November 5, 2024 - Arch Resources, Inc. (NYSE: ARCH) ("Arch" or the "company") has reported a net loss of $6.2 million, or $0.34 per diluted share, in the third quarter of 2024, compared with net income of $73.7 million, or $3.91 per diluted share, in the prior-year period. Arch had adjusted earnings before interest, taxes, depreciation, depletion, amortization, accretion on asset retirement obligations, and non-operating expenses ("adjusted EBITDA")[1] of $44.2 million in the third quarter of 2024. This compares to $126.3 million of adjusted EBITDA in the third quarter of 2023. Revenues totaled $617.9 million for the three months ended September 30, 2024, versus $744.6 million in the prior-year quarter. 

In the third quarter of 2024, Arch addressed operating and logistical challenges while laying the foundation for future value creation, as it:

• Announced plans to merge with CONSOL Energy Inc. ("CONSOL") to form a leading, global player in seaborne metallurgical and high-rank thermal coal markets
• Positioned the Leer South mine for enhanced operating execution in 2025 via the nearly completed transition to District 2
• Progressed through a stretch of challenging geology at the Leer mine into a more advantageous reserve area that is expected to support productive mining in 2025 and beyond
• Managed through a three-week outage of the shiploader at Curtis Bay Terminal that reduced coking coal shipments by an estimated 200,000 tons, and
• Declared a $0.25 fixed dividend, for a total payment of $4.6 million, payable on November 26, 2024.

"Since the start of Q3, the Arch team has positioned the company for long-term value creation and growth via the announcement of a transformational merger, the near-completion of a multi-quarter transition into more favorable geology at both our world-class metallurgical mines, and strong continued progress in the development of the geologically advantageous B-Seam reserves at our export-focused, high-rank thermal West Elk mine," said Paul A. Lang, Arch's chief executive officer. "While Q4 results will be tempered by the fact that Leer and Leer South won't start up in their new reserve areas until mid-November, we expect a positive step-change in operational execution for the coking coal portfolio in 2025. At the same time, we are making excellent progress towards completing the merger, as evidenced by the expiration of the Hart-Scott-Rodino waiting period and the securing of all needed international approvals, as well as our ongoing efforts to prepare for an efficient integration that unlocks the significant synergistic value of the combination."

Operational and Financial Update

During Q3, the metallurgical marketing and logistics team managed through challenges associated with a three-week outage of the shiploader at the Curtis Bay Terminal in Baltimore that constrained coking coal shipments, which totaled 2.1 million tons. On the production front, both the metallurgical segment's longwalls were throttled back while development work was completed in more advantageous reserve areas, leading to higher-than-normal unit costs in Q3. Looking ahead, the company expects both Leer and Leer South to deliver much-enhanced operational execution beginning in mid-Q4 as well as throughout 2025 due to these transitions.

During the third quarter, the thermal segment returned to profitability, buoyed by an improved performance from the Powder River Basin operations related to cost-cutting efforts and better alignment between stripping activities and sales volumes. The West Elk mine operated well but its contribution continued to be dampened by lower realizations associated with lower-priced legacy contracts – the vast majority of which are expected to expire at year-end 2024 – and higher costs stemming from additional continuous miner work related to the development of the highly attractive B-Seam reserves.

Arch generated cash provided by operating activities of $24.9 million in Q3, which included a working capital build of $18.2 million. Arch paid down $5.1 million in debt and ended the third quarter with $255.9 million in cash, cash equivalents, and short-term investments, for a net cash position of $127.7 million.

The just-declared dividend of $0.25 per share is payable on November 26, 2024 to stockholders of record on November 15, 2024. Arch has deployed more than $1.3 billion under its capital return program since its relaunch in February 2022, including $736.0 million, or $39.03 per share, in dividends and $614.7 million in common stock and convertible notes repurchases and retirements.

Merger Update

Arch currently expects the merger with CONSOL Energy to close by the end of the first quarter of 2025. Completion of the merger is subject to the satisfaction of the remaining customary closing conditions, including approval by both companies' stockholders.

Among many projected benefits, the merger:

• Joins best-in-sector operating platforms anchored by world-class, high-quality, low-cost, long-lived longwall coal-mining assets

• Creates a broad, diverse portfolio of coal qualities and blends capable of serving multiple growth markets and geographies

• Expands North American logistics and export capabilities, including ownership interests in two East Coast terminals and longstanding relationships with West Coast and Gulf Coast ports

• Creates visible revenue stream with meaningful upside opportunities, balancing CONSOL's seaborne industrial business with Arch's exposure to higher-value metallurgical coals and associated demand dynamics

• Enables robust adjusted EBITDA and free cash flow generation

• Is expected to unlock additional value creation from $110 million to $140 million of annual cost savings and synergies, and

• Creates the potential for robust capital returns and investments in innovation and growth underpinned by industry-leading cash generation and a strong balance sheet

Looking Ahead

"We are enthusiastic about the excellent progress the two companies are making to bring the merger to a successful closing, and remain focused on ensuring a speedy, efficient, and successful integration," Lang said. "At the same time, we believe we have positioned the metallurgical portfolio for a sustained period of operational excellence. We are more confident than ever that the pending merger will create a global industry leader well-equipped to capitalize on promising market dynamics in both of its core lines of business – global metallurgical and high-rank seaborne thermal coal."

Given the pending merger, Arch has elected to discontinue formal guidance at this time.

Arch Resources is a premier producer of high-quality metallurgical products for the global steel industry. The company operates large, modern and highly efficient mines that consistently set the industry standard for both mine safety and environmental stewardship. Arch Resources from time to time utilizes its website – www.archrsc.com – as a channel of distribution for material company information. To learn more about us and our premium metallurgical products, go to www.archrsc.com.

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