Core Natural Resources, Inc. (CNR) Q3 2026 Earnings Call Transcript

Operator: Good morning, ladies and gentlemen, and welcome to the Core Natural Resources Incorporated Third Quarter 2026 Earnings Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, November 5, 2026. I would now like to turn the conference over to Mr. Deck Slone. Please go ahead.

Deck Slone: Good morning from Canonsburg, Pennsylvania, everyone, and thanks for joining us today. Before we begin, let me remind you that certain statements made during this call, including statements relating to our expected future business and financial performance, may be considered forward-looking statements according to the Private Securities Litigation Reform Act. Forward-looking statements, by their nature, address matters that are, to different degrees, uncertain. These uncertainties, which are described in more detail in the annual and quarterly reports that we file with the SEC, may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required by law. I'd also like to remind you that you can find a reconciliation of the non-GAAP financial measures that we plan to discuss this morning at the end of our press release, a copy of which we have posted in the Investors section of our website at corenaturalresources.com. Also participating on this morning's call will be Jimmy Brock, our Chairman and CEO, Mitesh Thakkar, our President, Nate Tucker, our CFO, and Bob Braithwaite, our Chief Commercial Officer. After some formal remarks from Jimmy, Mitesh, and Nate, we will be happy to take questions. With that, I'll now turn the call over to Jimmy. Jimmy?

Jimmy Brock: Thank you, Deck, and good morning, everyone. During the third quarter of 2026, Core again demonstrated the power of our strategically diversified, world-class, highly cash-generative operating portfolio. Indeed, Core has generated robust levels of free cash flow and returned substantial capital to stockholders in each quarter since the company's formation in January of 2025. In short, the expanded Core platform is delivering exactly as intended. We have delivered value to stockholders in a strong, consistent, and reliable manner, even while navigating the inherent variability of coal markets and the mining process itself. Underscoring this fact, we have now deployed a total of $450 million in our capital return program since the company's inception, including a total of $90 million in the quarter just ending. As the centerpiece of this program, we have reduced a net total of 5.1 million shares, or nearly 10% of shares outstanding, in the seven quarters since the program's launch. Notably, we have achieved that reduction in share count during a period of relative market weakness and during a period when the operating platform had yet to round into form. There is good news on both fronts. First, coal markets appear to be shifting into a higher point in the cycle. Second, and perhaps more importantly, the Core team continues to make steady progress toward its ultimate objective of delivering operational excellence on a steady and sustained basis. Both developments have the potential to drive even stronger returns to stockholders in the future. While Mitesh will discuss the coal markets in more detail momentarily, let me stress that I am confident we are building significant operational momentum, even if the normal geology variability masked that progress somewhat in Q3. I assure you that the Core team remains sharply focused on managing every one of our controllables tightly and intensively by operating safely, driving continuous improvement, managing consumables with rigor, and taking cost out at every turn. In doing so, we are building an exceptional foundation for long-term growth, success, and value creation across a wide range of market environments. With that, I will now turn the call over to Mitesh to provide an operational and market update.

