Q4 2022 Warrior Met Coal Inc Earnings Call
Good afternoon.
My name is Joe and I will be your conference operator today.
At this time I would like to welcome everyone to the warrior met coal fourth quarter and full year 2022 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 the star key policy.
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This 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 releases and SEC filings.
I've also been asked to note that the company has posted reconciliations of the non-GAAP financial measures discussed during this call in the tables accompanying the company's earnings press release located on the investors section of the company's website.
Www Dot warrior met coal dotcom.
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.
Here today to discuss the company's results are Mr won't show, Chief Executive Officer, and Mr. Dale Boyles, Chief Financial Officer Mr.
Mr. Shaw 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 full year 2022 result.
After my remarks, Dan will review our results in additional detail and then you'll have the opportunity to ask questions.
We ended the fourth quarter with optimism the strong customer demand facilitate a drawdown of inventories with the expectation of continuous improvement and rail transportation and improved performance at the Mcduffie terminal.
Unfortunately, several uncontrollable shipment delays continued to drive higher than normal inventories and lower shipment volumes in the fourth quarter.
As we mentioned on previous calls the rail transportation and Mcduffie terminal performance issues impacted our shipment volumes each quarter during 2022 and caused our to merge cost to increase by 415% last year.
This under performance by our business partners resulted in sales volumes that were below our expectations and guidance for the full year 2022, we.
We had the custom orders ready to ship, but the mechanical failures prevented us from realizing the strong customer demand during the fourth quarter.
Looking further at our outbound logistics, the fourth quarter provided a mix of encouraging and disappointing news.
On the positive side, we experienced our best <unk> quarter of the year largely due to improvements in rail service and the consistent reliability of our barging system.
The performance of our real carrier were stable throughout the quarter and has remained so into the first few weeks of 2023.
We expect to see this level of service going forward as the incremental improvements are made over time in order to return.
Their service their historical performance levels.
On the disappointing side, our main export terminal mcduffie suffered a myriad of mechanical issues that greatly impeded its loading ability.
The mechanical failures have been mainly concentrated on its conveyor and transfer systems as well as on the larger operational equipment, such as the ship loaders.
In addition, that's some of it was interrupted for approximately six days during December due to heavy fog and severe weather.
As a result, we experienced longer than normal vessel queues and fell short of our end of year shipping potential by approximately 300 to 350000 short tons.
In January this year, we initiated a series of projects jointly with our partner Mcduffie to address the root causes of these recurring issues.
In addition, we've committed both personnel and other resources towards these projects.
We've already seen significant progress with these joint efforts and we expect the performance of mcduffie to improve over the coming quarters, while recognizing that some other projects such as the replacement of major operational equipment will take longer to fully address.
In addition to providing support to our terminal partner. We're also diverting some of our calls to alternative local terminals to maintain our sales volumes with a minimal increase in cost.
From a market perspective, the fourth quarter played out in line with our forecast with the obvious exception being China decision to abandon its zero Covid policy.
As a result of China's reopening we saw several transactions between Chinese customers in U S suppliers.
With loadings in the fourth.
The fourth quarter of 2022, and the early part of 2023.
Brian has also announced several measures to stimulate its critically important property sector, which should directly benefit the local steel industry.
Despite these tailwind improvement in China's economic activity have been slow to come.
In the Atlantic Basin still production remained subdued due to a combination of low demand high energy prices and inflation.
One estimate has a total capacity reduction close to 26 million metric tons per year.
During the fourth quarter, we also saw capacity reductions and other Asian countries.
No I'm announcing the idling of several of its blast furnaces.
The good news is it still pricing in most geographies seems to have found support late in the quarter are.
Several attempts to pass on price increases we're successful.
These price increases, albeit modest are welcomed by our customers, whose margins have been stressed by the current environment.
From a supply standpoint, there were challenges without logistics labor and production that remain a common theme across the world's three largest supply regions.
With November 2022 year to date exports trailing the previous year's volume by 5% the largest export or Australia is on track to deliver a third year in a row of negative year over year growth.
Exports from both the U S and Canada should end the year with single digit growth in export volumes versus 2021.
Yeah.
