Good morning, and welcome to the Contura Energy Third Quarter 2020 Earnings Call. All participants will be in listen-only mode. Please note, this event is being recorded. I would now like to turn the conference over to Emily O’Quinn, SVP Corporate Communications. Please go ahead.

Thanks, Iley, and good morning, everyone. Before we get started, let me remind you that during our prepared remarks and the Q&A period, our comments relating to expected business and financial performance contain forward-looking statements, and actual results may differ materially from those discussed. For more information regarding forward-looking statements and some of the factors that can affect them, please refer to the Company’s third quarter 2020 earnings release and the associated SEC filings. Please also see those documents for information about our use of non-GAAP measures and their reconciliation to GAAP measures. Participating on the call today are Contura’s Chairman and Chief Executive Officer, David Stetson, and Chief Financial Officer, Andy Eidson. Also participating on the call is Jason Whitehead, our Chief Operating Officer, who is available to answer questions on operations. With that, I’ll turn the call over to David.

Thanks, Emily. Good morning to everyone on the call, and thank you for joining us today. What an interesting and challenging year 2020 has given us. Just in the last few months, we’ve seen met prices dip to $105, spring back to $126, and just recently settle around $114. We’ve managed through the pain and hardship of the virus, assuring our teams have been as well-protected as possible, while still operating our business, dealing with economic implications and uncertainties in the domestic and international markets we serve, and preserving our capital to strengthen our long-term sustainability. When we announced our first-quarter operating results earlier this year, they were simultaneously praised and questioned regarding whether our costs could be sustained at those levels. Then, we reported our second-quarter results reflecting lower costs. But again, I heard that we had to prove our ability to sustain our cost performance to be considered one of the lowest-cost producers in the metallurgical space. Well, as everyone has read this morning, I’m pleased to announce that we have another solid quarter to report on today. The Contura team continues to do a great job of being vigilant and flexible, so we can adapt as necessary. As I said before, we choose to closely manage the business based on the factors we can control in this mindset as a result of another solid quarter for Contura. Before I get into details of the third quarter and our specific results, I want to briefly comment on last week’s Presidential election. Like the majority of the business community, we pay attention to politics; we seek to understand how election results may influence or impact our business. However, our goal in the way we manage our business is for our Company to be successful regardless of who sits in the White House or which party controls Congress. I don’t say this to diminish the importance of elections in any way, because they are critically important to our democracy. We regularly engage in dialogue with elected officials at all levels to help inform them about the importance of our products in manufacturing and the underpinning that they provide to a strong economy. However, election outcomes will never change the core principles that anchor our daily operations. Safety, responsibility, environmental stewardship, and continuous improvement will continue to drive our actions each and every day. We remain committed to those important aspects of who we are and how we operate. Turning now to our quarterly results, which include adjusted EBITDA of $20 million a quarter and the best cost performance on record for Central Appalachian met since the start of the Company over four years ago. Andy will provide a more robust overview and numbers after I finish my remarks, but I have to congratulate Jason and his team on repeatedly exceeding expectations in just $66.49 a ton for the quarter, managing to beat our prior record-setting met cost performance. Importantly, all this progress has occurred while keeping safety at the forefront at all times. I simply can’t say enough about the job we’ve done this year. I’ll briefly comment on our ‘21 guidance and let Andy go into more detail. We are pleased with our committed met-only position in the Central Appalachian met segment, with 34% of the anticipated midpoint of our shipments locked in for next year. The average price for committed tons for the met-only portion segment is just over $86 a ton. We expect to continue our strong cost performance with Central Appalachian cost per ton anticipating a range of $68 to $74. As for ‘21 CapEx, we expect it to come in significantly lower than our spend in 2020 at a range of $80 to $100 million. We project SG&A for next year to be in the $45 million to $50 million range, which is slightly better than our 2020 expectations. In addition to closely managing our costs, we’ve been operating with a strong focus on cash preservation, not only to help us weather the effects of the pandemic but also to help us navigate softness and recent volatility in the pricing of our products. As we predicted on our last call, the back half of 2020 has so far proven challenging, albeit with sporadic signs of optimism. We continue to believe we’re doing what we can to manage through these challenges and the guidance we’re issuing today reflects our thinking about what ‘21 will hold. I reiterate our prior statements from the second-quarter call with regard to the long-term, big picture strategy for Contura. We are accelerating our strategic exit from thermal coal mining, and we’ve made great strides in executing our strategic vision to become a pure-play metallurgical coal company, providing critical feedstock for steel production. As we discussed in prior quarters, our portfolio optimization efforts include bringing on some new met properties that are currently in development or being prepared to run in the future while deemphasizing or removing from our portfolio other lines that are mining out, uneconomic, or no longer offering synergistic value in terms of coal qualities, market demand, or cost structure. Whenever there’s a property that’s idled or mined out, we look for opportunities to realign our coal processing workflows into fewer plants and to redeploy mining equipment to other locations in the Company. These efforts allow us to tighten our cost structures and make the best use of existing capital in the organization. We regularly evaluate our portfolio and have been planning for the best utilization of our newer, high-quality mines. We continue to be on track or, in some cases, even exceeding our expectations in that regard. For example, Black Eagle is nearly finished with the corridor to the main reserve body, where we anticipate multi-section production next year. We’ve accelerated our third section at Road Fork 52, with section 3 now expected in early December instead of the first quarter of ‘21. Lastly, the surface infrastructure installation is almost complete for our Lynn Branch underground mining, with intake and return shafts in place, belts installed, and the finishing touches being put on the track tunnel. We remain excited about these properties and will keep you updated on their progress. Like our peers, Contura has closely watched the market landscape and the ebbs and flows of recent weeks. Pricing was soft throughout the better part of the quarter, then increased significantly before dropping meaningfully again in recent weeks. Within the quarter, we received communication from customers, either lifting or ceasing their force majeure notices, and we also negotiated agreements with certain customers to look for anticipated shortfall volumes from 2020 into 2021. We have largely seen limited impact from these circumstances on our metallurgical coal sale volume and production for the third quarter. Before I wrap up my prepared remarks, I want to congratulate our environmental and safety teams on another strong quarter of performance. Our environmental teams continue their near-perfect water quality compliance rate and a significant reduction in violations against the rolling three-year average. Our safety teams ended the quarter with all metrics stable at the national average. Additionally, two of our Virginia subsidiaries were recently presented with safety awards from the State Department of Mines, Minerals and Energy, reaching milestones of work hours without lost time accidents. Those are operations on the McClure Prep Plant, Long Branch Surface, and Long Branch High Wall. Congratulations to each member of these teams, and we look forward to your continued success. I will now turn the call over to Andy for some additional details on our financials.