Mitesh Thakkar: Thank you, Jimmy, and good morning, everyone. As Jimmy mentioned, the market backdrop improved during Q3, but remains slightly uneven across our product portfolio. Of our three major business segments, we are seeing the most positive momentum in the High CV Thermal segment, followed by the metallurgical and the PRB segments. On the High CV Thermal side, we continue to see favorable market conditions, with stronger Atlantic and Pacific export benchmarks supporting improved pricing opportunities for PAMC and West Elk. Seaborne thermal pricing strengthened meaningfully through the third quarter and into October. This represents a significant improvement from the weaker pricing environment experienced late last year and reinforces our view that high-quality thermal coal continues to play an important role in meeting global energy needs. Given our access to the seaborne market and the quality of our products, we believe we are well-positioned to capitalize on these improving market conditions. In the metallurgical segment, seaborne markets also strengthened throughout the third quarter, driven partially by continued supply tightness in China. We also saw a potentially meaningful development following the September meeting between President Trump and President Xi, where China agreed to import at least 10 million metric tons of U.S. coal in both 2027 and 2028. We believe this commitment could create an important additional outlet for U.S. metallurgical coal and further expand export opportunities for U.S. producers. The coal commitment is supported by a proposed tariff reduction framework that explicitly covers coking coal. We also saw positive momentum in the domestic market due to strength in the U.S. steel industry. For 2027, we secured approximately 2.4 million tons of metallurgical coal for delivery to the North American customers at fixed prices averaging above last year's commitments. Finally, moving to the PRB and High CV Thermal domestic power generation markets, we continue to believe the long-term outlook for U.S. power demand is compelling, supported by the expansion of data centers and broader industrial activity. We believe the benefits of this demand growth will be particularly concentrated in the PJM and other Eastern U.S. markets, which is the epicenter of data center build-out. Looking into 2027, the EIA currently projects commercial electricity demand, which includes data centers, to increase 2.8%, while industrial demand is projected to increase 2.7% in the U.S. That is a notable improvement from a decade ago, when the growth rate of electricity demand was forecasted to retreat. We believe these trends reinforce the importance of reliable, dispatchable generation and create a constructive longer-term backdrop for our thermal business. In summary, Core took advantage of the current market environment to further strengthen our sales position. Since the second quarter, we have broadened and extended our sales book, securing approximately 29.4 million tons of contracted volume through 2031 at attractive prices. This represents approximately 122% of our 3Q 2026 sales volume and provides a strong foundation as we move forward. Now, let me make some quick comments on our operations. In a nutshell, our diversified portfolio of operating assets did what it was designed to do. It generated strong free cash flow and allowed us to return a substantial amount of capital to shareholders. The issues we encountered, which primarily affected the quarter-over-quarter performance in the metallurgical and High CV Thermal segments, were partially offset by the strong quarterly performance in the PRB segment. Our team in the PRB did an excellent job of managing costs in the face of elevated diesel prices by running efficiently and complementing the marketing team's efforts to increase volumes on a quarter-over-quarter basis. In the metallurgical segment, costs were less favorable than in Q2, reflecting typical mining variability. We also had two high-priced coal vessels delayed by the late September nor'easter. Both vessels finished loading in early October, shifting those sales into the fourth quarter. The good news is, we will benefit from those higher-priced shipments in the fourth quarter, and our mining rates have now substantially improved as well. As you can see, despite these developments, we continue to track near the midpoint of our full-year cash cost guidance range for this segment. In the High CV Thermal segment, we also encountered some normal geologic variability and increased input costs at two of our longwalls that dampened our quarterly performance. However, we entered into the fourth quarter with strong momentum and are currently mining at rates that may exceed our expectations. In summary, all our operations are now running well, and we are expecting a strong performance in the fourth quarter. Now, let me turn the call over to Nate to discuss the financial update.