The lack of a positive supply response during the best met coal pricing you're ever is by itself remarkable.
We expect some of the issues affecting supply such as the European ban on Russian cold weather and Port disruptions high inflation and poor rail transportation performance to ease in 2023.
We do expect the lack of sector investment over the last several years with an improving global demand outlook beyond 2023 to continue to constrained supply and drive pricing above all benchmarks for long term pricing.
The World Steel Association recently reported that global pig iron production decreased by three 8% in 2022.
China recorded a decrease in production.
8% for the period, while the rest of the world's pig iron production decreased by nine 4%.
The decreases were primarily driven by the Russia, Ukraine warm weak economic conditions in Europe , and lower production from China.
This lower production continued to be impacted by strict COVID-19 policies and depressed park property markets.
India was the only country with a year over year increase of two 9%.
Our European customers had an especially challenging quarter dealing with compressed margins due to elevated energy and raw material costs and most steel pricing due to soft demand.
As reported by industry publications, several integrated producers operated at reduced production rates and in some cases, even idled some blast furnace capacity.
From a pricing standpoint, the fourth quarter was the least volatile quarter of the year and our primary index. The P. L. D F O B Australian.
The index started the quarter at $245 per short ton averaged $253 and closed the year at $267 per short ton.
The CFO , China index with more range bound averaging $277 per short ton and closing the year at $286 per short ton.
Even with the shipment delays, we performed quite well delivering fourth quarter sales volume of $1 5 million short tons that was flat compared to the fourth quarter of 2021.
As I said on previous calls in 2022, we could have sold more volume during the quarter if not for the shipment delays.
These shipment delays pushed our coal inventory level to 855000 short tons by the end of the fourth quarter.
That's performance on the Mcguffey terminal improves we believe that we are well positioned to take advantage of customer demand and spot market opportunities to reduce the working capital tied up in our inventories.
Yeah.
Our sales by geography in the fourth quarter were 46% into Europe , 32% into South America, and 22% into Asia.
European sales continued to be strong despite the economic headwinds facing the region, including the softening of the steel production.
Production volume in the fourth quarter 2022 was $1 5 million short tons compared to $1 1 million short tons in the same quarter of 2021.
The higher tons produced in the fourth quarter for the full year resulted primarily from restarting mine four and running a full year in 2022.
We added approximately 140 people at the mines during the year compared to the prior year with the bulk of those additions at mine for.
The mines ran well and we're very efficient in the fourth quarter. Despite the normal extended downtime for the holidays.
Our safety incident rate continues to be approximately 63% lower than the industry average and reflects the training programs in place and their dedication of our employees to maintain a safe working environment.
I want to say a special thank you to all of our employees for your hard work and dedication.
Over the past year, the mines have trended higher in clean tons produced per man hour work, you're well capitalized mining operations revised work schedules and a more productive hourly workforce.
This increase in productivity has helped to offset some of the inflation we had been experiencing.
These statistics represent another strong quarter for employee productivity and safety compared to historical periods.
We appreciate the significant efforts by our employees to drive higher production levels, while continuing to maintain a safe working environment.
During the fourth quarter, we spent a record high $98 million on Capex in mine development.
Capex spending was $85 million, which included $27 million on the Blue Creek project mine development spending was $13 million during the fourth quarter.
We expect development of mindful of them will be completed by the second half of this year.
We made good progress in 2022 on the development of Blue Creek, which represents a transformational growth opportunity for warrior.
More specifically, we continue developing the site construct in the slope service shaft and ventilation shafts.
We invested approximately $47 million in Blue Creek in 2022.
As we continue to move through the preliminary stages of development on schedule.
Its activity at Blue Creek, and the spending required for that activity will increase substantially over the next two years.
As I will discuss in a few minutes, we remain extremely excited about the potential to create significant stockholder value through this project.
We expect to continue to balance our growth investing in Blue Creek with returning excess cash to stockholders, allowing them to benefit from our strong free cash flow generation in the near term and over the long term.
I will speak to more to capital allocation in a moment.
For most of 2022, we met or exceeded our targets as outlined in our previous guidance.
Except for sales volumes that were lower than our expectations due to the previously discussed shipment delays.
