Implementation of Innovative Technologies and
Best Practices Significantly Increases Nameplate Capacity
Valuation Metrics Revised Upward Reflecting
Increased Efficiency
Warrior Met Coal, Inc. (NYSE:HCC) (“Warrior” or the “Company”)
today provided several positive operational and financial updates
regarding its progress towards developing its world-class Blue
Creek project. Warrior is the leading dedicated U.S.-based producer
and exporter of high-quality steelmaking coal for the global steel
industry.
Key Highlights
- Nameplate capacity increased 25% to 6.0 million short tons per
year from original production plan of 4.8 million short tons per
year;
- At revised nameplate capacity, Blue Creek is expected to
generate approximately $1.3 billion of incremental revenues, $735
million of incremental adjusted EBITDA, and $637 million of
incremental free cash flows annually;
- Net present value (“NPV”) of Blue Creek is approximately $5.4
billion with an internal rate of return (“IRR”) of 35% and a
payback period of 2.3 years at revised nameplate capacity
- On track for shorter production timeline, with the first
longwall expected to start no later than Q2 2026; and
- Project expected to be completed on time and within budget, and
fully paid for by cash flows generated from operations.
“Our decision to begin this transformational investment in Blue
Creek will transform Warrior and allow us to continue our proven
track record of creating value for stockholders,” said Walt
Scheller, CEO of Warrior. “This project represents a transformative
opportunity for Warrior through the significant addition of
nameplate capacity to address the market dynamics we believe will
continue to play out over the near and medium-term. By furthering
Warrior’s legacy of high-quality, low-cost assets, we believe that
Blue Creek will have a positive impact on Warrior for decades to
come and will benefit a wide range of stakeholders. I want to thank
our employees and the rest of the project team for their dedication
to this project and for ensuring the project is completed safely,
on time and on budget.”
Production Projections and Timeline
Since the Blue Creek project was re-launched in May 2022,
Warrior has made several meaningful operational and technological
improvements that are anticipated to have a positive impact on the
project economics. From a production standpoint, Warrior has been
able to increase the nameplate capacity of Blue Creek to 6.0
million short tons per year from the original production plan of
4.8 million short tons per year, an increase of 25%. The additional
capacity increases Warrior’s overall nameplate capacity by 75%,
from 8.0 million short tons per year to 14.0 million short tons per
year.
Warrior has the ability to increase the current nameplate
capacity 83%, an additional 0.6 million short tons, to 6.6 million
short tons per year by adding an additional continuous miner
unit.
Given current market conditions, Warrior plans to initially
operate Blue Creek at 4.8 million short tons per year until the
additional tons are warranted, as determined by supply and demand
dynamics in the market.
Warrior continues to advance the project on schedule. After
launching continuous miner production during the third quarter of
2024, the Company expects the preparation plant to start in the
middle of 2025 and the longwall to start no later than the second
quarter of 2026.
Budget and Valuation Update
Even with the addition of innovative technologies and best
practices, the project remains on budget. Warrior expects the total
project capital expenditures, excluding mine development costs and
including the impact of inflation on materials, labor, machinery,
and supplies, to remain unchanged in the range of $995 million to
$1.075 billion, of which $716.5 million has been spent through
December 31, 2024. These investments have been fully funded by cash
flows generated from operations due to Warrior’s strong performance
during the development period. In addition, one of Warrior’s
hallmarks of maintaining a low-cost structure will continue with
the Blue Creek mine, as third party and in-house data projects that
Blue Creek will be one of the lowest cost mines in the world.
Based on conservative projections and assuming a long-term
benchmark price of $250 per metric ton for the life of the mine,
Warrior expects the Blue Creek mine to generate approximately $1.3
billion of annual revenue, $735 million of incremental adjusted
EBITDA, and $637 million of incremental free cash flows annually.