Nate Tucker: Thank you, Mitesh, and good morning, everyone. This morning, we reported solid third-quarter financial results. For 3Q26, we reported net income of $9 million, or $0.18 per diluted share, and adjusted EBITDA of $165 million, compared to net income of $126 million and adjusted EBITDA of $324 million in 2Q26. Let me put our third-quarter results into better perspective. As a reminder, our second quarter benefited from approximately $125 million associated with the Leer South insurance settlement. When removing that effect, our 3Q26 adjusted EBITDA was $33 million lower than 2Q26. However, a part of that was due to a $17 million expense tied to recognizing our 401(k) profit-sharing incentive due to our strong year-to-date results. We are now firmly on track to achieve certain incentive compensation free cash flow targets for the full year of 2026, which triggered booking the expense for the amount that was earned as of September 30th. When taking this into account, plus our planned annual summer shutdown in the third quarter, our results were mostly in line with 2Q. From a cash flow perspective, we spent $94 million in capital expenditures and generated approximately $80 million of free cash flow during the third quarter. This compares with $148 million of free cash flow in the second quarter, which benefited from an incremental $50 million in insurance proceeds versus the current period. As a reminder, we are currently recognizing the 45X tax credit and adjusted EBITDA for 2026. However, this should provide an additional source of free cash flow through working capital release in future periods. From a capital allocation perspective, we had a very active third quarter. During 3Q26, we returned $90 million, or 112% of our free cash flow to our shareholders, which was significantly above the $68 million returned in 2Q26. As Jimmy highlighted, since February 2025, we have returned 85% of our free cash flow to our shareholders via our capital return program, which includes a net reduction of approximately 10% of our shares outstanding since the program's launch and underscores the meaningful progress we've made in reducing the share count in a short period of time. At the end of the third quarter, we had total liquidity over $1 billion, including $444 million in unrestricted cash and cash equivalents and short-term investments. This represents approximately a $30 million reduction in cash and short-term investments compared to the second quarter, driven in part by our strong capital returns during the third quarter. Even with the robust shareholder returns, we maintained our balance sheet strength and net debt neutral position. Going forward, the strength and diversity of our operational footprint positions us to generate substantial free cash flow through all parts of the commodity cycle, providing significant flexibility in how we deploy capital and create long-term shareholder value. Now let me provide an update on our expectations for the remainder of 2026. As indicated in today's earnings release, we are adjusting certain sales and cash cost guidance ranges. Starting with the High CV Thermal segment, we have a total contracted volume of 31.4 million tons, remaining near fully contracted for the year. Our average realized coal revenue on the volumes committed is approximately $59 per ton. For segment cash cost, we are increasing and tightening our guidance to an updated range of $40-$41 per ton from the previous range of $39-$40.50 per ton. The adjustment primarily reflects inflationary pressures that have proven more persistent than previously anticipated, particularly across supply and maintenance costs, power, and contractors. In the metallurgical segment, we added 600,000 tons to our sold position, bringing the segment to 9.3 million coking tons contracted for 2026, with approximately 7.6 million tons priced and an expected average realized coal revenue of approximately $123 per ton. As for segment cash cost, we are tightening the range from $86-$91 per ton to an updated range of $88-$90 per ton. In the fourth quarter, we have a planned longwall move at Leer and an accelerated longwall move at Leer South due to its strong performance this year. For the PRB segment, our contracted position now stands at approximately 48.5 million tons at an average committed price of $14.28 per ton. From a segment cash cost perspective, we are increasing guidance to a range of $13.75-$14 per ton, mainly due to persistently elevated diesel prices. As we close out the year, our focus remains on executing against our operating plans, controlling cost, and positioning the company to take advantage of an increasingly constructive commodity environment. Now let me pass it back to Jimmy for some closing remarks before we open the call for Q&A.

Jimmy Brock: Thanks, Nate. First, we are encouraged by the momentum we saw in the third quarter. We believe the underlying trajectory of the business remains strong, and our teams are intensely focused on execution as we close out the year. In fact, October has already set a positive tone for the fourth quarter, with operations off to a strong start and the geology-related variability we experienced during the third quarter now behind us. Second, the market environment has become increasingly constructive. Our marketing team continues to take a disciplined approach to adding commitments, balancing the opportunity to lock in attractive margins today while preserving exposures to further market upside. Third, we remain highly focused on cost containment. We see additional opportunities across the organization to improve productivity, capture efficiencies from our operating platform, and further enhance margins. Cost discipline will remain a major priority as we move into the fourth quarter and into 2027. And finally, we remain committed to disciplined capital allocation. Our strong balance sheet and free cash flow generation provide considerable flexibility as we evaluate opportunities to return capital to shareholders while investing in the long-term value of the business. We believe Core is exceptionally well-positioned heading into the final months of 2026 and into 2027. We have a differentiated portfolio of high-quality assets, a talented workforce, substantial market reach, and a clear strategy focused on safely maximizing the long-term value of the business. Lastly, I want to thank our employees for their continued hard work and commitment, and all of our partners and stakeholders for their continued support. With that, I will hand the call back over to the operator to begin the Q&A portion of our call. Operator, can you please provide the instructions to our callers?

Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the number two. If you are using a speakerphone, please lift the handset before pressing any keys. Again, should you have a question, please press the star followed by the number one on your touch-tone phone.

