Q2 2022 Warrior Met Coal Inc Earnings Call
Good afternoon, My name is Matt and I will be your conference operator for today.
This time I would like to welcome everyone to the warrior met coal second quarter 2022 financial results Conference call.
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
If you'd like to ask a question. During this time simply press the star key followed by the number one on your telephone keypad, if you'd like to withdraw your question Press Star then the number two.
Call is being recorded and will be available for replay on the company's website.
Before we begin I've been asked to 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 Ive also been asked to note that the company has posted reconciliations of the non-GAAP .
Matters discussed during this call in 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 dotcom and.
In addition to the earnings release the company has posted a brief supplemental slide presentation to the investors section at its website at Www Dot warrior met coal Dot com.
Here today to discuss the company's results are Mr. Walt Sheller, Chief Executive Officer, and Mr. Dale Boyles, Chief Financial Officer. Mr. Sheller, you may begin your remarks, thanks, operator, Hello, everyone and thank you for taking the time to join US today to discuss our second quarter 2022 result.
After my remarks, I will review our results in additional detail and then you'll have the opportunity to ask questions.
Yeah.
I'm excited to share the results from yet another very strong quarter. It represented our third consecutive quarter of record net income and earnings per share since the start of the COVID-19 pandemic.
We again demonstrated our ability to leverage our efficient business model can make strong customer demand for our premium met coal and taking advantage of strong met coal pricing to deliver these results.
In addition to net income and earnings per share. This resulted in record high amounts of revenue adjusted EBITDA cash flow from operations free cash flow and liquidity.
We were clearly the beneficiary of macroeconomic conditions, it's driving higher pricing and strong customer demand.
We're pleased with how well positioned the company is to be able to take advantage of these tailwind.
But is it with great efficiency and nimbleness of our business model that is a key differentiator for us in good times and bad.
We were able to see those screens inaction this past quarter in response to both the industry and non industry related issues.
For example, we felt the impact of the significant inflationary environment on our cost of sales, which Dan will speak to later.
Despite these increased costs, we were able to deliver strong profitability.
In addition, many industries, including ours.
Packard by shipment delays related to port maintenance, the lack of available rail transportation and port congestion.
Yeah, we were able to overcome these issues to deliver a premium products to our customers around the world.
That's why our thinking always remains ultimately defense or it is important for us to lean into the supercharged periods, while maintaining a strong buffer during periods of macroeconomic headwinds.
And most important is for us to know how to be able to definitely adjust given how market conditions can change very quickly.
We experienced this dynamic in part during this past quarter, which is a roller coaster of supply and demand.
We entered the second quarter expecting our market to experience price erosion and steel fundamentals were weakening.
However, the first half of the quarter played out stronger than we had anticipated as pricing level stayed quite high while we saw several pricing that were caused by end user selling cargos immediately reversed.
The global supply of backhaul remain tight most of the second quarter, Despite lower global steel production.
Eventually a clear downward trend was established later in May we've remained unchallenged until the very end of the quarter.
Lower steel prices across the globe and have your recessionary pressures affecting most economies there was no surprise that steel demand and deteriorating.
We were expecting to see buying activity from trying to emerge during the quarter, but they're highly restrictive COVID-19 policies.
Strong domestic coal production.
Availability of Russian cold and higher than historical imports from Mongolia limited the need to purchase U S met coals.
To illustrate how this dynamic played out our primary index. The P. L D F O B Australia.
Started the quarter at $467 per short ton.
Just to pick up $481 on May 18, well closing the quarter at $274 per short ton.
This correction represents a 43% decreased from its peak price achieved in the second quarter.
The absolute value of the correction is by itself almost 170% higher than the 10 year average of the index.
In short we believe the first half of 2022 will go down as one of the most volatile periods in our markets and we are pleased to emerge from it with strong results in hand.
One of the end of the quarter, we started to see a shift in customer demand for steel in certain industries.
Overall, the World Steel Association recently reported that global pig iron production decreased by five 5% in the first six months of 2022.
China recorded a decrease in production of four 7% for the period, while the rest of the world Pig iron production decreased by seven 1%.
China's lower steel production is largely due to recent shutdowns related to stringent COVID-19 restrictions and lower demand, especially in the property sector.
Discussions with our customers continue to indicate there's still demand for the oil and gas aerospace and shipbuilding sectors is strong.
Automotive demand still report it could be strong, but production remains constrained by the availability of semiconductors and components.
