Q4 2020 Warrior Met Coal Inc Earnings Call
Good afternoon, My name is <unk> and I'll be your conference later today.
At this time I would like to welcome everyone to the warrior met coal fourth quarter and full year, 'twenty and 'twenty financial results Conference call.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there'll be a question and answer session. If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad. If you would like to withdraw. Your question. Please press Star then two this call is being recorded and will be available for replay on the company.
And that site.
Before we begin I have been asked and note that today's discussion may contain forward looking statements and actual results may differ materially from those discussed.
For more information regarding forward looking statements. Please refer to the company's press release and SEC filings.
I have also been asked and note that the company has posted reconciliation of the non-GAAP financial measures discussed during this call and the tables accompanying the company's earnings press release located on the investors section of the company's website at Www Dot warrior met coal Dot com.
And in addition to the earnings release the company has posted a brief supplemental slide presentation to the investors section of its website at Www Dot warrior met coal dotcom.
Here today to discuss the company's for tolls on Mr. Walsh, Schiller, Chief Executive Officer, and Mr. Dale Boyles, Chief Financial Officer.
Mr. <unk> you may begin your remarks.
Thanks, Operator, Hello, everyone and thank you for taking the time to join US today to discuss our fourth quarter and for year 2020 results.
After my remarks, Dale will review our results and additional detail then you'll have the opportunity to ask questions.
For fourth quarter continued to present, a challenging market environment as the disruptive impact from the COVID-19 pandemic remained evident throughout the U S and global economies.
Although the steel and met coal industries operated below their normal yearly level, we saw volume stabilize with existing customers and our key markets as producers continue to increase their operating rates.
Despite these challenging headwinds, especially on met coal pricing, we were pleased to be free cash flow positive for the third consecutive quarter in a row.
We remain focused on preserving cash and liquidity, while managing the aspects of the business and we can control.
Importantly, we achieved our lowest annual cash cost per short ton since going public.
At the same time, we carefully balance for spending on long term capex investments to keep us uniquely well positioned to benefit from the eventual recovery and steel production met coal demand and pricing.
We continue to take the necessary measures to adjust our workplace environment to comply with social distancing and personal hygiene guidelines set forth by various health organizations to protect the health and safety of our employees, while maintaining our operations.
We continue to operate on mines as a critical infrastructure business and the state of Alabama.
And I would like to thank all of our employees for their hard work and resilience during these challenging times.
We've been fortunate to keep our people employed during this unprecedented period, whereas others and the industry I've had to either operations and furlough employees.
Our fourth quarter played out largely as expected with the exception of taking advantage of additional spot volume opportunities and to China.
And as the Chinese ban on Australia, and coal played out and the fourth quarter, we were able to monetize our higher than normal inventories.
We were able to successfully attract new Chinese customers during the fourth quarter, which partially offset some of the impact of the depressed pricing environment experienced and our natural markets.
Unfortunately, some of these Chinese cargos were sold early in the fourth quarter, just as the CFO index was beginning to rise.
Yes.
From a market perspective, the most consequential themes of the fourth quarter was without a doubt the Chinese ban on select Australia and commodities, including met coal.
While we were cognizant of this situation coming into the quarter the impact of the ban became apparent in early November as a large number of vessels were building up along the Chinese coast without being allowed to unload.
And this new reality settled in Chinese buyers scrambled to initiate discussions with alternative sourcing options.
Including U S based supply.
The Russia transact, coupled with additional complications such as the slowdown and the importation of land borne coal from Mongolia, and tightness and their domestic met coal markets created a significant distortion and the met coal indices, which persist today.
Premium low vol, CFR, China based indices have decoupled from premium low vol, and probably Australia and indices and.
Increasing from their normal spread of eight to $12 per metric ton to over $100 per metric ton at the end of the fourth quarter.
The increase and differential was primarily driven by two opposing forces.
