HCC

Strategic Inflection Point Post-Blue Creek Launch

• Q2 2026 marked a key inflection point for Warrior, with the Blue Creek mine fully operational and all development capital spending complete. The company has shifted to a new growth phase focused on free cash flow generation, balance sheet strength, and long-term shareholder returns.
• Customer adoption and reception of Blue Creek coal has exceeded management's high expectations, allowing Warrior to gain market share with strategic customers that recognize the product's differentiated value.
• Blue Creek's inherently low-cost structure is driving company-wide margin expansion even as the sales mix shifts toward lower-priced high vol A products.

Market and Pricing Dynamics

• Global steel fundamentals remained relatively stable in Q2 2026, following supply normalization after earlier-year disruptions. A mining incident in China in late May tightened domestic coal and coke sentiment, triggering safety inspections and higher domestic prices, which re-opened the closed China-Australia price arbitrage that had been shut for over a year.
• Regional market splits: demand from India remained resilient, while China continued to face soft internal demand and weak steel margins, pressuring the broader global market. Europe saw gradual benefits from protectionist measures, but the recovery remains uneven and too weak to offset weakness in other regions.
• Elevated global freight and demurrage rates (well above recent averages) negatively impacted average net selling prices in the quarter. U.S. East Coast HVLA prices have remained at a deep discount to PLV prices for five consecutive quarters, making Pacific Basin sales more profitable in the short term despite higher freight costs; management expects this discount to normalize over time.

Operational Updates

• Blue Creek is currently fully staffed for its planned initial production level, with only a small number of open positions remaining to be filled. The mine is on track to ramp up output toward its targeted 6 million ton annual run rate.
• A recent multi-day electrical outage at the Port of Mobile had no lingering operational impacts, and no meaningful production disruptions are expected from planned longwall moves for the remainder of 2026 due to process improvements that enable zero-day moves.

• Management raised full-year 2026 sales and production volume guidance by 0.5 million tons, bringing total planned Blue Creek sales volume for the full year to 5 million short tons, 90% of which is already under contract.
• Full-year 2026 capital expenditure guidance is $130 million to $150 million on a recurring annual basis, including maintenance capex for existing mines plus additional capex for Blue Creek. Going forward, recurring annual maintenance capex is expected to fall in this same broad range.
• Management expects pricing to remain range-bound at levels above the depressed prices of 2025, but below the supply-driven highs of H1 2026, with ongoing volatility driven by weather, logistics, geopolitics, and regional buying patterns.
• The company expects second-tier (HVLA) indices to remain at depressed levels relative to PLV indices, which will put pressure on net selling prices, profitability, and free cash flow generation in H2 2026 compared to H1 2026.
• Aggregate inflation across materials and supplies is expected to add a few dollars per ton to cash costs in the second half of 2026; cash costs for the full year are expected to land near the lower end of the guided range, with a small cushion built into the upper end of the range to account for unexpected inflationary pressures.

Warrior Met Coal reports only one core product segment: metallurgical (steelmaking) coal. For Q2 2026:

• Total revenue was $510 million, up $212 million (71%) from $298 million in Q2 2025. The revenue increase was driven by $186 million from higher sales volumes, $73 million from higher average gross selling prices, partially offset by a $40 million impact from a larger mix of lower-priced high vol A products.
• Net income was $87 million ($1.65 per diluted share), up from $6 million ($0.11 per diluted share) year-over-year.
• Adjusted EBITDA was $157 million, up 193% from $54 million in Q2 2025, with an adjusted EBITDA margin of 31% (up from 18% YoY).
• Sales volume hit a record 3.7 million short tons, a 65% increase YoY, driven by additional volume from the new Blue Creek mine. The sales mix was 66% high vol A (HVLA) and 34% premium low vol (PLV) coal. By geography, 50% of sales went to Asia, 35% to Europe, 14% to South America, with 13% of volume sold on the spot market.
• Production volume was 3.3 million short tons, a 45% increase YoY, reflecting Blue Creek's contribution. Coal inventory decreased to 1.4 million short tons at quarter end, down from 1.9 million tons at the end of Q1 2026.
• Operating cash flow was $132 million, up $95 million YoY. Free cash flow was $103 million, bringing H1 2026 free cash flow to a positive $11 million, slightly ahead of expectations.
• Total available liquidity at quarter end was $453 million, consisting of $302 million in cash and cash equivalents, $10 million in short-term investments, and $141 million available under the company's ABL facility.

• Broad-based inflation across key inputs including steel roof supports, shear bits, and diesel fuel could aggregate to a material impact on cash costs if pressures continue to build.
• Sustained depressed HVLA pricing relativities in the Atlantic Basin will continue to pressure net selling prices, profitability, and free cash flow if the discount does not normalize.
• Global freight and demurrage rates remain materially above historical averages, creating ongoing downward pressure on net selling prices for Pacific Basin-bound shipments.
• Global steel demand remains weak in China and uneven across developed markets, limiting broader upward momentum for metallurgical coal prices.
• Geopolitical developments (such as the Iran conflict) have already driven higher freight rates to the Pacific Basin, and further disruptions could continue to impact logistics and costs.

Q: With realizations under pressure due to volatile freight rates, can we expect current HVLA-PLV relativity trends to continue in Q3 2026, and how much volume can the company shift to the Atlantic Basin to reduce volatility? / A: Management expects relativity trends to remain consistent with year-to-date levels in Q3. It speculates that as PLV prices decline, relativities are likely to close (meaning HVLA prices will fall less than PLV prices, narrowing the discount). Most volume is already contracted for 2026, so the company cannot arbitrarily shift volume between basins, as shipment timing is dictated by customer contract requirements.

Q: With strong Q2 free cash flow generation, is the company ready to increase shareholder returns, or will it continue building cash balances first? What is the target steady-state cash level, and what is the status of net operating losses (NOLs) and potential share buybacks? / A: Management's target steady-state cash range is $350-$400 million, for a total target liquidity of ~$500 million. All federal NOLs were utilized in 2023; only ~$900 million in state NOLs remain, which are unlikely to be used substantially as the company pays no Alabama income tax. Share buybacks are a key lever for future shareholder returns that will be considered once the target cash balance is built and sustained free cash flow generation is confirmed.

Q: What is the primary driver of the $12 per ton quarter-over-quarter decline in average net selling price in Q2, given that benchmark indexes were relatively flat quarter-over-quarter? / A: The largest driver was a 10% shift in sales mix toward lower-priced European/Atlantic Basin volumes in Q2 compared to Q1, offset by a 10% decrease in sales to higher-priced (but higher freight cost) Asia. Additionally, average Pacific Basin freight rates were ~$10 per ton higher in Q2 than in Q1, which further pulled down net realized prices.

Q: What is the $3 per ton year-over-year reduction in cash costs attributable to 45X production tax credits, and does the addition of lower-cost Blue Creek incremental volume explain the lowered high end of full-year cost guidance? / A: The full $3 per ton year-over-year reduction in cash costs does come from the 45X production credit, which is correct. The lowered upper end of the full-year cost guidance range is indeed due to the incremental 0.5 million tons of lower-cost Blue Creek volume added to the guidance, aligning with the stronger-than-expected customer adoption of the mine's output.

Q: Given strong contracting success for Blue Creek, could the mine reach its 6 million ton annual run rate earlier than planned, and what is the current update on hiring for the mine? / A: Management intends to maximize production from Blue Creek as quickly as possible, and the 6 million ton annual run rate remains the long-term target. The mine is already fully staffed for its current planned production level (four continuous miner units plus longwall), with only a small number of open positions remaining to be filled.