However, all of those factors have experienced weaker demand since the latter half of the second quarter.
Yeah.
As for Warrior, our sales volume in the second quarter. This year with $1 5 million short tons compared to $1 8 million short tons in the same quarter last year.
Sales for this quarter were lower than last year, primarily due to shipment delays due to port maintenance lack of rail car availability and port congestion, which have.
Hampered our ability to ship more volume this year.
In addition, with the high demand for seaborne thermal coal, we're seeing higher volumes in thermal coal move through the port, creating some congestion and impacting loading dates and times.
By far the largest impact to our second quarter results was the poor performance of our rail transportation provider the delayed getting our product to the port in a timely manner.
We were not immune to the challenges posed by a very chaotic national rail system rail performance for the past quarter was one of the lowest we've ever experienced causing higher than expected coal inventory levels at our mine sites.
Your vessel the merge costs and Miss quarterly sales targets.
We understand that our Revpar our partners have plans in place to address the shortage.
We expect to return to normal operations to be lengthy and lumpy.
Therefore, we expect the outbound logistics to remain challenged for the foreseeable future.
Our coal inventory rose to 735000 short tons at the end of the second quarter.
We expect to bring down the level of inventory in the second half of the year and some of the shipment delay issues improve.
Our sales by geography in the second quarter were 62% into Europe , 18% into South America, and 20% into Asia.
We sold a small amount of volume into China during the second quarter as a CFO China index price was below the Australian F O b price to most of the quarter.
Production volume in the second quarter with $1 7 million short tons compared to $1 2 million short tons in the same quarter of last year.
The production tons produced in the second quarter resulted from running both longwall and five continue reminder, units and mine seven and three continuous monitoring units and a longwall mine for.
Our <unk> days on the longwall continued to remain solid.
The mines ran well and we're very efficient in the second quarter as we continued to ramp up production of mine for.
We finished the quarter running them until the combination of salaried and hourly employees, representing approximately 60% of the normal workforce, while producing nearly 83% of the normal production volumes.
Employee productivity was strong again during the second quarter compared to historical periods.
Over the past year, the mines have trying to hire in clean tons produced per man hour worked.
This increase in productivity has helped to offset some of the inflation we've been experiencing.
We appreciate the significant efforts by our employees to drive higher production levels, while continuing to maintain a safe working environment.
During the second quarter, we spent a record high amount of Capex and mine development of $79 million.
The amount included normal sustaining capital plus discretionary capital.
But then the development of our Blue Creek reserves work on our four north portal and the deposits on the new Longwall shields.
As previously disclosed our board approved the purchase of two new sets of longwall shields for the existing mines, which could be delivered in the third quarter of 2023.
We made down payments when they shields in the second quarter of approximately $48 million.
These sales represent another significant investment of approximately $100 million over two years to keep our minds, well capitalized and performing most efficiently.
We continue to see rising inflation and long lead times impact of our business the remainder of this year.
Despite partial mitigation of these issues with our improved productivity at the mines were experiencing 25% to 35% increases in cost of operating supplies and materials repairs and major equipment rebuilds.
Those price increases led to a $4 per short ton negative impact on our second quarter result.
As U S inflation in June and another four decade high of nine 1% the federal reserve shifted to a faster pace of interest rate increases and its efforts to bring down inflation.
There are growing fears of slowing economic growth worldwide, which has led to a decline in commodity prices in recent weeks, including met coal.
Before I ask be able to address our second quarter results in greater detail I wanted to take a moment to comment on the exciting and important announcements that we made during the second quarter, specifically, we announced on may 3rd.
First the relaunch of the development of our Blue Creek reserves.
Second our decision to accelerate stockholder returns a special cash dividend.
The first special dividend of <unk> 50 per share and third an update on our approach to capital allocation.
The development of Blue Creek represents a transformational opportunity for warrior.
During the second quarter, we began developing a site in constructing the surface shafts and slope.
We are in the preliminary stages of development and expect activities and spending to continue to ramp up over the remainder of this year.
We're extremely excited about this project and look forward to seeing the results of our investment once the development is completed.
Completed.
As a result of our strong free cash flow generation, we paid a special dividend of 50 cents per share during the second quarter.
In addition, we just announced additional returns to stockholders of a second special dividend of 80 cents per share to be paid in the third quarter.
These returns are on top of the significant investments, we're making into the business as I mentioned earlier, that's part of our capital allocation strategy.
Oh, no I should be able to address our second quarter results in greater detail.