First Chinese customers rush to secure the limited supply of non Australia, and premium coals and second the Australia and supply that is normally reserved for China was being offered to well supplied markets such as Europe and South America.
Despite the distorted met coal pricing conditions, we were generally pleased with global steel fundamentals.
Global Pig iron production as reported by the World Steel Association continues to show and ongoing recovery in steel demand for most regions outside of China.
Well I'll try and achieved another record breaking year.
For the full year global pig iron production was down less than 1%, which is quite remarkable given the severity and the impact of COVID-19 on the world's economy.
The global result is largely due to Chinese impressive production of 887 million metric tons of pig iron.
Equivalent to a year over year increase of four 3%, while the rest of the world was down nine 6% for the same period.
We also entered the fourth quarter with reservations about pricing, which turned out to be true.
The absence of clarity concerning Chinese import quotas for Chinese ban on Australia, and kohls and the perception of a well supplied market get all major indices tightly range bound for most of the quarter. After the early rapid decrease.
The Platts premium low vol. Fob Australian index price began the quarter at a high of $139 per metric ton and fell to a low of $97 per metric ton during the fourth quarter.
Averaging $108 per metric ton for the entire quarter.
Sales volumes and the fourth quarter were $2 2 million short tons compared to $1 7 million short tons and the same quarter last year.
These results were ahead of expectations set out on our last earnings call for volumes at the midpoint of our second and third quarter volumes, which was around $1 7 million short tons.
Our sales by geography, and the fourth quarter for 49% and Europe 20 per cent into South America, and 31% into Asia.
These higher volumes were a nice rebound from the lower volumes in previous quarters.
Production volume and the fourth quarter of 2020 was $1 8 million short tons compared to a similar amount and the same quarter of last year.
This aligns with our thinking on our third quarter earnings call, where we said we expected to better match, our sales and production volumes and the second half of 2020 and take advantage of opportunities if they met profitability thresholds.
That's planned and previously communicated inventories remained elevated at the end of the fourth quarter compared to pre pandemic levels.
Coal inventory levels decreased 515000 short tons to 1 million short tons at the end of the fourth quarter primarily.
Primarily due to the monetization of spot volume opportunities into China.
We expect on inventory levels to temporarily remained elevated which will help us mitigate the risk that our minds may be disrupted or shut down by widespread COVID-19 outbreak among our workforce.
The higher than normal inventory levels will allow us to capitalize on spot market opportunities.
Our gross price realization for the fourth quarter of 2020 was 102% of the Platts premium low vol. Fob Australian index price and was higher than the 97% achieved and the prior year period.
For better gross price realization was primarily due to a higher percentage of our sales being exposed to spot sales with lower relativity due to a fundamental oversupply and the marketplace.
Our spot sales volume and in the fourth quarter were approximately 50 per cent of the total volumes compared to a normal expectation of approximately 20%.
Yeah.
The company spent $29 million on capital expenditures and mine development costs during the fourth quarter compared to $34 million and the same period last year.
This is a 14% decrease and spending quarter over quarter.
We will continue to balance our free cash flow and liquidity preservation against maintenance and discretionary capital spending as we navigate the effects of the COVID-19 pandemic.
I'll now ask day, how to address our for fourth quarter results in greater detail.
Thanks, Paul.
Our fourth quarter continued to be about balancing competing priorities as it had been throughout most of 2020.
We randomize without idling or laying off employees, while keeping our cost low and at extremely depressed and challenging price environment.
At the same time, we continued to make significant capex and mine development investments.
Our ability to generate positive free cash flow and the fourth quarter was an important testament to the success of this bouncing Act.
For the fourth quarter of 2020, the company recorded a net loss on a GAAP basis of approximately $34 million or a loss of 66 cents per diluted share.
Compared to net income of $21 million or 41 cents per diluted share and the same quarter last year.
Non-GAAP adjusted net loss for the fourth quarter was 63 cents per diluted share compared to 32 cents of income per diluted share and the same quarter of 2019.
