Arch Resources announces plans to reduce thermal coal production

October 26, 2020

Arch Resources Inc., one of the world's largest coal producers, announced plans to reduce the amount of thermal coal it produces of generating electricity to instead focus on it toward steel and metallurgical coal markets.

The St. Louis Business Journal reported that the company said it would reduce by more than 50 percent the amount of coal it produces from the Powder River Basin in Wyoming. The decision follows an announcement last month that it would attempt to sell the thermal coal business after ending its joint venture with St. Louis-based Peabody Energy.

The company's thermal coal mining operations in the Powder River Basin of Wyoming last year produced nearly 68 Mt (75 million st) of coal, a figure the company said will drop to less than 50 Mt (55 million st) this year. Arch said it will reduce production by another 50 percent over the next two to three years.

“We view this systematic winding down of our thermal operations – in a way that allows us to continue to harvest cash and to fund long-term closure costs with ongoing operating cash flows – as the right business solution in the event we are unable to find an appropriate buyer,” Paul A. Lang, Arch’s CEO, said in a news release. “Just as importantly, we believe that a careful and well-communicated exit strategy is the most responsible way forward for a range of essential stakeholders, including our employees, the communities in which we operate, our longstanding customer base, and the many consumers who continue to rely on coal-based electricity.”

The move is sure to have a significant impact on Wyoming where Arch coal operates the Black Thunder Mine, the second largest coal mine in the United States.

The announcement came as Arch disclosed a third quarter loss of $191.5 million, or $12.64 per share, a dramatic decline from the same period a year ago, when it reported a profit of $106.8 million, or $6.34 per share.

The winding down of thermal coal operations is part of the company's "rapid pivot" toward steel and metallurgical coal markets, sparked by the end of the Peabody joint venture in which the goal was to boost coal's competitiveness.

Arch and Peabody in June 2019 reached a deal to combine assets in the Powder River Basin and in Colorado as part of a joint venture operated by Peabody, which would own a majority of the business. But the Federal Trade Commission alleged in an administrative complaint filed in February that the move would eliminate competition between the firms.

Peabody and Arch canceled the venture in late September, saying the U.S. District Court upheld the FTC's efforts to block the deal.
At the time, Arch said it was already directing more than 95 percent of its 2020 capital budget to its metallurgical portfolio.



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