Q3 2025 Alpha Metallurgical Resources Inc Earnings Call
Speaker #3: The .
Speaker #4: Greetings . Welcome to the Alpha Metallurgical Resources, Inc. . Third quarter 2020 results conference call . At this time , all participants are on a listen only mode .
Speaker #4: A question and answer session will follow the formal presentation . Please note this conference is being recorded . I would now like to turn the conference over to your host , Emily O'Quinn Senior Vice President , Investor Relations and Communications .
Speaker #4: You may now begin .
Speaker #5: 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 .
Speaker #5: For more information regarding forward looking statements and some of the factors that can affect them , please refer to the company's third quarter 2020 earnings release and the associated SEC filing .
Speaker #5: Please also see these documents for information about our use of non-GAAP measures and their reconciliation to GAAP measures . Participating on the call today are Alpha's Chief Executive Officer , Andy Eidson , and our president and chief operating Officer , Jason Whitehead .
Speaker #5: Also participating on the call are Todd Muncy , our chief financial officer , and Dan Horne , our chief commercial officer . With that , I will turn the call over to Andy .
Speaker #6: Thanks , Emily , and good morning , everyone . This morning , we announced our financial results for the third quarter , which include adjusted EBITDA of $41.7 million and 3.9 million tonnes shipped .
Speaker #6: It was another good quarter for our team , similar to Q2 . The highlight of the period is the outstanding performance on cost of coal sales .
Speaker #6: For the second quarter . We missed a sub $100 level by only $0.07 in Q3 . We were able to shave almost another $3 off the prior quarter level , coming in at $97.27 per ton .
Speaker #6: We're proud to have posted the best cost of coal sales performance for the company since 2021 , and back to back quarters . Our focus remains on finishing the year strong by continuing to safely keep costs in line .
Speaker #6: Our cost discipline is especially important as we continue navigating the current stage of the market cycle , and as metallurgical coal indexes reflect softness in the market environment .
Speaker #6: Broadly , the indexes have hovered around current levels for several months , with oscillated pockets of volatility . The underlying economic conditions informing steel demand around the globe remain vulnerable to uncertainty and lackluster economic growth .
Speaker #6: Expectations . Against this backdrop , we're in the process of planning for 2026 , putting together budgets and anticipating what we believe could be another challenging year for the coal industry .
Speaker #6: At the same time , we remain in discussions with our North American customers about domestic sales commitments for next year . With those conversations and budget planning still in progress , we're not quite yet ready to issue guidance for 2026 .
Speaker #6: Once domestic negotiations conclude and we have greater visibility into the coming year , we will share additional information about our expectations and guidance .
Speaker #6: Until then , we will keep working hard to manage costs , operate safely and effectively , and finish 2012 . On 2025 on a strong note .
Speaker #6: I'll now turn the call over to Todd for additional information on our third quarter financial results .
Speaker #7: Thanks , Andy . Adjusted EBITDA for the third quarter was $41.7 million , down from $46.1 million in the second quarter . We sold 3.9 million tons in Q3 , the same amount as in Q2 .
Speaker #7: Met segment realizations decreased quarter over quarter , with an average realization of $114.94 in the third quarter , down from $119.43 in Q2 .
Speaker #7: Export met tons priced against Atlantic indices and other pricing mechanisms in the third quarter . Realized $107.25 per ton , while export coal priced on Australian indices realized $106.39 per ton .
Speaker #7: These results are compared to realizations of $113.82 per ton and $109.75 , respectively . In the second quarter , the realization of our metallurgical sales in Q3 was a total weighted average of $117.62 per ton , down from $122.84 per ton in Q2 .
Speaker #7: Realizations in the incidental thermal portion of the met segment increased $81.64 per tonne in Q3 as compared to $78.01 per ton in the second quarter .
Speaker #7: Cost of coal sales for our met segment decreased to $97.27 per ton in the third quarter , down from $100.06 per ton in Q2 .
Speaker #7: SGA , excluding non-cash stock compensation and non-recurring items , increased to $13.2 million for the third quarter as compared to $11.9 million in the second quarter .