Thanks Walt.
In the press release, we issued on May 3rd we laid out our current policy in regards to capital allocation, which focuses on our ability to fund the operations regardless of volatility in the met coal market and.
Investing in highly accretive growth opportunities, such as Blue Creek, and leveraging our free cash flow to return cash to stockholders through special cash dividends or stock repurchases.
Using the strong cash flow generated during the second quarter, we deployed the highest quarterly amount of capital spending in mine development ever in the business of $79 million as Walter noted earlier.
We expect full year capital spending of approximately $200 million to be a record high for the company.
While deploying that capital into the business during the second quarter. We also paid a special dividend to stockholders of <unk> 50 per share.
In addition earlier this week, we announced our second special dividend of the year that will be paid to stockholders in late August on top of the regular quarterly dividend.
Yeah.
As previously disclosed there are certain key metrics they were continuing to focus on achieving as we make those capital allocation decisions during the five year development of Blue Creek.
They include first maintaining a higher amount of minimum total liquidity of $250 million.
Including a minimum cash balance of $150 million at all times during the development of Blue Creek.
Second staying no more than one and a half to two times levered over that same period.
And third balancing the value of our Nols with stock repurchases, which could jeopardize those nols until they're fully utilized.
While our current cash balance and total liquidity well exceeds those minimums, we continue to stockpile cash, but we anticipate capital spending for the new longwall shields and the development of Blue Creek.
While returning excess cash to stockholders as we have demonstrated this year.
Now that we have nearly enough cash to pre fund the entire Blue Creek project, we're pleased to be able to continue to balance capital investments for medium to long term growth with near term returns to our stockholders without incurring any debt.
We believe strongly that our capital allocation policy and our key metric guidelines provide the right approach.
With that I'll now turn to the second quarter results.
For the second quarter of 2022, the company recorded its third consecutive quarter of record quarterly results with net income on a GAAP basis of $297 million or $5.74 per diluted share.
Compared to a net loss of $5 million.09 per diluted share in the same quarter last year.
non-GAAP adjusted net income for the second quarter was an all time record.
Excluding the nonrecurring business interruption expenses and item on expenses.
Almost $5.87 per diluted share compared to an adjusted net income of 25 cents per diluted share in the same quarter last year.
We achieved an all time record high of $431 million of adjusted EBITDA in the second quarter this year compared to $65 million in the same quarter last year.
The quarterly increase was primarily driven by a 227% increase in average net selling prices.
Partially offset by a 15% decrease in sales volume.
Plus the impact of inflation on materials and supplies labor and parts on repairs and major equipment rebuilds.
Our adjusted EBITDA margin was 69% in the second quarter this year compared to 29% in the same quarter last year.
Total revenues another record high for $625 million in the second quarter compared to $227 million in the same quarter last year.
That's 175% increase was primarily due to the 227% increase.
And average net selling prices, partially offset by a 15% lower sales volume.
In addition, other revenues were positively impacted in the second quarter. This year by 130% increase in natural gas prices.
Offset by a noncash mark to market loss on our gas hedges of approximately $14 million.
Yes, Mark to Mark catch them off with a tribute to the hedge is put into place prior to the run up in natural gas prices.
During the second quarter, we terminated all outstanding gas hedges and our gas operations should report revenue more consistently with current market prices in future quarters.
The Platts premium low vol, Fob Australian index price averaged $280 per short ton higher and was up 225% in the second quarter. This year compared to the same quarter last year.
The index price average $404 per short ton for the second quarter.
Demurrage and other charges reduced our gross price realization to an average net selling price of $404 per short ton in the second quarter. This year compared to $123 per short ton in the same quarter last year.
The marriage and other charges were approximately $14 million higher than the second quarter. This year versus last year, primarily due to higher pricing and the shipment delays that Walt discussed earlier.
Cash cost of sales with $190 million for 30% of mining revenues in the second quarter compared to $152 million or 68% of mining revenues in the same quarter last year.
Increase in total dollars was primarily due to $61 million of higher variable costs associated with price sensitive wages transportation and royalty cost.
Partially offset by a $23 million impact.
15% lower sales volume.
In addition, our costs were higher due to inflation resulted in increased cost for belt structure, we bulk cable magnetite Rotten dust and other materials plus.
Plus labor and parts on repairs and major equipment rebuilds.
Despite the higher variable cost inflation cash margins with $281 per short ton in the second quarter compared to only $40 per short ton in the same period last year.
