Alpha Metallurgical Resources Q4 2024 Earnings Report

Alpha Metallurgical Resources EPS Results

• Actual EPS: -$0.16
• Consensus EPS: -$0.07
• Beat/Miss: Missed by -$0.09
• One Year Ago EPS: $12.88

Alpha Metallurgical Resources Revenue Results

• Actual Revenue: $617.30 million
• Expected Revenue: $658.20 million
• Beat/Miss: Missed by -$40.90 million
• YoY Revenue Growth: -35.70%

Alpha Metallurgical Resources Announcement Details

• Quarter: Q4 2024
• Date: 2/28/2025
• Time: Before Market Opens
• Conference Call Date: Friday, February 28, 2025
• Conference Call Time: 10:00AM ET

Alpha Metallurgical Resources (NYSE:AMR) (NYSE: AMR) is a leading pure-play producer of high-grade metallurgical coal, primarily serving the global steelmaking industry. Headquartered in Bristol, Virginia, the company operates multiple underground and surface mining complexes across the central Appalachian and Illinois basins. Its production portfolio focuses on premium raw and semi-soft coking coal products tailored to meet the specifications of steel producers worldwide.

Formed in July 2021 through the spin-out of Contura Energy’s metallurgical coal business, Alpha Metallurgical Resources has built a reputation for operational excellence and cost-efficient mining. The company’s asset base includes both legacy operations and strategically acquired properties that benefit from well-developed infrastructure and established rail and port logistics. This integrated approach enables AMR to deliver consistent product quality while maintaining tight control over freight and handling costs.

Under the leadership of President and Chief Executive Officer Robert C. Williams III, AMR emphasizes sustainable mining practices and environmental stewardship. The company invests in advanced mining technologies, reclamation projects, and community engagement programs designed to minimize its environmental footprint and support the long-term vitality of the regions in which it operates. AMR’s management team brings decades of collective experience in coal mining, supply chain management and capital allocation.

Alpha Metallurgical Resources markets its metallurgical coal products to steel manufacturers in North America, Europe and Asia. By focusing exclusively on the metallurgical segment, AMR seeks to capitalize on industry trends toward higher-quality coal blends and to position itself as a reliable partner for steelmakers aiming to enhance furnace productivity and reduce coke-making costs. The company’s strategic emphasis on high-BTU, low-impurity coal varieties underpins its competitive positioning in the global coking coal market.

Alpha Metallurgical Resources Q4 2024 Earnings Call Transcript

Key Takeaways

• Alpha reported $53 million adjusted EBITDA and shipped 4.1 million tons in Q4 with record safety metrics, reflecting strong operational execution.
• Extreme weather in Central Appalachia and weak metallurgical coal markets prompted a 500,000-ton reduction in annual shipment guidance and raised cost‐of‐coal sales guidance by $2 per ton.
• The company ended Q4 with $481.6 million in unrestricted cash (total liquidity of $519.4 million), no ABL borrowings and has paused share repurchases amid market uncertainty.
• Seaborne met coal indices fell 30–40% during 2024 as global steel demand softened and tariff uncertainty rose, signaling continued market headwinds in early 2025.
• Alpha maintains an “open door” M&A policy for opportunistic asset purchases and reports its Kingston Wildcat Slope development is halfway to its target depth, on track for 1 million tons of low‐vol production annually.

Presentation

[Operator]

Greetings and welcome to the Alpha Metallurgical Resources fourth quarter 2024 results conference call. At this time, all participants are on a listen-only mode. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to your host, Emily O'Quinn, Senior Vice President, Investor Relations and Communications. You may now begin.

[Emily O'Quinn, SVP of Investor Relations and Communications at Alpha Metallurgical Resources]

Thank you, Rob, and good morning, everyone. Before we get started, let me remind you that during our prepared remarks, our comments regarding anticipated business and financial performance contain forward-looking statements, and actual results may differ materially from those discussed. For more information regarding forward-looking statements and some of the factors that can affect them, please refer to the company's Fourth Quarter and Full Year 2024 Earnings Release and the associated SEC filing. Please also see those documents for information about our use of non-GAAP measures and their reconciliation to GAAP measures. Participating on the call today are Alpha's Chief Executive Officer, Andy Eidson, and our President and Chief Operating Officer, Jason Whitehead. Also participating on the call are Todd Munsey, our Chief Financial Officer, and Dan Horn, our Chief Commercial Officer. With that, I will turn the call over to Andy.

