Q4 2024 Alpha Metallurgical Resources Inc Earnings Call

Unknown Executive: Greetings and welcome to the Alpha Metallurgical Resources 4th Quarter 2024 Results Conference.

Greetings and welcome to the Alpha Metallurgical resources fourth quarter 2024 results conference call.

Unknown Executive: At this time, all participants are on a listen on Question and Answer Session will follow the formal.

At this time all participants are on a listen only mode. A question and answer session will follow the formal presentation.

Emily O'quinn: Please note this conference is being I will now turn the conference over to your host, Emily O'Quinn, Senior Vice President Investor Relations. Thank you, Rob. And good morning, everyone.

Please note this conference is being recorded.

Speaker Change: Now I'll turn the conference over to your host Emily O'quinn Senior Vice President of Investor Relations and Communications you May now begin.

Speaker Change: Thank you Rob and good morning, everyone before we get started let me remind you that during our prepared remarks, our comments regarding anticipated business and financial performance contain forward looking statements and actual results may differ materially from those discussed for more information regarding forward looking statements and some of the factors that can affect.

Emily O'quinn: Before we get started, let me remind you that during our prepared remarks, our comments regarding anticipated business and financial performance contain forward looking statements, and actual results may differ materially from those discussed. For more information regarding forward looking statements and some of the factors that can affect them, please refer to the company's fourth quarter and full year 2024 earnings release and the associated SEC filing. Please also see those documents for information about our use of non gap measures, and their reconciliation to gap measures.

Speaker Change: Then please refer to the company's fourth quarter and full year 2024 earnings release and the associated SEC filing. Please also see those documents for information about our use of non-GAAP measures and their reconciliation to GAAP measures.

Emily O'quinn: Participating on the call today are Alpha's Chief Executive Officer, Andy Eidson, and our President and Chief Operating Officer, Jason Whitehead.

Andy: Participating on the call today are <unk>, Chief Executive Officer, Andy Edson, and our President and Chief Operating Officer, Jason Whitehead also participating on the call are Todd Muncy, Our Chief Financial Officer, and Dan Horn, Our Chief commercial officer with that I will turn the call over to Andy.

Emily O'quinn: Also participating on the call are Todd Muncy, our Chief Financial Officer, and Dan Horn, our Chief Commercial Officer.

Andy Eidson: With that, I will turn the call over to Andy. Thanks, Emily. And good morning, everyone. Today we announce financial results for the fourth quarter in the full year of 2024, which include adjusted EBITDA of $53 million and 4.1 million tons shipped in the quarter. And despite the deteriorating coal market conditions, our teams completed another year of safe production with record-setting safety measures. As we've discussed in prior calls, the metallurgical coal market conditions have been negatively impacted by weak global steel demand, and these conditions persist.

Speaker Change: Thanks, Emily and good morning, everyone.

Andy: Today, we announced financial results for the fourth quarter and the full year of 2024, which included adjusted EBITDA of $53 million and $4 1 million tons shipped in the quarter.

Andy: And despite the deteriorating coal market conditions, our teams completed another year of safe production with record setting safety metrics.

Andy: As we've discussed in prior calls the metallurgical coal market conditions have been negatively impacted by weak global steel demand and these conditions persist.

Andy Eidson: Our operations, like all others in Central Appalachia, have also experienced significant challenges because of extreme weather this winter, which will have substantial implications for our quarterly performance for the first and perhaps second quarter.

Andy: Our operations like all others in Central Appalachia, if also experienced significant challenges because of extreme weather this winter, which will add substantial implications for our quarterly performance for the first and perhaps second quarters.

Andy Eidson: Jason will be sharing details on those impacts later. These issues caused us to increase the top end of our cost of coal sales guidance for the year and to bring down our annual metallurgical shipment volume guidance by 500,000 tons. This half a million ton figure roughly aligns with the amount we expected missed in the first quarter due to the confluence of law shifts from absenteeism, power outages, snow and flooding impacts and transportation delays. Beyond these direct impacts on our ability to move coal, other producers who we purchase coal from have experienced the same issues. So we've not been able to buy as much coal as expected in the first quarter.

Andy: Jason we'll be sharing details on those impacts later.

Andy: These issues caused us to increase the top end of our cost of coal sales guidance for the year and to bring down our annual metallurgical shipment volume guidance by 500000 tonnes. This half a million tons figure roughly aligns with the amount we expect to have missed in the first quarter due to the confluence of loss shifts from absenteeism power outages.

Thank you.

Andy Eidson: All of this coupled with the continued weakness in the metallurgical coal markets means we expect the rest of the quarter to be difficult. The good news is that a year ago we anticipated market weakness and we took action to prepare our business and our balance sheet. The weather impacts have been an unwelcome surprise, but we've managed through that and our teams have worked hard to protect the safety of our people and our operations. Adversity isn't a stranger to this company or this industry, and it makes me proud to see the way the team has responded to these circumstances.

Andy Eidson: During market conditions like these, it's not unusual to hear about tonnage coming offline due to uneconomic cost profiles, and a few very small operators have even made recent bankruptcy announcements. volatility in our industry is a constant, and its effects are often intensified and downmarked. However, conditions like these can sometimes present opportunities for well-capitalized companies to consider bolting on a mine, reserve base, or other kind of property. When it comes to M&A, our approach is to have an open door policy, meaning we believe it's important to evaluate the landscape for any potential transactions that could strengthen Alpha for the long term.

Andy Eidson: We don't have any announcements to make today, but we continue to keep our eyes open for opportunities to fortify the financial and operational health of this already strong organization.

We don't have any announcements to make today, but we continue to keep our eyes open for opportunities to fortify the financial and operational health of this already strong organization.

Andy Eidson: Despite the rough market environment and uncertainty around tariffs that are getting most of the headlines, we understand that market analysts' projections for global steel demand remain strong, with MET coal supply expected to stay constrained over the long term.

Andy: Despite the rough market environment and uncertainty around tariffs that are getting most of the headlines we understand that market analysts projections for global steel demand remained strong with met coal supply expected to stay constrained over the long term.

