Why Coal Mining Company Arch Resources' Shares Are Diving Today?

Arch Resources Inc ARCH shares are trading lower by around 13% after the company provided weak Q3 guidance and revised FY23 outlook.

Q3 Update: The company expects Q3 coking coal sales volumes to remain at par with Q2, on ongoing challenges mining in the first longwall district at its Leer South Mine.

Notably, Leer South Mine has generated segment-level adjusted EBITDA of about $470 million since its startup vs. an initial capital investment of about $400 million.

FY23 Outlook: Arch revised guidance for coking coal sales volumes to 8.6-8.9 million tons (from 8.9-9.7 million tons earlier) and its average metallurgical cash cost guidance to $88-$91 per ton (from $79-$89 per ton earlier). 

Also, the company expects adjusted EBITDA for Q3 to be roughly 10% lower than Q2.

Arch expects discretionary cash flow for Q3 2023 to be over half the $150.7 million achieved in Q2 2023, including a working capital reduction of $62.5 million. 

"While we remain enthusiastic about Leer South's long-term outlook, the conditions in the first longwall district – which, as previously discussed, represented the most capital-efficient access point for the Lower Kittanning reserve base – continue to constrain advance rates. In light of these conditions, we are moderating our volume and cost expectations for the balance of the year, even as we continue to benefit from a strengthening coking coal price environment," said Paul A. Lang, Arch's chief executive officer and president. 

The company expects to release Q3 FY23 results on October 26.

Price Action: ARCH shares are down by 13.87% at $146.99 on the last check Monday.