Q1 2024 Alpha Metallurgical Resources Inc Earnings Call

Participants

Emily O'Quinn; Investor Relations; Alpha Metallurgical Resources Inc

Jason Whitehead; President, Chief Operating Officer; Alpha Metallurgical Resources Inc

Todd Munsey; Executive Vice President and Chief Financial Officer; Alpha Metallurgical Resources Inc

Daniel Horn; Executive Vice President, Chief Commercial Officer; Alpha Metallurgical Resources Inc

Andy Eidson; Chief Executive Officer and Director; Alpha Metallurgical Resources Inc

Lucas Pipes; Analyst; B. Riley Securities

Nathan Martin; Analyst; The Benchmark Company

Presentation

Operator

Greetings. Welcome to the Alpha Metallurgical Resources first quarter 2024 Results Conference Call. (Operator Instructions)
Please note this conference is being recorded. I will now turn the conference over to your host, Emily O'Quinn, Senior Vice President, Investor Relations and Communications. You may now begin.

Emily O'Quinn

Thank you, Rob, and good morning, everyone. Before we get started, let me remind you that during our prepared remarks, our comments regarding anticipated 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 first quarter 2024 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 Alpha's Chief Executive Officer, Andy Eidson, and our President and Chief Operating Officer, Jason Whitehead.
Also participating on the call are Todd Muncie, our Chief Financial Officer, and Dan Horn, our Chief Commercial Officer. With that, I'll turn the call over to Andy.

Jason Whitehead

Thanks, Emily, and good morning, everyone. Today we announced financial results for first quarter 2024 with adjusted EBITDA of $190 million. This was another solid quarter of work from the alpha team despite some challenging circumstances and a significant softening of met coal market starting in March. Since the quarter closed, we witness further deteriorate deterioration in market fundamentals, which sets up a challenging backdrop for the second quarter, although our Q2 performance will obviously reflect the market environment in which we're operating.
I remain confident in our strength and ability to weather volatility for more than a few years now, we've used the word nimble to describe how we prefer to operate constantly evaluating lots of data to find areas that can be optimized or deploy costly. We believe that this approach is valuable in all market conditions, but especially in down cycles when quickly adapting to economic reality becomes a true necessity in response to the sharp market decline that has occurred so far in 2024, we've made small adjustments to safely reduce costs where possible by optimizing production and logistics.
Given our size and scale the magnitude of these changes, it doesn't impact our previously announced volume expectations for the year, but these adjustments are allowing us to respond appropriately to deterioration in the market. We will continue monitoring external market drivers while also maintaining a close eye on controllable costs within our business, and we'll take further action as necessary as our vision as I visit our operations and talk with employees, I'm consistently impressed by the alpha drive to overcome challenges and make the most difficult circumstances.
Our first quarter performance is yet another example of this determination, subjectively, I see it in mine visits, but there's also subjective measures that don't get a lot of attention. One in particular is a productivity metric called tons per man-hour.
As is always the case, safe production is our highest priority at Alpha and we continually promote a safety mindset, first and foremost and somewhat counterintuitively, we usually see that safety efficiency and productivity go hand-in-hand into the mine, Safety and Health Administration aggregates droves of data each quarter, including production by operator and tons per man hour, which is exactly as it sounds as a company alpha consistently performs well and has led the pack in this measurement among room and pillar where continuous miner operators for the last eight quarters, despite the well known differences between continuous miners and longwall operations, Alpha's operations often performed well against certain longwall operations, too.
I'm proud to say that in Q one, Alpha led all of our notable peers, long-haul operators included with the tons per hour metric, roughly 14% more productive than the next operator in line that kind of safe, consistent performance is a testament to the scale and effectiveness of our teams. We encourage this behavior among our operations and are consistently looking for ways to maintain this industry leading position.
During our fourth quarter earnings call, we discussed our intention to slower pause the buyback program in an effort to build cash balances back up to our targeted levels, especially given the market dynamics currently at play, we continue to believe this is the right strategy.
Our capital return philosophy remains the same and will continue to be driven by our cash flow. As minimum cash minimum cash levels and market conditions allow, we will utilize available free cash flow for the buyback program.
Lastly, we hosted our annual meeting of stockholders on May second, this meeting included a vote to elect members of our Board of Directors. All seven of our board members were elected by the shareholders to serve a term of one year. The full results of the annual meeting have been provided through our SEC filings.
I'll now turn it over to Todd for additional details regarding our first quarter financial results by Sandy.