Speaker #7: CapEx for the quarter was $25.1 million , down from $34.6 million in Q2 . Moving to the balance sheet and cash flows as of September 30th , 2025 , we had $408.5 million in unrestricted cash and $49.4 million in short term investments as compared to $449 million of unrestricted cash as of June 30th .
Speaker #7: We had $185.5 million in unused availability under our ABL . At the end of the third quarter , partially offset by a minimum required liquidity of $75 million .
Speaker #7: As of the end of September , Alpha had total liquidity of $568.5 million , up from $556.9 million at the end of June .
Speaker #7: Cash provided by operating activities was $50.6 million in Q3 , down from $53.2 million in the second quarter . As of September 30th , our ABL facility had no borrowings and $39.5 million of letters of credit .
Speaker #7: Outstanding , with additional visibility into remaining payments for the year . We are lowering our capital contributions to equity affiliates , guidance to a range of 35 to $41 million , down from the prior range of 44 to $54 million .
Speaker #7: In terms of our committed position for 2025 , at the midpoint of guidance , 85% of our metallurgical tonnage in the met segment is committed and priced at an average price of $122.57 .
Speaker #7: Another 13% of our met tonnage for the year is committed , but not yet priced . The thermal byproduct portion of the met segment is fully committed and priced at the midpoint of guidance at an average price of $80.27 .
Speaker #7: I'll now turn the call over to Jason to provide an update on operations .
Speaker #6: Thanks , Todd , and good morning , everyone . Last quarter , I spoke to the cost reduction efforts carried out in Q2 .
Speaker #6: Being twofold a 10% increase over Q1 in terms per man hours that lowered labor and other fixed costs , and the teams achieving these efficiency gains while reducing supply and maintenance expenses .
Speaker #6: I'm pleased to report on the operations team's continued success in managing costs and increasing tonnes per man hour again by another 2%. Q3 marks the second quarter in a row of record quarterly cost performance since 2021 at $97.27 per tonne.
Speaker #6: In addition to the very positive cost performance by operations in the quarter , I'm pleased to report strong progress on our new low ball mine , Kingston Wildcat .
Speaker #6: The slope development is complete and has intercepted the coal seam . We are now in development , production , working our way toward the areas where we will install ventilation shafts and dewatering shafts .
Speaker #6: While we plan to short tag this coal , this raw coal to our mammoth facility to leverage our existing preparation plant . We've also been working hard at building out the supporting infrastructures of the Wildcat mine , like building , loading and off loading infrastructure to help move the coal where it needs to go .
Speaker #6: Development . Production will continue through the rest of the year , and we expect to ramp up to a full annual run rate of roughly 1 million tonnes sometime within the 2026 calendar year .
Speaker #6: Lastly , I'd like to congratulate our Virginia teams on some recent outstanding safety and environmental achievements . First , the Virginia Department of Energy Coal Mine Safety Awards and those were awarded to Paramount Cantera , DeepMind , 41 .
Speaker #6: The McClure Preparation Plant . Both 88 strip and 88 strips . Highwall miner . The Long branch Surface mine and high minor and our three forks Highwall miner on the environmental side , the Met Coal Producers Association awarded our Tom's Creek preparation plant the best active prep Plant award , and our stone coal mine was awarded Best Reclaimed Underground Mine .
Speaker #6: Congrats again to all those involved in the safe and hard work that's behind these accomplishments . With that , I'll now turn the call over to Dan for some details on the market .
Speaker #8: Thanks , Jason . Good morning everyone . As steel demand remained subdued , metallurgical coal markets experienced slight fluctuations during the third quarter , but have been largely range bound over the prior six month period .
Speaker #8: The global economic outlook continues to be clouded with uncertainty surrounding policy changes . Geopolitical , geopolitical unrest , tariffs and ongoing trade negotiations , and shifting trade policies .
Speaker #8: Future steel demand and metallurgical pricing will also be impacted by these factors . Of the four indices that alpha closely monitors , the Australian Premium Low Vol Index represented the most significant move during the quarter , an increase of 9.6% .
