Arch Resources, Inc. today reported net income of $27.9 million in the second quarter of 2021, compared with a net loss of $49.3 million in the prior-year period. Revenues totaled $450.4 million for the three months ended June 30, 2021, versus $319.5 million in the prior-year quarter.
In a press release, the company said it expects to continue its positive operational and financial momentum in the second half of 2021, supported by the impending startup of Leer South, a strong coking coal price environment, and substantial contributions from the company's legacy thermal assets.
During the second quarter, Arch invested a total of $50 million at Leer South and has now expended a net total of $392 million on the project, which the company said is slightly above the high end of the original guidance range of $360 million to $390 million. Arch said it is raising its 2021 capex guidance by $10 million—to between $210 million and $230 million—to reflect the modest amount of additional capital required to complete Leer South and to fund certain opportunistic optimization efforts at its metallurgical mines. With the addition of Leer South, Arch expects to expand its High-Vol A metallurgical output by an incremental 3 million tons annually.
The company said its core metallurgical segment continued to execute at a high level during the second quarter, with a 23 percent step-up in coking coal sales volume, a 26 percent increase in per-ton cash margin, and a small but meaningful reduction in costs when compared to an already strong Q1 performance.
Arch said the seaborne metallurgical market is currently strong and well-supported, with global steel output on pace to match pre-pandemic levels and global steel prices at healthy if not historic levels. The company added that Australian coking coal indices have recently returned to parity with Atlantic Basin pricing, demonstrating more-than-sufficient global coking coal demand even in the face of the continuing Chinese lockout of Australian volumes. In short, while Chinese policies are re-mapping global trade flows, Arch said, the overall supply-demand balance remains constructive at present, despite growing concerns about the spread of new COVID-19 variants.
Arch also noted that opportunities for North American metallurgical coals to move into China remain substantial. At present, the delivered-in price for premium hard coking coal in China is approaching $320 per ton, underscoring China's need for high-quality replacement products. Moreover, the domestic spot price for high-quality indigenous Chinese products stands at nearly $310 per ton, which Arch views as further evidence that China's mine cost curve continues to shift higher.
During the quarter, Arch committed an additional 300,000 tons of metallurgical coal for delivery in 2021, bringing total commitments for the current year to 7.1 million tons and leaving just 700,000 tons still to sell at the mid-point of guidance.