Despite the lower sales volume, we delivered strong financial results in the fourth quarter that marked the conclusion of an exceedingly strong financial year for warrior.
We've posted record operating cash flow free cash flow and adjusted EBITDA.
This was more than double our 2021, adjusted EBITDA of nearly $1 billion.
I will now lets be able to address our fourth quarter results in greater detail.
Thanks, Paul.
For the fourth quarter of 2022, the company recorded net income on a GAAP basis of $100 million or $1 93 per diluted share.
<unk> to net income of $138 million or $2.68 per diluted share in the same quarter of 2021.
non-GAAP adjusted net income for the fourth quarter, excluding the nonrecurring business interruption expenses.
Mining expenses and other non cash adjustments.
It was $1.90 per diluted share compared to an adjusted net income of $3.17 per diluted share in the same quarter of 2021.
These decreases quarter over quarter were primarily driven by lower average net selling prices and higher operating cost.
We reported adjusted EBITDA of $148 million in the fourth quarter of 2022 compared to $240 million in the same quarter of 2021.
The quarterly decrease was primarily driven by a 17% decrease in average net selling prices hold flat sales volume plus higher available transportation and royalty cost and the impact of inflation labor materials and major equipment rebuilds.
Our adjusted EBITDA margin was 43% in the fourth quarter of 2022 compared to 58% in the same quarter of 2021.
Total revenues were $345 million in the fourth quarter compared to $416 million in the fourth quarter of 2021.
17% decrease was primarily due to the 17% decrease in average net selling prices.
Other revenues were slightly lower in the fourth quarter of 2022, primarily due to the prior year, including a mark to market gain of $7 million on our gas hedges offset partially by an increase in revenues due to higher natural gas prices.
The Platts premium low vol. Fob Australian index price on average was $82 per short ton lower in the fourth quarter of 2022 compared to the same quarter of 2021.
The index price to average $253 per short ton for the fourth quarter.
Mortgage and other charges reduced our gross price realization to an average net selling price of $227 per short ton in the fourth quarter of 2022 compared to $274 per short ton and the.
The same quarter of 2021.
The marriage and other charges were $4 million higher this fourth quarter versus the fourth quarter of 2021 as a result of the shipment delays.
We continue to see inflation and long lead times impacting our business for an indefinite period of time.
In addition to the higher cost the lead times on supplies and equipment purchases continue to be in the range of 18 to 24 months.
Despite partial mitigation of these issues with our improved productivity at the mines, we are experiencing significant increases in cost of operating supplies and materials repairs and major equipment rebuilds.
Price increases led to a $5 per short ton negative impact on our fourth quarter results.
Cash cost of sales were $179 million or 54% up mining revenues in the fourth quarter compared to $153 million, a 39% of mining revenues in the fourth quarter of 2021.
The increase of $26 million was primarily due to higher variable cost associated with price sensitive wages transportation and royalty cost plus the impact of inflation.
Favorable transportation and royalty costs were higher primarily due to the delayed impact of tons being produced in earlier quarters when met coal prices were higher.
And recognized in cost of sales on a FIFO inventory basis in the fourth quarter.
This delayed recognition, we revert back to normal as we bring down our coal inventory levels.
Inflation accounted for $7 million of the higher costs were $5 per short ton, resulting from higher costs for labor and materials of major equipment rebuilds as previously noted.
Cash cost of sales per short ton F. N B port was approximately $123 in the fourth quarter compared to $106 in the fourth quarter of 2021.
Higher variable wages transportation and royalty cost were the primary drivers as previously noted plus the $5 per short ton impact of inflation.
Despite the higher variable cost inflation cash margins $104 per short ton in the fourth quarter.
SG&A expenses were about $12 million or three 4% of total revenues in the fourth quarter of 2022 and were higher than the fourth quarter of 2021.
Primarily due to an increase in stock compensation expense of $2 million in charitable donations of $1 million.
The interest income earned on our cash investments exceeded the interest expense on our outstanding notes and equipment leases during the fourth quarter of 2022.
Primarily due to our high cash balances.
Our fourth quarter noncash tax expense, primarily reflects the utilization of our federal net operating losses or Nols.