Speaker #8: The Australian PLV index rose from $173.50 per metric ton on July 1st to $190.20 per metric ton on September 30th. The U.S. East Coast Low Vol index increased from $174 per metric ton at the beginning of the quarter to $177 per metric ton at the quarter close.
Speaker #8: The East Coast High Vol A index fell from $159 per metric ton in July to 152 . 50 per metric ton at the end of September , and finally , the US East Coast High Index decreased from $147 per metric ton to $144.50 per metric ton at quarter end .
Speaker #8: Since the quarter closed , all three US indices have either remained flat or trended downward , while the Australian POV has increased to $196.50 as of November 4th .
Speaker #8: US East Coast Low Vol index was one . 7750 , while high Vol and High vol B indices measured 150 and $140 per ton , respectively , as of the same date .
Speaker #8: In the seaborne thermal market , the API two index was $107.95 per metric ton . As of July 1st , and decreased to $95.40 per metric ton on September 30th , and since then , the API two has increased to $100.70 per metric ton .
Speaker #8: As of November 4th . Turning to logistics , we have been working alongside officials at CSX to understand the implications of a train derailment that occurred on October 25th .
Speaker #8: While the train was not carrying office cargo . The derailment occurred on an important rail line used to access Dominion Terminal Associates , where the majority of our our exports originate .
Speaker #8: Our team members have notified customers of potential for impacts depending on how quickly the railroad can reinstate service . In the meantime , we continue to fulfill shipments from our stockpiles at DTA and we're actively investigating alternative opportunities that can help keep our coal moving on its way to customers .
Speaker #8: If the outage would extend for a prolonged period of time , we remain in close contact with the railroad and their teams , and we look forward to the rail line being fully operational in the coming days .
Speaker #8: Lastly, we are still engaged in discussions about the sale of coal to North American customers in 2026. Given the ongoing nature of these negotiations, I do not have any additional details about the volume or pricing that will make up Alfa's domestic sales book for next year.
Speaker #8: However , after these negotiations conclude , we will share more information about our domestic commitments and guidance expectations for the coming year as we typically do .
Speaker #8: Operator we are now ready to open the call for questions .
Speaker #4: Thank you . At this time , we'll be conducting a question and answer session . If you'd like to ask a question , please press star one on your telephone keypad .
Speaker #4: One moment, please. While we pull for questions, our first question comes from Nick Giles with B Riley Securities. Please proceed with your question.
Speaker #9: Thank you . Operator . Good morning everyone . Andy , Jason , you and the team have done a really impressive job of cutting costs during this down cycle .
Speaker #9: And we know there will be a modest , incremental benefit from 45 in the new year . But my question is , ultimately , how should we think about the sustainability of some of these cuts ?
Speaker #9: You know , there's always sale sensitive components on the way up . But just would appreciate any additional perspective on how productivity could shift if prices really start to move here .
Speaker #6: Hey , Nick , this is Andy . I'll let Jason have the bulk of this one . But I mean , generally speaking , you're right .
Speaker #6: There's going to be some volatility quarter to quarter . Obviously , going into Q4 when you have vacation periods that that usually creates a little bit a little bit of chaos around costs .
Speaker #6: And production . But I mean , that's usually baked into expectations . But I would just pause for a moment to again congratulate the operations team .
Speaker #6: Jason and his his crew have done an amazing job over the past several quarters , continually ratcheting those costs down while maintaining , you know , our safe production mantra , which is above all important to us .
Speaker #6: So exceptional work there . Jason . Any comments on ? No , I mean , that's that's right . Andy . You know , I will say that , you know , I think , well , number one , there's always there's always we always run a risk of , you know , unforeseen geologic problems .
Speaker #6: You know , that could occur , you know , whether it's us or any of our competitors . But , you know , generally speaking , I think the mines are in a better place than they were .
Speaker #6: Maybe earlier in the year . We had planned development projects that were , you know , going on that are that are now behind us .
Speaker #6: So , you know , we still we have the problems with vacation shutdowns and things like that that we always see in the fourth quarter .
Speaker #6: But , you know , we're hopeful to , you know , largely offset a lot of that because the mines are just performing better .