Adjusted EBITDA was $9 million in the fourth quarter of 2000, and 'twenty as compared to $45 million and the same quarter last year.
The quarterly decrease was primarily driven by a 22% decrease and average net selling prices, partially offset by higher sales volumes.
Our adjusted EBITDA margin was 4% and the fourth quarter of 2000, and 'twenty compared to 22% and the same quarter last year.
Total revenues were approximately $212 million and the fourth quarter of 2020 compared to $205 million and the same quarter last year.
This increase was primarily due to the 33% increase and sales volumes.
Partially offset by a 22% decrease and average net selling prices and a weaker market environment due to the impact of COVID-19.
The Platts premium low vol, Fob, Australia, and index price averaged $32 per metric ton lower or down 23% and the fourth quarter 2020 compared to the same quarter last year.
After the early decrease at the beginning of the quarter. The index price remain range bound for most of the fourth quarter.
Averaging a $108 per metric ton and hitting a low point of $97 per metric ton.
The marriage and other charges reduced our gross price realization to an average net selling price of $94 per short ton and the fourth quarter 2020, compared to a $120 per short ton and the same quarter last year.
Mining cash cost of sales were $190 million for 92% of mining revenues and the fourth quarter compared to $142 million for 72% of mining revenues and the same quarter of 2019.
The increase of $48 million for 34% and cash cost of sales was primarily attributable to two factors one for 33% increase and sales volumes.
And to tighter cost management and 2020.
Partially offset by a 22 per cent decrease and average net selling prices.
Cash cost of sales per short ton Fob port.
And was approximately $86 and the fourth quarter and approximately the same amount and the same period of 2019.
While the cost per ton and both quarters was the same met coal prices were 22% lower in the fourth quarter of 2020.
Cash cost and price sensitive costs, such as wages transportation and royalties that vary with met coal pricing were lower and the fourth quarter. However, they were offset by higher production cost per ton.
Production cost per ton were higher due to our decision to slow production in order to preserve cash and the fourth quarter.
SG&A expenses were about $8 million from three 7% of total revenues and the fourth quarter of 2020 and were 2% lower than the same quarter last year.
Merely due to lower professional fees and employee related expenses.
Depreciation and depletion expenses for the fourth quarter of 2020 were $39 million the.
And the increase quarter over quarter was primarily due to a higher amount of assets placed in service and higher spending levels.
Net interest expense was about $8 million in the fourth quarter and included interest on our outstanding debt plus amortization of our debt issuance costs associated with our credit facilities, partially offset by interest income.
This was approximately $2 million higher compared to the same period last year price.
Merely due to incremental borrowings on our ABL facility this year and lower returns on cash balances.
We recorded a noncash income tax benefit of $11 million during the fourth quarter of 2020 compared to a benefit of $3 million and the same quarter last year.
This quarter's tax benefit is attributed to the pretax loss and additional marginal gas well credits from our gas businesses.
Turning to cash flow during the fourth quarter of 2020, we generate over $1 billion and positive free cash flow.
Which resulted from cash flows provided by operating activities of $30 million.
Net cash used for capital expenditures and mine development cost $29 million.
Free cash flow and the fourth quarter of 2020 was positively impacted by a $20 million decrease and net working capital.
The decrease in net working capital was primarily due to a decrease in inventory on higher sales volume and our decision to slow production this quarter.
Operating cash flows were higher and the fourth quarter of 2020 compared to the same quarter last year, primarily due to higher sales volume.
Cash used in investing activities for capital expenditures and mine development costs was $29 million during the fourth quarter of 2020 compared to $34 million and the same quarter last year.
We continue to rationalize spending versus investing in long term projects that will benefit the company and the future.
Specifically the company spent $13 million from 47% less on Capex and the fourth quarter for 2020 compared to the same period last year, which was partially offset by higher spending on mine development cost.
For the full year of 2020, our sustaining capex spending was approximately $60 million, which was $29 million less and the prior year.