Deck Slone: So operator, I believe there are. Please, thank you.

Operator: Yes. So sorry. So sorry. So first question comes from Lucas Pipes of B. Riley FBR Capital Markets. Please go ahead.

Lucas Pipes: Good morning, guys. For the record, I worked at Balyasny Asset Management. There must be something old in the archives. Nate, congratulations. Good morning, everyone.

Nate Tucker: Thank you.

Mitesh Thakkar: Morning, Lucas.

Bob Braithwaite: Morning, Lucas.

Lucas Pipes: Lots of earnings going on this morning, but maybe just to start out, curious how the international dynamics are impacting both your CV thermal as well as your met coal netbacks. Obviously, TTF in Europe has been very strong, but freight rates are elevated. If you could maybe speak to netback pricing for your Pennsylvania product in particular, and then also netbacks on the met coal side, that would be very helpful. Thank you.

Bob Braithwaite: Sure. Good morning, Lucas. This is Bob. In Europe, thermal coal pricing has strengthened meaningfully as we moved throughout the third quarter and also into October. API2 benchmark certainly moved higher, and that was supported again by the stronger natural gas price and power prices. With winter approaching and continued uncertainty around energy supply, we believe that market fundamentals remain supportive for our pricing in near term, both for our PAMC coal and for West Elk. India still continues to be the strong story for us. Petcoke imports are down over 50% year on year into India. Even most recently, we've been able to contract volumes into India for the first half of 2027, prices near $80 back to the mine. As we move through Q4 and into 2027, we certainly anticipate a meaningful increase on our ASP and our High CV segment. On the coking side, a lot of similar things happening there. You have U.S. East Coast prices are up, PLV prices are up. We've been successful in placing a lot of our volume in Q4 and beyond also against PLV. We're going to see the benefit there in Q4 and beyond as well. The million-dollar question is China, right? We're certainly seeing a lot of interest there over the past month, and we're certainly going to play in that market should that arb be open. When you look at where PLV CFR China prices are today and you take away freight, it's still better than what U.S. East Coast prices are. If that continues, I think we'll certainly participate there as well.

Mitesh Thakkar: Lucas, as you already know, I think we have a very strong operating platform with a lot of products, so we are exposed to a lot of these tailwinds. Some of our products, like the PAMC product in the High CV Thermal segment, can straddle multiple markets, whether it's the industrial market or metallurgical coal market, crossover market in China, as Bob mentioned, as well as the domestic power generation market. We try to make sure that we are getting the best arbitrage for our products. Very excited about what the market has in hold for us and looking forward to 2027.

Lucas Pipes: That's helpful. Thank you. On the cost side, obviously pressures from steel, I would expect some other inputs to molybdenum prices, or tungsten rather, for the mining units. Can you speak to what you see in Q3 cost as inflationary raw material pressures versus a mix in terms of different mines contributing more or less to the sales? Thank you.

Jimmy Brock: Yeah, Lucas, you hit on some of them. I mean, tungsten for shear bits and miner bits has certainly played a big part of it, as well as diesel fuel on the cost side. Then you look at some of the, like we said in the earnings script, some of the geologic variabilities that we had. We had three of our longwalls affected by some of those. I think it's just primarily mining. We'll handle that side of it. We know how to do it. But some of these inflationary pressures, when you start looking at the cost of diesel, the cost of miner bits, some of those things are the things that we can't control, that we have to find efficiencies or some other way to offset those.

Mitesh Thakkar: Lucas, if you look at our guidance also, we are expecting improvement at the midpoint of the guidance range on a sequential basis in Q4 versus Q3, as some of the geological issues are behind us. I think, yes, the inflationary pressures are real, but there are some operating indicators that we are also noticing that makes us more optimistic for Q4 versus Q3.

Lucas Pipes: That's very helpful. I appreciate all the color and continued best of luck.

Mitesh Thakkar: Thanks, Lucas.

Operator: Our next question comes from George Eadie of UBS. Please go ahead.