With these same assumptions and at the revised nameplate capacity
of 6.0 million short tons per year, Warrior projects an NPV of
approximately $5.4 billion, with an IRR of 35% and a payback period
of 2.3 years, net of $716.5 million already invested in the
project.
Investor Presentation
Concurrently with this release, Warrior has issued an updated
Blue Creek presentation, which can be found on the investor section
of www.warriormetcoal.com.
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) steelmaking 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 quality 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 coal seam contains very low
sulfur and has strong coking properties. The premium nature of
Warrior’s HCC makes it ideally suited as a base feed coal for steel
makers. For more information, please visit
www.warriormetcoal.com.
Non-GAAP Financial Measures
We have not reconciled our forward-looking adjusted EBITDA or
free cash flow to GAAP net income or cash flow from operations,
respectively, due to the uncertainty and potential variability of
stock-based compensation expense, non-cash asset retirement
obligation accretion and valuation adjustments, other non-cash
accretion and valuation adjustments, non-cash mark-to-market loss
(gain) on gas hedges and other non-recurring indirect mining
expenses that are difficult to predict in advance in order to
include in a GAAP estimate. Because such items cannot be provided
without unreasonable efforts, we are unable to provide a
reconciliation of these Non-GAAP Measures to the corresponding GAAP
measures. However, such items could have a significant impact on
our future GAAP net income and cash flow from operations.
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, including statements regarding the
development of, anticipated expenditures on, anticipated financial
performance of the Company related to, and the quality of coal to
be produced from, the Blue Creek project, as well as statements
regarding sales and production growth, ability to maintain cost
structure, demand, pricing trends, profitability and cash flow
generation, competitive advantage, the Company's future ability to
create value for stockholders, inflationary pressures and expected
capital expenditures. The words “believe,” “expect,” “anticipate,”
“plan,” “intend,” “estimate,” “project,” “target,” “foresee,”
“should,” “would,” “could,” “potential,” “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, fluctuations or changes
in the pricing or demand for the Company’s coal (or met coal
generally) by the global steel industry; the impact of global
pandemics, such as the novel coronavirus ("COVID-19") pandemic, on
its business and that of its customers, including the risk of a
decline in demand for the Company's met coal due to the impact of
any such pandemic on steel manufacturers; the impact of inflation
on the Company, the impact of geopolitical events, including the
effects of the Russia-Ukraine war and the Israel-Hamas war; the
inability of the Company to effectively operate its mines and the
resulting decrease in production; the inability of the Company to
transport its products to customers due to rail performance issues
or the impact of weather and mechanical failures at the McDuffie
Terminal at the Port of Mobile; 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; operational, logistical, geological, permit, license, labor
and weather-related factors, including equipment, permitting, site
access, operational risks and new technologies related to mining
and labor strikes or slowdowns; the timing and impact of planned
longwall moves; the Company’s obligations surrounding reclamation
and mine closure; inaccuracies in the Company’s estimates of its
met coal reserves; any projections or estimates regarding Blue
Creek, including the expected returns from this project, if any,
and the ability of Blue Creek to enhance the Company's portfolio of
assets, the Company's expectations regarding its future tax rate as
well as its ability to effectively utilize its net operating losses
to reduce or eliminate its cash taxes; the Company's ability to
develop Blue Creek; the Company’s ability to develop or acquire met
coal reserves in an economically feasible manner; 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, including cash
necessary to pay any special or quarterly dividend; the Company’s
ability to comply with covenants in its ABL Facility or indenture
relating to its senior secured notes; integration of businesses
that the Company may acquire in the future; 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, 2024 and other
reports filed from time to time with the Securities and Exchange
Commission (the “SEC”), which could cause the Company’s actual
results 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.
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version on businesswire.com: https://www.businesswire.com/news/home/20250221035055/en/
Analysts and Investors: Dale W. Boyles, (205) 554-6129
News Media: D’Andre Wright, (205) 554-6131
Warrior Met Coal (NYSE:HCC)
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