Demonstrating the leverage to higher met coal prices driving both profitability and free cash flow.
Cash cost of sales per short ton Fob port was approximately $123 in the second quarter compared to $83 in the same quarter last year.
Transportation and royalty cost accounted for $39 of the increase plus an increase in production costs due to the rising inflation of approximately $4 per short ton.
Cashcall some price sensitive items, such as wages transportation and royalties that vary with met coal pricing were significantly higher in the second quarter. This year compared to the same quarter last year.
As you May remember transportation cost lag on a one quarter basis and index prices averaged $280 higher in the second quarter versus the same quarter last year.
As a result of the significantly higher prices period over period.
Favorable transportation and royalty costs are significantly larger components of the cost per ton than the normal approximately one third percentage.
Terrible transportation and royalty costs were 54% of the cost per ton of $123 in the second quarter. This year.
Compared to only 33% in the same quarter last year.
Driven primarily by higher met coal pricing.
We expect our transportation cost to be higher in the third quarter due to the lag effect.
SG&A expenses were about $13 million or 2% of total revenues in the second quarter. This year.
And were higher than the same quarter last year, primarily due to higher employee related expenses.
During the second quarter, we incurred incremental nonrecurring business interruption expenses of $6 million that were directly related to the ongoing labor strike.
These nonrecurring expenses were primarily for incremental safety and security legal and labor negotiations and other expenses.
There is no update on the ongoing labor strike as we continue to negotiate in good faith to resolve the matter.
<unk> expenses were $2 million in the second quarter represent expenses incurred with the operations at both mines running at reduced capacities.
Such as electricity insurance maintenance labor taxes, and are primarily fixed in nature.
Turning to cash flow.
During the second quarter of this year, we generated an all time record high $250 million of free cash flow.
Which resulted from record high cash flows provided by operating activities of $329 million less cash used for capital expenditures and mine development cost of $79 million.
This resulted in free cash flow conversion of 58% in this quarter versus last year's second quarter at 82%.
Free cash flow in the second quarter. This year was negatively impacted by a $67 million increase in net working capital from the first quarter of this year.
Increase in net working capital was primarily due to an increase in accounts receivable on higher met coal pricing.
Combined with higher inventories due to the shipment delays previously discussed.
Our total available liquidity at the end of the second quarter was a record $768 million, representing an increase of $211 million or 38% over the first quarter of 2022 and.
And consisted of cash and cash equivalents of $645 million and $123 million under.
Our ABL facility.
Now turning to our outlook and guidance for 2022.
We believe we are well positioned to fulfill anticipate customer commitments for the year.
And the current operating environment and without a new Union contract. We believe that we will be able to meet our production and sales volumes, including the outlook section of our earnings release.
I'll now turn it back to Walt for his final comments.
Thanks, Dale before we move on to Q&A I'd like to make some final comments on our outlook for the third quarter and full year 2022.
As Bill noted earlier in his remarks, our cash cost per short ton in the second quarter of 2022 was significantly higher due to the variable components of our cost structure, such as wages transportation and royalties and the impact of inflation.
As you May remember, our transportation costs lagged met coal pricing by one quarter.
Therefore, our third quarter transportation costs will be based on the average price for the second quarter and were not expected to decline further until the fourth quarter.
Another factor that may negatively affect our cash cost is the impact of inflation.
As we also mentioned our inventory levels peak began at the end of the second quarter as a result of strong production and the shipment delays in getting our cold report.
We expect to draw down on those inventory levels in the third quarter as we perform maintenance on the skips at mine seven for approximately six weeks.
We expect third quarter production to be slightly lower in the second quarter, but still on track for the year.
Normally the third quarter tends to be the weakest quarter in terms of demand for most steel producing regions.
This time, the third quarter does not feel like it'll be normal steel production cuts in the form of extended or anticipated maintenance or even idling of blast in electric arc furnaces have already been announced.
And hopefully we'll provide a floor for steel prices to settle on.
Although a recession in Europe seems to be a given the uncertainty around access to Russian natural gas and subsequent impact of the industrial sectors as a concern.
We are aware of the Chinese recently announced fiscal stimulus package has the potential to provide a stronger business environment for the steel and coal markets in the second half of the year.
But we remain cautious on China due to the fragility of the property sector and the reality of the imaging Covid restrictions.
As noted in previous earning calls we believe the global supply of met coal should improve as year progresses, mainly coming from the Australian producers.
As such softer demand with stable supply should keep met coal prices at much lower levels than those we've experienced in the first half of this year.