Because our minds are well capitalized and generate significant cash flows we can continue to invest and our business even in challenging price environments.
We spent $27 million on discretionary capex and 2020 or approximately 31% of total capex.
Free cash flow for the full year could have been that much higher had we chosen to suspend those discretionary investments during the pandemic.
Cash flow was used by financing activities was $6 million and the fourth quarter of 2020 and consisted primarily of payments for capital leases of $3 million and the payment of a quarterly dividend of $3 million.
We continued to focus on cash preservation and total liquidity during the quarter and our balance sheet remains strong with a leverage ratio of one nine times adjusted EBITDA.
In addition, we have adequate liquidity as we have shared our fixed costs legacy liabilities and today have a low and variable cost structure with no near term debt maturities.
Total available liquidity at the end of the fourth quarter was $244 million.
<unk> has cash and cash equivalents for $212 million and $32 million available under our ABL facility.
Net of borrowings of $40 million and outstanding letters of credit of approximately $9 million.
Now turning to our outlook.
Due to the ongoing uncertainty related to the COVID-19 pandemic, the Chinese ban on Australia, and coal and other potentially disruptive factors, we will not be providing full year 2021 guidance at this time.
We expect to return to providing guidance once there is further clarity on these issues.
We continue to evaluate the impact of COVID-19, and these other potentially disruptive factors on our business.
Although we believe that it is premature to speculate on when the economies of the countries in which our customers are located will reopen on a sustained basis and lead to a return to normalized demand for met coal.
We continue to appropriately adjust our operational needs, including managing expenses capital expenditures working capital cash flows and liquidity.
We have delayed the development of the Blue Creek project until at least the summer of 2021.
This decision was not based on changes and the perceived value of the project, but rather on our short term focus and preserving cash and liquidity.
For stock repurchase program also remains temporarily suspended.
I'll now turn it back to Walt for his final comments.
Thanks, Dale before we move on to Q&A I would like to make some final comments.
While we understand the immediate consequences, the Chinese ban on Australia and coal we've adjusted our operations under the circumstances.
We still do not have a clear view on the trade of seaborne met coal will return to normal efficient market conditions.
We expect that China will allow some level of Australia and premium coal to be imported sooner rather than later.
But we remain cautious and predicting how and when China will act.
For now it's prudent to stay close to our long term customers, while strategically, placing some spot volumes into China to capture the benefits of the temporary pricing distortions and continuing to build brand recognition for our premium coals and China.
Most steel producers in Europe, and South America have increased production and restarted idle blast furnaces.
However, some countries in which we do business have again temporarily shut down their economies due to our recent rise and new COVID-19 cases, and new variance of the virus.
While we believe that demand for our products should remain stable throughout our portfolio for the next few quarters. We also believe that price volatility will present, the greatest uncertainty for the short term.
Okay.
As previously mentioned, we expect that our current inventory levels will remain elevated as we intend to adjust production rate in accordance with demand and as we manage the potential disruption risks due to COVID-19.
Of course with the opportunity to sell additional volume while meeting our profitability threshold materializes, we would expect to see a more rapid decrease and our inventory levels.
We plan to balance Chinese spot volume opportunities with existing commitments to our long term customers.
Just one last point I would like to remind everyone on as we've previously disclosed our union contract is set to expire on April one.
We believe that we have a good relationship with our union workforce and have done our best to do right by them.
We're in negotiations with the Union for a new contract.
At this time cannot comment any further on any potential terms of a new contract.
Finally, I have repeated a simple mantra many times book.
Before and during this pandemic, it's worth repeating again.
And that is the five important reasons, our business is well positioned to weather any prolonged economic or disruptive challenge.
One.
Our highly talented work force is committed to safely and efficiently driving results.
Two we maintain one of the world's highest quality met coal portfolios and have strong long term customer relationships.
Free we have a strong balance sheet and adequate liquidity.
For our low and variable cost structure enables us to drive high margins and free cash flow across most business environments and.