[Andy Eidson, CEO at Alpha Metallurgical Resources]

Thanks, Emily, and good morning, everyone. Today we announced financial results for the fourth quarter and the full year of 2024, which include adjusted EBITDA of $53 million and 4.1 million tons shipped in the quarter. Despite the deteriorating coal market conditions, our teams completed another year of safe production with record-setting safety metrics. As we've discussed in prior calls, the metallurgical coal market conditions have been negatively impacted by weak global steel demand, and these conditions persist. Our operations, like all others in Central Appalachia, have also experienced significant challenges because of extreme weather this winter, which will have substantial implications for our quarterly performance for the first and perhaps second quarters. Jason will be sharing details on those impacts later.

[Andy Eidson, CEO at Alpha Metallurgical Resources]

These issues caused us to increase the top end of our cost of coal sales guidance for the year and to bring down our annual metallurgical shipment volume guidance by 500,000 tons. This 500,000 ton figure roughly aligns with the amount we expected missed in the first quarter due to the confluence of lost shifts from absenteeism, power outages, snow and flooding impacts, and transportation delays. Beyond these direct impacts on our ability to move coal, other producers who we purchase coal from have experienced the same issues, so we've not been able to buy as much coal as expected in the first quarter. All of this, coupled with the continued weakness in the metallurgical coal markets, means we expect the rest of the quarter to be difficult.

[Andy Eidson, CEO at Alpha Metallurgical Resources]

The good news is that a year ago we anticipated market weakness, and we took action to prepare our business and our balance sheet. The weather impacts have been an unwelcome surprise, but we've managed through that, and our teams have worked hard to protect the safety of our people and our operations. Adversity isn't a stranger to this company or this industry, and it makes me proud to see the way the team has responded to these circumstances. During market conditions like these, it's not unusual to hear about tonnage coming offline due to uneconomic cost profiles, and a few very small operators have even made recent bankruptcy announcements. Volatility in our industry is a constant, and its effects are often intensified in down markets. However, conditions like these can sometimes present opportunities for well-capitalized companies to consider bolting on a mine, reserve base, or other kind of property.

[Andy Eidson, CEO at Alpha Metallurgical Resources]

When it comes to M&A, our approach is to have an open-door policy, meaning we believe it's important to evaluate the landscape for any potential transactions that could strengthen Alpha for the long term. We don't have any announcements to make today, but we continue to keep our eyes open for opportunities to fortify the financial and operational health of this already strong organization. Despite the rough market environment and uncertainty around tariffs that are getting most of the headlines, we understand that market analysts' projections for global steel demand remain strong, with met coal supply expected to stay constrained over the long term. With that, I will turn the call over to Todd for additional information about our quarterly financial results.

[Todd Munsey, CFO at Alpha Metallurgical Resources]

Thanks, Andy. Adjusted EBITDA for the fourth quarter was $53 million, up from $49 million in Q3. We sold 4.1 million tons in Q4, which is the same amount sold in the third quarter. Met segment realizations decreased quarter-over-quarter, with an average fourth quarter realization of $127.84 compared to $132.76 for the third quarter. Export met tons priced against Atlantic indices and other pricing mechanisms in the fourth quarter realized $122.24 per ton, while export coal priced on Australian indices realized $124.71. These results are compared to realizations of $129.31 per ton and $128.61 respectively in the third quarter. The fourth quarter realization for our metallurgical sales was a total weighted average of $132.63 per ton, down from $136.35 per ton in Q3.

[Todd Munsey, CFO at Alpha Metallurgical Resources]

Realizations in the incidental thermal portion of the met segment decreased to $75.39 per ton in Q4, as compared to $76.33 per ton in the third quarter. Cost of coal sales for our met segment decreased to $108.82 per ton in the fourth quarter, down from $114.27 per ton in Q3. SG&A, excluding non-cash stock compensation and non-recurring items, increased to $14.3 million in the fourth quarter, as compared to $13.4 million in Q3. CapEx for the quarter was $42.7 million, up from $31.5 million in Q3. Moving to the balance sheet and cash flows, as of December 31st, 2024, we had $481.6 million in unrestricted cash compared to $484.6 million of unrestricted cash as of September 30th. We had $112.9 million in unused availability under our ABL at the end of the fourth quarter, partially offset by a minimum required liquidity of $75 million.