George Eadie: Yeah. Good day, gents. Bob and Mitesh, just building on Lucas's first question there. What percent of the High CV book is contracted for 2027 and 2028, and can you maybe help us with a sort of average price of those tons at the moment as a group, considering West Elk blended in as well?

Bob Braithwaite: Yeah. So George, we announced this morning, we concluded or contracted 29.4 million tons. That runs through 2031, but 2027 specifically was just around 16 million. On the High CV side, we added about another 6 million. So sitting here today, we're roughly about 70%, give or take, contracted. The price direction is certainly higher year on year. I think you heard me say that we did conclude some volume, pretty close to $80 for the first half of 2027. So, I would say sitting here today, you're looking at a very similar level that we're anticipating in Q4, which is that $62, $63 type dollar level with what we have committed, and we certainly have a lot of potential upside there as we have, call it 25%-30% left of our volume to sell, which majority of that is PAMC tons.

George Eadie: Okay. That's super helpful. Then just back to this China stuff as well, this 10 million ton potential. Can you talk us through the opportunity for you guys here? I know you probably already selling it or are selling some Leer into China, but if that tariff went, how much are we talking and also crossover PAMC tons? If I was to guess, say, 3 or 4 million tons per annum of PAMC crossover and the same of Leer, is that reasonable as sort of a guess if that tariff goes?

Bob Braithwaite: Yeah. So if you look back to 2024, Consol moved about 4 million tons of PAMC, Arch moved about 1 million tons of Leer. So, I'd say the potential's there to move that, at least that, if not more. But obviously, we're going to wait to see what this looks like once the tariff reduction, assuming it happens, and we'll place the tons where we get the best value. At PAMC, I'd sit there and tell you today, India still makes the most sense for us based on where those netbacks are. But as I just mentioned, if you look at where CFR PLV prices are into China, and take away where freight is today, that market certainly looks a lot more attractive than selling on an East Coast, U.S. East Coast basis. So, when the opportunity arises, we'll take a look and see where things are and make the best decision forward for the company to maximize our revenue and realizations back to the mine.

George Eadie: Okay. No, that makes sense. Could you probably next year even push, call it another 1 million tons out of West Elk? Could you run PAMC a little bit harder as well, to feed into all these markets? Or do you still sort of view it more as a game of selling a bit less domestic and exporting the rest?

Jimmy Brock: No, I think there is definitely an opportunity for us to push more West Elk coal. We have it running on a schedule now. Again, logistics is a big part of what we do out there, but we certainly will have an opportunity to move more of the West Elk coal.

George Eadie: That is great. Cheers, guys. Have a good one.

Bob Braithwaite: Thank you.

Jimmy Brock: Thank you.

Bob Braithwaite: Thanks.

Operator: Next question comes from Nick Giles of B. Riley Securities. Please go ahead.

Nick Giles: Yeah. Thanks, operator. Good morning, guys. I just wanted to touch on shareholder returns. They were obviously strong here in 3Q. First of all, what would working capital look like in the fourth quarter? How should we think about the likelihood for this level of buybacks to repeat? Thank you.

Nate Tucker: Yeah. I will start, Jimmy. Hey, this is Nate, Nick. On the working capital, yeah, we did build some trade AR in the quarter. Mitesh kind of talked about in his prepared remarks that we had some vessels kind of slip into the fourth quarter. The other thing I would point out is trade AR is also moving up too, just for the fact that met coal pricing in particular, and thermal as well, but pricing is moving up, so our trade AR is moving up because of that. I think once we get on a kind of a normal churn there could be some release as well. I think we built about $40 million, as I said, in the quarter. There is a potential for that to kind of move around. We are always going to have shipments that can move around. Sometimes this is days at a time, so you are talking just a day at the end of the quarter it can move. Yeah, released, those shipments that happened at the end of September into October, those will certainly release as well.

Jimmy Brock: Yeah. Nick, this is Jimmy. As we generate more free cash flow, we'll certainly have some opportunities. As we said, we've been very disciplined about that. We said we're going to return at least 75% of our free cash flow back to shareholders in the form of repurchasing shares as well as a small dividend. We've done that. If you look at Q3 here, we're around 112% of free cash flow to that. The market is certainly providing us some opportunities to go on the upside of buying back shares currently where we are today.

