Alpha's Q3 2025: Contradictions Emerge on Domestic Strategy, Safety, and MSHA Enforcement

Guidance:

• Company is not yet issuing 2026 guidance while domestic contract negotiations and budget planning continue.
• Capital contributions to equity affiliates for 2025 lowered to $35–$41M (previously $44–$54M).
• Kingston Wildcat expected to ramp toward ~1.0M tons annual run-rate in 2026; roughly $40M additional capex expected next year (project ~ $80M total, ~half spent in 2025).
• For 2025 at midpoint: 85% of met tonnage committed and priced at $122.57/ton; 13% committed but unpriced; thermal byproduct fully committed at $80.27/ton.

Business Commentary:

• Cost Management and Efficiency:
• Alpha Metallurgical Resources reported a cost of coal sales of $97.27 per ton in Q3, marking the best performance since 2021.

• The company achieved this through a 2% increase in tons per man-hour, reducing labor costs and other fixed expenses.

• Metallurgical Coal Market Dynamics:

• The Australian Premium Low-Vol Index experienced a significant increase of 9.6% during Q3, rising from $173.50 to $190.20 per metric ton.
• The increase was attributed to supply and demand dynamics, with Australian production levels being relatively stable throughout the year.

• 

• Domestic Contract Negotiations:

• Alpha Metallurgical Resources is currently engaged in negotiations with North American customers for domestic sales commitments in 2026.
• The process has been ongoing since July, with delays attributed to uncertainties in steel industry capacity and steel pricing conditions.

Sentiment Analysis:

Overall Tone: Neutral

• Management highlighted record-low cost of coal sales ($97.27/ton) and strong operational execution but emphasized market softness and uncertainty: "indexes have held on current levels... vulnerable to uncertainty," they are "not quite yet ready to issue guidance for 2026," and they lowered capital contributions guidance to $35–$41M.

Q&A:

• Question from Nick Giles (B. Riley Securities): How should we think about the sustainability of recent cost cuts and productivity gains if prices start to move?
  Response: Management says productivity gains are largely sustainable due to completed development and continued operational improvements, but quarter-to-quarter volatility from geology and seasonal disruptions (e.g., Q4 vacations) could occur.

• Question from Nick Giles (B. Riley Securities): Is there precedent for domestic contract volumes flexing by more than 1 million tons year-over-year?
  Response: Management: volumes are driven by customers and North American steel production; outcomes vary year-to-year, they can't quantify a million-ton swing and expect volumes to remain within historically observed ranges (low threes to ~4+ million tons).

• Question from Nick Giles (B. Riley Securities): Have you explored rare earth opportunities at prep plants or waste streams and could those be material?
  Response: Alpha has done limited sampling and small-scale work dating back to 2014, will continue modest evaluation, but does not expect rare-earth projects to be material or a strategic priority today.

• Question from Nathan Martin (The Benchmark Company): What is the ETA for reopening the CSX line after the October 25 derailment and how much inventory do you have at DTA to serve contracts?
  Response: First trains have moved; company expects a short-duration disruption, had sufficient stock at terminals, and used access to all three Hampton Roads terminals to continue loading and serve customers.

• Question from Matthew Key (Bank Texas Capital): What is driving the spread between US East Coast Highball indices and the Australian benchmark and will it persist into 2026?
  Response: Management: spreads are supply/demand driven; Australian PLV is tied to Asian/Indian demand and tighter demand (e.g., India) or increased European demand in 2026 could strengthen Aussie indices and narrow spreads.

• Question from Matthew Key (Bank Texas Capital): Any color on 2026 CapEx expectations or major carryover projects?
  Response: Company not ready to finalize 2026 CapEx but expects roughly ~$40M more next year to complete Kingston Wildcat (project ~ $80M total, ~half already spent); other spending expected to be routine.

• Question from Nick Giles (B. Riley Securities): With a large cash balance, how are you approaching M&A or tuck-in opportunities?
  Response: Management is cautious—prioritizing liquidity and franchise protection—interested in bolt-ons that drive control/cost synergies (e.g., Maxim-like assets), but meaningful M&A is challenging in the current market and few material opportunities are actionable now.

• Question from Nick Giles (B. Riley Securities): Is the partial MSHA government shutdown affecting your safety operations or enforcement?
  Response: Management reports enforcement remains active, they see no operational impact from the shutdown, and safety performance is driven internally with recent improvements (September and October strong).

