Warrior Met Coal, Inc. Q4 FY2024 earnings call

• The company performed well despite market headwinds, with sales volumes 23% higher and production volumes 7% higher than Q4 2023. - Achieved sales and production volumes not seen since 2019, recorded highest annual production from Mine 4, and produced first tons from Blue Creek. - Generated over $370 million in cash from operations, used to develop Blue Creek and return over $43 million to stockholders via dividends. - Market factors like excess Chinese steel exports, weak demand, and ample steelmaking coal supply impacted pricing. - Sales geography shifted with Asia sales increasing from 25% in Q4 2023 to 38% in Q4 2024, at the expense of Europe. - Blue Creek project made progress: completed clean coal silos, began dry slurry processing system construction, etc., with $350 million invested in 2024 and $717 million total to date.

In the fourth quarter of 2024, Warrior Met Coal's sales volume was 1.9 million short tons compared to 1.5 million short tons in the same quarter of the previous year, with production volume at 2.1 million short tons vs. 2 million short tons in Q4 2023. Sales by geography in Q4 2024 were 38% into Asia, 36% into Europe, and 25% into South America. Mine 4 had a record annual production of 2.8 million short tons in 2024. The Blue Creek growth project produced 170,000 short tons in the fourth quarter and 209,000 short tons for the full year 2024. Revenue contribution by geography: Asia 38%, Europe 36%, South America 25%.

• Weak market conditions are expected to persist, potentially putting downward pressure on steelmaking coal prices. - Anticipates higher sales and production volumes in 2025, with contracted volume at ~85% and spot volume at 15%. - Blue Creek expected to produce ~1 million short tons of high vol A steelmaking coal in 2025, with sales in the second half. - Spending on Blue Creek in 2025 and 2026 is expected to step down dramatically from existing cash and liquidity.

• Persistent weak market conditions for steelmaking coal prices. - Impact of excess Chinese steel exports and ample global seaborne supply. - Potential new tariffs or trade wars negatively affecting financial results. - Uncertainty around labor contract negotiations with the United Mine Workers.

Q: Could you break out the contribution from Blue Creek versus Mine 4 and Mine 7, and how to think about sales cadence and realizations?

A: Projected production at Blue Creek in 2025 is about a million tons, with sales starting in the third quarter after prep plant comes online. Mine 4 is expected to mine and sell over 2 million tons. Realizations will be influenced by market conditions but rely on brand recognition for high-quality products.

Q: How much to attribute cash cost guidance reductions to pricing vs fixed cost absorption?

A: Most of the cash cost guidance reduction is due to lower net coal prices, particularly affecting transportation royalties. The outlook for 2025 assumes persistent weak market conditions, so cost assumptions are baked into guidance.

Q: How might sales by geography shift, especially tons that may have gone to China?

A: Tons that would have gone to China are likely to flow into the Asian market, with no big differential in transportation costs for those tons.

Q: Is shipment likely more second-half tilted given Blue Creek volume starting to ship then?

A: Yes, the majority of Blue Creek's 1 million tons in 2025 is expected to come in the second half.

Q: What about price realizations with High Vol A from Blue Creek?

A: Currently, the 85%-90% range stands for price realizations, but this may change as Blue Creek volume increases. Historically, the relativity of HCC to PLV has been stronger over time but was narrower in 2024.

Q: How much of Asia sales in Q4 2024 was to China?

A: Information by country is not provided for competitive reasons, but it's not enough to significantly impact overall sales.

Q: What are cash cost assumptions for 2025?

A: Assuming a PLD price of $200, with cost guidance reflecting low met coal price assumptions and persistent market conditions.

Q: Any inventory targets for year-end 2025?

A: Aim to get inventory levels back to normalized range, likely a couple hundred thousand tons, with expected reduction in third and fourth quarters.

Q: Thoughts on labor contract renewals and impact on Blue Creek?

A: Labor contract with United Mine Workers is still being negotiated; outcome is uncertain and could affect operations but not directly tied to Blue Creek development yet.

Q: Cash balance and capital allocation as Blue Creek nears steady state?

A: As Blue Creek comes online, will reassess cash balance and shareholder returns, aiming to maintain low leverage and flexibility for strategic growth opportunities