Speaker #6: But it was it was planned that way .
Speaker #9: Got it . Thank you . Thank you both for that . My next question was , you know , understand that you're unable to offer much additional color on next year's domestic contracts .
Speaker #9: But if we were to look back at prior years , is there any precedent that could inform us on how much you may flex those volumes ?
Speaker #9: Or , you know , are there any year over year changes where domestic contracts were changed ? You in excess of a million tons ?
Speaker #8: Yeah . Nick , this is Dan . You know , every year is different . I don't know , a lot of it is in the hands of our customers .
Speaker #8: They're the steel industry in North America . Is not running at full capacity . At least the blast furnace segment . So , you know , coking coal demand will go with the hot metal production .
Speaker #8: It's it's it's a little erratic . If you talk to our customers , the steel pricing is good , but the volumes aren't quite there .
Speaker #8: The automotive sector in particular . So you know , the demand could will shift because of that . You know , I'm I would guess it's going to be similar to to last year .
Speaker #8: You have some new supply entrants in the market on the supply side that might try to take some market share . And again this is nothing new .
Speaker #8: This happens every year . So I can't really comment on a million ton swing that that that seems like a lot . But you know until we're through the negotiations , I really can't say any more than that .
Speaker #6: Yeah . And I would say , generally speaking , I'm looking at Dan to to either nod or kick me under the table if I've got this wrong .
Speaker #6: But , you know , if you look back at our history , going back to , I guess , post post merger 2019 , we've been in as low as low threes and as high as , you know , for four and change in that time period .
Speaker #6: So I think that's kind of the the band that we will stay stay range bound in . And then you know the details will come out as we put those together .
Speaker #6: You know there could be smaller pieces of business that come in closer to the end of the year . But , you know , hopefully in the next couple three weeks we'll have more have more information to share on the bulk of what the book will look like .
Speaker #9: Understood . And then maybe one more , if I could , you know , some of your peers have have come out and talked about rare Earth opportunities .
Speaker #9: This has , you know , mostly occurred in the PRB , but it seems like there could be some opportunities to process , some waste material at prep plants , things of that nature .
Speaker #9: Is this something you've looked into at all, or is it really less relevant just given your operations? Are you centralized in the East?
Speaker #6: Yeah , I mean , that rare earths , it is the it's the shiny object at the moment . You know , it's kind of the Wild West as far as project announcement and evaluations .
Speaker #6: We actually have done work going back to 2014 , looking at some of these items . And it's been kind of a scattershot approach over the past decade .
Speaker #6: We've not really done a lot with it , but I mean , we are we are spending some time and a little bit of money , a very little bit of money looking at these opportunities .
Speaker #6: There are some some areas we've probably got , you know , as far as in the hundreds of areas to be sampled . I mean , we're not under any illusion that any of this is going to drive any material economic impact simply because , again , we just don't know what we don't know .
Speaker #6: But it is good to take an inventory of what we have and also know what we don't have . So we'll spend some , spend a little bit of time on that in the next couple of quarters and see what we have .
Speaker #6: But again , we're we're pretty happy mining , metallurgical coal . And if something else pops up , that'll be great . But that's that's really not our strategic intent at this moment .
Speaker #9: Got it . Well , thanks for that . Guys , I really appreciate all the color as always . So continued . Best of luck .
Speaker #6: Thank you . Nick .
Speaker #4: Our next question comes from Nathan Martin with the Benchmark Company . Please proceed with your question .
Speaker #10: And operator . Good morning , gentlemen . Congrats as well on the continued cost per ton progress there . Maybe first one for Dan .
Speaker #10: Dan , you talked about the the derailment on CSX line . Is there an ETA for the full reopening of that line ? And then how much more inventory do you guys have left on the ground at DTA to serve customer contracts ?
Speaker #8: And they will actually , the good news is we learned this morning that the first trains have moved through that area . So we expect this to be a relatively short duration event .
Speaker #8: There's a whole lot of empty railcars on one side of the derailment , and a whole lot of loaded coal cars on the other side , so it'll take some amount of time to get the get some fluidity on the system .