I'll set partially by the tax benefits for depletion.
During 2022, we utilized a significant amount of our federal Nols and have approximately $122 million remaining.
Plus $23 million and tax credit carryforwards.
We expect to continue to utilize our federal Nols and tax credit carryforwards and believe we may become a cash taxpayer late in 2023.
Or 2024.
Based upon our long term forecast in met coal prices and sales volumes and performance.
During the fourth quarter, we incurred incremental nonrecurring business interruption expenses of $3 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.
I don't mind expenses were $2 million in the fourth quarter and represent expenses incurred with the operations at both mines.
Running at reduced capacities, such as electricity insurance maintenance labor and taxes. These expenses decreased quarter over quarter, primarily due to the restart of mine for operations during 2022 versus the prior year comparable quarter when it was fully idle.
Turning to cash flow.
During the fourth quarter of 2022, we generated $97 million of free cash flow, which resulted from cash flows provided by operating activities of $195 million less cash used for capital expenditures and mining development cost of $98 million.
This resulted in free cash flow conversion of 65% this quarter versus 63% in the fourth quarter of 2021.
Free cash flow in the fourth quarter of 2022 was positively impacted by a $47 million decrease in net working capital from the third quarter of 2022.
The decrease in net working capital was primarily due to a decrease in accounts receivable due to lower average net selling prices, partially offset by higher inventories and lower accounts payable.
Our total available liquidity at the end of the fourth quarter was a record $953 million representing.
An increase of $84 million or 10% over the third quarter.
Consisted of cash and cash equivalents of $830 million.
$23 million available under our ABL facility.
From a capital allocation standpoint, the company continues to be committed to returning excess cash to stockholders to increase stockholder value, while driving long term growth with the investment in his blue World Class Blue Creek reserves.
We demonstrated that commitment in 2022 by increasing our fixed quarterly dividend by 20% and paying two different special cash dividends, which together totaled $1 30 per share.
A strong macroeconomic environment that pushed prices to levels never seen before in the sector enabled us to provide the stockholder returns on top of Relaunching, a significant value creation opportunity and Blue Creek.
In addition, and more recently.
The company announced further returns to stockholders with a dish with another increase and its fixed quarterly dividend of 17% and another special dividend of 88 cents per share to be paid in early March.
In summary, despite the multiple issues and rail transportation and operational issues at the Mcduffie terminal throughout 2022 that led to lower shipment volumes, we delivered record breaking financial results.
Are those all time records were revenues of over $1 $7 billion.
<unk> net income of $666 million or $12.88 per diluted share.
Adjusted EBITDA of nearly $1 billion cash flows from operations of $842 million.
Free cash flow of $588 million and total liquidity of $953 million.
In addition, we relaunched our gross investment.
Blue Creek reserves in 2022, which we expect to create significant stockholder value.
Now turning to our outlook and guidance for 2023, we believe we are well positioned to achieve our targets outlined in the outlook section of our earnings release.
Achievement of these targets will be driven in part by the continuous improvements in performance at the Mcduffie terminal any rail transportation to allow us to draw down our coal inventory in 2023 as we currently expect.
We expect capital spending for the year to be an all time record high as we continue the development of Blue Creek complete the four newest portal and make final payments on the two sets of longwall shields.
Future capital returns beyond those recently announced from excess cash flows will be at the discretion of the board of directors and subject to consideration of several factors.
New business and market conditions future financial performance and other strategic investment opportunities.
I'll now turn it back to Walt for his final comments.
Thanks, Dale before we move onto Q&A I would like to make some final comments on our outlook for 2023.
Overall, we are cautiously optimistic entering this year.
Some of the factors that impacted global steel and nickel demand last year will begin to subside and revert back to past norms. While other factors may continue to linger longer than expected.
The daily news headlines continue to proclaim the expectations are becoming global economic slowdown in 2023.
We believe the Atlantic base and customers will operate at reduced capacity levels in the first quarter.
Spending some improvements in local steel demand.
Also we expect the steel price increases initiated towards the end of 2022 to establish a floor and more importantly provide positive improvements for our customers margins.
In early January membership or a change in Chinese policy towards the import of Australian coals became true.