Nick Giles: Understood. Thanks for that, guys. Then maybe just on freight and demurrage, it seems like that has been impacting producers across the board. Can you just speak to kind of the sensitivity of that? If we were to see freight rates kind of moderate, how dollar for dollar for that is it in your sales realizations? Thanks.

Bob Braithwaite: Yeah, so we do a lot of our business on FOB, Nick, so I mean, we do have some exposure. We do sell some cargoes on a CFR basis. Again, it really does move with the index, although recently, I'd say you've seen freight come off pretty significantly. I mean, we're seeing freight rates in the 50s to India today. I'd say they're closer to lower 40s. Again, I'd say it's just more noise than anything. As far as demurrage is concerned, it's kind of a normal course of business. That's why we try to do everything we can to make sure that the coal is placed at the terminal in preparation for the vessel loading, so therefore we can minimize that. Demurrage rates are up. That's certainly the case. That all started obviously with the tightness because of the strait being closed. Overall, we just view that as kind of a normal course of business.

Nick Giles: No, thanks for that, Bob. Sorry, maybe just to ask more clearly, if we were looking at freight rates and we did see them come down, say, $10 a ton, is there a good rule of thumb that you would apply to total met realization, similar to the way that you provide a sensitivity for movements in API2?

Bob Braithwaite: Yeah, I'd say it's not that significant because again, majority of our cargoes that we do sell is on an FOB basis.

Nick Giles: Fair enough. Okay, I'll turn it over, but I appreciate the update, guys.

Bob Braithwaite: Thank you.

Jimmy Brock: Thanks, Nick.

Operator: Next question comes from Nathan Martin of StoneX. Please go ahead.

Nathan Martin: Thanks, operator. Good morning, everyone. You mentioned in your release and your comments as well, you committed now, what, 2.4 million metallurgical tons to the domestic market at a higher year-over-year price. Can we get some more details there around that pricing and quality of those tons, and then expect an opportunity to sell any additional domestic tons for 2027?

Bob Braithwaite: Yeah, Nate, I think we mentioned this morning, again, 2.4 million tons for 2027. Those tons are priced roughly about $4 or $5 higher year-on-year. I would say what's very encouraging for us is that volume includes a 50% increase in our High-Vol B tons compared to last year. The 2.4 gives us a solid base load of committed volume of what we would call attractive pricing as we enter 2027, while certainly leaving meaningful tonnage available to capitalize on opportunities in the export market as well.

Nathan Martin: Okay, appreciate that, Bob. Also wanted to ask about High CV Thermal realization during the quarter. They were down about $1.50 sequentially, obviously in a market that was getting stronger. Maybe can you kind of walk us through the drivers there? Is it fair to assume that realizations improve in the fourth quarter, especially given the current pricing backdrop?

Bob Braithwaite: Yeah, the big driver there was really the mix of tons. West Elk was probably 7%-8% higher than what it traditionally was in terms of the total mix. We believe that will kind of solve itself in Q4 as PAMC continues to ratchet up their, or to ramp up their production. If you look at where our guidance that we gave this morning on pricing at $59 for the year, that basically implies a $62-$63 price in Q4. That, again, is a reflection of more PAMC volume, but also being able to capitalize on some of the higher price volumes that I mentioned earlier. If you recall, we have about 31.4 million tons of committed volume in the High CV segment, which isn't even to the bottom range of our guidance. It gives us some ability to sell some additional tons. Our view is that Q4 should be meaningfully higher in terms of ASP in the High CV Thermal segment quarter-over-quarter.

Nathan Martin: Got it. Thanks for that. Maybe just one more. I understand it's mining, but I think you've now had a couple geological challenges in that High CV Thermal segment this year. Jimmy, I know you said you're continually focused on cost containment. Do you think this gives you guys an opportunity to improve costs per ton in 2027 for that segment?