Speaker #8: There . We had coal on the ground . We were able to continue loading vessels , move some things around . We're we're the only shipper that can ship out of all three of the Hampton Roads coal terminals .
Speaker #8: So we took advantage of that . And our team did a nice job . So it's as far as the inventory number we had sufficient tons to load the customers that we had to and just kind of kept kept things moving along .
Speaker #10: Okay , perfect . Good to hear . Maybe just coming back real quickly to the domestic negotiations . Again . Appreciate those that are ongoing .
Speaker #10: Just curious if if fixed price contracts can't be agreed upon on the normal call it 3 to 4 million tons . You guys just highlighted , would things just move to spot negotiations at that point ?
Speaker #10: Just trying to think about a situation where this has dragged on that long , meaning the negotiations with the domestic customers just would be curious for your thoughts .
Speaker #8: Yeah . Generally , Nate , the domestic customers all want to do fixed price one year contracts . So there's not a lot of spot activity in that market .
Speaker #8: So you know , no I it's spot activity usually only occurs when there's an interruption . You know at a at a mine or perhaps a ramp up that they didn't foresee in coke production .
Speaker #8: But generally it's fixed price in the volumes are pretty well known across the board .
Speaker #10: Got it . Yeah . I mean , I just to clarify , like you said , Dan , I've just never seen it drag out this long .
Speaker #10: So I was just curious . But it sounds like , you know , regardless , you'll get some fixed price contracts done at some point .
Speaker #8: Yeah , it agreed it took you know , I've been doing this a long time . We sort of started the process in July and now it's November .
Speaker #8: That is a you know , from in my experience , it's a long time . But there's , you know , the steel industry got some uncertainty to some new acquisitions and some , some of the steel plants around the US have been idled and things .
Speaker #8: So it's I think our customers have have their hands full to . .
Speaker #10: Got it . Thanks for those thoughts . Then maybe just one final question . You know pricing is getting a bit of a lift recently as you guys highlighted .
Speaker #10: But market conditions do remain largely challenged . You know , we also expect new coal supply or some restarted supply to potentially come online .
Speaker #10: I guess over the next few quarters here . So , you know , how does Alpha kind of expect to navigate these market conditions going forward ?
Speaker #8: Well , you know , new mines come online and old mines go offline . It's not new . So we'll navigate it . We're watching it closely .
Speaker #8: We're we like to think we're the supplier of choice for a lot of the customers . We we do what we do pretty well .
Speaker #8: And we'll , you know , we'll we'll have to deal with the market forces as they are , but we're not afraid of the competition .
Speaker #10: Okay , I'll leave it there . Appreciate the time and good luck in the fourth quarter .
Speaker #6: Thank you . Nate .
Speaker #4: As a reminder , if you'd like to ask a question , please press Star One on your telephone keypad . One moment , please .
Speaker #4: While we pull for questions . Our next question comes from Matthew Key with bank Texas Capital . Please proceed with your question .
Speaker #11: Good , good morning , and thank you for taking my questions . One of the big themes in the metal market has been that's spread between the US East Coast , High Valley .
Speaker #11: High Vol , versus the Australian benchmark . I was wondering if you could provide any color on on the major factors driving that spread and whether you would expect it to continue into 2026 .
Speaker #8: Yeah , Matt , this is Dan . You know , I know a lot of people focus on that spread . I don't necessarily find it particularly relevant .
Speaker #8: We don't . We track them both . But the relativities between the two are driven by obviously supply and demand . So the Aussie Aussie production has been okay this year .
Speaker #8: Not great . I don't really know how to answer that . We don't track that relativity exactly . Obviously , if you have excess supply , it will put pressure on the indices .
Speaker #8: What we're more more hoping for and expecting is some increase in demand in 26 , perhaps in Europe or some other markets . And that will affect the spread to if we see a little more demand , Asia is is , you know , a lot of the pelvi that's mined in Australia goes to markets like India and the increasing demand in India should pull on that supply pretty hard .
Speaker #8: And , you know , hopefully , hopefully that'll improve the the indices as well .
