Arch ends 2021 netting $226M, continues ‘pivot’ away from thermal production

Arch Coal's Black Thunder mine in southern Campbell County commenced operations in 1977. Arch Coal shed $5 billion in debt before emerging from bankruptcy in 2016, making it one of the most financially resilient mine operators in Wyoming's Powder River Basin. (Dustin Bleizeffer)
Arch Resources' Black Thunder Mine in Campbell County

Major PRB thermal coal player undergoing strategic shift towards exclusive metallurgical production

A shift towards metallurgical markets could mean Powder River Basin coal is on its way out for Arch Resources, but not quite yet as the coal giant looks to capitalize on committed thermal sales moving into 2022.

At the end of 2021, Arch closed out its fourth and final quarter of the year (4Q2021) with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) coming in at $304.4 million and a net income of $226.6 million.

Of those numbers, metallurgical coal sales accounted for the lion’s share in terms of revenue and cost per ton margins, raking in a total of $396.52 million before cost and $223.76 million after cost from two million tons sold, per Arch’s 4Q2021 results.

Thermal coal, despite producing approximately seven times more in terms of volume, accounted for $289.71 million before cost and only $67 million after cost, the most recent quarterly earnings report states.

With production and operations stepping up at Arch’s latest metallurgical endeavor in West Virginia, Leer South, the coal giant is dead set on its long-term strategic plan on transitioning away from thermal energy towards metallurgical markets, according to Arch CEO and President Paul A. Lang.

“As we progress into 2022, the state is set for even greater advances on our strategic priorities,” Lang said in a statement. “With our world-class asset base, top-tier marketing and logistics expertise, and high-performing workforce, Arch is exceptionally well-positioned to capitalize on expanding global steel demand and the buildout of a new, low-carbon economy.”

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For Arch, it’s a transition towards high profit, low-cost coal production that will have a place in a world economy driven by countries expected to resume and accelerate their efforts to build out new, intensive low-carbon economies, Lang said during a 4Q2021 conference call on Feb. 15.

For the PRB, on the other hand, the transition means driving forward with an accelerated reclamation plan for Arch’s thermal legacy assets with the unveiling of a new thermal reclamation fund that could leave asset retirement obligations (ARO) in the PRB at just $30 million at year’s end.

In 2021, Arch reduced their entire ARO in the PRB by 40.6 million, and the plan moving forward is to continue harvesting coal in the PRB until market conditions change, per Lang, who said that one pit will remain operational at Coal Creek Mine for the time being while the company continues to assess market conditions.

“But we’re in a great position to have a small, incremental footprint remaining that can be addressed when the markets are giving us the signal that (PRB) coal is no longer needed,” Lang said during the call.

Neither the quarterly earnings report nor the conference call made any reference to the future of Arch’s other PRB operation- Black Thunder Mine- though the company did say that they are completely sold out for the near future in terms of thermal coal generation with approximately 76 million tons committed in the PRB.