Jimmy Brock: It certainly does. I mean, if you look where we are, Nate, you have heard me say this many times before, what we try to do is try to stay below the inflationary pressures by picking up efficiencies or running more tons to do that. There are times when you have some of these variabilities, and it is just mining. I mean, you will have these geological conditions where you have sandstone you have to try to mine under, or you will have some other lower seams or things like that that cause that. But looking forward, I can tell you, we are off to a great start in Q4. I mean, October has been a normal, good month for us. As we continue to go in Q4 and carry that momentum into 2027, I think we will have an opportunity to improve on those cost structures in all our segments across it. Q3 has typically been a quarter for us that is not our best quarter, but I think we are going to come out and, if you look at our guidance, as Mitesh Thakkar mentioned a minute ago, we are thinking if you look at the met side, look at the midpoint of the guidance, we should be somewhere around 86 by the midpoint. If you look at the thermal, we will try to do exactly the same, continuing on cost. It is one of the things that we focus on every single day, to look for ways to improve it and overcome some of the inflationary pressures we have.

Nathan Martin: Thanks, Jimmy. Appreciate the time, everyone. I will pass it on, and best of luck in the fourth quarter.

Jimmy Brock: Thanks, Nate.

Operator: Question comes from Chris LaFemina of Jefferies. Please go ahead.

Chris LaFemina: Hey, guys. Thanks for taking my questions. I just want to understand the geological issues that you encountered in Pennsylvania in a little more detail. What I'm wondering, first of all, is did you know that this was going to be a potential risk in the quarter, or do you encounter these things sometimes without having knowledge that they're coming? The reason why I ask that question is because, how do you incorporate the risk of geological issues such as these in your forward guidance? I understand that you kind of came out of the tough geology at the end of the quarter, and things seem to be going better today. But what gives you confidence that you're not going to enter another difficult pocket in early 2027, and what sort of visibility do you have that these sorts of things are approaching? Thank you.

Jimmy Brock: Very fair question, Chris. We know, like when we have a lower seam height, for an example, we know that because of our core holes and things we drill, so we'll drop our tons per foot to account for that. Sometimes what we don't know, and we talk about geologic variabilities, is like if you have an unplanned roof fall that would shut a belt down, whereas you carry that out, or if you have some sort of sandstone that you typically can't mine under. Unfortunately for us, three of our longwalls encountered that. Two of them were in PAMC in this quarter. We've encountered them before. We've got out of them quickly, but this time took a little longer. What we try to do is run the remaining longwalls harder to where we don't see as much of this in the effect of the production. However, I will tell you, we had two of our PAMC longwalls that encountered these conditions at the same time, which makes it much more difficult. There's an increase in cost just to provide the tons to get those. What we know, we always plan for, and it is mining. I've been doing this for part of five decades. There are things come up that you just can't map. For an example, if we have bad roof conditions somewhere and we know it in time, yes, we can do things to supplement, support, and get around that. But again, if it's an unplanned fall or something that happens, we're very fortunate no one is hurt, and we just go take care of that, get that longwall back up and operating as quickly as we can, and try to overcome all the costs we had associated with it.

Chris LaFemina: When we think about what your guidance will be for 2027 and years beyond, should we assume that the risk related to geological challenges is reflected in the guidance already? Or is that the guidance that is basically the possible, but not necessarily the probable, if you know what I mean? Is there downside risk to the guidance because of potentially being surprised with these sorts of geological issues? How do you think about it in the guidance?

Jimmy Brock: No, I do not think you will see it. What you will see is if we have, like, all of our projections into 2027, as I said before, the areas where we have the sandstone, we have that all mapped out. Our geologists know that. We will slow the rates down to account for that. What I cannot guarantee, or I do not think anyone can, is that we will not have something unplanned that happens, some sort of geology that shows up that you just do not know about until you get there with the longwall shear and you find it. Or you have adverse roof conditions that slow down mining rates that you have to go through. But I think we have done a pretty good job in the past, in all the years where we have had these things, that we pretty much account for what we can. But again, it is mining, and you can get surprises along the way. But in our forecast, we try to take that into account for everything we know and as much as we possibly can.