Thanks, David. Good morning, everyone. David commented on the multitude of uncertainties facing the world and our industry. Our goal is to find ways to alleviate these risks in order to build a stronger, sustainable enterprise. Not to be redundant to what we’ve said in prior quarters, but the way we believe this is best done is by focusing on the issues we’ve mentioned many times before: effective cost management, matching up production with demand, and most importantly, a sharp focus on cash flows and cash preservation. To that end, if we take a closer look at our balance sheet and cash flows for the quarter, we ended the quarter with approximately $162 million in unrestricted cash. Our ABL is at capacity right now due to the market impact on our borrowing base, both through accounts receivable and inventory, so we have no additional availability there. But, quarter-over-quarter, we did use approximately $77 million in cash. To dig into that a little bit and give you a better picture of the usage in the quarter, we did reduce our debt by more than $30 million to $598 million during the quarter. This debt reduction included an ABL payment of approximately $12 million, $17.5 million in legacy payments related to the LCC note, and a small term loan principal payment of $1.4 million. We also had $13 million in cash interest payment, and we paid an additional $30 million in other legacy payments. Those include such things as pension and some of the other legacy bankruptcy items that we’ve been clearing out. On top of those payments, we also provided roughly $19 million in additional cash collateral for surety bonding. As we discussed a couple of quarters ago, it was a little bit of a harbinger of things to come. But, the surety markets, the insurance markets, all these peripheral markets that we have to deal with for services become even more challenging day by day. So, the third quarter for us was certainly no exception. We continue to see some benefit from our working capital, mainly inventory and accounts receivable, which provided a total of $30 million of cash in the third quarter and basically covered our CapEx for the quarter. Going back to the ABL for just a second, we had borrowed and drawn down against ABL earlier this year in March. At quarter-end, that facility was down to $18.4 million in outstanding borrowings and had about $122 million of letters of credit outstanding as of the end of the quarter. Subsequent to the quarter end, we paid an additional $15 million of the principal, and so the current outstanding borrowings on the ABL, as of today, are approximately $3.4 million. So, we’ve almost worked that back down. Next, I want to give a quick update on a couple of tax-related items. We still anticipate that we’ll receive our $66 million AMT credit monetization refund in the coming weeks. It has faced a couple of processing delays, but we feel pretty good that we may actually receive it at some point this week, but certainly in the next couple of weeks. Also, in connection with the CARES Act, as we’ve mentioned previously, we still expect to defer approximately $14 million in payroll taxes until ‘21 and ‘22, with the total deferral amount distributed evenly across both years. Finally, we anticipate an additional $70 million NOL carryback related tax refund in the back half of ‘21. Moving to our financial results for the quarter, our EBITDA increased by $3 million quarter-over-quarter from $17 million to $20 million, despite the continued decline in market prices relative to the second quarter. The strong EBITDA performance was driven by another quarter of excellent cost containment, particularly in the CAPP - Met segment, where we reported the lowest full-quarter cost since the inception of Contura of $66.49. The third quarter CAPP - Met costs were approximately $3.5 lower than the second quarter costs. If you kind of adjust Q2 for a more normalized run rate, it excludes the impact of our April furlough and other one-time type issues. On a three-quarter moving average basis, and this is really a testament to the sustainability of some of these cost decreases we’ve seen, our current average is $70.53, down more than $5 over the prior three-quarter moving average and down from a high of nearly $90 a ton. So, again, David mentioned the performance of the operating team. Just when we think that Jason and the operating team kind of hit their peak as far as cost