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Arch to sharply cut PRB coal production, continue shift to met coal

October 23, 2020

Casper Star Tribune:

Coal giant Arch Resources, Inc. plans to aggressively shrink thermal coal operations in the Powder River Basin, outlining a shift toward coking coal and steel production in an investor call on Thursday.

Arch anticipates slashing thermal coal production by another 50% over the next two to three years at its coal mines in the Powder River Basin. The firm went so far as to suggest it would be looking for “an appropriate” buyer for certain assets, and if no buyers are found, significantly scale down production. Arch operates the Black Thunder mine — the second largest mine producing over 10% of the nation’s coal — as well as the Coal Creek mine in Wyoming.

“We have launched an accelerated effort to evaluate strategic alternatives for our thermal operations, including possible divestiture,” Paul Lang, Arch’s chief executive officer, said in a statement. “Simultaneously, we are finalizing plans to shrink the operational footprint at these operations, with a particular emphasis on our Powder River Basin assets, where we are sharply focused on systematically reducing our asset retirement and related mine closure obligations.”

“I think there are buyers out there,” Lang added during the investor call. “…If you stand back and look at the basin, there have been some non-traditional players come in, and they come in in various ways. It will be kind of interesting to see how this plays out in the next couple of months.”

The company also reported a net loss of $191.5 million in the third quarter and a $163 million non-cash write down of assets at “several of its legacy thermal operations.” Black Thunder coal firm was not included in this impairment, according to the company.

But a write down for Black Thunder is likely around the corner, according to Rob Godby, economist at the University of Wyoming and associate dean of the Haub School of Environment and Natural Resources. “It has to be. If you’re saying that you’re going to reduce production by 50%, that means that the asset value of that mine has just declined by half, give or take.” Godby continued: “I think what we need to do is pay attention. This company is the second largest company in the basin, operating the second largest mine — a mine that produces 10% of the country’s coal. They are signaling very clearly that they would like to leave this market, and they would like to reduce their production by as much as 50% in the next few years.”

Arch’s Powder River Basin mines produced nearly 75 million tons of coal last year. But it forecast significantly lower production levels for 2020. Less than 55 million tons of coal will be mined this year at its mines in the basin, due to an “enormous demand shock,” according to company executives. In comparison, Arch’s Black Thunder mine alone produced over 116 million tons of coal in 2010, according to the Mining, Safety and Health Administration.

[Camille Erickson]

More: Major Wyoming coal company suffers huge losses, plans to divest from thermal coal

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