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Arch: Wyoming operations helped offset Colorado mine challenges

Strong cost control in Arch Resources' Powder River Basin operations improved margins and helped offset challenges at a mine in Colorado, according to the second quarter report the company released today.

A BNSF Coal Train being loaded at a continuous coal loading depot of the Black Thunder Mine (Photo Credit: David Brossard, Flikr/Creative Commons)

GILLETTE, Wyo. — Strong cost control in Arch Resources’ Powder River Basin operations improved margins and helped offset challenges at a mine in Colorado, according to the second-quarter report the company released today.

The West Elk mine in Colorado experienced geologic challenges that hampered volumes and decreased product quality, the company said. Arch’s legacy thermal segment contributed adjusted earnings before interest, taxes, depreciation, depletion, amortization, accretion on asset retirement obligations and non-operating expenses of $29.2 million in the second quarter, while capital spending was $10 million.

Reiterating what Arch said in its first-quarter report, it noted in the July 27 report that it expected the challenges to impact the segment in the second and third quarters. In the third quarter, the mine expects to transition to an area with more beneficial geology.

Arch expects to ship about 60 million tons from its Powder River Basin operations in 2023, the report said. It will roll 5 million tons of its committed and priced PRB volumes into 2024. It’s doing that following customer requests and “in exchange for volume and/or price considerations on future shipments.”

Since the fourth quarter of 2016, legacy thermal, which includes Powder River Basin, has generated $1.3 billion in adjusted earnings, with $154.2 million in capital expenses.

In all, it has 67.9 million tons of thermal coal committed and priced at $17.40, while costs are about $15 per ton.

“The Arch team delivered another first-quartile cost performance in our core metallurgical segment in Q2, driving still-attractive margins despite a significantly weaker pricing environment,” CEO and President Paul Lang said. “In total, we generated cash flow from operating activities of $196.8 million and discretionary cash flow of $150.7 million, underscoring yet again Arch’s significant cash-generating capabilities in a wide range of market environments. Perhaps most notably, we continued to reward shareholders via our robust capital return program, increasing the total amount deployed via the program to nearly $1.2 billion since its relaunch in February 2022.”

Lang said the company has recently expended its coking coal portfolio, increased sales, reduced debt, simplified its capital structure and bolstered its environmental, social and governance practices.

“Through these substantial and ongoing efforts, we believe we have laid a strong and durable foundation for long-term value creation, with the capability to generate significant levels of discretionary cash with which to continue our ongoing capital return program.”

Wyoming recognized the Black Thunder mine with the 2023 Excellence in Mining Reclamation Award during the second quarter.