reduction, they go and drop a quarter like this on us, and we have to come up with new words to describe it. So, just incredible, incredible work. Overall, CAPP - Met generated $18 million of EBITDA during the quarter, basically flat with the prior quarter, while met contributed $7 million of EBITDA. The CAPP - Thermal segment contributed more than $5 million of EBITDA in the quarter. Naturally, SG&A expenses are allocated into the segments, so to get the total, that will have to be added back in. Regarding shipments and revenue, our CAPP - Met shipments remained strong in the third quarter with total volumes of 3.3 million tons shipped, which is up about 100,000 tons from the second quarter. Another trend we’ve seen over the past couple of quarters is that our revenues continue to be negatively impacted by a soft market, particularly in the export market. The CAPP - Met realization is down approximately $8 a ton to around $74 in the third quarter. CAPP - Thermal were essentially flat, with second quarter total shipments of around 600,000 tons and realizations improving to just under $58 a ton from $50. In the prior quarter, we did have some cleanup of some lower quality thermal coal that impacted product, and we also had some customer mix issues. But, I think third quarter realizations are more in line with Q1 as our customer mix got back to a more normal baseline. Northern Appalachian revenue improved as a result of higher volumes, with prices effectively flat at $40 a ton. Our shipments were about 300,000 tons, totaling 1.6 million tons all-in. SG&A, excluding non-cash stock compensation and one-time items, was $13.5 million in the third quarter compared with $10 million in the second quarter. Our third-quarter CapEx was down $13.7 million to just under $28 million. Looking at ‘21, David touched on some of the highlights earlier. We do expect to ship a total of between 20.4 and 22.2 million tons in ‘21, with 12.5 to 13 million tons of that being pure met flowing through the CAPP - MET segment, and approximately 1 to 1.5 million tons of Thermal that will also go through that segment as kind of tangential or incidental production. For the CAPP - Thermal segment, we’re guiding to 1.3 to 1.7 million tons and 5.6 to 6 million tons of Northern Appalachia. The CAPP - Thermal reduction relative to 2019 is part of our ongoing and planned strategic focus toward moving towards a pure-play met company. Based on the midpoint of our CAPP - Met guidance, the met-only portion of that is 34% committed and priced at $86.41, with an additional 27% committed but unpriced. The thermal portion of the CAPP - Met segment is 72% committed and priced at an average price of $52.11, and we’re essentially fully committed and priced at CAPP - Thermal and Northern Appalachian at $57.17 and $40.43, respectively. Looking at costs for next year, we expect our CAPP - Met cost to be in a range of $68 to $74. Our CAPP - Thermal should come in between $45 and $49 per ton, and NAPP is holding relatively static at $33 to $37 a ton. SG&A, excluding non-cash stock compensation and one-time items, is forecasted to be in the range of $45 million to $50 million. Also, as you can see from David’s earlier comments, we’re expecting our ‘21 CapEx to be significantly lower than where we were trending in 2020. We expect it to be near a more regular maintenance level of $80 million to $100 million as most of our growth had CapEx we spent in the past two years, and we don’t have any large near-term projects to address. Idle operations expenses are expected to be between $27 million and $33 million as we continue that aforementioned shift away from thermal coal production. Cash interest should come in roughly between $51 million and $55 million in ‘21, while DD&A is expected to be down meaningfully to a range of $150 million to $175 million, mostly due to the previously announced impairments and write-downs in the second quarter. Finally, the cash tax rate should be near zero. Before we open up the call for Q&A, I want to briefly mention that we still don’t have any meaningful updates from the Department of Labor on our appeal regarding collateral amounts for certain black lung obligations. So, I don’t have any updates to share there. However, once something conclusive is determined, we’ll obviously share that information with you. So, with that, operator, we’re ready to open the line for questions at this time.