Todd Muncy: So with that, I will turn the call over to Todd for additional information about our quarterly financial results. Thanks, Andy. Adjusted EBITDA for the fourth quarter was $53 million, up from $49 million in Q3. We sold 4.1 million tons in Q4, which is the same amount sold in the third quarter. Met segment realizations decreased quarter over quarter with an average fourth quarter realization of $127.84 compared to $132.76 for the third quarter. export met times priced against Atlantic indices and other pricing mechanisms in the fourth quarter realized $122.24 per ton, while export coal priced on Australian indices realized $124.71.

Todd: So with that I will turn the call over to Todd for additional information about our quarterly financial results.

Todd: Thanks, Andy adjusted EBITDA for the fourth quarter was $53 million up from $49 million in Q3, we sold $4 1 million tonnes in Q4, which is the same amount sold in the third quarter.

Todd: Segment realizations decreased quarter over quarter with an average fourth quarter realization of $127 84 compared to $132.76 for the third quarter.

Todd: Export met tons priced against Atlantic indices, and other pricing mechanisms in the fourth quarter realized $122.24 per ton well export coal prices on Australian indices realized $124 71 says these results are compared to realizations of $129 31 per ton and 128.

Todd Muncy: These results are compared to realizations of $129.31 per ton and $128.61 respectively in the third quarter. The fourth quarter realization for our metallurgical sales was a total weighted average of $132.63 per ton, down from $136.35 per ton in Q3. Realizations in the incidental thermal portion of the MET segment decreased to $75.39 per ton in Q4, as compared to $76.33 per ton in the third quarter. Cost of coal sales for our MET segment decreased to $108.82 per ton in the fourth quarter, down from $114.27 per ton in Q3. SG&A excluding non-cash stock compensation and non-recurring items increased to $14.3 million in the fourth quarter as compared to $13.4 million in Q3.

Todd: Dollars 61 cents, respectively in the third quarter.

Todd: The fourth quarter realization for our metallurgical sales was a total weighted average of $132 63 per ton down from $136 35 per tonne in Q3.

Todd: Realizations and the incidental thermal portion of the met segment decreased to $75 39 per ton in Q4 as.

Todd: As compared to $76 33 per ton in the third quarter.

Todd: Cost of coal sales for our <unk> segment decreased to $108 82 per ton in the fourth quarter down from $114 27 per ton in Q3.

Todd: SG&A, excluding noncash stock compensation and nonrecurring items increased to $14 $3 million in the fourth quarter as compared to $13 $4 million in Q3.

Todd Muncy: CapEx for the quarter was $42.7 million, up from $31.5 million in Q3. Moving to the balance sheet and cash flows as of December 31, 2024, we had $481.6 million in unrestricted cash compared to $484.6 million of unrestricted cash as of September 30. We had $112.9 million in unused availability under our ABL at the end of the fourth quarter, partially offset by a minimum required liquidity of $75 million. As of the end of December, Alpha had total liquidity of $519.4 million, up from $507 million at the end of the third quarter. Cash provided by Operating Activities was $56.3 million in the fourth quarter, down from $189.5 million in Q3.

Todd: Capex for the quarter was $42 $7 million up from $31 $5 million in Q3.

Todd: Moving to the balance sheet and cash flows as of December 31, 2024, we had $481 $6 million in unrestricted cash compared to $484 $6 million of unrestricted cash as of September 30th.

Todd: We had $112 $9 million in unused availability under our ABL at the end of the fourth quarter, partially offset by a minimum required liquidity of $75 million.

Todd: As of the end of December Al had total liquidity of $519 $4 million up from $507 million at the end of the third quarter.

Todd: Cash provided by operating activities was $56 $3 million in the fourth quarter down from $189 $5 million in Q3.

Todd Muncy: As a reminder, the third quarter cash flows were positively impacted by a decrease in working capital of $144.5 million. As of December 31st, our ABL facility had no borrowings and $42.1 million of letters of credit outstanding, a reduction of $15 million in letters of credit outstanding as compared to the end of the third quarter.

Todd: As a reminder, third quarter cash flows were positively impacted by a decrease in working capital of $144 $5 million.

Todd: As of December 31st our ABL facility had no borrowings and $42 $1 million of letters of credit outstanding a reduction of $15 million in letters of credit outstanding as compared to the end of the third quarter.

Todd Muncy: We reduced our metallurgical shipment guidance for the year by 500,000 tons, bringing the range to 14.5 million to 15.5 million tons. This is largely due to the impact we're already seeing in the first quarter of the severe weather impacts on our own production levels as well as the production of our peers, which we expect will lower the volumes of coal we purchase in 2025. Together with that change, we increased the high end of our met cost of coal sales guidance for the year, widening the range to $103 per ton to $110 per ton, up from the prior range of $103 to $108.

Todd: We reduced our metallurgical shipment guidance for the year about 500000 tonnes, bringing the range to $14 5 million to $15 5 million tonnes.

Todd: This is largely due to the impact we're already seeing in the first quarter of the severe weather impacts on our own production levels as well as the production of our peers, which we expect will lower the volumes of coal we purchased in 2025.

Together with that change we increased the high end of our met cost of coal sales guidance for the year widening the range to $103 per ton to $110 per ton up from the prior range of $103 to $108.

Todd Muncy: In terms of our committed position for 2025, at the midpoint of guidance, 32% of our metallurgical tonnage in the MET segment is committed and priced at an average price of $143.81. Another 56% of our MET tonnage for the year is committed but not yet priced. The thermal byproduct portion of the MET segment is 95% committed and priced at the midpoint of guidance at an average price of $80.74.

Todd: In terms of our committed position for 2025 at the midpoint of guidance, 32% of our metallurgical tonnage in the met segment is committed and priced at an average price of $143 81.

Todd: Another 56% of our met tonnage for the year as committed but not yet priced.

Todd: The thermal byproduct portion of the met segment is 95% committed and priced at the midpoint of guidance at an average price of $80.74.

Todd Muncy: Due to the continued softness in the met coal markets, we did not repurchase any shares in the fourth quarter under the company's share buyback program. As of February 21st, the number of common stock shares outstanding was approximately 13 million. The remaining stock buyback program authorization permits approximately $400 million in additional repurchase. Contingent on cash flow levels and market conditions. We have repurchased a total of 6.6 million shares under the existing plan at an average share price of $165.74.