[Todd Munsey, CFO at Alpha Metallurgical Resources]

As of the end of December, Alpha had total liquidity of $519.4 million, up from $507 million at the end of the third quarter. Cash provided by operating activities was $56.3 million in the fourth quarter, down from $189.5 million in Q3. As a reminder, the third quarter cash flows were positively impacted by a decrease in working capital of $144.5 million. As of December 31st, our ABL facility had no borrowings and $42.1 million of letters of credit outstanding, a reduction of $15 million in letters of credit outstanding as compared to the end of the third quarter. We reduced our metallurgical shipment guidance for the year by 500,000 tons, bringing the range to 14.5 million-15.5 million tons.

[Todd Munsey, CFO at Alpha Metallurgical Resources]

This is largely due to the impact we're already seeing in the first quarter of the severe weather impacts on our own production levels as well as the production of our peers, which we expect will lower the volumes of coal we purchase in 2025. Together with that change, we increased the high end of our met cost of coal sales guidance for the year, widening the range to $103 per ton-$110 per ton, up from the prior range of $103-$108. In terms of our committed position for 2025, at the midpoint of guidance, 32% of our metallurgical tonnage in the met segment is committed and priced at an average price of $143.81. Another 56% of our met tonnage for the year is committed but not yet priced.

[Todd Munsey, CFO at Alpha Metallurgical Resources]

The thermal byproduct portion of the met segment is 95% committed and priced at the midpoint of guidance at an average price of $80.74. Due to the continued softness in the met coal markets, we did not repurchase any shares in the fourth quarter under the company's share buyback program. As of February 21st, the number of common stock shares outstanding was approximately 13 million. The remaining stock buyback program authorization permits approximately $400 million in additional repurchases, contingent on cash flow levels and market conditions. We have repurchased a total of 6.6 million shares under the existing plan at an average share price of $165.74. I will now turn the call over to Jason to provide an update on operations.

[Jason Whitehead, President and COO at Alpha Metallurgical Resources]

Thanks, Todd. Good morning, everyone. At the conclusion of each year, we evaluate each operation's track record to determine the winners of our Best in Class awards, which recognize excellence in safety, environmental stewardship, and productivity, three critical pillars of Alpha's success. This year is extra special as the award has been renamed in honor of our previous Chairman and CEO. We are pleased to announce the winners of this year's David J. Stetson Best in Class awards. Rolling Thunder Deep Mine won the Best Mine category. Mammoth Processing Plant was the winner of the Processing Plant category, and our Feats Loadout took home the honors in the Loadout category.

[Jason Whitehead, President and COO at Alpha Metallurgical Resources]

Achieving this level of performance requires teamwork and a commitment to continuous improvement, and I want to offer my congratulations to each and every employee whose hard work earned these accolades, strengthening both their respective operations and the company as a whole. It's encouraging to see the competitiveness across the company as these teams work hard to earn this sought-after recognition. This makes us all better. While we call out only a few specific operations for Best in Class awards, it's important to acknowledge the good work occurring across our organization. For example, in the area of environmental stewardship, we maintained our 99.9% water quality compliance in 2024. A measure of success in safety is TRIR, or Total Reportable Incident Rate, where we consistently perform favorably to the coal industry average.

[Jason Whitehead, President and COO at Alpha Metallurgical Resources]

In the last two years, we've had back-to-back company records for this safety metric, along with the second-best year on record for company-wide NFDL, or Non-Fatal Days Lost, which is another safety measure where we consistently perform better than the coal industry average. In aggregate, we had 41 work groups, which totaled over 2.8 million exposure hours throughout the 2024 calendar year with zero NFDL injuries. As we often say, a safe mine is a productive mine, and that holds true as our Alpha underground productivity rates continue to exceed that of our non-long-haul peers. I want to publicly praise our teams for continuing to perform exceptionally well in these and many other measures of safety, environmental compliance, and productivity. Turning to the quarter, I want to thank the operations teams for their continued hard work focusing on controlling spend while maintaining productivity.