Five we have made significant investments and our operations over the past few years, allowing us to now reduce capital expenditures as needed without significantly impacting our operations.
And.
As a result of these factors I'm confident that we will emerge from these ongoing uncertainties ready to achieve our long term growth potential.
With that and we'd like to open the call for questions operator.
At this time I would like to remind everyone that to ask a question. Please press Star then the number one on your telephone keypad.
Using a speakerphone please pick up your handset before pressing the keys.
Any time your question has been interest and you would like to withdraw. Your question. Please press Star then two we will pause for just a moment to compile the Q&A roster.
The first question comes from David Gagliano with BMO capital markets. Please go ahead.
Hi, Thanks for taking my questions and.
And I appreciate the you know the.
The challenges associated with providing full year color in this environment I'm just wondering though can you give us some color on the first quarter given what you know.
Based on past halfway.
Through the first quarter and can you give a sense on volumes and pricing and costs.
For the operations are running as expected.
And we've discussed.
Frequently how our coal is price there and it's still being price that way for our standard customers and.
Thank you for one as cash.
As we expected, but that's about as much clarity as I can give you.
Okay, and just to drill down a little bit more on on what you expected and the first quarter. When you say as expected what and what are you expecting and the first quarter for volumes.
Hum.
You can look at our last year or two and see how we've run and that's.
And how we expect to operate.
Okay, and then in terms of spot sales.
At this point.
Many times have you sold in the spot market and the first quarter or for delivery and the first quarter into China.
And I was getting into that level of detail David.
Hey.
Alright, I'll just leave it at that thanks.
Appreciate you appreciate your column.
The next question comes from Lucas pipes with B Riley Securities. Please go ahead.
Hey, good afternoon everybody.
And that looks.
I wanted to.
And a sense of committed volumes for <unk>.
And in 'twenty, one I appreciate that.
But at the number for the full year, but are you typically layer and commitment and to Europe, South America and then.
If you could also add we typically stand kind of on a percentage basis for its capacity on the committed side.
Would be very helpful. Thank you.
Well I guess.
Do you know and the previous peak.
Few quarters Lucas.
Our spot sales have been running about 50%.
Of our quarterly volumes because of the pandemic.
And most of the shutdowns that occurred.
As those geographies are.
Improving you know some of those countries and also kind of step back as well with the new cases, and the new variance of this virus. So it's hard to say.
Exactly on the committed volume because of the spot volume as well.
But we expect.
You know to improve more above that 50 50 ratio as we move forward this year.
The whole.
Market disruption with China, and what's going on there with that ban.
You know, we can try to take advantage of those opportunities when we can but we still want to make sure that we fulfill everything with our customers. So.
And don't want to get into the committed at this point.
And because that can change very quickly and.
And you know our contracts to rollover from year to year. So just want to say that look we're going to be improving on that 50, 50 ratio and as we've been for the last three quarters I believe it is.
And just as you think about the year and.
Just kind of goes back to David's question.
You know our volumes were off about 7% year over year, both production and sales volumes and you know and 2020.
Being off 7% and total.
Given the pandemic I think that's that was a pretty good result, after the fact.
And I just think you would think about next year or 2021 somewhere and knows.
Are those numbers and.
It just depends on how quickly some of these things get resolved and you.
You know I would say everything looks very positive.
But until we start to see that improvement we tend to always be very cautious.
Yes, yes.
And that's appreciated.
Thank you Darren.
Higher higher level question follow up question on.
Marketing and this environment.
Kind of Big picture.
Isn't this total.
And for someone like you to gain share on the market.
And if Australia is.
On a oh.
Shut out of the Chinese market.
And to hold transportation logistical advantages into Europe, Latin America, why not run full out and.
Kind of based on where prices are today.
I would have these on a positive contribution margin and I'll be telling you sell so it's a kind of just big picture kind.
And philosophically why not why not run full out here.
Well you remember you've got millions of tons of Australia, and coal sitting off the coast of China.
