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Powder River Basin’s improved volumes, ‘solid cost control’ benefit Arch

Arch's Powder River Basin operations were strong in the third quarter, the mining company said 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. — Arch’s Powder River Basin operations were strong in the third quarter, the mining company said today.

According to its third-quarter report, Arch’s Powder River Basin operations were particularly helpful considering the West Elk mine in Colorado only basically broke even. Reiterating what Arch said in its first-quarter report, it noted in its second-quarter report that it expected the challenges to impact the segment in the second and third quarters.

Arch’s thermal segment brought in adjusted earnings before interest, taxes, depreciation, depletion, amortization, accretion on asset retirement obligations and non-operating expenses of $23.4 million in the third quarter, while there was $10.4 million in capital spending.

“Arch’s thermal segment again generated substantial, supplemental adjusted EBITDA, driven by improved volumes and solid cost control at our Powder River Basin operations,” Chief Operating Officer John Drexler said.

Since the fourth quarter of 2016, the overall legacy thermal segment has generated $1.4 billion in adjusted EBITDA and spent $164.5 million in capital.

Chief Financial Officer Matthew Giljum said the company is progressing toward its long-term goal of strengthening and simplifying its finances. Since the beginning of 2022, the company has reduced its debt by 77% and built a thermal mine reclamation fund that has largely covered the cost of its Powder River Basin final reclamation obligation.

Powder River Basin operations are almost sold out for 2024 at fixed-price levels that the company anticipates will have solid margins, the release said. Underinvestment in supply is benefiting the thermal coal market.

“Global thermal coal markets appear to be range-bound at present, trading at prices well below last year’s historically strong levels but at a level that still supports healthy U.S. export volumes,” the release said.

So far this year, Arch’s lost-time incident rate has been 0.42 per 200,000 employee-hours, which is five times better than the industry average, according to the release. It has recorded no environmental violations or water quality exceedances since the beginning of the year. The U.S. Department of the Interior recently gave Arch’s Powder River Basin operating subsidiary the 2023 Excellence in Coal Mining Good Neighbor Award for community engagement. This marked the third time in five years an Arch subsidiary has received the award.

Overall, Arch Resources‘ net income was $73.7 million, or $3.91 per diluted share, in the third quarter of 2023, compared with net income of $181 million, or $8.68 per diluted share, in the prior-year period, the release said. Its revenues were $744.6 million, down from $863.8 million for the third quarter of 2022. Arch had adjusted EBITDA of $126.3 million in the third quarter of 2023, down from $223 million in the third quarter of 2022. That quarter included a $12.3 million non-cash mark-to-market gain associated with coal hedging.

CEO and President Paul Lang said the company remains focused on driving incremental productivity and cost improvements in operations, capitalizing on the global coking coal market; extending the global reach of its coking coal products, maintaining and augmenting its financial position and extending its sustainability practices.

“Through these substantial and ongoing efforts, we are seeking to lay a strong and durable foundation for long-term cash generation — in a wide range of market environments — in support of our robust and ongoing capital return program,” he said.

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