Contradiction Point 1

Domestic Market Strategy and Pricing

It highlights a shift in the company's approach to the domestic market, which may impact pricing strategy and customer relations.

If fixed price contracts cannot be reached, would negotiations shift to spot pricing? - Nathan Martin (The Benchmark Company)

2025Q3: Domestic customers prefer fixed price contracts, with spot activity occurring only when there are interruptions or ramp-ups in production. Negotiations are ongoing, with the process taking longer than usual due to industry uncertainties. - Dan Horn(CRO)

Would you consider increasing domestic production given the market's resilience in a weak economy, and how do you view domestic opportunities as summer approaches? - Nick Giles (B. Riley Securities)

2025Q1: It's too early to say if domestic volumes will increase. Alpha will approach the domestic market based on customer needs, with no specific targets in mind. Domestic market pricing is generally higher. - Dan Horn(CRO)

Contradiction Point 2

Safety Performance and MSHA Involvement

It addresses the company's approach to safety and the role of the MSHA, which could impact operational efficiency and regulatory compliance.

How are you addressing safety in the current environment, and is the MSHA shutdown affecting your operations? - Nick Giles (B. Riley Securities)

2025Q3: MSHA's enforcement activities remain active, with October seeing significant involvement. Alpha Metallurgical Resources' safety performance is driven internally, not by MSHA's actions. Despite some early issues, the company has seen significant safety improvements in September and October. - Andy Eidson(CEO)

Any updates on MSHA inspectors, their impact this year, or comments on the industry's response? - Nathan Martin (The Benchmark Company)

2025Q1: The company works closely with MSHA to ensure that we're in compliance with those regulations. We're a company that wants to operate as safely as we can, but we also want to operate in compliance. - Andy Eidson(CEO)

Contradiction Point 3

Domestic Contract Flexibility

It involves differing statements on the flexibility of domestic contracts, which could impact revenue projections and negotiations with customers.

Were there any historical precedents for adjusting domestic contract volumes by more than a million tons year-over-year? - Nick Giles(B. Riley Securities)

2025Q3: Every year is different, and it depends on customer demand. The steel industry in North America is not running at full capacity, affecting coke and coal demand. Until negotiations conclude, more details cannot be provided, but typically volumes are similar to the previous year. - Dan Horn(CMO)

How will new tariffs affect Alpha's domestic demand, and can the company shift production between domestic and export markets? - Nick Giles(B. Riley)

2024Q4: We have the ability to shift tons between domestic and export markets as needed. The domestic market is driven by blast furnace operations which are currently running without plans for additional capacity increases. We'll be prepared if demand increases. - Dan Horn(CMO)

Contradiction Point 4

Impact of Government Shutdown on Safety

This contradiction concerns the impact of a government shutdown on safety procedures, which is crucial for operational continuity and regulatory compliance.

Could you discuss current safety procedures? - Nick Giles(B. Riley Securities)

2025Q3: MSHA's enforcement activities remain active, with October seeing significant involvement. Alpha Metallurgical Resources' safety performance is driven internally, not by MSHA's actions. - Andy Eidson(CEO)

Where did the savings come from, and how much was attributable to lower labor costs, repair and maintenance, and other operating efficiencies? - Nicholas Giles(B. Riley Securities)

2025Q2: While our operations have been impacted this year, it has still been a good year from a safety standpoint. - Andy Eidson(CEO)

Contradiction Point 5

Safety Performance and MSHA Enforcement

It involves differing statements on the impact of MSHA enforcement on safety performance, which could influence investor perceptions of the company's operational standards.

Could you clarify current safety procedures? - Nick Giles(B. Riley Securities)

2025Q3: MSHA's enforcement activities remain active, with October seeing significant involvement. Alpha Metallurgical Resources' safety performance is driven internally, not by MSHA's actions. Despite some early issues, the company has seen significant safety improvements in September and October. - Andy Eidson(CEO)

How should we expect 2025 quarterly sales trends to unfold, considering the initial weather disruptions and the planned DTA outage in May? - Nathan Martin(The Benchmark Company)

2024Q4: We have made great progress with our safety performance over the past 8 months. We've had one fatal accident in 2025, compared to 11 in 2024. - Andy Eidson(CEO)