Alpha Metallurgical Resources, Inc. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Production Adjustments: Made small but meaningful changes to production expectations, including reducing Saturday and evening shifts and removing mine sections to match production to demand. Ramping down the Checkmate Powellton mine to hot idle by year-end, with the Chess Processing Plant also idling. Transferred Checkmate employees to other company positions.
• 2025 Expectations: Midpoint expects to ship 16.7 million tons of coal next year. 2025 domestic commitments include 3.7 million tons at an average price of $152.51.
• Liquidity: Total liquidity increased by $150 million to $507 million as of September 30, 2024, with $484.6 million in unrestricted cash.
• Kingston Wildcat Mine: New low-low mine in development, with Slope work ongoing. First production cuts expected late 2025, full run rate up to 1 million tons annually.
• Safety/Environmental: Alpha leaders and employees aided in Hurricane Helene recovery in Western North Carolina, assisting with road rehabilitation.

Segment Performance

• Metallurgical Segment: In Q3 2024, adjusted EBITDA was $49 million with 4.1 million tons shipped. Met segment realizations decreased quarter-over-quarter, with an average third quarter realization of $136.35 per ton (down from $145.94 in Q2). Export Met tons: Atlantic indices realized $129.31 per ton and Australian indices $128.61 per ton (both down from prior quarter). Cost of coal sales for the Met segment increased to $114.27 per ton in Q3. For 2025, guidance includes shipping 15 - 16 million tons of metallurgical coal and 1 - 1.4 million tons of thermal coal by-product, totaling 16.0 - 17.4 million tons shipped.
• Thermal Byproduct: The incidental thermal portion of the Met segment is fully committed and priced at the midpoint of guidance at an average price of $75.97 per ton.

Guidance

• Shipments: Expect to ship 15 - 16 million tons of metallurgical coal and 1 - 1.4 million tons of thermal coal by-product in 2025, totaling 16.0 - 17.4 million tons.
• Cost of Coal Sales: Guiding to a range of $103 to $108 per ton in 2025.
• SG&A: Selling general and administrative costs expected to be between $53 million and $59 million in 2025, a 11% reduction from 2024's guidance range.
• Idle Operations Expense: Anticipated to be between $18 million and $28 million.
• Capital Expenditures: Expected to be between $152 million and $182 million in 2025, including sustaining maintenance, mine development for Kingston Wildcat, and carryover from 2024.
• Cash Tax Rate: Expecting a cash tax rate of between 0% to 5% in 2025.

Risks

• Market Conditions: Soft metallurgical coal markets, oversupply in high-vol coal impacting pricing and realizations.
• Geology/Weather: Challenging geology and weather affecting productivity and increasing costs.
• Rail Delays: Localized rail delays due to extreme weather impacting operations.

Question and Answer

Q: Comment on cost outlook for 2025 vs 2024, including buckets like purchase tons, supplies/maintenance, sales-related costs A: Over half the $7.50 cost savings related to purchase tons, with sourcing team efforts to reduce costs. Supplies/maintenance savings ~$2 per ton, and sales-related costs also contributing to the cost reduction.

Q: CapEx and SG&A guidance A: Sustaining CapEx is ~$7 per ton (sustainable), and SG&A is reduced by over 10% due to outside spend reductions and one-off items not recurring.

Q: Fourth quarter CapEx, shipments, cost per ton A: CapEx timing with carryover to 2025, full year shipments at high end of range, cost per ton within established guides considering holidays and small operational issues.

Q: Other rationalizations in 2025 guidance A: Checkmate Powellton mine ramping down due to uneconomic conditions, with portfolio constantly evaluated but no other material rationalizations at the moment