Alpha Metallurgical Resources(AMR) - 2020 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2020, Alpha reported EBITDA of $7.4 million, down from $12.4 million in Q3, primarily due to lower volumes and increased costs in the Met segment [25] - The company ended the year with approximately $139 million in unrestricted cash and reduced long-term debt by $15 million to $583 million [22][23] - Cash provided by operations for Q4 was $56 million, including a $66 million accelerated AMT tax refund [22] Business Line Data and Key Metrics Changes - The Met segment reported a cost of coal sales of $69.25 per ton in Q4, with a full-year cost of $70.19, down 20% year-over-year from nearly $88 in 2019 [26] - The CAPP - Thermal segment's Q4 cost was $44.15 per ton, with a full-year cost of $47.20, a slight decline of approximately $2 year-over-year [26] - Total Met shipments in Q4 were 3.2 million tons, down about 100,000 tons from Q3, while CAPP - Thermal volumes also decreased by 100,000 tons to 500,000 tons [28] Market Data and Key Metrics Changes - Demand for metallurgical coal is strong in both North American and international markets, with steel plants rebounding well [35] - The disconnect between Australian low-vol indices and U.S. East Coast indices has created challenges, particularly for sales in India [35] - The company expects to ship all its product this year, indicating strong demand [36] Company Strategy and Development Direction - Alpha is transitioning to a pure-play metallurgical coal producer, having divested its largest thermal property, the Cumberland Mine, to reduce thermal production [9][21] - The company aims to capitalize on market recovery by focusing on low-cost development mines, with expectations of production costs below $70 per ton [10] - The strategic shift is expected to eliminate standalone thermal production by 2023, with thermal shipments only as byproducts [30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the demand for metallurgical coal in national and global economic recoveries, particularly with anticipated infrastructure spending [13] - The company is focused on cash preservation while awaiting the impacts of higher pricing on sales contracts [12] - Management noted that the market is trending positively, with improved pricing and demand for products [35] Other Important Information - The company achieved record low cost performance and reduced overhead and SG&A by more than $10 million [10] - Alpha's safety and environmental performance were highlighted, with six operations receiving awards for excellence in safety and compliance [14][15] - The company has strengthened its leadership team with several key promotions and new board members [11] Q&A Session Summary Question: Market strength and pricing expectations - Demand for products is strong, with steel plants rebounding and the company expects to sell all its product this year [35][36] - There is minimal discounting in the current strong market, with sales often at or above index pricing [37] Question: Unrestricted cash balance and liquidity - The unrestricted cash balance primarily supports surety collateral, with limited flexibility for additional liquidity [39][43] - The ABL facility is trending positively, with around $50 million of availability [43] Question: Domestic market and pricing - Approximately one-third of tons are expected to come from the domestic market, with domestic steel producers returning to the market [48] - Spot tons would move at prices reflective of the indices, with high-vol pricing around $110 [48] Question: Production mix and quality - The company is shifting towards more productive mines, with expectations of increased low-vol coal in the market [54] - The quality mix is expected to remain stable, with a good production profile for the next decade without additional growth capital [57]