Speaker #11: Got it . Thank you for that . And I was wondering if you could provide any color on CapEx expectations in 2026 . Any major growth gap or carryover capital that we should be thinking about next year ?
Speaker #6: No , I mean , we're not we're not quite ready to to delve into 26 yet . I think numbers are pretty well , they've stopped moving , but the only project that we have ongoing is , as Jason was giving an update on Kingston Wildcat mine , which we began work on last year , there'll be some additional capital spent next year to wrap that up .
Speaker #6: And I think we've talked about that publicly . Publicly , the total project was , you know , roughly 80 ish million dollars and half of that was spent this year .
Speaker #6: It'll probably be another 40 million ish to wrap that project up next year , to get it up to full production . But but everything else , we'll probably be kind of standard course , but we'll , you know , we'll get those more precise numbers out to you hopefully in the coming weeks .
Speaker #11: Great. Well, I appreciate the time, and best of luck moving forward.
Speaker #6: Yeah . Thank you very much .
Speaker #4: Our next question is from Nick Giles with B Riley Securities . Please proceed with your question .
Speaker #9: Thanks for taking my follow up questions . Just looking at your cash balance , you have 400 million today . Pretty nice cushion there .
Speaker #9: I just wanted to ask about how you're thinking about M&A opportunities . You know , I think back to the , you know , tuck , tuck in of Maxim rebuild .
Speaker #9: So curious if you know , there's opportunities in your supply chain and then just how you're looking at some of the smaller operations out there , whether those are becoming more or less attractive .
Speaker #9: Thanks .
Speaker #6: Yeah . I mean , we we have to we have to obviously tread carefully and soberly . Job one is always , as we've said for years , you know , protect the franchise , maintain this as much of a cash cushion as we can during these more difficult markets , which we do think is going to be , you know , continue to be a protracted situation through through next year .
Speaker #6: At least . It feels like we are very interested in in things like Maxim manufacturing , maximum transportation . These things that bring more control and cost reduction in-house .
Speaker #6: Those are those are a little bit more challenging to track down because they have to make sense and there have to be synergies where we're not just picking up something that we we don't necessarily know how to do , but there are opportunities out there and we continue to to look at those and evaluate those .
Speaker #6: M&A right now is pretty tough in this landscape because again , cash burn is a consideration . You know , are the assets burning cash and how do you view accretion , you know , from a whether it's EBITDA , net income or cash cash flow .
Speaker #6: How do you how do you evaluate and view those in this kind of a market . It's pretty tough . There are some opportunities , some small ones that will kick around , but it's really hard to imagine much at this , you know , at this very second .
Speaker #6: That's hugely material . And executable .
Speaker #9: Hey , I appreciate that . And one more and I promise I'll let you go . I just wanted to ask about safety procedures in this current environment .
Speaker #9: I mean , you never get as much credit when it's good . And you certainly do when it's bad . So in in this government shutdown .
Speaker #9: Seems like MSHA is is , you know , also shut down . So so how are you approaching safety and is is this MSHA shutdown really having any impact on your operations .
Speaker #6: Well I would say this about MSHA and the shutdown portions of MSHA are shut down . The enforcement is still quite active . October in particular .
Speaker #6: We've had a lot of activity at the mine . So they're still very much engaged . So from that perspective , we're not we're seeing no , no impact from I guess , less enforcement and less monitoring of safety .
Speaker #6: And naturally that's msha's actions don't drive our safety performance . We drive our safety performance and we've had a couple of blips early in the quarter of safety performance that we weren't terribly pleased with .
Speaker #6: The team has really responded and recovered . September was the best safety month we've had this year , and maybe , gosh , going back years , it was an excellent month .
Speaker #6: October has been very good as well . So again , outside forces don't drive our safety . We do . And I think we're in a we're in a really good spot right now .
Speaker #9: Guys thanks again . And keep it up .
Speaker #6: Yeah thanks a bunch .
Speaker #4: We have reached the end of the question and answer session . I will now turn the call over to Andy for closing remarks .
Speaker #6: Thanks again , everyone for joining us today . We appreciate your interest in Alpha and we hope you all have a great rest of the day .