Strategy Designed to Unlock Value of Blue Creek
Reserves and Return Cash to Stockholders in Higher Price
Environment
Announces Decision to Accelerate Returns to
Stockholders with Special Cash Dividends
Maintains Balanced Focus on Delivering Short-
and Long-Term Stockholder Value
Warrior Met Coal, Inc. (NYSE:HCC) (“Warrior” or the “Company”)
today provided an update on its capital allocation strategy
designed to accelerate returns to stockholders through special cash
dividends and also to unlock the value of its transformational
growth investment in the Company’s Blue Creek reserves, which
Warrior announced earlier today that it would be relaunching.
Also earlier today, Warrior’s board of directors declared a
special cash dividend of $0.50 per share to be paid on May 20,
2022, to stockholders of record as of the close of business on May
13, 2022.
“We are pleased to share our current approach to capital
allocation, which balances value-enhancing capital investments for
medium to long-term growth with near-term returns to stockholders,”
said Dale Boyles, CFO of Warrior. “The recent shift to a higher
price environment, and the outlook for a continuation of that
environment for the near future, presents us the opportunity to
deploy our capital on two important fronts – special dividends (in
addition to our regular quarterly dividends) and the Blue Creek
project.
“While we continue to follow the principles set out in our
previous capital allocation policy, our prudent cash management has
enabled us to manage through the pandemic and emerge in a stronger
liquidity position than two years ago. With this additional degree
of flexibility, we are committed to maintain a balanced focus on
delivering short and long-term stockholder value.”
Mr. Boyles continued, “Even after considering the funding
required to relaunch the development of Blue Creek, Warrior is
expected to generate robust free cash flow over the construction
period in most price environments. While we will always balance the
return of cash to stockholders with the benefit of maintaining
enough liquidity to insulate the company against an unexpected
negative shift in met coal prices, our Board has determined that
some of Warrior’s cash on hand is best returned directly to
stockholders at this time. Consistent with our approach to
balancing stockholder returns with capital investments for growth,
the Board will continue to consider paying special dividends or
buying back stock moving forward as the pricing environment
allows.”
The Company noted that it has not changed its capital allocation
policy as a result of its announced intention to relaunch the
development of Blue Creek. While the Company has paid some large
special dividends in prior high met coal price environments, any
future special dividends or stock repurchases from excess cash
flows will be at the discretion of the board of directors and
subject to consideration of a number of factors, including business
and market conditions, future financial performance, and other
strategic investment opportunities.
Approach to Capital Allocation
Given the current market dynamics for met coal, Warrior is
providing additional detail on its broad approach to capital
allocation, which continues to follow its long-standing current
capital allocation policy. Warrior is committed to continuing to
operate as a low cost, low leverage company with strong liquidity
to maintain flexibility through market cycles and volatility in the
met coal market. This approach has enabled it to continue
operations successfully in the past despite significant headwinds,
including an unexpected and prolonged lower pricing environment as
a result of COVID-19.
Conceptually, Warrior’s approach to capital allocation rests on
the following principles:
- Ensuring the business has the funding to maintain operations,
uninterrupted, and make necessary capex investments in the mines
regardless of any potential volatility in the price of met
coal;
- Maintaining the ability to invest in projects, like Blue Creek,
or in highly accretive inorganic opportunities that can deliver
significant stockholder value over the medium- and long-term;
and
- Leveraging free cash flow to return increasing amounts of
capital to stockholders via increases in quarterly dividends, as
met coal prices allow, paying one or multiple special dividends, as
appropriate, and buying back stock. The return of capital to
stockholders will be subject to unexpected increases in inflation
and other events that are outside of our control.
Warrior plans to target certain key metrics as it determines the
best use of its cash and free cash flow during the development of
Blue Creek:
- Maintain higher total minimum liquidity of $250 million and
cash of $150 million during the development of Blue Creek;
- Keep leverage below 1.5x - 2x Adjusted EBITDA; and
- Balance value of NOLs with share buybacks, which could
jeopardize those NOLs.
More broadly, Warrior intends to return cash to stockholders in
stronger price markets where the Company is generating significant
amounts of free cash flow, and less cash to stockholders during
weaker markets. Warrior intends to consider the use of stock
buybacks when there is no short- or long-term use for additional
cash that will deliver meaningful value to stockholders.
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 demand
for 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, and projected free cash flow
generation. 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 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/20220503005138/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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