Good day. And welcome to the Alpha Metallurgical Resources Fourth Quarter 2020 Earnings Conference Call. All participants will be in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Emily O'Quinn, Senior Vice President of Corporate Communications. Please go ahead.

Thanks, Tom, and good morning, everyone. Before we get started, let me remind you that during our prepared remarks and the Q&A period, our comments relating to expected business and financial performance contain forward-looking statements and actual results may differ materially from those discussed.

Thanks, Emily. Good morning to everyone on the call and thank you for joining us today. Part of the typical year and the reporting process for the fourth quarter results is also to consider the prior year as a whole. The challenges and opportunities that presented, how the leadership team responded and what might be learned from the past 12 months to help us improve the path ahead. 2020 was anything but normal, and unfortunately, was a year marked by disruption, uncertainty, and in many cases, extremely difficult circumstances due to the global pandemic. Both our industry and our company experienced tremendous adversity. Despite the headwinds, we weathered the uncertainty and ended the year with a strong sales book, a new record low in cost performance and a clear foundation for leading the business forward. In fact, 2020 ended up being extremely productive and transformational year for Alpha. We set some big goals for ourselves at the end of 2019, and I’m proud to say, we accomplished nearly all of them, even during a global pandemic. This is truly a situation where we put our heads down, did the work to deliver on our stated goals. Before we dive into the details of the fourth quarter, I want to touch on some of the accomplishments of the last year to put these achievements in perspective. I also want to point out that we have a new investor presentation on our website and we invite investors to view our new presentation as it contains additional details, which include a number of the points that I’m going to be discussing this morning. As you heard me say many times before, we are working to become a pure-play metallurgical producer. In the middle of the last year, we completed our exit from the Powder River Basin, idled the Kielty Thermal Mine and the adjacent Delbarton Preparation Plant. In December, we divested our largest thermal property, the Cumberland Mine, thereby reducing our bonding collateral requirements in eliminating most thermal production from our portfolio. As a result of these moves away from thermal production, we execute a rebranding effort to better reflect our strategic vision for the future, while also returning to our Alpha roots in our brand’s rich heritage. We’re now proudly hosting our first earnings call under our new name of Alpha Metallurgical Resources.

Thank you, David, and good morning, everyone. As you’ve already heard this morning, 2020 was a busy year for us and we’ve accomplished a lot over the last several quarters. Despite enduring a global pandemic and challenges within our markets, our employees were able to stay focused and achieve safety and regulatory compliance rates that are lower than the national average, all this while maintaining 99.9% compliance with water quality standards. Each year, the West Virginia Office of Miners’ Health Safety and Training along with West Virginia Coal Association award Mountaineer Guardian Awards operations as co-excellence and safety and compliance performance. For 2020, we’re pleased to share that six Alpha operations were recipients of that award. On the environmental side, our Republic team, they won two awards jointly given by the West Virginia DEP and West Virginia Coal Association, and I’m just like to point out very proud of the outstanding work that’s been recognized, that shown by these awards and I congratulate everyone at our operations for what they’ve done to contribute to this. Referencing our 99.9% compliance with water quality standards, I’m pleased to report to you that we’ve successfully met the commitments within our EPA consent decree, which was officially terminated at the end of January. You may recall, on prior earnings calls that we received a partial termination back in February of 2020 and now thanks to the continued diligent work of our ops and environmental crews, we fully satisfied those commitments. We continue to focus on operating safely and responsibly each day and build on that daily performance into another successful year. As David mentioned, we’re going to provide an update on our portfolio optimization efforts. Over the last 18 months, we’ve taken nearly $50 million worth of costs out of our operation structure and we’ve redeployed capital to projects with lower cost profiles. We’re now at a point where the bulk of our capital expenditures for our new low cost met mines have been spent and those investments are providing important optionality for us as we planned for the future. In addition to serving as replacement mines for higher cost mines that we have and will continue to take offline, there’s room for growth in each of these projects.

Thanks, Jason. By any measure, 2020 was a uniquely challenging year. But as David mentioned, it was also very productive year for Alpha, as we accomplish many worthy goals, reducing operating SG&A and overhead costs, divesting the Cumberland properties as part of our strategic shift away from thermal production, achieving high standards of safety and environmental performance, and enhancing our Board composition. Going back to lead this past December we closed the transaction to divest Cumberland and related assets, and in addition transferring ownership of the mine, coal reserves, permits and infrastructure. The closing of this transaction also released Alpha from all reclamation obligations associated with those Pennsylvania entities. That number is estimate to be around $169 million on an undiscounted basis.

And the first question comes from Lucas Pipes with B. Riley Securities. Please go ahead.