We do however believe that pricing will remain at or above cost curve economics for the period due to the impact of the ban on Russian calls the potential for a prolonged period of thermal coal pricing premiums.
The overall vulnerability of the global supply chain.
Despite all these headwinds we remain focused on ramping up production and your existing mines as we add head count control our costs and continue the development of a world class asset Blue Creek.
This represents a key development project launching at the right time to make the significant future demand for our unique premium product to deliver value to our stockholders.
With that 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.
We will pause just for a moment to compile the Q&A roster.
And our first question will come from David Gagliano with BMO. Please go ahead.
Hi, Thanks for taking my questions and congratulations on a very strong quarter by the way I wanted to just ask about the cost guidance for the second half of the year.
And for the full year the full year guide, obviously, you didn't change the range and it implies.
Kind of a flat second half versus the first half.
You talked up the third quarter number because of the you know the lagging and transport costs in and then it and we'll get some relief. So it's kind of a two part question here first is.
You know can you frame the order of magnitude of the increase quarter over quarter in cash costs and.
Also talk about.
What price assumptions, you're using for the second half of the year embedded in that full year range that hasn't changed.
Sure Dave This is Dale.
So if you're looking at a range I mean for the first half we're right in the middle of that range.
And if you look at cash cost based on what we're looking at right now you know theyre going to be very similar to the third quarter.
While prices have decreased and you'll have a decrease in royalties.
Transportation will be virtually the same.
Because.
The one quarter lag effect there.
And yes, we are experiencing a roughly $4 and increased costs related to inflation. So.
I think that keeps us right in that range for the year and that was pretty much. What we were focused on last time.
And so our pricing is somewhere in the mid <unk> I think for the full year is in the mid three hundreds to a little bit little bit above the mid three hundreds.
Obviously, you can change and as prices continue to drop we will just have to see where we are but that's kind of where we are right now.
Okay. So maybe I misunderstood so overall cash cost per ton second sorry.
Third quarter flattish.
Flattish versus the second quarter is that what youre, saying or I thought I heard ops versus the second quarter because of higher transportation costs.
Well there'll be there'll be flattish because you have opposing forces going on you'll have royalties decreasing but transportation will be virtually the same amount you got inflation, we're having as well so you're going to be net net very close very similar to where we were in the second quarter.
Understood. Okay I appreciate that clarification, and then on a different note.
You know reasonably obviously, Matt has come down very sharply.
I think there's a bit of bounce today, but nevertheless quite.
Quite a decline in met.
If if you know the world stays where it is I haven't had a chance to actually go through the math.
But you know with Capex accelerating in.
In the second half and into 2023 for Blue Creek.
Yeah, we're sitting around 180, 200 ish Pacific Basin benchmark pricing will warrior continue to pay out special dividends during our second half of 'twenty, two and into 2023.
I think that's possibility you know we continue to execute on our capital allocation strategy, obviously investing in growth in the existing business with the new shield.
But you also have the growth with Blue Creek and then when you think about next year now that our capital spending should be in that $100 million range.
Outside of Blue Creek.
So you know right.
Right now with nearly $700 million, which is pretty much pre funding Blue Creek I entirely.
To the extent, we generate cash.
Above that Dan and the board determines that we can return.
Return that we will and so there's opportunity it just depends on where the markets go.
Looking at the second half you know in the potential slowdown in the different markets.
Yeah, we will just have to see where the market or the markets are at the end of the next quarter and just kind of take it quarter by quarter.
Okay. That's helpful. Thanks.
Thank you.
Okay.
Again, if you have a question. Please press Star then one our next question will come from Lucas pipes with B Riley Securities. Please go ahead.
Thank you very much and good afternoon, everyone.
First wanted to ask a bit on the labor situation are you are you, adding head count at my number seven mine number four.
Thank you.
We continue to add head count incrementally we.
We continue to hire folks so we can yes, we continue to hire.
Is there possible to put some numbers around it in terms of.
Kind of the pace of additions now versus.
Fourth quarter first quarter.
Uh huh.
<unk> slowed down in the late in the third quarter early fourth quarter last year and it's been Oh.
Slower.
Since then and it continues to kind of trickle in we still have some folks continue to cross the.
Thanks, a lot and we continue to get some new hires so just kind of a steady trickle and as you can see we build a little inventory in the second quarter.
So we're really pretty happy with where things are right now we continue to hire and move forward with that.