Our first question today comes from Lucas Pipes with B. Riley Securities.

Hey. Good morning, everyone, and congrats on the outstanding cost performance, really great to see. I also want to thank you for the 2021 outlook at this point and all the encouraging updates included there. My first question is on the cost side; you mentioned in the release and your prepared remarks a couple of drivers: productivity, labor costs, and sourcing. Can you provide a little bit of a breakdown on what these various buckets contributed in terms of dollars per ton, compared to maybe the third quarter 2019, just to kind of get a good sense of where the bulk of the savings came from? Thank you very much.

Hey Lucas, it’s Andy. This question is a bit challenging due to the significant transitions within the portfolio. The main factor at play here is productivity, and this heavily influences various aspects of our operations. It will affect different areas on your profit and loss statement, particularly in relation to labor costs and supply improvements per ton. We have observed slight reductions in both of those on an extended cost basis, but the real key is the volume of tons moving through the system. To touch on another point that Jason mentioned, looking back to 2019 and into most of 2020, we had about 22 mines contributing to our portfolio. This number has decreased as we consolidate production, optimize outputs, and phase out higher-cost mines. By the middle of next year, we expect to reduce the number of mines from 22 to 12. This progress reflects the productivity improvements we have seen since Jason joined us and reimagined the entire portfolio. So, while I might be going around the question, the true driver is the productivity impact on those specific areas, although this wasn't included in the sales figures.

Got it. That’s very helpful. I’ll turn to my second question regarding your 2021 met coal volume outlook. It looks very robust, which is great to see. However, how do you feel about your sales projections? Is the shipment outlook for 2021 based on the current forward curve for met coal, or would you say that in any reasonable price environment, even considering the recent not-so-great conditions, you would still be able to fulfill these tons? Thank you very much for that.

I’ll start with a brief introduction and then let Dan provide some details. When we examine our production, it appears mostly stable in the metallurgical coal sector, with a slight increase expected in 2021. However, we don't possess any more information than others regarding the market trends; while everyone is hopeful about the future, the timing and trajectory remain uncertain. Overall, we're fairly confident. Dan and his team have successfully secured a domestic sales book in this challenging market. Therefore, we feel good about our overall volumes. Of course, we cannot control pricing. Dan, do you have anything to add?

Yes. Thanks, Andy. Lucas, yes, I think we’re comfortable going forward. We’re shipping at about a rate of 3 million tons a quarter this year, and through some very difficult times and challenging markets with our customers. And I think, it’s fair to say we’re more optimistic about 2021 as far as the volumes. But, we’re moving the coal right now. We’re moving it in Q4, we’re going to move it into Q1 and Q2. And as far as the domestic book, we like our position there. We took the business that we felt like we wanted and left some business we didn’t want. So, I think we like the balance that we have.

That’s very good to hear. Thank you everyone for the color, and continued best of luck.

Thanks, Lucas.

Our next question comes from Mark Levin with The Benchmark Company.

Yes. Great. And echoing Lucas’s comments, congratulations to the team on a great cash cost performance. I remember it wasn’t that long ago where met cash costs were in the 90s, and it’s really quite an improvement. Let me ask a couple of questions on cash. So, Andy, in fourth quarter, I guess, you referenced some time you’ll get to $66 million AMT refund. So, I would assume it’s reasonable to believe that your cash would build Q3 over Q4, or are there some other factors that we should be mindful of?

Yes. I don't want to guide too precisely since we can't predict where market prices will land. The past few months have been particularly inconsistent. However, the third quarter is typically our heaviest cash quarter due to legacy payments coming in July. Therefore, I would expect the fourth quarter, all else being equal, to show significantly better cash usage or generation compared to Q3. I don't want to delve into specifics or make projections, but without those payments impacting us in Q4, we should see an improvement of $30 million to $40 million, provided other factors remain constant.

Plus the $66 million AMT refund, right?

Plus the $66 million, correct.

Got it. You mentioned the $17 million cash collateral call from third-party surety providers. Can you help us understand the potential exposure and how to model the cash collateral requirements for the future? This morning, Peabody announced they reached a standstill agreement with their surety providers, and their situation is quite different. I'm curious about how to approach the potential exposure and what to anticipate moving forward.