Fact that China is not letting.
And the coal and from Australia doesn't mean to close not being produced in China, and Australia, It's really still pretty close balance between supply and demand and we've seen some cargoes of Australia and coal makes its way into both Europe and South America.
As we've had opportunities to move our coal into China, and and the best thing for US has been.
And it allows us to get brand recognition in China with our coal out of non for mindset and because we havent sold as warrior into China previously.
Yeah.
The market is really not that significantly under supplied at this point I think as of a couple of weeks ago, you still had about 4 million tons of Australia and coal sitting off the coast of China.
Okay.
That's helpful.
And one final follow up and then go back into queue.
And how we're all looking at.
Darius pricing around the globe.
However, China, Fob, Australia, Fob the east coast.
Right.
Would you say those prices are representative or representative for you and what you say look given that.
You noted the inventories from Australia.
Oh for steel and coal outside of China that maybe some of these.
Prices are not fully represented just help me understand and I'm just gonna be free.
And I'm a little confused when you look at it and improving index score a number of weeks now.
And what would be so much hesitation to provide more volume color and it seems like it would be quite profitable even at these prices. So so would appreciate the additional color on pricing and today's environment. Thank you.
Well it is as we look at the ability when we sell into our customers in both Europe and South America. We used that coal is sold based on the F O B, Australia and price.
And we expect to be able to fully achieve the plug those prices based on whatever our particular contract is for a particular customer whether it's two weeks three weeks four weeks of average price in previously.
And with what's going into China.
CFR again, and I don't know.
You know China is not always fully active and the market and knees CFR prices, maybe on very very small volumes.
I think the same thing happen with the east coast price as well right. Yeah net price has ramped up over the last several weeks and theres been virtually no volume traded under that and.
Next.
Very helpful.
On the back in queue. Thank you very much and best of luck.
Thanks Lucas.
The next question comes from Chris Terry with Deutsche Bank. Please go ahead.
Hi, Walter and I just wanted to just look at ask you a little bit on on the costs for the quarter.
The the Ids shakes was five or six those hard and what we had appreciate you sold out of inventories I. Just wanted if you could talk about.
How do you see that and I know you're reluctant to talk too much about 'twenty 'twenty, one and maybe just some of the moving parts. So I guess I guess it was just that inventory my that was the main contributor to the higher cost and in the quarter for wondering if you could give some details.
If you look at our average cost for sales for the last five years, we've been between 90 and $95 met.
And that's per metric ton and now that's kind of where we continue to be last quarter was exceptional and Q3 and.
And we expect to be able to operate in that.
Same level year after year and quarter after quarter now on any particular quarter no. We're going to have some blips and you know and for instance, and the fourth quarter and Theres, an awful lot of fixed costs associated with these mines and when we intentionally.
And dropped back the number of days, we operate and the number of tons we produce.
Fixed cost gets spread across fewer tons. So we're going to see a higher cost per ton number.
And on one anecdote there the third quarter. If you were basing it off the third quarter third quarter was so unusually low I mean that was just an outstanding number being and I don't.
Think about $78 a tonne.
And that's that's highly unusual to be down that low.
And so.
That's you got a big snap back there.
First of all the different things and one other factor that kind of makes us a little bit harder to is since our inventory levels are so high what we sold and the fourth quarter a lot of that was mined and the third quarter. So you got some rollover effect and some other quarters on the inventory layering. So it just makes it a little bit more comparable.
But yes, I mean low low to mid.
$80 range is what we've been historically and running at.
Yeah, Okay. That's clear and then in terms of 'twenty 'twenty, one and how many longwall moves do you have do you and maybe you could just talk a little bit about your expectations on the on a capex range.
Well we have.
Free, possibly a fourth longwall move.
In terms of Capex. My expectation is you should see again us probably and similar levels to we'd been in previous years, where we've.
Budgeted between 100 and $120 million.