Todd: Due to the continued softness in the met coal markets, we did not repurchase any shares in the fourth quarter under the company's share buyback program.

Todd: As of February 21st the number of common stock shares outstanding was approximately $13 million.

Todd: The remaining stock buyback program authorization permits approximately $400 million in additional repurchases.

Todd: On cash flow levels and market conditions.

Todd: We have repurchased a total of $6 6 million shares under the existing plan at an average share price of $165.74.

Jason Whitehead: I will now turn the call over to Jason to provide an update on operation. Thanks, Todd. Good morning, everyone. At the conclusion of each year, we evaluate each operation's track record to determine the winners of our Best-in-Class Awards. which recognize excellence in safety, environmental stewardship and productivity. three critical pillars of Alpha's success. This year's extra special as the award has been renamed in honor of our previous chairman and CEO. We are pleased to announce the winners of this year's David J. Stetson Best in Class Award. Rolling Thunder Deep Mine won the Best Mine category. Mammoth Processing Plant was the winner of the Processing Plant category.

Todd: I will now turn the call over to Jason to provide an update on operations.

Jason: Thanks, Todd and good morning, everyone.

Jason: At the conclusion of each year, we evaluate each operations track record to determine the winners of our best in Class Awards, which recognizes excellence in safety environmental stewardship and productivity three.

Jason: Three critical pillars of Alpha success.

Jason: This year's extra special as the award has been renamed in honor of our previous Chairman and CEO we.

Jason: We are pleased to announce the winners of this year's David.

Jason: Stetson Best in Class Awards.

Jason: Oh and Thunder Deep mine, one of the best mine category mammoths.

Jason: Mammoth processing plant was the winner of the processing plant category and our feet slowed out to call them the owners and the load out category.

Jason Whitehead: And our Peach Loadout took home the honors in the Loadout category. Achieving this level of performance requires teamwork and a commitment to continuous improvement, and I want to offer my congratulations to each and every employee whose hard work earned these accolades, strengthening both their respective operations and the company as a whole. It's encouraging to see the competitiveness across the company as these teams work hard to earn this sought after recognition. This makes us all better.

Jason: Achieving this level of performance requires teamwork and a commitment to continuous improvement and I want to offer my congratulations to each and every employee whose hard work earn these accolades strengthening both their respective operations and the company as a whole.

Jason: It's encouraging to say the competitiveness across the company.

Jason: As these teams work hard to earn a solid after recognition this makes us all better.

Jason Whitehead: While we call out only a few specific operations for best-in-class awards, it's important to acknowledge the good work occurring across our organization. For example, in the area of environmental stewardship, we maintained our 99.9% water quality compliance in 2024. A measure of success and safety is TRR, or Total Reportable Incident Rate, where we consistently perform favorably to the coal industry average. In the last two years, we've had back-to-back company records for this safety metric, along with the second best year on record for company-wide NFDL, or non-fatal days lost, which is another safety measure where we consistently perform better than the co-industry average.

Jason: While we call out only a few specific operation for best in Class Awards. It is important to acknowledge the good work occurring across our organization.

Jason: For example in the area of environmental stewardship, we maintained our 99.9% water quality compliance in 2024.

Jason: Our measure of success and safety S. T R hour or total reportable incident rate, where we consistently perform favorably to the coal industry average.

Jason: In the last two years, we've had back to back company Records for this safety metric along with our second best year on record for our company wide NFC L or nonfatal days lost which is another safety measure, where we consistently performed better than Nikola industry average.

Jason Whitehead: In aggregate, we had 41 workgroups, which totaled over 2.8 million exposure hours throughout the 2024 calendar year with zero NFDL injuries. As we often say, a safe mine is a productive mine. And that holds true as our alpha underground productivity rate continue to exceed that of our non-longwall peers.

Jason: In aggregate, we had 41 work groups, which totaled over $2 eight.

Jason: Million exposure hours throughout 2024 calendar year with zero F D L injuries.

Jason: As we often say a safe mine is a productive mine and that holds true as our alpha underground productivity rates continue to exceed that of our non longwall peers.

Jason Whitehead: I want to publicly praise our teams for continuing to perform exceptionally well in these and many other measures of safety, environmental compliance, and productivity. Turning to the quarter, I want to thank the operations teams for their continued hard work focusing on controlling spend while maintaining productivity. As Todd stated, quarter over quarter costs of coal sales were down approximately $6 a ton across equivalent sales volumes of 4.1 million tons. I'll remind everyone that typically the fourth quarter is challenging due to two planned shutdown periods across most of our operations. Heavy contributors to the quarter over quarter decrease came from lower supply and repair costs as well as lower transportation and preparation costs.

Jason: I want to publicly praised our teams for continuing to perform exceptionally well in these and many other measures of safety environmental compliance and productivity.

Jason: Turning to the quarter I want to thank the operations teams for their continued hard work focusing on controlling stand while maintaining productivity.

Speaker Change: As Todd stated quarter over quarter cost of coal sales were down approximately $6 a ton across equivalent sales volumes of $4 1 million tonnes.

Speaker Change: I'll remind everyone that typically the fourth quarter is challenging due to two planned shutdown periods across most of our operations.

Speaker Change: Heavy contributors to the quarter over quarter decrease came from lower supply and repair costs as well as lower transportation and preparation costs.

Jason Whitehead: I preach every appreciate everyone's continued focus on things within our control as we head into 2025 I'd also like to give an update on the Kingston Wildcat slope that we're developing in Pax, West Virginia. Our in-house crews continue to push the slope development down. As of today, we're approximately 880 feet deep, which is about halfway. We're still on track with our initial estimates hit the coal seam and start taking development cuts in coal late this year. As a reminder, we expect the Wildcat mine will produce approximately 1 million tons of low vol coal per year when it reaches full production.

Speaker Change: I appreciate I appreciate everyone's continued focus on things within our control as we head into 2025.

Speaker Change: I'd also like to give an update on the Kingston Wildcat slope that we're developing impacts west Virginia.

