Arch Resources Stock

Arch Resources, Inc. (Arch) operates as a coal producer and a producer of metallurgical coal worldwide.

For the year ended December 31, 2023, the company sold approximately 75 million tons of coal, including approximately 0.1 million tons of coal it purchased from third parties. The company sells substantially all of its coal to steel mills, power plants and industrial facilities. As of December 31, 2023, the company operated seven active mines located in three of the major coal-producing regions of the United States. The locations of the company’s mines and access to export facilities enable it to ship coal worldwide.

The company is a leading United States producer of metallurgical products for the global steel industry, and the leading supplier of premium High-Vol A metallurgical coal globally. The company operates four large, modern metallurgical mines that consistently achieve high standards for both mine safety and environmental stewardship. Leer and Leer South longwall mines anchor the company’s large-scale, first quartile metallurgical franchise. The Leer and Leer South operations are complemented by the Beckley and Mountain Laurel continuous miner mines, which in aggregate provide the company with a full suite of high-quality metallurgical products for sale into the global metallurgical market.

Arch and its subsidiaries also operate thermal mines in the Powder River Basin and Colorado that produce thermal coal for sale into international and domestic markets. In Colorado, the company’s West Elk mine produces a high-quality thermal product. In addition, West Elk supplies a sizeable North American industrial customer base that the company will continue to rely significantly on thermal coal, which can be highly advantageous for specific industrial applications. In the Powder River Basin, most of the company’s production is sold to U.S. power generators, who are systematically shifting their generating capacity to other, non-coal fuel and energy sources. In keeping with this shift and the ongoing decline in domestic demand for thermal coal, Arch is managing the shrinking of its operating footprint in an economically and socially responsible manner, taking into careful consideration the needs of its thermal employee base, the communities in which the company operates, and the needs of its thermal power customers, as well as consumers of power generation generally.

In the fourth quarter of 2023, the company’s Leer mine achieved Level A verification for all protocols comprising the Towards Sustainable Mining (TSM) Initiative. In the environmental arena, the company’s subsidiaries received zero notices of violation (NOV) in 2023 and 2021 while receiving one NOV in 2022.

Mining Operations

As of December 31, 2023, the company operated seven active mines in the United States. The company reports its results of operations primarily through two reportable segments: the Metallurgical (MET) segment, containing the company’s metallurgical operations in West Virginia, and the Thermal segment containing the company’s thermal operations in Wyoming and Colorado.

In general, the company has developed its mining complexes and preparation plants at strategic locations in close proximity to rail or barge shipping facilities. Coal is transported from the company’s mining complexes to customers by means of railroads, trucks, barge lines, and ocean-going vessels from terminal facilities. The company owns or leases under long-term arrangements all of the equipment utilized in its mining operations.

Metallurgical

Leer: The Leer Complex is a longwall operation, located in Taylor County, West Virginia that is primarily sold as High-Vol A metallurgical quality coal in the Lower Kittanning seam, and is part of approximately 93,300 acres that is considered the company’s Tygart Valley area. A significant portion of the reserves at Leer are owned rather than leased from third parties.

All the production is processed through a 1,400 ton-per-hour preparation plant and loaded on the CSX railroad. A 15,000-ton train can be loaded in less than four hours.

Leer South: The Leer South mining complex is a longwall operation in the Lower Kittanning seam with a preparation plant and a loadout facility located on approximately 26,600 acres in Barbour County, West Virginia. The 1,600 ton-per-hour preparation plant is located near the mine, and the loadout facility is served by the CSX railroad and connected to the plant by a 4,000 ton-per-hour conveyor system. The loadout facility is capable of loading a 15,000 ton unit train in less than four hours.

Beckley: The Beckley mining complex is located on approximately 16,700 acres in Raleigh County, West Virginia. Beckley is extracting high quality, Low-Vol metallurgical coal in the Pocahontas No. 3 seam.

Coal is conveyed from the mine to a 600-ton-per-hour preparation plant before shipping the coal via the CSX railroad. The loadout facility can load a 10,000-ton train in less than four hours.

Mountain Laurel: Mountain Laurel is an underground mining complex located on approximately 38,200 acres in Logan County and Boone County, West Virginia. Underground mining operations at the Mountain Laurel mining complex extracts High-Vol B metallurgical coal from the Alma and No. 2 Gas seams.

The company processes all of the coal through a 1,400-ton-per-hour preparation plant before shipping the coal to its customers via the CSX railroad. The loadout facility can load a 15,000-ton train in less than four hours.

Thermal

Black Thunder: Black Thunder is a surface mining complex located on approximately 35,300 acres in Campbell County, Wyoming. The Black Thunder complex extracts thermal coal from the Upper Wyodak and Main Wyodak seams.

The company controls a significant portion of the coal reserves through federal and state leases.

The Black Thunder mining complex consists of four active pit areas and two active loadout facilities. The company ships all of the coal raw to its customers via the Burlington Northern Santa Fe and Union Pacific railroads.

Coal Creek: Coal Creek is a surface mining complex located on approximately 7,400 acres in Campbell County, Wyoming. The Coal Creek mining complex extracts thermal coal from the Wyodak-R1 and Wyodak-R3 seams.

The Coal Creek complex consists of one active pit area and a loadout facility. The company ships all of the coal raw to its customers via the Burlington Northern Santa Fe and Union Pacific railroads. The loadout facility can load a 15,000-ton train in less than three hours.