This change is unfolding now and additional details may change our view buffer.
But for now we do not see the reopening is materially disruptive we believe changes in trade flows will occur overtime as markets become more efficient.
The recent changes in Chinese policies are encouraging with the government unveiling a comprehensive plan to support the property markets in guidelines for gradual reversal, others strict zero COVID-19 policies.
These measures combined with all the stimulus measures should lead to some recovery in Chinese steel demand in 2023.
Offsetting the challenging economics in the U S and Europe .
India has continued to demonstrate ongoing strength in steel production recently and May provide another bright spot to global weaknesses elsewhere.
We expect the year 2023 will be a significant turning point in the development of a world class Blue Creek mine that would draw of long term stock.
Stockholder value.
<unk> said earlier, we started the construction of the slope service shaft ventilation shafts in 2022 and that work will continue in 2023.
More importantly in 2023, we will begin broke ground breaking for the larger infrastructure components, such as the new coal preparation plant.
Household mine offices overland belt, conveyor and barge load out.
We're very excited to see the progress that will come this year as we expect to spend approximately $250 million on the project.
We are extremely excited about this organic growth project, which will transform warrior and allow us to build upon our proven track record of creating value for our stockholders.
As we've previously indicated we expect the first development tons from continuous monitoring units in the third quarter of 2024 with a longwall scheduled to start up in the second quarter of 2026.
As I said earlier, there are expectations of a global economic slowdown in 2023, which could impact the short term overall financial results of the company if those expectations play out as forecasted.
However, since we have over $800 million of cash on hand, and nearly $1 billion in total liquidity. We expect to continue the development of Blue Creek at a rapid pace. Despite the overall macroeconomic environment in 2023.
With that we'd like to open the call for questions operator.
At this time I would like to remind everyone to ask a question. Please press Star then the number one from your telephone.
And to withdraw your question. Please press Star then two.
We will pause for just a moment to compile the Q&A roster.
And our first question here will come from Lucas pipes with B Riley Securities. Please go ahead.
Thank you very much operator, and good afternoon, everyone.
My My first question is on on the cost guidance for 2023, and I wondered if you could add a little bit more color as to.
Kind of the key drivers here to what extent is the first half of this year materially higher than the first half last year right.
<unk> really taking off over the course of last year is that static component and then.
Related to this obviously there are still some terminal issues.
Down in mobile.
If those issues are.
Resolved here in the short term could there be.
And greater fixed cost absorption on the sell side. So so so interested in the interplay there with the awesome volumes. Thank you for your perspective.
Yeah. Thanks, Lucas this is Dale.
Yeah. The cost guidance includes some incremental inflation this year on top of what we experienced last year.
And as I noted for the full year, we experienced about an additional $4 a ton of inflation. So are.
We built in a somewhat of a similar amount into 2023.
Because we're not seeing any changes in that right now at this point and we said in our prepared remarks.
Also the lead times on supplies and equipment.
<unk> continued to be quite long.
And so the security of some of those supplies are is costing a little more.
So we tried to protect ourselves with that but that is one of the key drivers.
And as I also said in my remarks, because we built up from these inventories that were produced.
Earlier in the year.
Those were at higher met coal prices, so our transportation rates.
Reset, but they havent reset to the lowest prices in the fourth quarter. So you have some lag effects still rolling over for a quarter and tool that as inventories get down. So that's part of it we can get some good leverage as we move forward depending upon.
You know how the operations at the Port in Peru.
Thank you.
That support our expectation is that they will.
Their performance will improve relatively quickly it won't get back up to what we consider to be optimal levels for a while I don't think our I think they have some.
Some big projects they have to work on but I think they'll get back to a reasonable operating level and that shouldnt.
We should see decreasing inventory level, that's our expectation.
And that should not have any impact on our cost.
Yes.
That's helpful. Thank you and.
It's kind of stay on the on the sports side can you one.
Elaborate a little bit more on what what what exactly happened and then.
Two.
In terms of the sales cadence throughout the year.
Hum.
I appreciate it's early but could you maybe walk us through maybe what.