Hey. Good morning, everyone, and thanks so much for all the detail. This is very helpful and also congratulations on managing really this incredibly uncertain time very well. My first question is on the market. We’ve had a few of your peers report results thus far, and frankly, there’s been a bit of a mixed message as to the strength of the met coal market today. And I wondered if you can provide a little bit more color as to what you’re seeing, you expect to be able to sell all your product this year on the met coal side? And then on pricing, obviously, we can look at the SAS assessments from Platts, et cetera. But what would be really great to kind of here, are there discounts versus those assessments and then on a netback basis, where would be pricing coming in, in today’s environment? Thank you very much.

Hi, Lucas. This is Dan Horn. There’s a lot to unpack there, but I’ll start. The demand we’re seeing for our products is really good, both here in the North American markets and abroad. Steel plants have rebounded surprisingly well from last year’s below economic levels. The demand for coke and for coking coal is really good. I guess the mixed message is that you’re referring to is, yeah, we are -- there is a disconnect between the Aussie low-vol indices and the U.S. East Coast indices. We’re dealing with that in India. We ship, as we’ve indicated, we ship coal into India based on those indices. But at the same time to counteract that U.S. indices have been quite strong. And as far as the demand, we expect to hit our numbers. In fact, we’re shipping all we can and we’re turning down some business here, we’re not able to even chase every opportunity right now that we see that.

Okay. Very, very helpful. And any color you’d be able to provide kind of on a blended basis what we could expect in today’s environment for your unpriced tons?

I will just say that…

Met coal ton…

Yeah. I’ll just say that, in this strong environment, we’re not seeing much discounting at all if that to the indices. In a weaker market you tend to see discounts to the index, but here of late, we’re selling out or in some cases slightly above the index, generally speaking.

Very helpful. Really appreciate that color, Dan. My second question, maybe more for Andy, but when I kind of look at your balance sheet, there is an unrestricted cash balance there, that’s quite sizable and how should investors think about that? And maybe if you could take that to kind of comment on liquidity more broadly and what other ways there may be to enhance liquidity outside, of course, the recovering market and generating cash? Thank you,

Sure. Hi, Lucas. It’s Andy. Yeah. So the unrestricted cash balance on our balance sheet is, that’s really, I would say, the vast lion’s share of that money is being held to support surety. It’s cash collateral for different surety and in some instances and this goes for our ABL as well the $123 million of LCs that combined with the unrestricted or the -- you are asking about unrestricted or restricted cash?

I was asking about unrestricted, sorry.

Unrestricted. I’m sorry. I’m sorry.

I think I said unrestricted and then restricted. Sorry about that.

Okay. That’s what I was thinking. So I’ll stick with the restricted cash discussion. So between restricted cash and the ABL LCs, that covers surety collateral as collateral for workers comp, collateral for SBL . In some instances, we’ve got regular property insurance collateral. But the vast majority of the actual restricted cash is on bonding surety collateral. So that cash is basically tied up until end of mine life, end of reclamation and complete phase release from the different regulatory agencies. So that’s, that cash won’t be seen again for quite a while. Similar story on workers comp and black lung, those are basically end of life type collateral arrangements. As far as other sources of liquidity, again, under our debt documents, we don’t have a whole lot of flexibility. But we do have a $50 million basket that we could raise additional period to suit debt, if we wanted to. We do you have after getting through the trough crossing in Q4, our ABL is trending upward as of today, which, today is just anecdotally one data point, we’re probably looking at around $50 million of availability on the ABL and that’s after receiving our $22 million of cash back last week. So we’re trending in the right direction. That being said, it’s still pretty tough. As I mentioned earlier, the impact on our working capital of the low pricing in Q4 is just something that we’re having to manage through, as I would imagine, all of our peers are also dealing with and the links to this, we’ll call it a malaise on the Aussie low-vol pricing and how it impacts relatively significant amount of sales going into India, continues to create some pressure for us. So, it’s -- we could always -- we always want more liquidity. But I think we’re doing pretty good managing things right now and it is helpful to see our ABL pushing back in the right direction and giving us a lot more liquidity than it has the past couple of quarters.

Very helpful color. Andy, team, everyone, really appreciate the update and continued best of luck. Thank you.

Thanks, Lucas.

Thanks, Lucas.

The next question comes from Nathan Martin with Benchmark Company. Please go ahead.

Hey, guys. Good morning and congrats on another great cost quarter.

Hi, Nathan.

Yeah. Thanks. Two quick questions kind of related to the mix within your Met business. First, I guess, from a sales standpoint. Any idea what percentage of tons you guys might expect to come with the domestic market this year and if you have seen any of those domestic steel producers back in the market looking for additional tons? And if so, can you give us maybe an idea of what pricing might look like there?