Speaker Change: Our in house crews continue to push the slope development down as of today were approximately 880, <unk> date, which is about halfway.

Speaker Change: We're still on track with our initial estimates hits the calls same and start taking development cuts and coal like this year.

Speaker Change: As a reminder, we expect the Wildcat mine will produce approximately 1 million tons of low vol coal per year when it reaches full production.

Jason Whitehead: Looking forward into Q1, I can tell you that 2025 has presented with some challenges. Weather data from Beckley, West Virginia, which is in the proximity of many of our operations, show year-to-date precipitation and snowfall have been 201% and 135% of normal, respectively. On top of the excessive precipitation, below average temperature has hindered operation. Internal and external transportation systems, our preparation facilities, utilities infrastructures, and safe means for employees to travel to work have all been compromised several times. which contributed to the change in cost guidance mentioned earlier.

Speaker Change: Looking forward into Q1 I can tell you that 2025 is presented with some challenges.

Speaker Change: Whether data from Beckley, West, Virginia, which is in the proximity of many of our operations show year to date precipitation and snowfall had been 201% and 135% of normal respectively.

Speaker Change: On top of the excessive precipitation below average temperature has entered operations.

Speaker Change: Internal and external work apparel transportation systems, our preparation facilities utilities infrastructures and safe means for employees to travel to work have all been compromised several times.

Speaker Change: Which contributed to the change in cost guidance mentioned earlier.

Jason Whitehead: It's times like this where the hardest work often goes unnoticed, and I'd like to thank the Alpha team members who doubled their efforts to ensure that internal roads and systems were kept open and operating to the very best of their abilities through the first couple challenging months of the year.

Speaker Change: Sounds like this where the hardest work often goes unnoticed and I'd like to thank the alpha team members, who double their efforts to ensure that internal roads in systems work at the open and operating to the very best of their abilities very the first couple challenging months of the year.

Dan Horn: With those operational updates, I'll now turn the call over to Dan for an update on the market. Thanks, Jason, and good morning, everyone. metallurgical coal markets ended 2024 at sharply lower levels than they began the calendar year, with each of alphas followed indices experiencing at least a 30% drop. For example, the Australian Premium Low Vol Index declined by 40% from the start of the year until the end. From the start to the finish of the fourth quarter specifically, there was limited movement among the four indices that Alpha closely monitored. The Australian premium low vol index fell from $204.75 per metric ton on October 3, October 1, 2024 to 196.

Speaker Change: With those operational updates I'll now turn the call over to Dan for an update on the markets.

Dan: Thanks, Jason and good morning, everyone.

Dan: Metallurgical coal markets ended 2024 at sharply lower levels than they began the calendar year with each of alpha's, followed indices experiencing at least a 30% drop.

Dan: For example, the Australian premium low Vol index declined by 40% from the start of the year until the.

Dan: From the start to the finish of the fourth quarter, specifically there was limited movement among the four indices that off with closely monitors.

Dan: The Australian premium low Vol index fell from $204 75 per metric ton on October 3rd October one 2024 to 196.

Dan Horn: $196.50 per metric ton on December 31, 2024. The U.S. East Coast Low Vol Index decreased slightly from $189 per metric ton at the beginning of the quarter to $188 per metric ton at quarter end. The U.S. East Coast Highball A Index fell from $184 per metric ton in October to $183 per metric ton at the end of December 2024. And finally, the U.S. East Coast Highball B Index opened and closed the quarter at $171 per metric ton. Since the quarter closed, the Australian PLV decreased to $187 per metric ton as of February 26. The U.S.

Dan: $196 50 per metric ton on December 31, 2020 for the U S East Coast low Vol index decreased slightly from $189 per metric ton at the beginning of the quarter $288 per metric ton at quarter end.

Dan: The U S East Coast Highboy index fell from $184 per metric ton in October to $183 per metric ton.

Dan: At the end of December 'twenty, 'twenty, four and finally, the U S East Coast High Vol. B index opened and closed the quarter at $171 per metric ton.

Dan: Since the quarter close the Australian P. L V decreased $287 per metric ton as of February 26th.

Dan: The U S East Coast low Vol High Vol, a and high vol, B indices measured $184 $180 50.

Dan Horn: East Coast Low Vol, High Vol A, and High Vol B indices measured $184, $180.50, and $167.50 per ton, respectively, as of the same day. In the seaborne thermal market, the API 2 index was $118.25 per metric ton on October 1, 2024, decreased to $113.15 per metric ton on December 31, 2024. And since then, the API 2 has fallen to $93 per metric ton as of February. The downward movement in metallurgical coal indices are primarily due to a decline in steel demand, which has been influenced by uncertainty in geopolitics and economic conditions across the globe. With numerous elections having been held and leaders elected within 2024, markets are now attempting to digest the anticipated future actions and governing priorities of these recently installed governments.

Dan: And $167 50 per ton respectively as of the same date.

Dan: In the seaborne thermal market. The API two index was $118 25 per metric ton on October one 2024 decreased to $113 15 per metric ton on December 31, 2024, and since then the API two has fallen to $93 per metric ton as of <unk>.

Dan: February 26.

Dan: The downward movement in metallurgical coal indices are primarily due to a decline in steel demand, which has been influenced by uncertainty and geopolitics and economic conditions across the globe.

Dan: With numerous elections, having being didnt held and leaders who elected within 2024 markets are now attempting to digest the anticipated future actions and governing priorities of these recently installed governments.

Dan Horn: For example, the new U.S. administration has expressed its commitment to imposing tariffs on certain imported goods and materials. If new tariffs are imposed and trade wars occur, these circumstances will likely impact natural coal trade flows and the cost of materials for coal production. As we've seen in recent weeks, the tariff situation is one that changes rapidly, so we continue to keep an eye on it, and we will adjust as necessary depending on where things land once the dust settles. Many of the factors that negatively influenced metallurgical coal markets last year, such as steel, depressed steel demand, continue to loom over the current pricing environment.

Dan: For example, the new U S administration has expressed its commitment to imposing tariffs on certain imported goods and materials.

Dan: If new tariffs are imposed and trade wars occur these circumstances will likely impact natural coal trade flows and the cost of materials for coal producers.

