Coal Giant Arch Resources To Keep Shrinking Wyoming ‘Operational Footprint’

 

July 26, 2024 - Arch Resources Inc. reported Thursday that thermal coal shipped from Wyoming’s energy-rich Powder River Basin faltered again in the second quarter of 2024, but is expected to rebound in the second half of the year.

However, in a filing with federal securities regulators, Arch cast renewed doubt about the company's future in the Powder River Basin. The message sure is to rattle the nerves of government and business leaders in the northeastern Wyoming region and budget planners in state government in Cheyenne where coal revenue is critical to paying for education, roads and other financially starved agencies.

Arch said Thursday that the company continues to shrink its “operational footprint” in the northeastern Wyoming mining region and to “pay for the eventual closure and final reclamation of these operations.”

The company has paid a total of $146 million in reclamation costs for its two surface pit mining operations in the PRB that continue to see falling production rates.

Additionally, the company’s thermal coal sales in the first half of 2024 fell $143.4 million due to decreased sales volume in the PRB operations.

Still, Arch expects performance in the northeastern Wyoming coal region to improve in the back end of the year through “cost-cutting initiatives,” language that sometimes can be an indicator of layoffs, which already are beginning to emerge.

 

An aerial view of the Coal Creek mine about 30 miles southeast of Gillette.

Photo: Ecoflight

The St. Louis-based company reported 53 jobs cut over the past year at its Black Thunder and smaller Coal Creek mines in Wyoming.

At the end of the second quarter, Arch employed 1,011 people at its Black Thunder mine, one of the largest coal mines in the United States, and 41 at its smaller Coal Creek mine, according to the company’s reports to the federal Mine Safety and Health Administration.

The layoffs reflects a dramatic slowdown in production at the PRB mines.

In the 2024 second quarter, production at Black Thunder fell 36.2% to 9.7 million tons of coal mined versus 15.2 million tons in the same quarter last year.

At Coal Creek, production fell 44% to 301,300 tons of coal mined in the 2024 second quarter versus 533,380 tons mined in the same quarter last year.

Shutdown Plans?

 

Since Arch unveiled plans to shut down its Coal Creek mine nearly three years ago, the volume of coal scraped from the surface pit operation has tapered off.

About a year ago, Campbell County commissioners and other local economic development officials began working in earnest with Arch to cushion the blow of closing the mine about 30 miles southeast of Gillette near Wright.

That’s when the idea of turning the site into an industrial park emerged.

After all, the inevitable was coming and local officials couldn’t just sit on their hands facing a grim outlook of the closure of Coal Creek and the eventual closure of Arch’s flagship Black Thunder mine just south of it.

Arch executives on a Thursday conference call with Wall Street analysts did not provide any insights on their next move with Coal Creek or Black Thunder.

Going forward, Arch executives said that the thermal segment expects to benefit from a realignment of “stripping rates” — which is a key measure Arch follows on how much ore is mined — and operational activities with lower demand levels.

Combined, the thermal segment of the PRB and the West Elk coal mine in Somerset, Colorado, “effectively broke even” for the second straight quarter, the company said.

Growing PRB Inventory

 

Arch reaffirmed guidance for its thermal segment to produce 50-56 million tons of coal in 2024, boosted partially by excess stripping that resulted in a significant inventory build of 8 million tons of coal sitting idle in PRB mine pits in the first half of 2024.

This is about twice the normal inventory in Wyoming.

That inventory should balance out to historic levels as utilities make purchases to meet growing electricity demand. This should help improve Arch’s PRB outlook in the second half, said Arch President John Drexler on the call.

Given that the expense of removing overburden from coal in PRB pits was removed in the first half, Arch should realize significant cost savings when the coal is eventually shipped in the second half, he said.

Tough Sell

 

Thermal coal dug from the Powder River Basin has been a tough sell as natural gas trades at depressed levels, making it a desired commodity option for utilities to buy.

Coal sales also were slowed down in the first half of the year because of utility stockpiles at historically high levels after the mild winter, the company said.

While Arch hasn’t said what it’s timeline is for shuttering its Wyoming mines, it has repeatedly maintained a corporate stance that it wants to be out of the thermal coal business.

It announced in 2020 its plans to shut down Coal Creek and Black Thunder, and while the company continues to mine Black Thunder for the cash flow it can create, it’s tapered off Coal Creek significantly. At the same time, Arch has reported it’s accelerated its reclamation of both mine sites.

The demise of Coal Creek began in earnest in 2019, when it dropped to 2.5 million tons of production compared to the 8 million tons the year before. In the years since, the mine has continued to produce in the low 2 million tons range, except for 2021, when it pulled 3.8 million tons out.

In the first half of 2024, Coal Creek has produced 834,500 tons.

In its second quarter ended June 30, Arch said profit fell 81% to $14.8 million on revenue of $608.8 million, versus profit of $77.4 million on revenue of $757.3 million in the same quarter last year.

The company said that the financial results were impacted by the Baltimore bridge collapse earlier this year that forced coal exports to another East Coast port.