That's very helpful and then.
Across the industry a lot of.
Executives are noting skilled labor, it's difficult to come by what.
What's your experience in this market is it a is it challenging to find skilled labor or would you say, you're well positioned from that perspective.
In terms of finding skilled labor is continues to be very difficult with the.
Basically.
Everything.
All months were operational if they can be so finding skilled.
Various labor had been difficult. So we just haven't been trained some new folks up and they're doing great.
Good good.
And then.
The last one I wanted to touch on is thermal coal pricing, whereas this met coal pricing of course, there is a big big spread between the two.
Are you able to sell into the thermal coal market and if so is there a way to quantify it at this point. Thank you very much.
Well, we will continue we are looking into selling into the thermal market.
Though these quality coals are met coal like this one from a btu standpoint, as a a much stronger coal themselves normal thermal coal. So we will continue to explore that and as we have opportunities present themselves.
We can achieve higher realizations and still meet our customer commitments, we will do so.
Alright, I appreciate it very much best of luck. Thank you.
Thank you.
Our next question will come from Nathan Martin with the Benchmark Company. Please go ahead.
Good afternoon, guys. Thanks for taking my questions congrats on the quarter.
Thank you.
I'm, just maybe just trying to think about production and sales shipments kind of as we've moved from the second quarter the third quarter.
Just going back to the comments you guys made I guess when you commented that there were some maybe some downtime on line number seven I think in Q3, so production should likely be down quarter over quarter.
But on the sales side, obviously, you guys called out the inventory levels, but more importantly, maybe the transportation issues that seem to be persisting, especially on the rail side. So I was hoping maybe we can get a little more color on transportation side of things and would you expect hopefully an increase in shipments quarter over quarter, maybe as that improves a little bit.
And you want to let some of the inventory. Thank you.
Well, that's our intent is to reduce our inventory from now through the end of the year and definitely in the third quarter.
As I mentioned.
Sex is.
Implementing some plans to hopefully improve.
Their performance and we'll see how how long does it take to come to fruition.
But we're hopeful that that will begin to take shape. We also had some major maintenance work done at the port and a third in the second quarter, which included rebuilding.
One of the car.
Car dumps.
Railcars, so those two things slowed the pull down a bit.
And again, the additional congestion from other calls coming in including thermal to go out of that port facility.
We expect there's going to continue to be congestion.
The.
Port facility should be completed and get up and running pretty quickly and hopefully we will see improved.
Four months out of the railroad.
Got it very very helpful. Walt I guess, you guys still have the ability to barge some cold as well.
We do we are barge some of our call we have our own barge load out we borrowed some money for it in mind seven coal.
And we continue to do that to the extent, we can we're pushing on the barge facilities is as much as we can.
Got it perfect. That's all I really had left I appreciate it guys special luck on the second half.
Thank you. Thank you.
Our next question will come from Ken Cayman with Pacific Rim investments LLC. Please go ahead.
Uh huh.
Walton and Dale.
Lucas basically already asked my question about the the thermal coal, but that I might ask you if you could elaborate a bit.
The quality specific qualities of our coals the low volatile in mid volatile products.
Or are they amenable to use in thermal plant site I understand it.
Sometimes seem like a good coking quality coke coking qualities can kind of backfired IRA on you if you have to use it in there.
In a thermal plant.
Would we have to perhaps that would perhaps have to be mixed with a with a with a different a different product to create something that could be burned or.
Just kind of wondering about the probability that we we may be able to take advantage of these are these higher rent a thermal prices before the opportunity Scott.
But that's really a power plant by power plant issue power plants are in different parts of the world are able to operate with different coal you're right some of the.
Some of the balls can create issues for Oh, when being utilized as a thermal coal.
But.
Again, the Btu quality, all kind of makes them want to figure out a way to blend it in and utilize it because it is.
It's about a 15 or 20% premium in terms of quality.
Okay.
Thanks for that so I guess something that.
You know well, we'll know with time.
Yeah, no one's going to be able to just completely I agree with you know, we're going to be able to completely switch over to met coals because it would cause them problems, but I think.
You'll see it it found its way in and it'll close things balanced out a bit.
Yeah, Thanks for that.
Thank you.
Okay.
At this time there are no further questions I will now turn the call back to Mr. Schiller for any comments.
That concludes.
Our call. This afternoon. Thank you again for joining US today, we appreciate your interest in warrior met coal.
Thank you that concludes today's conference. Thank you all for participating you may now disconnect.