Todd Munsey

First quarter adjusted EBITDA was $190 million, down from $266 million in Q4 2023. We sold 4.4 million tons in the quarter.
Quarter over quarter realizations decreased for the Met segment with an average first quarter realization of $166.68 compared to $183.76 for the fourth quarter. Export met tons priced against Atlantic indices and other pricing mechanisms in the first quarter realized $172.24 per ton, while export coal priced on Australian indices realized $193.70.
These are compared to realizations of $175.32 per ton and $213.41, respectively, in the fourth quarter. Realization for our metallurgical sales in the first quarter was a total weighted average of $176.20 per ton, down from $193.54 per ton in the prior quarter realizations and the incidental thermal portion of the Met segment decreased to $76.53 per ton in Q1 as compared to $89.76 per ton in Q4.
Cost of coal sales for our Mats segment decreased to $115.65 per ton in the first quarter, down from $119 per ton in Q4.
Sg&a, excluding noncash stock compensation and nonrecurring items, increased to $19.9 million in the first quarter as compared to $16.9 million in the fourth quarter, Q1 CapEx was $63.6 million, up from $61.5 million in the fourth quarter.
Moving to the balance sheet and cash flows. As of March 31, 2024, we had $269.4 million in unrestricted cash, roughly flat against the $268.2 million. At the end of the fourth quarter, we had $93.7 million in unused availability under our ABL.
At the end of the quarter, Alpha had total liquidity of $288.1 million as of the end of March, which is net of a $75 million minimum liquidity ABL covenant cash provided by operating activities decreased slightly quarter-over-quarter to $196.1 million in Q1 as compared to $199.4 million in Q4. As of March 31, our ABL facility had no borrowings and $61.3 million of letters of credit outstanding, up from $60.9 million in the prior quarter.
Turning now to our committed position for 2024, 49% of our metallurgical tonnage in the Met segment is committed and priced at the midpoint of guidance at an average price of $168.26. Another 49% of our met tonnage for the year is committed, but not yet priced thermal byproduct portion of the Met segment is fully committed and priced at the midpoint of guidance at an average price of $76.10 with first quarter actuals and increased visibility into the balance of the year, we announced two adjustments to our 2024 guidance.
We now expect idle operations expense for the year to be between $25 million and $33 million, up from the previous range of $18 million to $28 million. For the 2024 tax rate, we decreased guidance to a range of 10% to 15% down from the previous expectation of 12% to 17%. During the first quarter, we repurchased approximately 305,000 shares at a cost of approximately $116 million, including shares repurchased from employees in connection with tax withholdings on annual stock vestings.
As of April 30, 2024, the number of common stock shares outstanding was approximately $13 million. The remaining stock buyback program authorization permits approximately $400 million in additional repurchases, contingent upon cash flow levels and market conditions.
We continuously monitor market conditions and due to the current weakness in the pricing environment relative to Q1, our focus in Q2 will shift toward maintaining our liquidity position. While we do not guide toward share repurchase activity, we do expect market softness to limit our repurchase activity in Q2.
I will now turn the call over to Jason.