[Jason Whitehead, President and COO at Alpha Metallurgical Resources]

As Todd stated, quarter-over-quarter costs of coal sales were down approximately $6 a ton across equivalent sales volumes of 4.1 million tons. I'll remind everyone that typically the fourth quarter is challenging due to two planned shutdown periods across most of our operations. Heavy contributors to the quarter-over-quarter decrease came from lower supply and repair costs, as well as lower transportation and preparation costs. I appreciate everyone's continued focus on things within our control as we head into 2025. I'd also like to give an update on the Kingston Wildcat slope that we're developing in Pax, West Virginia. Our in-house crews continue to push the slope development down. As of today, we're approximately 880 feet deep, which is about halfway. We're still on track with our initial estimates to hit the coal seam and start taking development cuts in coal late this year.

[Jason Whitehead, President and COO at Alpha Metallurgical Resources]

As a reminder, we expect the Wildcat mine will produce approximately 1 million tons of low-ball coal per year when it reaches full production. Looking forward into Q1, I can tell you that 2025 has presented with some challenges. Weather data from Beckley, West Virginia, which is in the proximity of many of our operations, show year-to-date precipitation and snowfall have been 201% and 135% of normal, respectively. On top of the excessive precipitation, below-average temperature has hindered operations. Internal and external transportation systems, our preparation facilities, utilities infrastructures, and safe means for employees to travel to work have all been compromised several times, which contributed to the change in cost guidance mentioned earlier.

[Jason Whitehead, President and COO at Alpha Metallurgical Resources]

It's times like this where the hardest work often goes unnoticed, and I'd like to thank the Alpha team members who doubled their efforts to ensure that internal roads and systems were kept open and operating to the very best of their abilities through the first couple challenging months of the year. With those operational updates, I'll now turn the call over to Dan for an update on the markets.

[Dan Horn, Chief Commercial Officer at Alpha Metallurgical Resources]

Thanks, Jason, and good morning, everyone. Metallurgical coal markets ended 2024 at sharply lower levels than they began the calendar year, with each of Alpha's followed indices experiencing at least a 30% drop. For example, the Australian Premium Low Volatile Index declined by 40% from the start of the year until the end. From the start to the finish of the fourth quarter specifically, there was limited movement among the four indices that Alpha closely monitors. The Australian Premium Low Volatile Index fell from $204.75 per metric ton on October 1st, 2024, to $196.50 per metric ton on December 31st, 2024. The U.S. East Coast Lowball Index decreased slightly from $189 per metric ton at the beginning of the quarter to $188 per metric ton at quarter end. The U.S.

[Dan Horn, Chief Commercial Officer at Alpha Metallurgical Resources]

East Coast Highball A Index fell from $184 per metric ton in October to $183 per metric ton at the end of December 2024. Finally, the U.S. East Coast Highball B Index opened and closed the quarter at $171 per metric ton. Since the quarter close, the Australian PLV decreased to $187 per metric ton as of February 26th. The U.S. East Coast Lowball, Highball A, and Highball B indices measured $184, $180.50, and $167.50 per ton, respectively, as of the same date. In the seaborne thermal market, the API-2 Index was $118.25 per metric ton on October 1st, 2024, and decreased to $113.15 per metric ton on December 31st, 2024. Since then, the API-2 has fallen to $93 per metric ton as of February 26th.

[Dan Horn, Chief Commercial Officer at Alpha Metallurgical Resources]

The downward movement in metallurgical coal indices is primarily due to a decline in steel demand, which has been influenced by uncertainty in geopolitics and economic conditions across the globe. With numerous elections having been held and leaders elected within 2024, markets are now attempting to digest the anticipated future actions and governing priorities of these recently installed governments. For example, the new U.S. administration has expressed its commitment to imposing tariffs on certain imported goods and materials. If new tariffs are imposed and trade wars occur, these circumstances will likely impact natural coal trade flows and the cost of materials for coal producers. As we've seen in recent weeks, the tariff situation is one that changes rapidly, so we continue to keep an eye on it, and we will adjust as necessary depending on where things land once the dust settles.

[Dan Horn, Chief Commercial Officer at Alpha Metallurgical Resources]

Many of the factors that negatively influenced metallurgical coal markets last year, such as depressed steel demand, continue to loom over the current pricing environment. Additional uncertainty around fiscal policies, shifting geopolitical priorities and trade practices, as well as the overall economic health of the major coal-producing and coal-buying regions of the world, will continue to influence metallurgical coal pricing. Absent an increase in steel demand and a more certain geopolitical and economic backdrop, challenging coal market conditions are expected to continue in the coming months. We continue to engage with customers as usual, making commitments for our 2025 export tonnage. Our most immediate challenges relate to the unfortunate weather conditions that have hammered the eastern United States in recent weeks, as they have created bottlenecks along the entire process of producing, moving by rail, and loading coal into vessels.

