Warrior Met Coal, Inc. Q1 FY2025 earnings call

• Market Conditions: Steelmaking coal prices have dropped significantly; average premium low vol index prices were $168 per short ton in Q1 2025 vs $280 in Q1 2024, and High Vol product prices decreased 43% over the same period. Weak market fundamentals with global steel demand challenging. - Blue Creek Project: Made excellent progress, on budget and schedule. Hit major milestones early, including completing the AIM module of the preparation plant and starting to wash coal. Expect to begin shipping small amounts of Blue Creek product in Q2. - Cost Discipline: Tightly managed spending at mines, with lower variable transportation royalty costs contributing to lower cash cost of sales despite lower prices.

In the first quarter of 2025, Warrior's sales volume was 2.2 million short tons, a 2% increase from the same quarter last year. Production volume was 2.3 million short tons, a 10% increase. Total revenues were $300 million in Q1 2025 compared to $504 million in Q1 2024. Sales by geography: 43% into Asia, 37% into Europe, 20% into South America. Spot volume was 8% in Q1 2025, expected to be approximately 15% of total sales volume for the full year. Cash cost of sales in Q1 2025 was $244 million, 83% of mining revenues, down from $284 million, 57% of mining revenues in Q1 2024.

Warrior expects weak market conditions to persist, but anticipates higher sales and production volumes in 2025. Initial 2025 guidance remains unchanged for now. Price realization is expected to be in the range of 80% to 85%. The company expects to provide further updates on financial outlook in connection with the second quarter earnings call.

• Market Volatility: Continued weak steelmaking coal prices and potential new tariffs or trade wars could put additional pressure on seaborne pricing. - Supply Chain Issues: Mining events at other steelmaking coal facilities and China's retaliatory tariffs halting coal trade between the US and China, impacting supply reliability and trade flows.

Q: Maybe starting on the pricing side, I think, Walt, you mentioned that price realization could stay below the 85%. So, given the current market environment, is it fair to still assume somewhere between 80% to 85% or how should we think about it?

A: I think that's reasonable. We're still hopeful it will be above that, but I think that's reasonable, 80% to 85%.

Q: And then in this environment, given how good your costs were this quarter, is the $120 per ton something we should be considering in the near term or what are some of the moving pieces there?

A: It's really going to be price-dependent because our transportation royalties are variable. So, prices continue to go down from here. We could see some more improvement as well as our management of our costs as well. But if prices, met coal prices, rise, we'll see a rise in our variable cost as well.

Q: My first question was just back on the realizations. You listed a number of factors that drove things lower, and I was wondering if you could add some color around that. I mean, should we think about transportation differentials and higher sales to Asia, as some of the biggest drivers or any color you could add around, the type of discounts that U.S. producers are ultimately taking to send tons to Asia?

A: Those factors are the what drove it and it really depends on where we sell our volumes into Asia. So, the transportation we saw last year rates as high as $50.55 a ton. We're more in that mid-30s now. So, it's come down quite substantially over time but with the trade and tariff noise, those rates have started to rise recently, given potential with the landed vessel charge that was talked about there for a while. So, those are the things that kind of drive those things, as well as the difference between the relativity between the PLV and High Vol A that prices off of flats.

Q: Blue Creek and the remaining $220 million to $300 million CapEx. Could you maybe just clarify what it is specifically or at least what the big parts are and when it will be spent over the next 12 months?

A: A lot of this is final construction, like labor, a lot of things like that. The majority of the large purchases of steel and equipment, I would say, we have the majority of that already on hand. So, this is really finishing out the project. So, if you look, our estimate was $225 million to $250 million for this year. So that's what we look to spend this year, and the $55 million in the first quarter is right on target with that. So, then it steps down significantly in 2026.

Q: As you guys begin to start trucking that Blue Creek coal over to the loadout and shipping it, how should we think about the impact on cost per ton of the operations?

A: That won't have a dramatic impact because the volume this year is small comparative to the run rate volume. So, it will have some benefit, but it won't stand out this year like it will starting next year.