Dan: As we've seen in recent weeks the tariff situation is one that changes rapidly. So we continue to keep an eye on it and we will adjust as necessary, depending on where things land once the dust settles.

Dan: Many of the factors that negatively influenced metallurgical coal markets last year, such as steel depressed steel demand continue to loom over the current pricing environment.

Dan Horn: Additional uncertainty around fiscal policies, shifting geopolitical priorities and trade practices, as well as the overall economic health of the major coal-producing and coal-buying regions of the world will continue to influence metallurgical coal prices. Absent an increase in steel demand and a more certain geopolitical and economic backdrop. Challenging coal market conditions are expected to continue in the coming months. We continue to engage with customers as usual, making commitments for our 2025 export timing. Our most immediate challenges relate to the unfortunate weather conditions that have hammered the eastern United States in recent weeks, as they have created bottlenecks along the entire process of producing, moving by rail, and loading coal into vessels.

Dan: Additional uncertainty around fiscal policies shifting geopolitical priorities and trade practices as well as the overall economic health of the major co producing new coal buying regions of the world will continue to influence metallurgical coal pricing.

Absent an increase in steel demand and a more certain geopolitical and economic backdrop.

Dan: <unk> coal market conditions are expected to continue in the coming months.

Dan: We continue to engage with customers as usual, making commitments for our 2025 export tonnage.

Dan: Our most immediate challenges relate to the unfortunate weather conditions that have hammered the eastern United States in recent weeks as they have created bottlenecks along the entire process of producing moving by rail and loading colon to vessels. We expect these negative influences to lower our overall shipments and therefore weigh on our quarterly results for both Q1 and Q.

Dan Horn: We expect these negative influences to lower our overall shipments and therefore weigh on our quarterly results for both Q1 and Q2. At DTA, the team has done a great job of keeping operations running as smoothly as possible despite unfavorable weather conditions. As part of the multi-year program to upgrade equipment and infrastructure, a planned outage of roughly two weeks is scheduled to occur in May. While significant work and preparation have occurred to minimize the disruption to our shipping operations, we recognize that this outage has the potential to delay some shipping.

Dan: Two.

Dan: At DTA. The team has done a great job of keeping operations running as smoothly as possible despite unfavorable weather conditions as.

Dan: As part of the multi year program to upgrade equipment and infrastructure a planned outage of roughly two weeks is scheduled to occur in may.

Dan: While significant work in preparation of occurred to minimize the disruption to our shipping operations. We recognize that this outage has the potential to delay some shipments.

Unknown Executive: And with that, Operator, we are now ready to open the call for questions. Thank you. At this time, we'll be conducting a question and answer session.

Dan: And with that operator, we are now ready to open the call for questions.

Dan: Thank you at this time, we'll be conducting a question and answer session if.

Unknown Executive: If you would like to ask a question, please press star 1 on your telephone. One moment, please, while we poll for questions.

Dan: If you'd like to ask a question. Please press star one on your telephone keypad.

Dan: One moment, please while we poll for questions.

Dan: Yes.

Nathan Martin: Our first question comes from Nathan Martin with Venture. Please proceed. Thanks, operator. Good morning, guys. How are you? doing well. Thank you. You know, Dan, maybe just coming back to your comments at the end.

Speaker Change: Our first question comes from Nathan Martin with Benchmark Company. Please proceed with your question.

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

Speaker Change: Hey, how are you.

Nathan Martin: I'm doing well thank you.

Nathan Martin: And then maybe just coming back to your commentary and you know.

Dan Horn: Uh, you know, how should we think about the cadence of sales as we go through the quarters here in 25? You mentioned clearly the weather disruptions to start the year. I just called out the plane out of the D. T. A. In May. Um, you know, I think typical seasonality also limits domestic shipments in one cure anyways because of the weather. So, um, maybe just get some thoughts on how you guys see that playing out quarter by quarter for 25. Yeah, Nate, I mean, I think the well, the domestic shipments should be the cadence on those should be roughly pro rata, we do don't have much like business.

Nathan Martin: How should we think about the cadence of sales as we go through the quarters here in 'twenty five you mentioned clearly the weather disruptions to start the year I just called out the planned outage of DTA in May.

Nathan Martin: I think typical seasonality also limits domestic shipments and one carrier anyways because of the weather. So can you maybe just give some thoughts on how you guys see that playing out quarter by quarter for 25.

Speaker Change: Yeah Nate.

Speaker Change: I think it was the domestic shipments should be the cadence on those should be roughly pro rata. We do don't have much weight business. So we continue that that that should be fairly ratable through the year.

Dan Horn: So we continue that that that should be fairly routable through the year. You know, on the export side, probably have more in the back half, as we catch up from some of the miss shipments will have what some of my team calls the accordion effect on the on the shipments will work. We have low inventories today. As things come back to normal, we'll pick up and resume slightly higher level shipments as we go forward. And the market depends, you know, some of that's market dependent, too. We expect this steel demand hopefully improves towards a back out.

Speaker Change: Yeah on the export side, probably have more in the back half.

Speaker Change: As we catch up from some of the missed shipments will have what some of my team calls the accordion effect on the on the shipments will work.

Speaker Change: We have low inventories today as things come back to normal will pick up in.

Speaker Change: Your resume.

Speaker Change: A slightly higher level of shipments as we go forward.

Speaker Change: And the market. It depends you know some of that's market dependent too we expect.

Speaker Change: Steel demand hopefully improves towards a back out there should be some more spot demand.

Nathan Martin: There should be some more spot demand and spot shipments as well. Okay, guys, that's helpful.

Speaker Change: And spot shipments as well.

Speaker Change: Okay got it.

Speaker Change: That's helpful and then.

Andy Eidson: And then, you know, talking about cost per ton guidance, clearly, you guys raised that $2 at the high end, as you mentioned, is it possible to get a breakdown of that between the expectation for lower shipments, the purchase coal, how that impacted the cost range, and then, you know, the difficult weather to start the year, any way to quantify that? Hey Nate, it's Andy. I don't think so. I mean, We're kind of picking nits there, and again, we only increased the upper range by $2. And it's a little bit of a fudge factor, to be honest.