[Dan Horn, Chief Commercial Officer at Alpha Metallurgical Resources]

We expect these negative influences to lower our overall shipments and therefore weigh on our quarterly results for both Q1 and Q2. At DTA, the team has done a great job of keeping operations running as smoothly as possible despite unfavorable weather conditions. As part of the multi-year program to upgrade equipment and infrastructure, a planned outage of roughly two weeks is scheduled to occur in May. While significant work and preparation have occurred to minimize the disruption to our shipping operations, we recognize that this outage has the potential to delay some shipments. With that, operator, we are now ready to open the call for questions.

[Operator]

Thank you. At this time, we'll be conducting a question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad. One moment, please, while we poll for questions. Our first question comes from Nathan Martin with Benchmark Company. Please proceed with your question.

[Nathan Martin, Senior Equity Research Analyst at Benchmark Company]

Thanks, operator. Good morning, guys.

[Andy Eidson, CEO at Alpha Metallurgical Resources]

Hey, David. How are you?

[Nathan Martin, Senior Equity Research Analyst at Benchmark Company]

I'm doing well. Thank you. You know, Dan, maybe just coming back to your comments here at the end, you know, how should we think about the cadence of sales as we go through the quarters here in 2025? You mentioned clearly the weather disruptions to start the year. You just called out the planned outage at DTA in May. You know, I think typical seasonality also limits domestic shipments in one tier anyways because of the weather. So, you know, maybe just get some thoughts on how you guys see that playing out quarter by quarter for 2025. Thanks.

[Dan Horn, Chief Commercial Officer at Alpha Metallurgical Resources]

Yeah, Nate. I mean, I think the domestic shipments should be, the cadence on those should be roughly per outage. We do not have much lake business, so we continue that. That should be fairly ratable through the year. You know, on the export side, probably have more in the back half as we catch up from some of the missed shipments. We will have what some of my team calls the accordion effect on the shipments. We will have low inventories today. As things come back to normal, we will pick up and resume slightly higher level shipments as we go forward. The market depends, you know, some of that is market dependent too. We expect the steel demand hopefully improves towards the back half. There should be some more spot demand and spot shipments as well.

[Nathan Martin, Senior Equity Research Analyst at Benchmark Company]

Okay. Got it, Dan. That's helpful. You know, talking about cost per ton guidance, clearly you guys raised that $2 at the high end, as you mentioned. Is it possible to get a breakdown of that between, you know, the expectation for lower shipments, the purchase coal, how that impacted the cost range, and, you know, the difficult weather to start the year? Any way to quantify that?

[Andy Eidson, CEO at Alpha Metallurgical Resources]

Hey, Nate, it's Andy. I don't think so. I mean, we're kind of picking nits there. Again, we only increased the upper range by $2. It's a little bit of a fudge factor, to be honest. We do know that there's going to be some—we've seen the cost impacts in actuals in January. We haven't seen February actuals, of course, but we do expect some impact there. We're really just guarding against any kind of issues with Q1 throwing us off track for guidance. It gives us a little bit of breathing room. We do know there's, you know, there's at least a dollar of impact baked in there to the midpoint. It is, you know, it's really hard to break it down between any of the contributing factors.

[Nathan Martin, Senior Equity Research Analyst at Benchmark Company]

Okay. That's fair, Andy. I get it. Maybe just shifting over to the price side, it looks like you guys priced some export met tons now at $113. If my math is close, it's probably around a million tons, maybe a little bit more than that based on the rest of your guidance. Could we get an idea maybe of the quality or index mechanism being used for those tons? Because, you know, even in this market, I feel like that $113 is maybe a little lower than I would have expected and clearly getting close to kind of the high end of that cost per ton guidance now. Maybe it's just because it's, you know, Highball B or going CFR or whatever, but some additional color would be great.

