“We have diligently worked over the past 18 months to create a business model that will allow Alpha to thrive in any market,” said Alpha CEO David Stetson. “We have invested in our people and our properties to create a company that can quickly adjust its production to match the coal markets.”
Stetson added that the company has lowered the costs of operating its mines since emerging from bankruptcy in July 2016.
More than half of Alpha’s metallurgical sales in 2018 will be sold under Alpha’s multiyear arrangement to a counterparty for ultimate sale to third parties in the international market. The majority of Alpha’s thermal sales are to long-standing domestic utility customers with the remaining thermal production to be sold domestically or into the export market via spot sales.
“We are already taking advantage of the strong international markets for our coal through additions of incremental production with minimal new capital investments,” Stetson said. “If this market remains strong and stable, we can further flex and increase our metallurgical production beyond the guidance provided above by approximately 1 million tons on an annualized basis without incurring significant capex cost. We also have the ability to decrease production without having to absorb material fixed cost if this market changes.”
Stetson said a major transportation infrastructure project at Workman Creek is scheduled to be completed in the first quarter of 2018 and several mines were opened or expanded at the Marfork Complex in 2017. The transportation infrastructure project will decrease costs, and, combined with the new mines, allow the Marfork Complex to provide one-half of Alpha’s incremental metallurgical production, he added. The capex projects that are completed or nearing completion have also enabled Alpha to begin preliminary development work on new underground and surface mines at the Marfork Complex with more than 35 million tons of high-quality metallurgical reserves associated with them.
In addition to the investments at the Marfork Complex, Alpha deployed capital on the slope to the new Road Fork 52 mine at its Kepler Complex, which is expected to be completed in late 2018, allowing this mine to begin production in early 2019. The Road Fork 52 mine will extend the life of the Kepler Complex and provide additional mining capacity when it is fully operational in 2019.
“This past year was truly transformational for Alpha,” said Stetson. “The sale of properties to Lexington Coal in October 2017 will not only relieve our obligations associated with legacy properties, but will enable our team to focus our capital and resources toward sustaining and growing Alpha as the leading producer of high-quality coals in the Central Appalachian region.”
Alpha also announced it expects sales in the fourth quarter of 2017 to be 1.9 million tons of metallurgical coal and 1.7 million tons of thermal coal, and full-year 2017 sales of 7.9 million tons of metallurgical coal, including 1 million brokered tons, and 7 million tons of thermal coal. With the Lexington Coal transaction closing in the fourth quarter of 2017, Alpha expects to incur a one-time loss of approximately $165 million. The full benefits of the Lexington Coal transaction are expected to be realized in 2018.