Jason Whitehead

Thanks, Todd, and good morning, everyone. I mentioned on our last call that our teams continue to achieve new Company records in safety and environmental stewardship. Since then, Alpha operations and team members have received public recognition with a number of awards for their work are paramount in Southern West Virginia mine rescue teams placed first and second respectively, in the southeast regional mine rescue contest in March.
In addition to earning these top spots. Overall, both teams collected a host of other first-aid technician team and bench awards. This event, including alpha southern West Virginia team, climbing first placed in the mine rescue and first-aid competition and our paramount team coming in second each year.
The West Virginia office of monitors, Health Safety and Training presents Mountaineer Guardian awards to operations that exhibit high safety standards for 2023 six alpha operations were named Mountaineer Guardian recipients, Cedar Grove, number three, mine band meal prep plant, Kingston prep plan, Kingston, South surface mine, Rolling Thunder mine and Workman Creek surface mine additional late last week, a number of our operations were recognized at the homes Mine Safety Award, banquet and the surface mines category, Black Castle surface mine, Kingston, North surface behind Kingston, South surface mine and Workman Creek surface mine were award winners in the underground mines category. The more port belt transfer system, Cedar Grove number two, mine slab can't mine.
Glen Allen mine, Kingston, number two, mine Horse Creek Eagle Mine and the Road Fork 52 mine were recognized in the plants and load outs, category packs, loadout, Marmot dot feet slowed out mammoth plant and River loadout power, Mountain processing, plant band meal prep plant, and more pork processing plant all received awards.
Finally, I'm proud to announce a couple of individual achievements. Steve Archegos received the Sharon Cook award for its outstanding safety service and positive impact on the training and retraining of monitors are key as a safety representative at our Mid West Virginia surface region and exemplifies an unwavering commitment to safe production. Brian Ketan, our Senior Vice President of Safety, and the author of safe production for home, the safety Leader of the Year award.
And I'll point out that's two years in a row that an alpha leader has received this award. I want to congratulate our key brand and all the individuals at the award-winning locations I just mentioned. It's a long list, which is an accurate reflection of how important safety is within this company.
Turning to environmental and West Virginia, our operations received three environmental awards for 2023. The West Virginia DEP. recognized Workman Creek for exemplary reclamation of surface mine operations on their middle Ridge permit and Kingston for exemplary construction techniques of valley fill on their Kingston nor surface mine permit.
The West Virginia DEP also awarded Elk Run for exemplary reclamation of the Queen and black coal mines in Virginia alpha operations received five awards for environmental performance. Paramount to the bond 26 received awards for the met coal producers association for best AML. dangerous highwall elimination and from the interstate mining Compact Commission, they received the National Reclamation Award. The MCPA. also awarded paramount for best complete a deep mine, a deep mine 25 and best active deep mine, Deep Mine 41.
Lastly, the MCPA. awarded Dickinson, Russell for best active, feel it on record preparation plant. I want to congratulate both our environmental and operations teams for their commitment to environmental excellence and all that they do to go beyond compliance. First quarter performance for operations was solid, especially in light of some challenges we face and I'll expand on that shortly.
As Andy mentioned before, I could not be prouder that our teams sell in both safety and productivity measures like tons per man hour, we can be safe and productive at the same time, which is exactly what we aim to do every day, as we all know much has changed since spring of 2020 when the COVID-19 pandemic took the world by storm already such a competitive and competitive labor market became even more challenging recruiting new talent to work in a crowded, hands-on environment seemed almost impossible at times as a result of inflation calls, business calls like supplies and labors to grow to unprecedented highs while critical supply component availability cratered.
Frankly, in some cases, you just couldn't get supplies, as we've discussed on previous calls, how we've mitigated many of these hurdles by increasing the scale of our rebuild facilities, stocking our warehouses with parts and supplies to weather the storm and with acquisitions like Maxim manufacturing and Maxim transportation.
Todd spoke to the quarter-over-quarter decrease in Australian index export realizations of approximately $20 a ton, which is representative of the recent downward trend in coking coal price. This trend is also shedding light on the softening of the supply competition in our industry, which has eased in recent quarters. Now we're facing a very different set of circumstances than the ones we navigated successfully after COVID. And in many ways more challenging, the decisions are harder to make the necessary with the uncertainty of how long the markets will stay in this current trough year to date 2024, there's been a lot of behind-the-scenes work going on to steer alpha through these headwinds with over 1,200 active suppliers. It takes some time to communicate what is happening in the market as well as Alpha's needs and expectations going forward.
But we are well underway with this process. While we value the partnership formed with suppliers over the years, we have not hesitated to change the viable lower-cost options as they present themselves. Alpha is also shifting focus in our rebuild and manufacturing facilities. As I mentioned, the availability of certain supplies has improved.
We're not always in a situation where we have to make it to have it and our initiatives are centered around maximizing margins. Any component we build is at a discount versus sourcing it from a third party, but we're evaluating every plan project with the goal of utilizing our facilities in a way that brings the highest return to alpha. It is a blessing to have the expertise in-house to seamlessly move from machining things like tracks and chains for continuous miners to fabricate and shoot work for preparation plants.
Lastly, while citing and communicating the current market trend or employees, Alpha has made the difficult decision to make certain incentives cuts across the Orkin organization. These reductions equate to about $35 million per year. But with the seasoned workforce we have, I believe they understand how cyclical the markets are and although no one likes it, most understand Actions like these are necessary to ensure sustainability.
I'll now turn the call a call over to Dan for an update on the markets.

