Transformational Growth Investment Will
Reinforce Warrior’s Position as the Premier U.S. Pure-Play Met Coal
Producer
Planned Capacity of 4.8 Mstpa of Premium High
Vol A Met Coal with First Quartile Cost Position
Warrior Met Coal, Inc. (NYSE: HCC) (“Warrior” or the “Company”)
announced today that it is relaunching the development of its Blue
Creek reserves into a new, world-class longwall mine located in
Alabama near its existing mines. Once completed, this
transformational growth investment will reinforce Warrior’s
position as the premier U.S. pure-play producer of premium
metallurgical (“met”) coal products that are sought by customers
throughout the global steel industry. Met coal, unlike thermal
coal, has unique physical properties and is used solely for the
production of steel.
Previously, the Company had delayed the development of the Blue
Creek reserves due to the uncertainty of COVID-19, as well as
market conditions and the labor strike. As market conditions have
significantly improved and the Company’s cash generation and cash
on hand have significantly increased, the Company has decided now
to move forward with the development.
Since the initial announcement, inflation in steel and other
commodity prices, including labor costs, have increased the total
capital spending requirements of the project. However, during a
refresh of the project, the Company has identified potential
production increases of approximately 10% and anticipates being
able to accelerate the start of longwall production by
approximately fifteen months based on design modifications and
projected stronger available liquidity to fund the project. Based
on an assumed met coal price of $150 per metric ton, the projected
net present value (“NPV”) is approximately $1 billion over the life
of the mine with a projected after-tax internal rate of return
(IRR) of nearly 30% and an expected payback of approximately two
years from initial longwall production.
“We are extremely excited about this organic growth project,
which will transform Warrior and allow us to build upon our proven
track record of creating value for stockholders. Blue Creek is
truly a world-class asset and our commitment to this new initiative
demonstrates our continued, highly focused business strategy as a
premium pure-play met coal producer,” said Walt Scheller, CEO of
Warrior.
The Blue Creek development will be a single longwall mine and is
expected to have the capacity to produce an average of 4.8 million
short tons per annum (‘mstpa”) of premium High-Vol A met coal over
the first ten years of production. It is one of the last remaining
large-scale, untapped premium High Vol A met coal reserves in the
U.S.
Once fully developed, the Company expects Blue Creek to increase
Warrior’s annual production capacity by 60% and expand its product
portfolio to its global customers, by offering three premium hard
coking coals that are expected to achieve the highest premium met
coal prices in the seaborne markets. Warrior controls approximately
70 million short tons of recoverable reserves and 49 million short
tons of resources at Blue Creek, which totals to over 119 million
short tons. Warrior has the ability to acquire adjacent reserves
that would increase total recoverable reserves at the mine. The
inclusion of all coal reserves, resources, and adjacent properties
would extend the life of mine reserves to approximately 170 million
short tons. Under this expanded mine plan, Blue Creek is expected
to have a mine life of approximately 50 years assuming a single
longwall operation.
The Company’s third-party reserve report indicates that Blue
Creek would produce a premium High Vol A metallurgical coal that
will differentiate itself from the industry benchmark with lower
sulfur and higher coke strength after reaction (“CSR”). High Vol A
has historically priced at a slight discount to the Australian
Premium and U.S. Low Vol coals, and that trend has continued over
the last two years. Warrior expects High Vol A coals will continue
to become increasingly scarce as a result of Central Appalachian
producers mining thinner and deeper reserves, which is expected to
continue to support this pricing level. Likewise, Warrior expects
premium hard coking coals to become even more highly valued by
customers due to their blending characteristics and ability to
improve coke oven efficiency. Warrior believes this creates an
opportunity for Blue Creek to take advantage of favorable pricing
dynamics driven by the declining supply of premium High Vol A
coals.
Blue Creek’s estimated production cost per short ton is expected
to be in the first quartile of the U.S. and global seaborne hard
coking coal cost curve and to be approximately 30 to 35% lower than
Warrior’s existing mines today. The Company believes the
combination of a lower production cost and premium quality of the
High Vol A product, at the expected price realizations, will
generate some of the highest met coal margins in the U.S.,
resulting in strong investment returns and achieving a rapid
payback across a range of met coal price environments.
Capital Investment and Financing
Warrior expects to invest approximately $650 to $700 million
over the next five years to develop Blue Creek with expected
spending in 2022 of approximately $45 million to begin the project.
Based on the current schedule, Warrior expects the first
development tons from continuous miner units to occur in the third
quarter of 2024 with the longwall scheduled to start up in the
second quarter of 2026.
Warrior’s strong cash flow generation and current available
liquidity, as well as the ability to finance $120 - $130 million of
capital expenditures through equipment leases, allows the Company
to be opportunistic as it evaluates funding options for Blue Creek
with the goal of maintaining an efficient and low-cost capital
structure.
“We estimate Warrior will continue to generate robust free cash
flows during the development of the project and we expect to fund
the 2022 capital expenditure requirements of $45 million from
internally generated cash flow and cash on hand,” said Dale W.
Boyles, CFO of Warrior. “We plan to be opportunistic in evaluating
funding alternatives for Blue Creek, which we view as very
manageable given our current liquidity position and ability to
utilize existing free cash flow and equipment financing.
“Finally, we believe the Company’s strong balance sheet,
liquidity and free cash flow generation provide us the ability to
pay for the project fully in cash and significant flexibility in
how we ultimately choose to finance Blue Creek longer-term,” Mr.
Boyles concluded.
