Arch Resources reported strong operating cash flow from its core metallurgical and legacy thermal segments during Q3 2022, even as it navigated through persistent rail service challenges at the western mines, continuing inflationary pressures, and isolated geologic issues in its coking coal portfolio, explained John Drexler, COO for Arch Resources. “Importantly, and as anticipated, the Leer South mine progressed into better geology in September — and has continued to execute at an improved productivity level in October — after managing through localized, difficult cutting conditions in July and August. We are now intensifying our focus on increasing efficiency and driving down unit costs in our premier coking coal portfolio,” Drexler said.
Despite a significant step-down in coking coal prices, higher-than-anticipated unit costs related to the previously mentioned geologic issues, and inflationary pressures on labor and materials, the metallurgical segment again generated robust cash margins during Q3 2022. The company said it expects coking coal shipments to increase modestly in Q4 2022, but has adjusted down full-year volume guidance to reflect ongoing logistical disruptions.
During Q3 2022, Arch’s metallurgical segment, which includes the Leer, Leer South, Beckley and Mountain Laurel mines, sold 1.8 million tons, which was equal to Q3 2021. The company’s thermal segment, which includes the Black Thunder and Coal Creek mines in Wyoming and the West Elk mine in Colorado, sold 18.4 million tons, compared to 19 million tons in Q3 2021.
Even with continued poor western rail performance in the Powder River Basin during Q3 2022, Arch’s legacy thermal segment again generated robust amounts of cash, capitalizing on its strong book of domestic business, highly advantageous export markets, and solid cost control.
As previously discussed, Arch created a thermal mine reclamation fund, which has now reached its initial target funding level of $130 million, matching the asset retirement obligation at the Black Thunder mine. The Coal Creek mine, where the Arch team has completed roughly 75% of final reclamation work over the course of the past 21 months, was honored by the state of Wyoming with the 2022 Excellence in Mining Reclamation Award.
