Warrior Met Coal, Inc. Q3 FY2025 earnings call

• Operational achievements: Blue Creek longwall operations started 8 months ahead of schedule; won federal coal lease sale of 58 million short tons of high-quality steelmaking coal reserves. - Market conditions: Steelmaking coal markets faced headwinds from Chinese steel exports, subdued global demand, and oversupplied seaborne markets, but Warrior achieved record quarterly sales volume due to contractual demand and Blue Creek sales. - Production: Third quarter production was 2.2 million short tons, up 17% from the same quarter last year; existing mines performed well, and Blue Creek's continuous mining units produced 175,000 short tons. - Sales: Third quarter sales were 2.4 million short tons, up 27% from the same quarter last year, with 378,000 tons of Blue Creek development steelmaking coal sold.

In the third quarter, Warrior saw strong financial performance in its steelmaking coal segment. The Blue Creek mine started longwall operations 8 months ahead of schedule, with an expected production of approximately 1.8 million short tons of high-vol steelmaking coal, an 80% increase over initial 2025 guidance, raising full year 2025 production volume guidance by ~10%. Third quarter sales volume was 2.4 million short tons, a 27% increase from the same quarter last year, with production volume at 2.2 million short tons, a 17% increase. Sales by geography: 43% into Europe, 38% into Asia, and 18% in South America. Blue Creek contributed 378,000 tons of steelmaking coal during the third quarter.

• Raised full year 2025 production volume guidance by approximately 10% due to early Blue Creek longwall start-up. - Blue Creek production volume increased to 1.8 million short tons, an 80% increase over initial guidance. - Full year 2025 spot volume expected to be approximately 10% to 15% of total sales volume.

• Market risks: Persistent surplus in Chinese steel exports, global trade tensions, and subdued economic activity continuing to pressure steelmaking coal markets. - Operational risks: Potential unexpected breakdowns in repairs and maintenance leading to higher cash costs. - Regulatory risks: Several regulatory and administrative steps remain to finalize the federal coal lease agreement with the Bureau of Land Management.

Q: How should we think about production next year for Blue Creek?

A: Still working on the budget; it's market-driven as we get into next year rather than operationally driven, but we're working on it now.

Q: Can you remind us how you're thinking about capital allocation as CapEx is coming down on the Blue Creek project?

A: Similar to the past, excess free cash flow above business needs will be returned via fixed quarterly dividends, possibly higher in the future, supplemented by cash special dividends and maybe stock buybacks.

Q: Do you still need incremental workers to ramp up Blue Creek, and would you plan to build inventory?

A: Still need incremental workers; we'll balance production with market conditions, not wanting to build excessive inventory or flood the market.

Q: How much does the reserve acquisition influence adding another longwall?

A: Incremental capital needed for another longwall is probably ~$300 million, but the reserves enhance efficiency at Mine 4 and Blue Creek.

Q: How should we think about realizations versus the benchmark going forward as Blue Creek tons are brought on?

A: Target is to get back to the 85%-90% range, but it depends on market conditions; we can't control prices, but we aim to get there.

Q: Why is there a slight tick up in cost guidance for the fourth quarter?

A: Baking in potential repairs and maintenance issues, it's a conservative approach as something could break and need fixing in the fourth quarter