Okay. Thank you and then just coming back to the for the inventory level, you've got now and keeping that ready in case and he was to happen around COVID-19.
I wanted to if you could just talk a little bit about that and look what what level do you have to keep vs opportunities that come up in the spot market and I'm just trying to understand that million tons can you tell it to and a half a million and still be comfortable with whats the opportunity and that million tons, you've got and inventory.
I think for us really low inventory levels are when we get below 250000 tons and thats really below where we want to be optimum I would say is somewhere in the $3 50 to $4 50 range.
Okay. Thanks, guys. That's it for me thank.
Thank you.
The next question comes from pharma with Roth Capital. Please go ahead.
Hi, Thanks for taking my question.
Just a question on China, how you know given the high CFR prices and China is there a way that we should think about the realizations for the mine rallied versus how we would think about Australia and low vol.
Obviously, 100 and $100 per tonne premium, but also higher logistics and logistics costs I'm just looking for just a rough way to estimate and then secondly.
Just on your commentary about.
About exports from China It seems.
And you know fairly on Nick like I I feel like there are less than five per cent of the volumes would potentially reach China. This year on and I'm wondering if you can comment on that on that estimate.
Okay.
And all the the first one there.
You know as far as the realizations you know, obviously I can't predict that.
Having actual volumes, but as we said and our prepared comments look we're going to try to take advantage of the opportunities if we can.
But first and foremost it's our long term customers we have to make sure that we service are long term customers that are here today and been with US for 20, plus years and you know a Chinese customer comes today and go on tomorrow. So we have to balance that and make sure we meet that demand so I can't really.
Predict the actual transactions and my occur this year on.
Other than just say look we will try to take advantage of any spot volume opportunities at.
Some of those CFR prices into China, if we can do that.
And as far as the second part of the question I think Dale to answer really captures that as well and that no. We're first going to take care of our long term customers and then we'll look at spot opportunities determine where our best opportunities are and and go after that realization.
Okay, Great and then just one other question on Capex.
And you can just provide any more.
More clarity on discretionary projects that are planned for this year. So I can.
I think a little bit deeper into the capex.
And.
Well as you've seen and our materials and as we've talked about on previous calls you know we are building out the for north Port portal and net facility and that's continuing.
B under construction, so I don't expect that that's our primary project as.
We did say in our prepared comments right now we are.
<unk>.
The start of development and the Blue Creek project and lease until the summer of this year.
And so discretionary spending.
Again, it could be similar to what we encourage prior year.
Uh huh.
This year as you know.
And as Walt said earlier, it could be anywhere from $100 million to $120 million, what we budget to start with but as we get into this year, depending on how things go.
And if things take off as everybody seems to be so exuberant about that's probably a pretty good target but.
Things don't pick off as fast as that then you would not see us spending that kind of money.
Got it great. Thanks for the color.
Thank you.
The next question comes from Nathan Martin with Benchmark coal. Please go ahead.
Hey, Yeah, Walt and Dale Thanks for taking my question guys.
And most most of the topics I was looking at dig into have been touched on maybe just to follow up real quick on the Capex question.
Obviously, you guys did a great job, bringing down and sustaining capex and 2020, because at $60 million level.
Made the comment that as well for tomorrow and shipping well capitalize it for last few years.
And do you feel like that number is something that you could sustain going forward into 'twenty and 'twenty, one if necessary.
That would be my first question.
And in 'twenty and 'twenty, one, yes, it's not a long term sustainable number, but yes, we could do that in 'twenty and 'twenty one.
Okay, Great and then quickly kind of going back to the CFR China story.
Just curious.
Gosh, what is a reasonable number right now that you're saying it may be out there for for ocean freight from mobile to China.
I think it was and the $40 range led me to check, yes, 40 to $50 range.
Okay.
Got it and I appreciate that too and then finally and just a little housekeeping question. Bill you were mentioning that volumes in 2020, I think we're down 7% and roughly year over year and then you made a comment about 'twenty, one and you said the numbers would be roughly the same did you mean roughly the same maybe there's 20 from sales perspective on it.