What's reasonable for Q1 volume sales volume wise Q2, obviously back half of the year, it's pretty far out and to the extent any longwall moves to have an impact on on this cadence as well I would appreciate that additional color. Thank you.
Okay, Oh on the ports.
It really is just a myriad of a small maintenance issues that are plugging them belt splicing.
You know the the chute works at Ah transfer points on their belt lines now they had the weather issues and this all kind of in my opinion is this all kind of really started back when when they had to completely rebuild the the two car dump last summer I think that just started kind of.
A little bit of a cascading all of our problems at the port as they completed that project and we're very focused on that I think some other things just kind of slipped past.
And now Oh, there's a bit of attention that needs a pay to that and that that project replacement of the AR.
Of that two car dumped was a pretty capital intensive and you know they they have a budget as well and I think that now we're just gonna have to work our way back to what we consider to be strong performance.
Yeah.
What was the cadence a little because.
I think we tried to build in to our guidance. There for sales volume are taking down some of these inventories versus what we're going to produce this year.
And if you kind of take the midpoint and evenly put that over the quarters.
You're probably looking at an average of about 1.71 0.75 per quarter.
So we don't want to get too far ahead of ourselves and say look we're up we're gonna would cover all of this in the first quarter week.
As we said all last year, we thought we're going to get there every quarter and we just didn't get there so.
While were seeing improvement in things down there.
You know, we don't want to commit to anything higher than that at this point.
Understood Alright, well I have more questions I'll turn it over for now, but thank you and continued best of luck.
Thanks Lucas.
Again, if you have a question. Please press Star then wanted to join the queue.
Our next question will come from Nathan Martin from the Benchmark Company. Please go ahead.
Yeah. Thank you good afternoon, guys. Congrats on the record year, even despite some of the logistical challenges.
Maybe just sticking with full year shipment guidance for a second up around 1 million tons below and.
Yeah, obviously, hopefully going to sell some of those inventory out and some of that inventory based on the delta between production and sales guidance as well, but maybe can you walk us through kind of how you see the increase which I think on the sales side again over a million tons or on the production side, all looks over 300000 tons or so at the midpoint. How are how is how are you getting to those.
Thanks.
Well I think first of all you have to look at our production. The production is going to be pretty good for this year 6.3 to $6 nine in that range and.
Yeah. We just finished this year strong production year of $6 three.
Sorry.
<unk>.
Yeah. It was a $6 three I'm, sorry, 8 million tons. So that's the low end of our guidance. So if we do nothing different.
In 'twenty three we should be at that low end.
And the fact that we're trying to hire more people will get more.
Boots on the ground to increase production that can get us to that upper end of that range.
Yeah that actually leads me.
So barring a daughter.
On the inventory like you were saying should get us to those sales guidance numbers well when we look at the inventory levels as we exited last year of 880000 tons. Our expectation is the right level of inventory is sub 500000 pounds somewhere between $3 50, and 500000 pounds is probably on.
The optimal inventory levels you can see we have at least 380000 tons of excess inventory that we expect to us to work off.
That's very helpful guys, and then I wanted to touch on the labor situation I think.
So in your prepared remarks, you added about 140 <unk> mine workers in 'twenty two Dale it sounds like Youre still looking to grow that number just to kind of confirm that and then just any updates on the efforts there given the tight market.
Yeah, we we continue to do we continue to hire people on a monthly basis and train them and get.
Get them to work now naturally a lot of these people that we're hiring right now are inexperienced. So it takes time for them to get up to speed and be able to do some of the jobs like running equipment, but.
But we'll continue to hire.
Oh.
There's a lot of opportunity if we can continue to get our.
Folks in at the rate, we were able to hire last year and we will continue to hire at that rate as far as the labor situation with the U M. W. A we continue to negotiate in good faith.
But so it hasn't been an awful lot of headway made.
Got it appreciate it I appreciate that Oh, Walt I mean, you're kind of going back maybe real quickly to the full year cost guidance I appreciate the earlier comments.
Additionally, just curious what met prices are you guys assuming in that range.
We're just a little over 200 for the year.
Okay, and does that kind of get you to that midpoint of that that cost per ton range. Dale I think that's a little bit wider than you guys usually give to that one O nine two.