Mitesh Thakkar: Chris, just to add to it, as Jimmy said before too, right, like oftentimes what ends up happening, we have had these issues in the past, but when you have issue at one out of five longwalls, the other four compensate for it, and you do not notice it, right? We meet our numbers, we meet our guidance, and move on, right? This one was a little bit unusual in the sense where we had it at multiple locations, right? So it became more prominent, and that is why we are talking about it. But it is general mining variability, right? This is mining, not manufacturing. So things happen, but most of the time, given our diversified platform, it does not come to fore.

Bob Braithwaite: Chris, I'd add that we started the year with guidance at $88-$94, and right now we're guiding to $89 at midpoint. You can see that we expect that sort of natural variability, and we build that in. Again, you can see it this year. We've actually reduced from the beginning of the year down to a midpoint of $89.

Chris LaFemina: Yeah, thank you.

Bob Braithwaite: Yeah.

Operator: Question comes from Matthew Key of Texas Capital. Please go ahead.

Matthew Key: Good morning, everyone, and thanks for taking my question. A few analysts have already asked about seaborne thermal business, so maybe I'll shift gears to domestic side. It's been a softer year for coal burn, and natural gas prices are low. How has the demand environment kind of held up in that context? At a high level, how should we be thinking about total shipments in the PRB as we look out to 2027?

Bob Braithwaite: Yeah, I'd say it's based on geography. In the PJM, I'll say, where we sell most of our PAMC coal, it's actually been fairly consistent. In fact, I'd say in recent weeks, we've actually seen a pickup in burn. Power prices are still pretty healthy, albeit very low natural gas prices, sub-3. But I think, again, it just goes to show the electricity demand growth that there is in the PJM. In terms of most of our customers out west for our PRB product, I mean, you probably noticed we had a significant pickup in volume, over 3 million tons quarter-on-quarter, Q2 to Q3. We expect that to remain very consistent as we move throughout Q4 as well. We're basically looking at a very similar, I'd say, year-on-year type of sales view for 2027 as we did for 2026. We're sitting here at a very healthy contracted position for 2027, give or take 40 million tons in the PRB today, with a lot of opportunities ahead of us. It gives us some pretty good confidence here that, again, another, call it, 48 million to 50 million tons of sales for 2027 is in our future.

Deck Slone: You know, Matt, I would just add, look, this is the third year in a row we've had power generation demand nearly 3%. We expect that to continue going forward. Look, so far this year, because of low natural gas prices, coal burn's down around 20 million tons, but it was up 40 million tons last year. So, still on balance relative to 2024, we're on a good trajectory. So, we're still feeling positively about that. We continue to see utilities announce investments in their existing coal plants and try to wring out additional electrons from their existing systems. So, the story still feels very much intact, even though we've had a dip this year in terms of coal consumption in the U.S.

Matthew Key: Got it. That's super helpful. I guess I'll ask a pretty broad macro question, but we had the midterms on Tuesday. Could there be any potential impact on your business, either directly or indirectly, kind of from the results of that? Obviously, the current administration has been highly supportive of the industry, and they're still in office, but just due to the big shift in the Senate and House, any kind of moving parts that you think could kind of play out as we progress through the coming months?

Jimmy Brock: I think you've heard me say this before. What we try to do is we try to build our company to where we can withstand any administration. We're smart enough to know that they're going to change from election cycle to election cycle. Also from a political standpoint, we want to be able to withstand all the regulations that come out as well. I think no doubt about it, we had an administration that was very favorable, and they were openly talking about the benefits of coal. But I still remain really focused on the fact that we're still going to need the power. If it does increase 3%, as everyone's projecting it will, or 2.5%, as we say, then they're going to have to have all the sources available to meet the power needs. I still feel really good. Obviously, we'll see what happens here. We won't know until January, and obviously, we have President Trump in for another two years. But we'll stay tuned, and we'll respond accordingly.

Matthew Key: Got it. Appreciate the color, and best of luck.

Jimmy Brock: Thank you.

Bob Braithwaite: Thanks a lot.

Operator: There are no further questions at this time. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.