Daniel Horn

Thanks, Jason, and good morning, everyone. In recent months, metallurgical coal markets have softened, do weakens the weakened global demand for steel economic pressures, geopolitical uncertainty and global recessionary fears have contributed to the demand dynamics and volatility in metallurgical coal markets.
Economic conditions remain uneven across the world with generally stronger circumstances in the United States than in Europe and in certain parts of Asia, which continue to experience significant geopolitical strife article coal prices fell significantly during the first quarter of 2024 for all four indices that offer closely monitor saw a drop of 16% or more within the quarter with the Australian PLV index, representing the largest reduction of 25%.
The Australian premium low-vol index dropped from $324.75 per metric ton on January 2, 2024 to $244.50 per metric ton at the end of the first quarter, US East Coast low-vol index decreased from $268 per metric ton at the beginning of January to $225 per metric ton at the end of March.
The US East Coast High-Vol A. index moved from $281 per metric ton at the start of the year to $225 per metric ton at quarter close and US East Coast high-vol B decreased from $252 per metric ton to $200 per metric ton at the end of the quarter. Since then, the PRB has dropped from its quarter close level to $238 per metric ton on May 3.
The other three indices have also softened from their end of quarter levels with US East Coast indices of low-vol, High-Vol A. and high-vol B measuring 217, 221 hundred and $195 per tonne, respectively, as of May 3, in the thermal coal market, the API two index moved from $101.55 per metric ton on January 2 to $118.25 per metric ton at the end of March. And on May 3, the API two was at $109 per metric.
These macro index numbers certainly suggest softness, but from our office perspective, we believe they may not reflect the full extent of the market deterioration that has occurred in recent weeks or the significant drop-off in sales activity.
Before I close my remarks, I want to briefly discuss the March '26. Francis Scott Key bridge collapse in Baltimore, which is blocked shipping access to and from Baltimore harbor in terms of coal markets and office specifically, we have not used the Baltimore terminals to export or export our coal in nearly a decade and thus did not have any coal stored there at the time of the bridge collapse.
Instead, the vast majority of our export business travels through Dominion Terminal associates in which we hold a 65% ownership interest in comparable throughput capacity rights. We also have the ability to use other East Coast terminals for export shipments as necessary for in cases where it is opportunistic for us to do so. Therefore, we do not believe that the bridges collapse will have direct effects on our business.
We like other producers may experience some indirect effects such as greater competition for rail capacity as companies who have historically exported their products through Baltimore's port seek alternate options. This increased demand for rail transport may also result in rail congestion, longer shipment times or higher costs. However, our majority ownership in DTA. continues to serve us well, and we do not expect any material adverse effects from the Baltimore bridge collapse the office.
Lastly, speaking of DTA., the team recently completed a planned week-long outage or shipload of maintenance for maintenance was successful and the terminal is back to operating at full capacity. Another scheduled equipment maintenance outage is scheduled to occur in the middle of May the downtime is expected to be roughly one week and will only impact one of the stacker reclaimer machines at the terminal. This means DTA. will be able to continue operating with the other equipment.
But overall throughput will be less during the time when this machine is down for May. And with that, operator, we are now ready to open the call for questions.

Question and Answer Session

Operator

Thank you. At this time we'll be conducting a question and answer session.(Operator Instructions)
Lucas Pipes, B. Riley Securities. Please proceed with your question.

Lucas Pipes

Thank you very much, operator. Good morning, everyone, and Andy. First, I want to tip my hat to because you're probably the only executive who mentioned. So lots of data in the prepared remarks without also mentioning a I. So well done there, but but in all seriousness, a great.
Great job on on on the on the cost and productivity side in in Q1, and I wondered if you could maybe speak to kind of from here on out what are some of the key initiatives? I mean, they were partially discussed on the on the prepared remarks, but maybe you could expand on were we're really looking to drive on cost savings from here on out and manage what you describe as a weaker market environment.

