of the proposed merger with Consul?
Speaker Change: So if I'm starting with the easiest one, which is West Elk, you know, West Elk fits clearly in our strategy.
Nathan Martin: pursuing high-quality seaboard thermal business.
Nathan Martin: West Elk is going to be a big player in that business for the next 10 years plus, so clearly West Elk has a place.
Nathan Martin: You move on to PRV, it's a tougher discussion. I've been very open the last couple of years about whether it fits longer term in the portfolio and what we can do, but we've made no bones about talking to people about our alternatives with it.
Nathan Martin: We will continue to do so, but at the end of the day, you know, we've set aside the Reclamation Fund and, you know, we have a view of what the value of that fund is. If someone's willing to give that to us up front, we'll listen to them, but it has to be a clean exit.
Nathan Martin: By that I mean we're going to get out of it with no bonds, no permits, no leases, a truly clean exit.
Nathan Martin: If somebody could do that with the value brought forward, we'd definitely listen to them.
Speaker Change: Maybe I just add just a little bit more color around West Elk and what a good fit that is.
Speaker Change: You know, look, as we move into the BC and in particular West Elk will move up again in terms of heat content and already it's a high-quality coal, but as we move into the BC and it'll be approaching a 12,000 BTU product.
Speaker Change: very low sulfur, you know, when you think about West Elk and PAMC, you're talking about two of the highest ranked coals in the seaborne marketplace. So that fit couldn't be better. We're enthusiastic, quite frankly. West Elk's been, you know, our only asset that is focused on the seaborne thermal market. The fact is that I think there'll be a greater understanding and appreciation of it being truly a core asset for us going forward. And, you know, an exceptionally strong fit with the portfolio.
Speaker Change: All right. Very helpful, gentlemen. Appreciate the time. Good luck here in the fourth quarter and with getting the merger completed.
Speaker Change: Thank you, Dave. Thanks, Matt.
Speaker Change: And the next question comes from Katja Jancic with BMO Capital Markets. Please go ahead.
Katja Jancic: Hi, thank you for taking my questions. I might have missed this, but you mentioned Lear was going through a bit of a challenging geology. Is that now behind or when should we expect it back to, let's say, more normal operations?
Paul Lang: Hi Connie, this is Paul. It really started in...
Speaker Change: Well, I'd say kind of late September and through October.
Katja Jancic: Well, it was a pretty rough period, really, at both times. The good news is, both Longwalls are through it.
Speaker Change: I'm expecting the start up of the LearSouth Long Wall later this week.
Speaker Change: and the later long haul will be a couple days behind that and by all indications, the panels that we're going into are in good and we're expecting production to pick back up kind of to what our expectations are.
Speaker Change: And what would be like a normalized reduction level at beer? Can you remind us?
Speaker Change: Roughly, we've been running, you know, basically about a million tons a quarter, both coca-cola and meds.
Katja Jancic: We've done slightly better than that. I wouldn't be surprised to see that if we're going into the fourth quarter in a normalized rate after the fourth quarter. Clear South is still continuing to ramp up. I think it's got a chance of coming up to its potential.
Katja Jancic: At the end of our last panel at District 1, we saw some really good rates and a lot of optimism at that line. I still think that operation's got some ability to grow and continue to increase production.
Katja Jancic: Everything was being tied in District 2 at Lear South.
Katja Jancic: is reflective of our expectations. It is being nearly a foot thicker in terms of the coal team there relative to where we've been in district one. So a very substantial improvement there, and that should translate into higher yields, which should also translate into lower costs. And then we're going to be in very thick coal in 2025. So both those developments really,
Katja Jancic: both well for, you know, a strong execution in 2025. As you know, we've been talking a lot about transitioning from District 1 to District 2 at Lear South, and we've put a lot of focus on that, but feel really good about what we're seeing, and, you know, as Paul indicated, the development was a little slower in getting District 2 ready, so we had to, you know, leave the, you know, the long wall been down for the first, you know, six weeks or so of this quarter. But as we look at development on the next panel in District 2, that's...
Katja Jancic: We expect that to proceed and be ready to roll as we go through the first panel on District 2, so feeling really quite positive about what we're seeing.
Speaker Change: So is it still fair to assume that now that Learsoft entered District 2 that we should be seeing coal production closer to 4 million tons per year plus?
Speaker Change: I mean, Connie, we've avoided putting numbers out there and don't feel like that is appropriate here. Obviously, we're going through our own budgeting process.
Speaker Change: That clearly should translate into a better performance for the memories portfolio overall in 2025.
Speaker Change: Thank you for watching!
Speaker Change: Okay, thank you.
Speaker Change: Thank you.
