Alpha Metallurgical Resources(AMR) - 2020 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported adjusted EBITDA of $20 million for the quarter, an increase of $3 million from the previous quarter's $17 million, despite a decline in market prices [20][21] - The CAPP - Met segment achieved the lowest full quarter cost since the company's inception at $66.49 per ton, down approximately $3.5 from the second quarter [21][22] - The company ended the quarter with approximately $162 million in unrestricted cash, having used about $77 million in cash during the quarter [16][18] Business Line Data and Key Metrics Changes - CAPP - Met shipments totaled 3.3 million tons, up about 100,000 tons from the second quarter, generating $18 million of EBITDA [22][23] - CAPP - Thermal segment contributed over $5 million of EBITDA, with shipments remaining flat at around 600,000 tons [22][23] - Northern App revenue improved due to higher volumes, with shipments of about 300,000 tons at a price of $40 per ton [24] Market Data and Key Metrics Changes - The average price for committed tons in the metallurgical segment is just over $86 per ton, with 34% of anticipated shipments locked in for 2021 [9][25] - CAPP - Met realization decreased by approximately $8 per ton to around $74 in the third quarter, while CAPP - Thermal realizations improved to just under $58 per ton from $50 [23][24] Company Strategy and Development Direction - The company is strategically exiting thermal coal mining to focus on becoming a pure play metallurgical coal company, which is critical for steel production [10][11] - Portfolio optimization efforts include bringing on new metallurgical properties while deemphasizing or removing uneconomic lines [11][12] - The company plans to reduce capital expenditures significantly in 2021 to a range of $80 to $100 million, focusing on maintenance rather than growth [9][26] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by the pandemic and market volatility but expressed optimism about navigating these issues [10][12] - The company expects to ship between 20.4 and 22.2 million tons in 2021, with a focus on maintaining strong cost performance [24][25] - Management remains committed to safety and environmental stewardship, achieving near-perfect water quality compliance and stable safety metrics [13] Other Important Information - The company anticipates receiving a $66 million AMT credit monetization refund soon, along with a $70 million NOL carryback tax refund in the latter half of 2021 [19][27] - Idle operations expenses are expected to be between $27 million and $33 million as the company continues to shift away from thermal coal production [27] Q&A Session Summary Question: Can you provide a breakdown of cost drivers for the third quarter? - Management indicated that productivity is the main driver of cost reductions, with a significant shift in the number of mines contributing to the portfolio [30][31] Question: How confident is the company about its sales outlook for 2021? - Management expressed confidence in the sales outlook, noting that they have locked in a solid domestic book despite market challenges [32][34] Question: What is the expected cash position for Q4? - Management expects Q4 to be considerably better in terms of cash generation due to the absence of legacy payments that impacted Q3 [36][38] Question: What is the exposure regarding cash collateral requirements? - Management explained that the main exposure comes from thermal permits, and they have a longstanding relationship with surety providers, which helps mitigate risks [39][41] Question: What is the likelihood of completing the NAPP asset sale? - Management rated the likelihood of a deal on a scale of 1 to 10, indicating it is more than 1 but less than 10, reflecting uncertainty [44][45] Question: How is the company positioned regarding the Chinese and Indian markets? - Management confirmed that they do not sell coal to China but have steady shipments to India, which are expected to remain stable into 2021 [50][51]