Andy Eidson

Sure, Lucas. And I hate to beat me to the punch on the A. I will get to that maybe next earnings call. We'll have a lot of work to do on that. But as far as I think Jason covered a good portion of that. A lot of this is organic productivity improvements. And and I have to say it's amazing watching Jason and the team work the level of detail that they review their operations at it.
It really is I mean, it would be something that could be a test case for AIA. requires a much bigger brain than than I currently contain to monitor all the things that they've got going on, but the sheer volume of metrics down to whether it's equipment uptime or any number of things that are being evaluated real time is pretty incredible and it's real.
It's again across the number of operations we have and the fact that we're pushing out $17 million-ish tons, some small changes have pretty significant snowball effects when they're applied across the entire portfolio. So I don't really want to get into any specifics unless there's some some things that Jason walk to throw at you.
But again, it goes back to capturing all the appropriate data that covers every aspect of operations and then being able to cut it in a way that that you can really derive some some wisdom from I mean, information without wisdom is kind of pointless. And we've got the right team to take this data and make some significant impact out of it?

Jason Whitehead

It's Jason. I'll follow up a little bit. I mean, Andy, Andy covered the first half of it really well. And I guess the second part that we're really keying in on now is just with the softening, I guess, of the supply market and things are easier to get now relative to maybe and even a few quarters ago, things have really turned around there.
So we want to make sure that we're utilizing our rebuild facilities, our manufacturing facilities to get the absolute best return for Alpha. So, you know, as we're able to pick things up off the shelf.
We may see in some cases, it makes sense to to shift the things that we're fabricating and we're making for internal use.

Lucas Pipes

Thank you very much, Andy and Jason, I am going to touch on the market a little bit, but from my vantage point there, kind of a lot of mixed signals pricing is seemingly holding in there, but you describe demand is softer and maybe softer than the IBM builds.
So I wondered if you could maybe expand on that and where you see the market today, if there are green shoots or if there may be more signs of caution ahead and and on, if you repeat it on that, the outlook on the buyback is maybe more muted here in this environment.
How should we think about that? And is it would it be reasonable to expect that if you get to a $300 million cash balance, for example, that you would resume cash sort of resume share purchases with any cash in excess of that? Just wondering how you think about that.

Andy Eidson

Yes, Lucas, I'll hit the second part of the question first, and I'll let Dan do with the market. But on the buyback, we've talked about it before. We're kind of slaves to our 13-week cash flow forecast. We're obviously we're not ambivalent to the method of capital return.
We're all in on the buyback, but we are somewhat agnostic as far as following what the forecast is it's it's kind of a there's a cold logic to it. And naturally, job one is to protect the franchise. And when we're in market A market with choppy waters like this we do want to make sure that we have enough dry powder to withstand any maintained down lags even even if we get below some previously tested Mark's of whether whether we call it '25, the bottom or two hundreds, the bottom or even less who knows, I don't think we're going to see things like that.
But the world changes quicker than we can keep up with, but we've got approximately a month before our trading window closes. And that means that we'll have the opportunity to have to play with the 10b5 programming up until probably the first week of June before we have to lock it down and leave it. And so we've got some time to analyze the market, give more information and so you're foreseeing some some reversal in trend that would support and firing up the buyback in earnest again.
But until then, you know, I'm not I don't want to commit one way or the other. We're just we're going to play it as required to keep our cash balances at a comfortable place to where we don't have to stay up and not worrying about where where the where it's everything's going to come from. But then I'll let you comment on the market piece of that.