Yes. The main exposure still is coming from thermal permits. The surety companies, by and large, aren’t terribly excited about holding thermal permits. And they’re under the same pressures as all the other third-party providers. Not only is there risk from a market perspective and ongoing economics, but it also has considerable ESG risk involved from the surety’s perspective themselves. So, it’s kind of hard for these surety guys to go upstairs and ask for permission, even to take new bonds or have to justify not requiring higher collateral levels. So, I think, by and large, we’re in a pretty good position on our bonds out now. We did continue to have conversations with our sureties, but we have a very longstanding relationship with the sureties. Most of the books have been with us for many, many years, going back to legacy Alpha days. So, they’ve been partners with us for a long time and have been very patient in challenging markets. But, I do think with what we did to shore collateral in Q3, I think we’re in pretty good position. But to the degree that we continue moving away from thermal markets, that will only benefit us.

Is there a way, Andy, to quantify what to consider or how to maybe think about it?

I mean, you have to look at any given company’s total bonding exposure, and then…

What is it and what is the total bonding exposure now?

I'm not exactly sure of that number right now. It will likely reflect our undiscounted reclamation costs. We'll have that number shortly. The weighted average mix is key in this situation. Typically, for any thermal permit, a surety would require over 50% collateral on that type of bond. If it meets certain conditions, the requirement will be much lower. Currently, we're a bit over 30% in total collateral across our portfolio. On a weighted average basis, the met conditions help bring that number down. Overall, I believe we are in a solid position, and we should not face significant additional exposure from this. However, as the political climate regarding thermal permits evolves, the situation could change.

Yes. That makes sense. That dovetails into something I’m sure you’re not going to want to discuss, I’m going to ask anyway. You referenced ongoing progress with the NAPP asset sale. Maybe your degree of confidence on a 1 to 10 scale that you think you can get something done, and then what the timing might be? And if you did do something, would it require cash going out the door, or would this be at worst a cash-neutral transaction?

So, actually to close out the loop, Mark, it kind of partially answers a little bit of your question here. We have roughly $350 million of bonds outstanding, and that’s more than just reclamation bonds. That includes workers’ comp, things like that. But, of that $350 million, around $150 million of that is Cumberland. So, that kind of feeds into your question of the transaction. On a scale of 1 to 10, I would probably put our likelihood of getting a deal done at somewhere between 1 and 10.

Okay. That’s terribly not helpful, Andy…

Yes. It’ll be more than 1 but less than 10.

Excellent. That is outstanding color. However, regarding the follow-up, if you were to sell it and there was a buyer, you would have to post various forms of cash collateral. Could you proceed with a transaction, or is the bottom line that any cash transaction would require you to actually contribute some cash?

Yes. Well, Mark, I think when you look to deal like this because of the strategic benefit to the entire enterprise, you can mix and match lots of financial and non-financial benefits on something like this. So, is it possible to expect the transaction? I mean, can you envision a transaction where you could get some cash? Maybe. Can you envision when you get some cash? Maybe. So really, again, I hate to give you a non-answer answer, but there are so many pieces there you can move around to benefit the overall enterprise. It’s kind of hard to put a dollar tag to it without knowing all the other pieces in the mix.

I understand there are many factors at play. My final question is straightforward and focuses on the market and the met market overall. Following China's unofficial import ban announcement, have you noticed any changes, or would you consider entering the Chinese market? What are the potential impacts if trade flows shift and they continue to restrict Australian coal? Additionally, India plays a crucial role in seaborne coking coal demand. Could you share your observations from that market recently and what the outlook looks like for the next 3 to 6 months?

Hey, Mark. I’ll begin with the issue of the China trade war. We do not sell coal to China and we have noticed a few inquiries. However, as you know, most of the coal exported to China from Australia is low volatile coal, which is generally what they seek. We don’t export much of that type of coal and maintain a balanced portfolio. Therefore, we are not actively pursuing any sales to China. We are aware of some inquiries and know some competitors may have shipped a vessel or two there. Regarding India, it’s a very important customer and has been quite steady throughout the year. Like many customers, they faced some slowdowns and challenges due to the pandemic, but overall, our shipments have remained consistent. I anticipate that consistency will continue into 2021.

That’s great to hear. Super. All right. Well, thanks very much for all of the time this morning. And congrats again on the cost performance.

Thanks, Mark.

This concludes our question-and-answer session. And I would like to turn the call back over to David Stetson for any closing remarks.

Well, thank you very much. Thanks for everyone for joining us this morning. Have a great end to your year. And we appreciate it so much. Thank you.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.