Absolute basis does that mature and getting that.
Yeah, I was saying on yeah, there could be a similar amount of our.
Our mail volume.
2020.
And again that all depends on how fast our customers are able to ramp back up.
And there's lots of talk about it we just need to see that.
And so on.
That range I think is a reasonable range.
But again it just we just need to get a little more clarity from our customers on their actual run rates for the year.
Got it. Thank you and then just real quick one final one and going back to Capex and everything obviously, just pointed out before north portal project et cetera, or where you would expect to spend most of your discretionary dollars. This year and any color you can provide on how much is left to spend on on those projects.
I think we're about halfway through the mine for capital needed for that project you have for me.
And we're capitalizing some of the development. It also includes a bunker cause it'll be built underground so far it's a sizeable project is bigger than just putting a portal and so it's.
We're about halfway.
If you're halfway what was and what would be the original I think it was 80 ish.
Mid eighties and the total okay got it thanks for the reminder, guy and sorry I. Appreciate your time on best of luck.
Thank you.
The next question comes from Lin Shen with Hite. Please go ahead.
Hey, Thanks for taking my call and <unk>.
Wanted to ask for them.
Ooh Creek project, so from now for summer what do you want the on.
To make you.
And comparable to that by day projects and that time, what do you want to see for their coal price inventory supply and demand and what are you seeing.
Yeah.
I just think that you see.
And you're talking about asking about us starting and Blue Creek I think we would have to see I talk for just a minute about the.
Uh huh.
We have the COVID-19 issues, we want to see a little more clarity around that sort of weaken a little better.
And we're clearly defined demand.
We would like to see pricing stay pretty stable and.
And we talked a little bit about the fact that we have the contract negotiation.
And so we just need clarity around some of those issues.
Before moving to commit a lot of money into the project.
Got it.
And also.
Mike.
And we heard a lot of the Kinect and also for you.
And on the coal from the New administration, so I know as and more promise for the thermal coal, but I guess, while youre operations for your business do you kind of feel like any Vanessa.
For tangible warehoused and actively for Europe.
Business either from there.
I guess may be.
Like most.
Cost on or like less demand I guess and can you talk a little bit about what are you seeing other industries Inc.
Well, it's a little early to tell.
But you know some of the moratoriums on the federal land leasing.
Specifically excluded coal metallurgical coal.
All coal actually so at this point and it's kind of hard to say what what they expect.
Other than that one which doesn't impact us.
We don't know.
And we can't predict that at this time.
And then just for clarify you don't have any federal land.
Yes.
Well, we do lease some federal land yes.
And he has been on line Suez is for you on <unk>.
And new projects.
And it would be both.
Okay got it thank you.
Thank you.
The next question is a follow up from David Gagliano with BMO capital markets. Please go ahead.
Hi, I think a lot of my questions have now been asked but I guess I just had two quick follow ups first of all just on the longwall moves and is there any particular quarter that were there.
Chunkier than other quarters.
Oh no no.
Pretty much spread throughout the year.
Okay. Okay. Thanks, and then just on the.
On the on the on the Union negotiations and contract can you just give us some context and so.
One was that contract last negotiated.
Five years ago from this coming April 1st.
Okay. Okay. So obviously things were quite different than one of the.
Pieces of the.
Prior contract I believe it was you know.
Wages that were tied to prices and in some respect and and is that still likely to be the structure moving forward or is that part of the negotiation.
And that'll be part of and negotiation, but interestingly prices stayed robust enough that wages stayed constant.
From that standpoint throughout the contract we never hit a trigger.
Okay, Alright got it good alright, that's it from me thanks.
Thanks, David.
At this time there are no further questions I will now turn the call back over to Mr. Shallow for any comments.
That concludes our call. This afternoon and thank you again for joining us today and we appreciate your interest and warrior met coal.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
[music].