West Elk: West Elk is an underground mining complex located on approximately 18,400 acres in Gunnison County, Colorado. The West Elk mining complex extracts thermal coal from the E seam. The company is working on developing longwall panels in the B seam at the complex.

The company controls a significant portion of the coal reserves through federal and state leases. The West Elk complex consists of a longwall, continuous miner sections, a preparation plant, and a loadout facility.

Sales, Marketing and Trading

The company’s sales, marketing and trading functions are principally based in St. Louis, Missouri and consist of sales and trading, transportation and distribution, quality control and contract administration personnel, as well as revenue management. The company also has sales employees in its Singapore and London offices. In addition to selling coal produced from the company’s mining complexes, from time to time it purchases and sells coal mined by others, some of which it blends with coal produced from its mines.

Customers: The company markets its metallurgical and thermal coal to domestic and foreign steel producers, domestic and foreign power generators, and other industrial facilities. For the year ended December 31, 2023, the company derived approximately 15% of its total coal revenues from sales to its three largest customers, JFE Steel Corporation, T S Global Procurement Company Pte. and Southern Company and approximately 39% of its total coal revenues from sales to its 10 largest customers.

In 2023, the company sold coal to domestic customers located in 29 different states. The locations of the company’s mines enable it to ship coal to most of the major coal-fueled power plants in the United States. In addition, in 2023, the company exported coal to Europe, Asia, Central and South America, and Africa.

Long-Term Coal Supply Arrangements

The company typically sells coal to North American customers under term arrangements through a request-for-proposal process. The company typically sells its metallurgical coal to non-North American customers based on various indices or agreements to mutually negotiate the price. In most of its thermal coal contracts, the company has a right of substitution (unilateral or subject to counterparty approval), allowing it to provide coal from different mines, including third-party mines.

Trading: In addition to marketing and selling coal to customers through traditional coal supply arrangements, the company seeks to optimize its coal production and leverage its knowledge of the coal industry through a variety of other marketing, trading and asset optimization strategies.

Transportation: The company generally sells coal to international customers at export terminals. The company transports its coal to Atlantic coast terminals, Pacific cost terminals or terminals along the Gulf of Mexico for transportation to international customers. The company’s international customers are generally responsible for paying the cost of ocean freight.

The company owns a 35% interest in Dominion Terminal Associates LLP (DTA), a limited liability partnership that operates a ground storage-to-vessel coal transloading facility in Newport News, Virginia. The facility has a rated throughput capacity of 20 million tons of coal per year and ground storage capacity of approximately 1.7 million tons. The facility primarily serves international customers, as well as domestic coal users located along the Atlantic coast of the United States. From time-to-time, the company may lease a portion of its port capacity to third parties.

Additionally, the company has entered into throughput agreements with third parties to facilitate international shipments. The majority of the comany’s international metallurgical shipments are shipped through DTA or Curtis Bay, which is strategically located on the CSX network and the Chesapeake Bay.

The company ships its coal to domestic customers by means of railcars, barges, or trucks, or a combination of these means of transportation. The company generally sells coal used for domestic consumption free on board (f.o.b.) at the mine or nearest loading facility.

Most coal mines are served by a single rail company, but much of the Powder River Basin, including the company’s mines, are served by two rail carriers: the Burlington Northern-Santa Fe railroad and the Union Pacific railroad. The company generally transports coal produced at its Appalachian mining complexes via the CSX railroad. Besides rail deliveries, some customers in the eastern United States rely on a river barge system or over-the-road trucks.

Environmental and Other Regulatory Matters

The Surface Mining Control and Reclamation Act, which the company refers to as SMCRA, establishes mining, environmental protection, reclamation and closure standards for all aspects of surface mining, as well as many aspects of underground mining. Mining operators must obtain SMCRA permits and permit renewals from the Office of Surface Mining, which the company refers to as OSM, or from the applicable state agency if the state agency has obtained regulatory primacy. All states in which the company conducts mining operations have achieved primacy and issues permits in lieu of OSM, but are still subject to federal oversight.

The Clean Air Act indirectly affects coal mining operations, for example, by extensively regulating the emissions of fine particulate matter measuring 2.5 micrometers in diameter or smaller, sulfur dioxide, nitrogen oxides, mercury and other compounds emitted by coal-fueled power plants and industrial boilers, which are the largest end-users of the company’s coal.

A number of species indigenous to the company’s properties are protected under the Endangered Species Act or other related laws or regulations.

The company is required to comply with numerous other federal, state and local environmental laws in addition to those previously discussed. These additional laws include, for example, the Safe Drinking Water Act, the Toxic Substance Control Act and the Emergency Planning and Community Right-to-Know Act.

Competition

The company’s principal domestic coal-producing peers include Allegheny Metallurgical; Alpha Metallurgical Resources Inc.; Blackhawk Mining LLC; Coronado Coal LLC; Corsa Coal Corp.; Eagle Specialty Materials LLC; Navajo Transitional Energy Company LLC; Peabody Energy Corp.; Ramaco Resources; and Warrior Met Coal, Inc.

History

The company was founded in 1969. The company was incorporated in 1969. It was formerly known as Arch Coal, Inc. and changed its name to Arch Resources, Inc. in 2020.