Paul Lang, president and CEO of Arch Resources Inc., the company operating the second-largest coal mine in the U.S., said aligning the company with the world's evolving priorities on environmental, social and governance issues is essential to long-term success.

With moves including a name change from Arch Coal Inc. to Arch Resources in early 2020, Arch has been pivoting its focus from thermal coal used to generate power to metallurgical coal used in the steelmaking process. Company executives reiterated on Arch's first-quarter earnings call that the company is winding down its substantial legacy thermal coal assets while pushing forward with a new metallurgical mine in West Virginia.

"We continue to realign our value proposition to reflect our focus on steel markets in keeping with the global economies' intensifying focus on decarbonization," Lang said. "We believe that a significant amount of new steel will be required in a decarbonizing world, given steel's importance in urbanization, infrastructure development, and construction of essential decarbonization tools, such as mass transit systems, wind turbines and electric vehicles."

The company's Leer South project is on track to start its longwall mining operations in the third quarter. According to its earnings release, the company invested $60 million in Leer South in the first quarter, raising the total amount spent on the project to $342 million, net of an insurance recovery related to assets at a different mine.

Arch's new mine will expand its high-vol A metallurgical coal output by about 3 million tons annually. The company expects the new project to "cement its position as the leading supplier" of the steelmaking product.

"We're more confident than ever about the transformational impact the new mine will have on our cash-generating capabilities," Lang said on the earnings call.

The company projected metallurgical coal sales volumes will increase 15% in the second quarter and increase further in the second half of the year.

Arch's overall strategy is to optimize cash flows from its legacy thermal coal operations while working down reclamation and bonding obligations under an accelerated reclamation plan. The company reduced its asset retirement obligations at the Coal Creek mine by $8 million and its Black Thunder mine obligations by approximately $2 million.

Both of the thermal coal mines are in the Powder River Basin. Arch plans to finish production at Coal Creek by the end of 2021 and reduce the mine's reclamation obligations by about $40 million, or 80%, by mid-2022. The company will then begin to focus on winding down Black Thunder, the second-largest coal mine in the U.S.

Arch is also exploring options to sell its legacy thermal coal assets but has said any such sale comes "with the clear stipulation that we'll only move forward with the sale if the prospective buyer can meet our rigorous requirements for a clean and responsible transaction."

Arch executives may be hoping to avoid the sort of complications faced by competitor Contura Energy Inc., now operating as Alpha Metallurgical Resources. Contura sold its Powder River Basin assets to a company that later filed for Chapter 11 bankruptcy reorganization, raising questions about potential liabilities that prompted Contura to revisit the assets in a bankruptcy sale and facilitate a transaction with a different operator.

There is also a limited number of buyers seeking to invest in U.S. coal properties. Even at drastically reduced prices, many that bought coal properties in recent years found themselves filing for bankruptcy shortly after acquiring the operations.

"We'll continue to run these things for cash and look for a possible buyer of the assets," Lang said. "I think it's true that as we carry on this parallel path, particularly as we drop the liability and bonding, the universe of buyers will expand. At some point, they'll cross, and we'll just keep this path going."

Arch reported a net loss of $6.0 million, or 40 cents per diluted share, in the first quarter.