November 19, 2019 - Metallurgical coal producer American Resources reported a net loss from operations of $7.08 million in Q3, compared with a net loss from operations of $3.35 million in Q2 and $4.13 million in the year-ago quarter, the company said Monday in a quarterly earnings report.

The company sold 25,969 st of metallurgical coal at its McCoy Elkhorn and Deane Mining complexes with total revenue at $1.85 million, down from 127,021 st and revenue at $9.34 million in the prior quarter and 122,823 st and $9.04 million, respectively, in the year-ago quarter.

On a per-ton basis, revenue was at $71.13/st, while cash costs were at $113.84/st in Q3, compared with $73.38/st and $49.27/st, respectively, in Q2, and $72.38/st and $48.27/st in the year-ago quarter.

"Throughout the third quarter of 2019, where we idled some production during a time of market softness, we also continued to make progress on our growth objectives to position ourselves for advancement in 2020," CEO Mark Jensen said in the statement.

"Organically, we took the opportunity to further develop some of our existing mines around our McCoy Elkhorn complex, including commencing the final development stage to bring our Carnegie 2 mine into production," Jensen said.

American Resources reported a cash margin per ton loss of $42.71/st in Q3, compared with a cash margin per ton of $24.11/st in Q2 and $23.11/st in the year-ago quarter. Development costs were at $1.43 million in Q3, compared with $1.89 million in the prior quarter and $945,341 in Q3 2018.

'Opportune Time'

"The capital investments and development of our mines meant that we needed to take some production offline. We feel that this was done at an opportune time and has put us in a better position in terms of volume and quality metrics," Jensen said.

The company has $716,840 in cash, down from $1.13 million reported after Q2, but up from $57,739 in the year-ago quarter.

"Over the past five months, we have seen a meaningful amount of US carbon supply come offline given market participants idling assets plus several participants entering into bankruptcy," Jensen said. "Our unique business model has allowed us to be opportunistic during this time and strengthen our position in the market."

Through the first nine months of 2019, coal sales were $18.16 million, down from $23.22 million in the same period a year ago, while development costs were $5.91 million, up from $3.43 million last year.

Cumulative net loss from operations were at $20.32 million through the first nine months, compared with a net loss of $8.7 million in the same period a year ago.

Markets Expected to Firm Up

Jensen added.that the company expects the market to firm up sometime next year "as it digests a tighter supply outlook, while our outlook on demand remains healthy. We feel that we are in as good of a position as we have ever been to deliver attractive growth to our customers, employees and shareholders."

For 2020, the producer lowered its production forecast to 2 million-2.2 million st, down from 2.2 million-2.8 million st estimated in Q2.