Speaker Change: Hello, Michael. You're on line. Oh, go ahead, please. Oh, yeah. Yeah, go ahead. No, thank you. Good morning, Deck and Paul.
Speaker Change: Goodbye.
Speaker Change: Thank you.
Speaker Change: Paul, maybe you can share some thoughts on distress on the supply side in Appalachia
Nathan Martin: pricing is for cooking cold product and if we continue to see some softness
Nathan Martin: Will it be noticeable and are you seeing that in from whether it's the labor side or some...
Speaker Change: Hey, Mike, apologies. We're struggling to hear. We've got bits and pieces, but can you hear me now?
Speaker Change: Paul, the supply side in Appalachia, given the weakened market,
Nathan Martin: next couple quarters. I would think that could see some more meaningful kind of supply pullback and are you seeing that from vendors or labor flows or what the talk is in the marketplace?
Nathan Martin: I think you hit on what I would call some of the main leading indicators, which are that people are all of a sudden not an issue.
Nathan Martin: We have...
Speaker Change: You know, we're in as good a shape as we've been in a long time and, you know, the labor pressure, you know, by that I mean just finding the people to work the mines as well as pressure on wages has really diminished.
Speaker Change: I think that's the first main indicator. I think the second one is that you're also starting to see the availability...
Speaker Change: That's better on parts and supplies. And we're starting to hear some of the lead times on equipment dropping. So I think all those indicators tell you that there is a slowdown coming.
Speaker Change: And as I said in my remarks, you know, we're seeing particularly some of the smaller mines drop offline as the cost pressure is starting to hit them.
Speaker Change: Look, these periods of weak markets aren't any fun, but in the end, it kind of cleans up the production side, and I think it's good for everybody.
Nathan Martin: And Michael, you know, Paul just talked about Appalachia, and you asked about it, and that's probably the, you know, where we're going to see the leading indication.
Nathan Martin: The reality is these prices don't work anywhere, is our view, and that's not to say first quartile producers can't continue to generate cash, but you've got a lot of players out there that are struggling, and I'd say that even in Australia, when you add back things like sustaining capital, you're looking at prices that are well below a break-even.
Nathan Martin: even with the big horses in Australia.
Nathan Martin: particularly post the changes in the wealthy structures there and the other pressures we've seen. So, you know, we do believe the supply side, you know, is going to come under pressure. It's why we're, you know, feeling positively about, you know, 2025 and where the market might trend. You know, a little demand uptick would certainly be positive and I think would, could have a significant influence on coca-cola markets and prices.
Nathan Martin: But by the same token, this will fix itself as well if these prices stay down where they are for much longer. I'll tell you, the last comment I'd make, and I don't want to...
Nathan Martin: try and make it sound any better than it was, because 2.3 was a tough quarter, but as bad as the quarter was, at $93 costs, that's still probably $20 below the bottom of the midpoint. I mean, there's a lot of mines in the U.S. that are out of the money with these prices.
Speaker Change: Thank you.
Speaker Change: Yeah, yeah, duly noted, Paul and Deck, and given that your improvement in operations and maybe the improvement in market, I guess the timing on the transaction could be quite helpful for everyone. Thanks.
Speaker Change: Thank you, thank you Mike.
Speaker Change: This concludes our question and answer session. I would like to turn the conference back over to Paul Lang for any closing remarks.
Paul Lang: I want to thank you again for your interest in art, not only today, but also over many years.
Speaker Change: Upon the anticipated closure of the merger, we'll be turning a page in our long and successful history, but at the same time starting an exciting new chapter with Consolidated as core natural resources.
Speaker Change: as we prepare for the transition.
Speaker Change: I want to thank the people who made this new beginning possible.
Nathan Martin: Throughout the process, the ARCH Board, the management team, our employees, the employees at Gonzales have worked tirelessly and selflessly to bring this value creation merger to fruition, believing that it is the right path forward to ensure the company's long-term success.
Nathan Martin: It's truly been an admirable show of professionalism that the organization, its shareholders, and its other stakeholders are in their debt for delivery.
Nathan Martin: But that operator will conclude the call. I look forward to the possibility of reporting to the group in Q1 as part of the first Core Natural Resources earnings call. Stay safe and healthy, everyone.
Speaker Change: This is now concluded. Thank you for attending today's presentation. You may now disconnect.
Nathan Martin: The end
Speaker Change: David Gagliano, Paul Lang, John Drexler, John Drexler, John Drexler, John Drexler [inaudible]
Speaker Change: Thank you for watching!
Speaker Change: Allen Luther King, St. John the Reveler, Louisiana State University, Richard Gingras allows you locally to obtain living records about the history of Louisiana state university. Find legal comment functional engagements for the video at this site.
Speaker Change: THE END
Nathan Martin: [music]
Nathan Martin: Giljum Accompaniment