Concurrent with this release, Warrior has issued a slide
presentation on the Blue Creek project that can be found on the
investor section of www.warriormetcoal.com.
Conference Call
The Company will hold a conference call to discuss its first
quarter 2022 results and the Blue Creek project Thursday, May 5,
2022, at 4:30 p.m. ET. To listen to the event live or access an
archived recording, please visit http://investors.warriormetcoal.com/. Analysts and
investors who would like to participate in the conference call
should dial 1-844-340-9047 (domestic) or 1-412-858-5206
(international) 10 minutes prior to the start time and reference
the Warrior Met Coal conference call. Telephone playback will also
be available from 6:30 p.m. ET May 5, 2022, until 6:30 p.m. ET on
May 12, 2022. The replay will be available by calling:
1-877-344-7529 (domestic) or 1-412-317-0088 (international) and
entering passcode 4980978.
About Warrior
Warrior is a U.S.-based, environmentally, and socially minded
supplier to the global steel industry. It is dedicated entirely to
mining non-thermal metallurgical (met) coal used as a critical
component of steel production by metal manufacturers in Europe,
South America, and Asia. Warrior is a large-scale, low-cost
producer and exporter of premium met coal, also known as
hard-coking coal (HCC), operating highly efficient longwall
operations in its underground mines based in Alabama. The HCC that
Warrior produces from the Blue Creek, AL, coal seam contains very
low sulfur, has strong coking properties and is of a similar
quality to coal referred to as the premium HCC produced in
Australia. The premium nature of Warrior’s HCC makes it ideally
suited as a base feed coal for steel makers and results in price
realizations near the Platts Index price. For more information,
please visit www.warriormetcoal.com.
Forward-Looking Statements
This press release contains, and the Company’s officers and
representatives may from time to time make, forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended and Section 21E of the Securities Exchange Act
of 1934, as amended. All statements, other than statements of
historical facts, included in this press release that address
activities, events or developments that the Company expects,
believes or anticipates will or may occur in the future are
forward-looking statements and are based on current market
conditions and are therefore subject to change, including the
amount, timing and financing of capital investments to be made in
Blue Creek and the anticipated start of production date for Blue
Creek, demand for and supply of metallurgical coal, High-Vol A
metallurgical coal or otherwise, and projected or expected results
or returns from the development of Blue Creek, including expected
production levels, expected cost position, expected mine life,
projected internal rate of return, projected net present value,
expected margins, projected payback periods and the generation of
free cash flow. Forward looking statements by their nature address
matters that are, to different degrees, uncertain and depend upon
important estimates and assumptions concerning our financial and
operating results. No representations or warranties are made by us
as to the accuracy of any such forward-looking statements. The
inclusion of this information should not be regarded as an
indication that we consider it to be necessarily predictive of
actual future results. The words “believe,” “expect,” “anticipate,”
“plan,” “intend,” “estimate,” “project,” “target,” “foresee,”
“should,” “would,” “could,” “potential,” or “outlook,” “guidance”
or other similar expressions are intended to identify
forward-looking statements. However, the absence of these words
does not mean that the statements are not forward-looking. These
forward-looking statements represent management’s good faith
expectations, projections, guidance, or beliefs concerning future
events, and it is possible that the results described in this press
release will not be achieved. These forward-looking statements are
subject to risks, uncertainties and other factors, many of which
are outside of the Company’s control, that could cause actual
results to differ materially from the results discussed in the
forward-looking statements, including, without limitation, the
state of the global economy, fluctuations or changes in the pricing
or demand for the Company’s coal (or met coal generally) by the
global steel industry; federal and state tax legislation; changes
in interpretation or assumptions and/or updated regulatory guidance
regarding the Tax Cuts and Jobs Act of 2017; legislation and
regulations relating to the Clean Air Act and other environmental
initiatives; regulatory requirements associated with federal, state
and local regulatory agencies, and such agencies’ authority to
order temporary or permanent closure of the Company’s mines or
temporary or permanent suspension of the Blue Creek project;
operational, logistical, geological, permit, license, labor and
weather-related factors, including equipment, permitting, site
access, operational risks and new technologies related to mining;
inaccuracies in the Company’s estimates of its met coal reserves;
significant cost increases and fluctuations, and delay in the
delivery of raw materials, mining equipment and purchased
components; competition and foreign currency fluctuations;
fluctuations in the amount of cash the Company generates from
operations; the Company’s ability to comply with covenants in its
ABL Facility or indenture relating to its senior secured notes;
adequate liquidity and the cost, availability and access to capital
and financial markets; failure to obtain or renew surety bonds on
acceptable terms, which could affect the Company’s ability to
secure reclamation and coal lease obligations; costs associated
with litigation, including claims not yet asserted; and other
factors described in the Company’s Form 10-K for the year ended
December 31, 2021 and other reports filed from time to time with
the Securities and Exchange Commission (the “SEC”), which could
cause the Company’s actual results from the investment in and
development of Blue Creek to differ materially from those contained
in any forward-looking statement. The Company’s filings with the
SEC are available on its website at www.warriormetcoal.com and on
the SEC's website at www.sec.gov.
Any forward-looking statement speaks only as of the date on
which it is made, and, except as required by law, the Company does
not undertake any obligation to update or revise any
forward-looking statement, whether as a result of new information,
future events or otherwise. New factors emerge from time to time,
and it is not possible for the Company to predict all such
factors.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220503005136/en/
For Investors: Dale W. Boyles, 205-554-6129
dale.boyles@warriormetcoal.com
For Media: D’Andre Wright, 205-554-6131
dandre.wright@warriormetcoal.com
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