Daniel Horn

Yes, good morning, Lukas up, meaning I guess this market I would describe is still kind of a balanced market. We no doubt steel production around the world is down. It's been a long time. I guess since I've seen all of our markets have kind of depressed steel markets.
There's not a lot of good demand in any markets. India, as you know, is a little weaker than they've been in few years. And I guess a lot of that is obviously due to economic circumstances and the other piece that people don't talk about as much as it affects us, there's a lot of metallurgical coke out there.
That's been kind of an overhang situation. And I think that's affecting our coking coal shipments, and that's starting to work off. So I suppose if you're looking for a green shoot. One of the green shoots might be that we see some of the coking coal and coke market pricing starting to go up and maybe not quite the availability of metallurgical coal and the number of blast furnaces, hot metal production actually is probably starting to increase too.
So but it won't happen immediately. We don't think so we're still seeing a lower demand than usual and a certain amount of deferrals or delays to the you know, that's something else that piece of our business is up. Customers still buy same tons, but they'll spread out the shipments just a little bit honest, and that has the cumulative effect as well.

Lucas Pipes

Thank you, Dan, are you seeing any movement on the supply side, either good or bad, as you know, circumstance that we hear anecdotally of some business, some mines that are idling them. You buy read a couple of them in the in some of the medias. So there is there seems to be some production coming off offline here in the U.S. And I guess another point that I need that way.

Daniel Horn

Certainly on the high-vol coals in U.S. is the thermal market, as you know, has been really terrible for the last year or so. You know, there was really no summer demand last year, no winter demand. So there's been a real overhang of thermal coal.
And a little bit of that thermal coal tends to creep into our high-vol markets here too. That's another area that it hasn't really been talked about a lot, but some of that coal actually ends up competing with the coal and coal the prices down to. And I think some of those thermal operations. We've heard anecdotally have been slowing down as well.

Lucas Pipes

Very helpful, gentlemen, I really appreciate all the color. Thanks so much and continued Best of luck.

Daniel Horn

Thanks, Lucas.

Operator

Nathan Martin, The Benchmark Company. Please proceed with your question.

Nathan Martin

Thanks, operator. Good morning, everyone, and I will start off with that kind of a mixed question.
I know domestic shipments seasonally light in the first quarter, but it looked like Aussie index, export tonnage also kind of dipped below your typical one-third or so, let's call it a met sales level, your exports tied to the other pricing mechanisms were about 51% of sales.
It looks like. So Dan, maybe great to get your thoughts behind kind of the mix drivers there? And then maybe how should we kind of think about that mix evolving with those three buckets here in the second quarter?

Daniel Horn

And I guess I'd take exception to light, I would say are those light shipping schedule? I think we're still 4 million tonnes, 4 million tonnes on, but here are some of there was certainly some deferrals we saw coming out of Asia, so lighter, lighter spot demand and a little bit of deferral. So that did skew the Aussie index-based, the volumes a bit downward, probably see that in Q2 as well for picks up. India still looks real solid for us.

Nathan Martin

But for the reasons that have been addressed and the elections coming up and things there is definitely up in the both on timing and spot business, little little bit less coming out of India and then just generally Southeast Asia and China, a little slower than we had hoped as well for just overall economic reasons.

Daniel Horn

Okay, got it. And just to clarify, then I was just saying light from an Aussie indexed a percentage of sales, not not 4.1 million tonnes relate. So that makes sense. I guess sticking with the demand thing, New Pacific Basin had been kind of outpacing the Atlantic Basin for a few quarters. Now it sounds like maybe things a little bit weaker near term in India, as you just mentioned.
Maybe could I get your thoughts on Europe? I mean, how are things looking there. Maybe when do you think that market could start to improve?

Andy Eidson

I think it's safe to say Europe should have a produce more hot metal in 24 than they did in 23. That seems to be in the cards. Several of our customers have more blast furnaces operating. As I mentioned, there's an overhang on Coke and with the low coal prices up where there's a fair amount of purchased coke are going into Europe that probably won't last in my experience that last for a while.
And then when the cheap Coke gets worked off, the categories began producing more of their own. So I tend to think of Europe start to pick up. That probably applies to South America as well.

Nathan Martin

Okay. Got it. Thanks for that color. And then maybe shifting over to DTA., I know you had some prepared remarks there specifically some comments, I guess, on the Baltimore port outage related transportation, but did you guys see any benefits maybe from the Baltimore port outage as far as your tonnage necessarily needing to shift away and likely Hampton Roads are now taking the majority of that, I guess short answer would be no, Nate.

