Arch Resources(US:ARCH)2021-02-09 21:33Financial Data and Key Metrics Changes - The company achieved cash costs of $61.13 per ton for the year, slightly above the midpoint of guidance despite a nearly 1 million ton reduction in coking coal shipments due to the pandemic [18] - Fourth quarter operating cash flows were $5 million, weaker than the third quarter, reflecting the semi-annual payment of production taxes [31] - Total liquidity at year-end was $315 million, with unrestricted cash of $284 million [32] Business Line Data and Key Metrics Changes - The company maintained a first quartile cost structure in its core coking coal segment despite significant market-driven volume reductions [7] - The Leer South growth project is expected to significantly improve cash-generating capabilities, with startup anticipated in about six months [18][20] - The company plans to produce around 2 million tons from Coal Creek in 2021, the final full year of operation before reclamation begins in 2022 [11] Market Data and Key Metrics Changes - Global steel production was up nearly 6% in December 2020 compared to December 2019, indicating a strong recovery in the steel market [13] - The price of hot rolled coil is trading at levels 50% to 150% above last year's pandemic-driven lows [14] - The US East Coast High-Vol A price assessment is up nearly 50% compared to last summer's lows, reflecting strong demand and reduced supply [15] Company Strategy and Development Direction - The company is strategically pivoting to focus on metallurgical coal, aiming to become a premier producer of metallurgical coal in the US [10] - Plans include reducing the operating footprint of thermal assets and optimizing cash generation for future reclamation [24] - The company is committed to environmental, social, and governance (ESG) leadership, achieving a loss time incident rate of 0.93, nearly three times better than the industry average [22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the ongoing impacts of COVID-19, with expectations for modest sequential increases in coking coal shipments in Q1 2021 [27] - The company is optimistic about the post-pandemic recovery, anticipating increased demand for metallurgical coal as economies stimulate growth [69] - Management highlighted the importance of operational excellence and continuous improvement across the enterprise [27] Other Important Information - The company reduced corporate staffing levels by 25% and cut overhead costs by $10 million per year through a voluntary separation program [8] - The divestiture of the Viper thermal mine reduced long-term undiscounted mine closure obligations by about $21 million [10] - The company plans to target a reduction of $40 million in Asset Retirement Obligation (ARO) at Coal Creek over the next 18 months [25] Q&A Session Summary Question: Can you provide a breakdown of growth CapEx with Leer versus maintenance sustaining capital in 2021? - Management indicated that they are trending towards the upper end of the $360 million to $390 million range for Leer South, with maintenance CapEx expected to run around $100 million post-startup [38][39] Question: What should we expect for thermal guidance and costs? - The thermal guidance is primarily influenced by PRB operations, with costs expected to be between $11.50 and $12 per ton [44] Question: What is the coking coal volume outlook for 2021? - Management expects flat shipment levels for Q1, with an increase anticipated in the second half of the year as Leer South comes online [48]