Sure, Nathan. Hey. This is Dan. I think when you look at our domestic seaborne split, it’s about one-third, two-third, 4 million plus or minus into the domestic market, the other 8 million to 9 million go seaboard. As far as the answer to your question, did we see some domestic people in the market? The answer is yes. And those tons are essentially spot tons and they would move at a price reflective of the indices. So if we move back for high-vol be was 110 or so that we -- that would be the ballpark where you’d be selling those times.

Got it. Thanks. Thanks, Dan. And then, I guess, on the export side, Dan, and you guys made the comment specifically on India, I know they are important customer for you guys, but obviously, with the -- with China still the ban on Australian coals. I know you guys don’t traditionally sell any coal to China, but have you seen any changes in your typical customer base as the global trade flows have kind of altered?

Yeah. No. That’s just when you think you’ve seen everything, something like this comes along. We actually did move a cargo into China that we loaded a last week So, we are participating in that, we -- if the opportunities there we will do that. But certainly the -- we will follow the price, if the markets -- right now our strategy is to continue to ship to our core customers in the Atlantic Basin and in India. That’s -- they are the customers that were with us all last year that we stayed with them, they stayed with us and but we will certainly look for new opportunities if they arise, which they did here in the last two months.

Got it. Thanks, Dan. Cargo to China. What quality I’m seeing, obviously, that would be priced off if our China index, correct?

Yes. And it was a mix of a few different products actually.

Got it. Got it. And then kind of just shifting, when you guys look at production, mix on the Met side, obviously, we’ve had some shifts around if you guys have moved towards more productive mines and we’ve got Road Fork 52, Lynn Branch, Black Eagle ramping up. How should we think about your quality mix this year and even going forward?

Yeah. Nathan, this is David Stetson. We put out an investor deck this morning. On page 14 of that you’ll see, our view of where our quality mix is going forward.

Yeah.

Which is primarily at the…

I saw in that, David. Yeah.

Yeah. So it’s high-vol A is 39, B and mid-vol both be right to 25 and then low-vol around 13.

Okay. Got it. Yeah. I saw that in there, it was 2020. I was just wondering if that was going to change much due to the fact that you guys are bringing on those three mines?

I think, Nathan, as we ramp up Road Fork 52, I’m not continue to put more low-vol into the market this year.

Perfect.

That’s for sure.

Yeah. Got it. Thank you, guys. And just…

Sorry, Nathan.

Yeah.

This is Andy. Just to add one more piece to that puzzle. We did add some material to the investor deck shows kind of an illustrative 10-year production profile. And really when you lay that out compared to or in concert with the quality mix, and what Dan just mentioned, you can see that we’re actually in really good shape for basically the next decade as far as production numbers without having to spend any kind of growth capital to maintain this 12 million to 13 million ton run rate of met coal. So again, the -- all the pieces have fallen into place to implement David strategy and we’re really happy to be where we’re -- where we’ve gotten into.

Got it. Thanks. Thanks for that color, Andy. Appreciate it. And then, I guess, just one more, and Andy, you kind of went through the puts and takes of the $25 million you guys had to post, I think just to recap, I mean, the 3.4 million, you paid back that much towards your borrowing, the $22 million satellites , you just said you’ve already got back last week. I just wanted to get your final thoughts on future bonding requirements maybe for your business or the industry. And maybe even you could give us an update on your totals kind of closed the Cumberland sale? Thanks.

Sure. Sure. Yeah. I mean the bonding market still kind of tough for coal across the Board. As I mentioned, thermal is really tough. I think just everything ebbs and flows with the market because of the broader coal market. So as the Met markets went into a trough, the surety providers got a little bit more nervous and we’re looking for extra collateral. Now that we’re trending the other direction, it feels like things are in a good place. We -- even in the tough comps, we continue to maintain really good relationships with our surety provider. So I think we’re in pretty solid shape right now and we do continue to pursue some smaller transactions to exit some potential reclamation items transactionally that can get us even more, I guess, you’d call it headroom or extra capacity for bonding perspective, couple of one-offs in the in the hopper, nothing that really moves the needle law, but again, just gives us some extra headroom on the bonding. But I think post-Cumberland transaction undiscounted amount of our bond exposure, our ARO exposure with kind of equivalent case to our bond is basically almost a $210 million down from about $370 million year-over-year.

Perfect. All right. Well, thank you guys for all the information and the time and take care.

Thanks, Nathan.

Thank you, Nathan.

This concludes our question-and-answer session. I would now like to turn the conference back over to David Stetson for any closing remarks.

I just want to thank everyone for getting on the call today. I encourage our stockholders and others to review our investor presentation that we put on our website this morning. So thank you all very much and have a wonderful day.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.