Daniel Horn

We we're moving clicking along with our business as we had before. We got a few phone calls right after the bridge collapse, but didn't really translate into any any spot business. We know that there's a fair amount of Norfolk Southern base business that's moved to Lambert's Point of that would have shipped out of Baltimore.
And I probably we probably got back in the queue a little bit there. So that's a minor effect. I think on Alpha would be there's just there's a little more volume going out, Lamberts Point than there was prior. But as far as DTA., I have to say we didn't see any effects.

Nathan Martin

Okay, perfect. Got it. And maybe just one more and maybe, Jason, Jason to you. I think you mentioned in your prepared remarks you guys are looking at the current market conditions. Did make a difficult decision to make some cuts to some labor incentives and have you seen much churn or labor attrition due to those? And then I think you mentioned that roughly $35 million or so in cost savings. How does that translate on a dollar per tonne basis maybe to your full year kind of Met segment coal costs?

Jason Whitehead

Well, on an annual basis it's nominally $2. To answer your question about attrition, it's kind of early yet. We made those announcements, I think around the 1st of April, actually mid-March, excuse me, but from what I've seen since mid-March.
You know, attrition rates are generally in line with recent history. So we haven't seen definitely not on Exodus or anything, but we really haven't seen even much of an uptick yet, and I suspect that's just due to the just the general state of the market. I mean, we're not the only ones that we all have the same problem to know these things go together.

Nathan Martin

Okay, perfect. Thanks. I leave it there, guys. Appreciate the time. And so and best of luck in second quarter.

Jason Whitehead

Thank you.

Operator

Lucas Pipes, B. Riley Securities. Please proceed with your question.

Lucas Pipes

Thank you very much for taking my follow up. It's not on a I am it's on the idle mine expenses. Andy, can you comment on what the what drove the increase and is this something we should kind of as kind of hold steady over the coming years or maybe kind of revert back to lower? Thank you very much.

Andy Eidson

I'll let Todd give the detailed answer, but it's always you have properties that are we'll call it in between. They could be in full reclamation status where the cost of the property is going through your your ARO balance sheet accounts. Sometimes when you're in between you've got some timing issues and you're going to pick up a little bit of extra idle expense while that that property's waiting to go into full actual reclamation status?
So Todd, that is that's pretty much in the ballpark of where?

Todd Munsey

Yes, and I think that's the primary driver, Lucas. We did have a little bit of non-recoverable royalties relative to when we did the budget that we layered in, but the Andy has hit the major point there. So and in terms of looking forward, I think you can look back and see where that Range has been.
I mean, we certainly don't anticipate that to increase in the future. So and I think the range that we're in for the for the near future at least is probably where it will be.

Lucas Pipes

Thank you very much. And Andy, at some of your peers have public, they commented on the desire to kind of grow their met coal exposure, especially to the seaborne market. And what's your take right now on M&A on other properties for sale out there? If so, do you have any interest or not a I mean, you're a pure play as is, but curious to get your take on on M&A and some of those comments. Thank you.

Andy Eidson

Well, I think we've we've kind of hit it a little bit on on previous calls, we're always what all coal companies are for the most part, acquisitive. We are what we are today because of transactions we've done in the past. And so we're always looking and there are probably some smaller opportunities where, as Dan mentioned, we're seeing some small supply coming offline.
Some of these folks just are undercapitalized and with no ability to to get access to capital markets. There are probably a handful of pretty high quality or at least good quality mines out there that could be attractive that may be available over the next few months.
But as far as larger transactions, again, it's just really tough to envision a world where with everyone's current shareholder bases and capital structures, any significant deals getting done any anytime soon. And everyone really loves the buybacks.
There's been a lot of value created. We agree with that. And so it's kind of challenging to look at a world where you're on you're doing the big transformational deals, at least from from our vantage point and very helpful.

Nathan Martin

I really appreciate it. And again, keep up the good work. Thank you.

Andy Eidson

Thanks, Lucas.

Operator

We have reached the end of the question and answer session. I would now like to turn the call over to Andy Edson for closing remarks.

Andy Eidson

Thanks again, everyone, for your interest in Alpha and for being on the call with us today, and we hope you have a great rest of the week.

Operator

That concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.