[Dan Horn, Chief Commercial Officer at Alpha Metallurgical Resources]

Yeah. Nate, those tons probably are Highball tons. You know, we're still anticipating a little bit of uplift in the price curves as the year goes on. I can't really comment if they're going to be Highball A, Highball B. Can't get too granular on that. But broadly speaking, those tons would be priced as Highball. I will say that the supply is a little tighter than maybe you'd read in the rags these days, that the weather impacts on the East Coast have affected all Cap producers and Nap producers as well. I think, you know, maybe things are being a little bit underreported as far as supply.

[Nathan Martin, Senior Equity Research Analyst at Benchmark Company]

Okay, Dan. Got it. Appreciate that. Maybe just one more, guys, just kind of thinking about, you know, the macro in general. You made a couple of comments related to tariffs. You know, I was just thinking, we know Alpha is one of the largest suppliers of met coal to the domestic steel markets. You know, given the moves we've seen thus far from the new administration, you know, what are your thoughts on how that could impact your domestic demand for your products? You know, is there—what's your ability to shift tons, you know, back and forth, you know, domestic export to kind of maximize your margins there? Thanks.

[Dan Horn, Chief Commercial Officer at Alpha Metallurgical Resources]

Sure, Nate. You know, we certainly have the ability to shift some tons between the two, between seaborne and domestic. I think when you look at the domestic market, it sort of begins and ends with the blast furnaces. Right now, our customers are running their blast furnaces that they intend to run, let's say. I'm not sure that there will be additional blast furnace production coming on. If there is, that is going to require additional coke production, and that will require additional coking coal. To the extent that happens, we are prepared. I'm not sure I see signals that that will happen yet, though.

[Nathan Martin, Senior Equity Research Analyst at Benchmark Company]

Great. Appreciate those thoughts, Dan. Thank you, guys, for the time, and best of luck in 2025.

[Andy Eidson, CEO at Alpha Metallurgical Resources]

Thanks, Nate.

[Operator]

Our next question comes from the line of Nick Giles with B. Riley. Please proceed with your question.

[Nick Giles, Senior Research Analyst at B. Riley]

Thanks, operator. Good morning, everyone. Guys, congratulations on all your accomplishments at the operating level. I'm sure the trophy case is getting pretty full. My first question is, you know, cash of $480 million, which I believe is roughly flat quarter-over-quarter, but still higher than historical periods. Is this kind of the level we should expect you to target if the market remains weak? And then what kind of level should we think about if markets are to turn, and how should we square this with cash that could be deployed towards share purchases? Thanks so much.

[Andy Eidson, CEO at Alpha Metallurgical Resources]

Yeah. Thanks, Nick, for the compliment. It's kind of lost in the chaos of the market right now how well operations did perform in Q4. We don't want to gloss that over. As I mentioned, the bad market and tariffs get the headlines, but the real story here is how well operations performed in the quarter, both from, you know, productivity. Once again, we're top of the heap on the met production side. As far as [audio distortion] productivity metrics, our safety was off the charts, not just for the quarter, but for the year. A lot of good work happening there. Talking about liquidity, I mean, our target has been, and we talked about—we started this conversation a year ago, really, a year ago, almost this week, of we felt the market was getting some weak legs, and we went into cash preservation mode.

[Andy Eidson, CEO at Alpha Metallurgical Resources]

We suspended the share repurchase, and we wanted to warehouse as much cash as possible. We have hit this kind of a static rate in that, generally speaking, we'll call it a $400 million-$500 million range of cash and then additional liquidity from the ABL. You know, we want to hold on to that as long as we possibly can. We're going to continue managing to cash rather than any other outside situation. You know, at this point, I don't know that, you know, we're really interested in thinking about any share repurchase activity or any kind of capital returns until we do see some trend in the market going the other direction because this thing has set in for a little bit, and there's just a lot of uncertainty. I think we're going to kind of maintain course on what we've been doing.

[Andy Eidson, CEO at Alpha Metallurgical Resources]

Job one has always been protect the franchise. We're going to continue that direction.

[Nick Giles, Senior Research Analyst at B. Riley]

Makes sense. I appreciate that, Andy. Maybe just from an M&A perspective, I think you may have alluded to some potential opportunities out there. Any other additional color around those, whether from a size perspective or what kind of metrics are you paying attention to? What geographies make most sense? Would this be some of your centralized peers, for instance?