Speaker Change: Talking about cost per ton guidance, clearly you guys raised out $2 at the high end as you mentioned.

Speaker Change: Is it possible to get a breakdown of that between the expectation for lower shipments to purchase coal how it impacted the cost range and then you know the difficult weather to start the year any way to quantify that.

Speaker Change: Hey, Nate its Andy I don't think so I mean it is.

Speaker Change: We're kind of picking nits, there and again, we only increased the upper range of about $2 and it's it's a little bit of a fudge factor to be honest, we do know that there's going to be some we've seen the cost impacts and actuals in January we haven't seen February actuals of course, but we do expect some impact there so well.

Andy Eidson: We do know that there's going to be some... We've seen the cost impacts in actuals in January. We haven't seen... February Actuals, of course, but we do expect some impact there. So we're really just guarding against any kind of issues with Q1 throwing us off track for guys to give us a little bit of a little bit of breathing room. But we do know there's, you know, there's at least a dollar of impact baked in there to the midpoint. And, and it is, you know, it's really hard to break it down between any, any of the contributing factors.

Speaker Change: Just guarding against any kind of issues with Q1 throwing us off track for guidance. It gives us a little bit of a little bit of breathing room, but we do know if there's you know there's at least a dollar of impact baked in there to the midpoint.

Speaker Change: And it is you know, it's really hard to break it down between any any of the contributing factors.

Nathan Martin: Okay, that's that's fair, Andy. I get it.

Speaker Change: Okay, that's fair and I get it maybe just shifting over to the price side. It looks like you guys priced X.

Nathan Martin: Maybe just shifting over to the price side. Looks like you guys priced some export MET tons now at $113. If my math is close, it's probably around a million tons, maybe a little bit more than that based on the rest of your guidance.

Speaker Change: Export met tons now at $113.

Speaker Change: If my math is close to probably around a million tons, maybe a little bit more than that based on the rest of your guidance could we get an idea maybe the quality or index mechanism being used for those tons because even in this market I feel like that 113, maybe a little lower than I would've expected and clearly getting close to kind of a high end of that cost per ton guidance now, but maybe it's just.

Dan Horn: Could we get an idea maybe of the quality or index mechanism being used for those tons? Because even in this market, I feel like that 113 is maybe a little lower than I would have expected and clearly getting close to kind of the high end of that cost per ton guidance now. But maybe it's just because it's high ball B or going CFR or whatever, but some additional color would be great. Yeah, they, it's probably those those times probably are highball tons. You know, we're still anticipating a little bit of uplift in the price curves as the year goes on.

Speaker Change: Cause it's you know high vol, b, you're going to see a car or whatever but some additional color would be great.

Speaker Change: Yeah.

Speaker Change: They.

Speaker Change: Probably those costs, probably our high voltage <unk>.

Speaker Change: We're still anticipating a little bit uplift and the price curves as the year goes on.

Dan Horn: I can't really comment if they're going to be high vol A, high vol B, can't get too granular on that, but broadly speaking, those tons would be priced as high. I will say that the supply is a little tighter than maybe you'd read in the rags these days. The weather impacts on the East Coast have affected all cap producers and NAP producers as well. So I think maybe things are being a little bit underreported as far as supply.

Speaker Change: I can't really comment if theyre going to be high vol. A I will be you can't get too granular on that but broadly speaking those those those tonnes would be.

Speaker Change: As I well.

Speaker Change: I will I will say that the supply is a little tighter than maybe you would read in the rags. These days.

Speaker Change: Weather impacts on the East coast are affected all cap producers in Napa and that producers as well so.

Speaker Change: Thank you you may be things are being a little bit underreported as far as supply.

Speaker Change: Yeah.

Nathan Martin: Okay, Dan, got it. Appreciate that.

Speaker Change: Okay. Okay got it appreciate that and then maybe just one more guys just kind of thinking about.

Dan Horn: And then maybe just one more, guys, just kind of thinking about, you know, the macro, in general, you made a couple comments related to tariffs. You know, I was just thinking, we know Alpha is one of the largest suppliers of met coal to the domestic steel markets. And given the moves we've seen thus far from the new administration, you know, what are your thoughts on how that could impact your domestic demand for your products? And, you know, is there and what's your ability to shift tons, you know, back and forth, you know, domestic export to kind of maximize your margins there?

Speaker Change: The macro in.

Speaker Change: In general made a couple of comments related to tariffs you know I was just thinking we know alphas you know one of the largest suppliers of met coal to the domestic steel markets.

Speaker Change: And given the moves we've seen thus far from the new administration.

Speaker Change: What are your thoughts on how that could impact the domestic demand for your products and or and what's your ability to ship tons back and forth in their domestic or export to kind of.

Speaker Change: Maximize your margins there.

Dan Horn: Sure, we certainly have the ability to shift some tons between the two, between seaboard and domestic. I think when you look at the domestic market, it sort of begins and ends with the blast furnaces. And right now, our customers are running their blast furnaces that they intend to run, let's say. I'm not sure that there will be additional blast furnace production coming on. If there is, then that's going to require additional coke production and then that'll require additional coking coal. So, to the extent that happens, we're prepared. I'm not sure I see signals that that will happen yet.

Speaker Change: Sure.

Speaker Change: We certainly have the ability to shift some tons between the two between seaboard and domestic I think when you look at the domestic market.

Speaker Change: Begins and ends with the blast furnaces and right now our customers are running their blast furnaces.

Speaker Change: Intend to run, let's say I'm not sure that there'll be additional blast furnace production coming on if there is then that's going to require additional co production and then I'll require additional coking coal so to the extent that happens we're prepared I'm not sure I see signals that that will happen yet though.

Speaker Change: Yeah.

Nathan Martin: Great.

Nathan Martin: Appreciate those thoughts, Dan.

Speaker Change: Great appreciate those thoughts Dan Thank you.

Nathan Martin: Thank you guys for your time and best of luck in 2025. Thanks, Nate.

Speaker Change: You guys time and.

Speaker Change: Best of luck in 'twenty five.

Nick: Thanks, Nick.

Speaker Change: Yeah.