[Andy Eidson, CEO at Alpha Metallurgical Resources]

Yeah. Let me go ahead and warn you, there's nothing actionable out there at the moment. There are obviously some processes going on with certain assets. There are some bankruptcy processes that are working through the system. There are lots of opportunities to do some things that could be at, you know, kind of a low entry cost. The issue now is you have to be careful of watching for cash burn from operations. That's the thing you have to keep an eye on. There are potentially some opportunities. We've always thought about the filter of, number one, it needs to be geographically synergistic. Number two, it needs to be somewhat synergistic or additive from a coal quality standpoint. Thirdly, it needs to be in some way accretive, whether it's net income, cash flow, or EBITDA, some metric it needs to make some sense.

[Andy Eidson, CEO at Alpha Metallurgical Resources]

At this point in time, it's a little bit tougher to hit the accretion mark. Again, right now is not forever. If there are some opportunities for us to see some consolidating M&A, whether it's very, very small or slightly larger than a buy size, then we're going to have to strongly consider it.

[Nick Giles, Senior Research Analyst at B. Riley]

That's helpful. Maybe just one more from me. Any color around kind of where you see marginal cost today? Any other comments you can share around how much supply out of Central Appalachia might have come out of the market to date and then how much could be at risk?

[Andy Eidson, CEO at Alpha Metallurgical Resources]

Oh, goodness. That's the billion-dollar question right there. I mean, we have seen a few tons come out. Some of it has been through actual mine idling. Some of it has been through, you know, operational interruptions for other reasons. It's kind of hard to gauge how much of these are permanently gone or even, you know, more midterm tons that are out of the market. I don't want to comment on that. I do think, you know, another thing that we talked about last year was the cost curve. At the time, the cost curve was the [audio distortion] was around, you know, the view was it was $225, and the thought was that would provide a floor. Obviously, that has not been the case.

[Andy Eidson, CEO at Alpha Metallurgical Resources]

It still boils down to, you know, the breakdown of fixed versus variable cost and what optimizes cash flow for these operations. I think we are, and at this point, I think we've probably crossed the Rubicon in some respect of several operations that are moving into that zip code of where they may not be covering their variable costs on some of their tons. I would expect, you know, obviously, kind of stating the obvious, as this market continues, we'll see more pressure on these, particularly the smaller operators that don't have the ability to spread their fixed costs across a bunch of tons. We're going to see some of those, more of those folks exiting, and a lot of the higher cost operations could be coming out, you know, sooner rather than later.

[Andy Eidson, CEO at Alpha Metallurgical Resources]

We're not going to comment on anything specific because everybody's got to make their own decisions. I can't see how there's not more to come. I do think marginal cost is becoming a real issue at this point. I think that's where the pressure is going to apply, particularly in Central Appalachia.

[Nick Giles, Senior Research Analyst at B. Riley]

Andy, I appreciate all that color. If I could sneak in one more, maybe just on the transportation side, can you just remind us of maybe any sensitivity to pricing? I believe your transportation costs do not work on a lag. If you could just clarify that, that would be helpful.

[Andy Eidson, CEO at Alpha Metallurgical Resources]

You're referring to rail costs?

[Nick Giles, Senior Research Analyst at B. Riley]

Correct.

[Andy Eidson, CEO at Alpha Metallurgical Resources]

Yeah. We do not really comment on that. Those are contractual situations with both railroads. So we do not say too much. I mean, they are somewhat aligned with indexes. So that is probably all I should say about that.

[Nick Giles, Senior Research Analyst at B. Riley]

Fair enough. Andy and team, I want to commend you on all your efforts in this tough market. Keep up the good work.

[Andy Eidson, CEO at Alpha Metallurgical Resources]

Thank you very much.

[Operator]

We have reached the end of the question-and-answer session. I'd now like to turn the call back over to Andy Eidson for closing remarks.

[Andy Eidson, CEO at Alpha Metallurgical Resources]

Thanks, everyone, for your time today. We appreciate you. We'll see you next quarter. Have a great rest of the day and a great weekend.

[Operator]

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Participants

Executives

• Todd Munsey, CFO
• Dan Horn, Chief Commercial Officer
• Emily O'Quinn, SVP of Investor Relations and Communications
• Andy Eidson, CEO

Analysts

• Nick Giles, Senior Research Analyst at B. Riley
• Jason Whitehead, President and COO at Alpha Metallurgical Resources
• Nathan Martin, Senior Equity Research Analyst at Benchmark Company