Nick Giles: Our next question comes from the line of Nick Giles with B.

Speaker Change: Our next question comes down the line of Nick Giles with B Riley. Please proceed with your question.

Nick Giles: Reilly, please proceed with your question. Thanks, Operator. Good morning, everyone. Guys, congratulations on all your accomplishments at the operating level. I'm sure the trophy case is getting pretty full. My first question is, you know, cash for $480 million, which I believe is roughly flat quarter over quarter, but still higher than historical periods. Is this kind of the level we should expect you to target if the market remains weak? And then what kind of level should we think about if markets are to turn? And how should we square this with cash that could be deployed towards share purchases?

Nick Giles: Thanks, operator, good morning, everyone.

Speaker Change: Guys can congratulations on all your accomplishments at the operating level I'm sure the trophy cases getting pretty full.

Nick Giles: <unk>.

Speaker Change: My first question.

Cash and 480 million, which I believe is roughly flat quarter over quarter, but still higher than historical periods.

Speaker Change: This is kind of the level, we should expect you to target if the market remains weak and then what kind of level should we think about it market starts to turn and how should we square this with cash that could be deployed towards share repurchases. Thanks. So much.

Andy Eidson: Thanks so much. Yeah, and thanks, Nick, for the compliment. It's kind of lost in the in the The chaos of the market right now of how how well operations did perform in Q4. And so we don't want to gloss that over that, as I mentioned, the bad market tariffs get the headlines. But the real story here is how well operations performed in the quarter, both from, you know, productivity. Once again, we're Top of the Heap. on the MET production side, as far as MSHA productivity metrics, our safety was off the charts, not just for the quarter, but for the year.

Speaker Change: Yes.

Nick Giles: Thanks, Nick for the.

Speaker Change: The compliment it's kind of lost in the in the.

Speaker Change: The chaos of the market right now of how how well operations did perform in Q4, and so we don't want to go off that over that as I mentioned.

Speaker Change: The bad market and tariffs get the headlines, but the real story here is how well operations performed in the quarter both from a productivity once again, where.

Speaker Change: Top of the heap.

Speaker Change: On the met production side as far as and shelf productivity metrics are safety was off the charts not just for the quarter, but for the year. So a lot of good work happening there, but talking about liquidity.

Andy Eidson: So a lot of good work happening there.

Andy Eidson: But talking about liquidity. I mean, our target has been and we talked about we started this conversation a year ago, really a year ago, almost this week, of we felt the market was getting some weak legs. And we went into cash preservation mode. So we suspended the share repurchase, and we wanted to warehouse as much cash as possible. We have hit this Kind of a static rate in that, generally speaking, we'll call it a $400 to $500 million range of cash and then additional liquidity from the ABL. You know, we want to hold on to that as long as we possibly can.

Our target has been and we talked about we started this conversation a year ago really a year ago.

Speaker Change: Almost this week of we felt the market was getting some weak legs and we went into cash preservation mode. So we suspended the share repurchase and we wanted to warehouse as much cash as possible.

Speaker Change: We have hit this.

Speaker Change: Kind of a static rate and that generally speaking we'll call. It a 400 to 500 million dollar range.

Speaker Change: Range of cash and an additional liquidity from the ABL and.

Speaker Change: You know, we want to hold onto that as long as we as long as we possibly can we're going to continue managing to cash rather than any other.

Andy Eidson: We're going to continue managing to cash rather than any other outside situation. And you know, at this point, I don't know that, you know, we're really interested in thinking about any share repurchase activity or any kind of capital returns until we do see some trend in the market going the other direction, because this thing has set in for a little bit, and there's just a lot of uncertainty. So I think we're going to kind of maintain course on what we've been doing, and job one has always been protect the franchise, and we're going to continue that direction.

Speaker Change: Outside of the situation.

Speaker Change: And you know at this point I don't I don't know that we're really interested in thinking about any any share repurchase activity or any kind of capital returns until we do see some trend in the market going the other direction. Because this thing is set in for a little bit and there's just a lot of uncertainty. So I think we're going to kind of maintain portion of what we.

Speaker Change: We've been doing and job one has always been protect the franchise and we're going to continue that direction.

Nick Giles: Makes sense.

Nathan Martin: Makes sense I appreciate that Andy.

Andy Eidson: I appreciate that, Andy. Maybe just from an M&A perspective, I think you may have alluded to some potential opportunities out there. Any other additional color around those, whether from a size perspective, or what kind of metrics are you paying attention to? What geographies make most sense? Would this be some of your Central App peers, for instance?

Nathan Martin: Maybe it's from an M&A perspective, I think you may have alluded to some potential opportunities out there or any other additional color around those whether from a size perspective, or what what kind of metrics are you paying attention to what what geographies make much sense would this be some of your central up here for instance.

Andy Eidson: Yeah, and again, let me let me go ahead and warn you, there's nothing actionable out there at the moment. There are obviously some some processes going on with certain assets, there are some bankruptcy processes that are working through the system. So there are lots of opportunities to do some things that could be at, you know, of kind of a low entry cost. The issue now is you have to be careful of watching for cash burn from operations. That's the thing you have to keep an eye on. But there are some – potentially some opportunities. We've always thought about the filter of, number one, it needs to be geographically synergistic.

Nathan Martin: Yeah, and again, let me let me go ahead and warn you there is nothing actionable out there at the moment.

Nathan Martin: There are obviously, some some processes going on with certain assets. There are some bankruptcy processes that are working through the system.

Nathan Martin: So there are lots of opportunities to do some things that could be at a you know a kind of a low entry cost. The issue now is you have to be careful of watching for cash.

Nathan Martin: Cash burn from operations and that's the thing you have to keep an eye on but.

Nathan Martin: There are some potentially some opportunities we've always thought about the field drove number one it needs to be geographically synergistic.

Andy Eidson: Number two, it needs to be somewhat synergistic or additive from a coal quality standpoint. And thirdly, it needs to be in some way accretive, whether it's net income, cash flow, or EBITDA. Some metric, it needs to make some sense. And, you know, at this point in time, it's a little bit tougher to hit the accretion mark. But, again, right now is not forever. So if there's some opportunities for us to see some consolidating M&A, whether it's, you know, very, very small or, you know, slightly larger than a buy size, then we're going to have to strongly consider it.

Nathan Martin: Two it needs to be somewhat synergistic or additive from a coal quality standpoint, and thirdly, it needs to be in some way accretive whether its net income cash flow or EBITDA. Some some metric it needs to make some sense and you know at this point in time, it's a little bit tougher to hit the accretion Mark.

Nathan Martin: But again right now it's not forever. So if there's some opportunities for us to.

Nathan Martin: See some some consolidating M&A, whether it's you know very very smaller.

Nathan Martin: Holly larger than a bathhouse then we're gonna have to strongly consider it.

Nathan Martin: Okay. That's helpful. Maybe just one more for me any color around kind of where you.

Andy Eidson: That's helpful. Maybe just one more for me. Any color around kind of where you see marginal cost today?

Andy Eidson: Any other comments you can share around how much supply out of Central App might have come out of the market to date and how much could be at risk? Oh, goodness, that that's the that's the billion dollar question right there. I mean, we we have seen a few tons come out some of it has been through actual Mynodling. Some of it has been through, you know, operational interruptions for other reasons. So it's kind of hard to gauge how much of these are permanently gone or even, you know, more midterm tons that are out of the market.

Nathan Martin: T marginal cost today any other comments you can share around how much supply out of central App might have come out of the market to date and then how much could be at risk.

Nathan Martin: Oh goodness that that's the that's the $1 billion question right there.

Nathan Martin: We have seen a few tons come out some of it has been through actual.

Nathan Martin: Manav link some of it has been through operational interruptions for other reasons. So it's kind of hard to gauge how much of these are permanently gone or even more.

Nathan Martin: More midterm tons that are out of the market. So I don't want to comment on that I do think you know another thing that we talked about last year was the.

Andy Eidson: So I don't want to comment on that. I do think, you know, another thing that we talked about last year was The cost curve, you know, at the time, the cost curve was, the C90 was around, you know, the view was it was 225, and the thought was that would provide a floor, and obviously, that has not been the case. It still boils down to, you know, the breakdown of fixed versus variable cost and what optimizes cash flow for these operations. I think we are, and at this point, I think we've probably crossed the Rubicon in some respect of several operations that are moving into that zip code of where they may not be covering their variable costs on some of their tons.

Nathan Martin: The cost curve you know at the time of the cost curve C. 90 was around you know the view was it was $2 25, and the thought was that would provide a floor.

Nathan Martin: And obviously that has not been the case, it's still boils down to.

Nathan Martin: The breakdown of fixed versus variable cost and what what optimizes cash flow for these operations I think we are in at this point I think we'd probably we'd probably crossed the rubicon in some respect of several operations that are moving into that ZIP code of where.

Nathan Martin: They may not be kept covering their variable cost on some of their tons. So I would expect you know obviously kind of stating the obvious.

Andy Eidson: So I would expect, you know, obviously, it's kind of stating the obvious, as this market continues, we'll see more pressure on these, particularly the smaller operators that don't have the ability to spread. They're fixed costs across a bunch of times.

Nathan Martin: As this market continues we will see more.

Nathan Martin: More pressure on these particularly the smaller operators that don't have the ability to spread.

Nathan Martin: They're fixed costs across a bunch of times.

Andy Eidson: We're going to see some of those more of those folks exiting and a lot of the higher cost operations could be coming out, you know, sooner rather than later, we're not going to comment on anything specific because everybody's got to make their own decisions. But I can't see how there's not more to come. I do think marginal cost. is becoming a real issue at this point. I think that's where the pressure is going to apply, particularly in central apple acid. Andy, I appreciate all that color.

Nathan Martin: We're going to see some of those more of those folks exiting and a lot of the higher cost operations could be coming out you know sooner rather than later.

Nathan Martin: Not going to comment on.

Nathan Martin: Anything specific because everybody's got to make their own decisions, but.

Nathan Martin: I can't see how theres not more to come I do think marginal cost is.

Nathan Martin: <unk> is becoming a real issue at this point and.

Nathan Martin: I think that's where the pressure is going to apply particularly in central Appalachia.

Speaker Change: Andy I appreciate all that color if I could sneak in one more maybe just on the transportation side can you just remind us of maybe any sensitivity to pricing and then I believe your transportation costs don't work on a lag. So if you could just clarify that that'd be helpful.

Andy Eidson: Um, if I could think in one more, maybe just on the transportation side, can you just remind us of maybe any sensitivity to pricing? And then I believe your transportation costs don't work on a lag. So if you could just clarify that, that'd be helpful. You referring to rail costs? Correct. Yeah, we don't really comment on that. Those are contractual situations with both railroads. So we don't say too much. I mean, they are somewhat aligned with indexes. So that's probably all I should say about that.

Speaker Change: You're referring to rail costs.

Correct.

Speaker Change: Yeah, well we.

Speaker Change: We don't really comment on that those are those are contractual situations with both railroads. So we don't say too much I mean, they are somewhat aligned with indexes.

Speaker Change: That's probably all I should say about that.

Speaker Change: Yeah.

Andy Eidson: Fair enough.

Speaker Change: Fair enough well Indian team and when I commend you on all your efforts in this tough market. So keep up the good work.

Nathan Martin: Well, Andy and team, I want to commend you on all your efforts in this tough market. So keep up the good work. Thank you very much.

Speaker Change: Thank you very much.

Speaker Change: Yeah.

Unknown Executive: We have reached the end of the question and answer session.

Speaker Change: We have reached the end of the question and answer session I would now like to turn the call back over to Andy Hudson for closing remarks.

Andy Eidson: I'd now like to turn the call back over to Andy Edson for closing. Well, thanks, everyone, for your time today. We appreciate you. We'll see you next quarter. Have a great rest of the day and great weekend.

Speaker Change: Well thanks, everyone for your time today. We appreciate you will see you next quarter have a great rest of the day and a great weekend.

Unknown Executive: This concludes today's conference. You may disconnect your lines at this time and we thank you for

Speaker Change: This concludes today's conference you may disconnect your lines at this time and we thank you for your participation.

Speaker Change: Yeah.