The 125 range.
That's correct yeah the midpoint.
Okay perfect.
I just want to make sure I heard this correctly too looking at the breakdown of growth Capex for the year of the the 325 to $3 45, I think you guys said in the prepared remarks $250 million of that was Blue Creek, but maybe just to make sure can you break out Blue Creek versus spending on the longwall shields in our four north portal.
That's correct about $250 million of Blue Creek for the year.
Okay, and then just your balance mainly on those two other items yeah. The shields are roughly 55.
52% to 55, and then the rest of it is finishing out for north portal.
Perfect all right I'll leave it there very helpful guys I appreciate the time and best of luck in 'twenty three.
Thank you. Thank you.
Our next question will come from David Gagliano with BMO capital markets. Please go ahead.
Hi, Thanks for taking my questions a lot of them have already been asked I. Just wanted a quick follow up on the on the last question on the other discretionary spending obviously longwall shields and tissue for north portal as.
Is he going to 'twenty four is there any any.
Meaningful incremental other discretionary spending aside from obviously, the Blue Creek, which has already been laid out.
There should be a very small amount we were putting a bulker in at the foremost portal and that bulk are set to come online in the first quarter of 'twenty four so there'll be a little maybe $5 million or so.
On that project and I.
I can't say, we won't find other projects, we want to do.
But right now that would be the only one that I'm aware of that would be.
Categorized as discretionary.
Okay. Okay. That's helpful. Thanks, and then just switching gears a little bit.
We've seen some restarts obviously in Europe in terms of the blast furnaces and I was just wondering if you could comment a little bit on the high end. There was some commentary in the prepared remarks, I was going to be kind of a little bit further on.
Any recent change.
Obviously your volumes are committed but just curious about the you know the customer activity in recent weeks.
What we've seen is very strong customer demand, we've seen our customers.
Customers that ask for additional tons.
Additional vessels here and there are a few additional vessels. So we're seeing very robust demand out of our IPO.
Our traditional customer base.
Okay, Alright thats helpful. Thanks.
Thank you.
If you have a question you May press Star then one to join the queue.
Our next question is a follow up from Lucas pipes of B Riley Securities. Please go ahead.
Thank you very much for taking my follow up question. The first one is also market related question.
But the pricing pulled a while ahead of Atlantic prices first I believe that is.
Ultimately.
And if hitting you because you stop selling under the Aussie price. So so you're benefiting from from some from that strength.
You could just comment on that and then related.
What do you think it's driving.
Those spreads and any views on.
How sustainable they are at these levels. Thank you very much.
I just don't think there's been a lot of the additional supply come online I think that's driving it more than anything else and I think you know when you look at and I think I mentioned it in my comments that if you look at last year was the you know one of the best is the best market for met coal ever and from a supply standpoint, there was very little if any incremental supply come.
Online there's reports of some additional problems a few of the Australian operations.
Going into this year I think when you look at the growth model for whats expected in India.
And again I think the other thing that's allowing the market to stay firm right now or some of the price increases our customers were able to get.
For steel are towards the end of the year last year.
And is.
It's the strength in the Australian price holding more of your cargoes into the Asian market already.
Oh.
No that's it.
Pretty traditional number in the low 20% range somewhere there. We may we may have a quarter here or there where we find a few spot vessels.
Some spot vessels out so we may have a quarter or two where that'll be impacted but I think overall it'll be.
Pretty traditional for us in terms of our 22022% into Asia, a 50% or so into it.
Europe and the remainder in South America.
That's that's helpful. Thank you and then.
Turning to Blue Creek for a moment.
Could you comment on.
The nature of the.
Contract with the.
General contractor or a key contractor or their pass through provisions for some of these inflationary pressures that we're seeing.
For example, raw materials price protected for you any any views on that and then in terms of the debt.
Project development labor generally still be tight across across the economy.
Any view on potential impacts there I know, it's early but curious to hear your thoughts. Thank you.
Uh huh.
So on the contract side a lot of the key large contracts as we noted in our prepared remarks will be entered into this year and started Lucas.
Still you know speculation on what those prices are.
Some may have provisions for passengers others won't.
Because you know, we're basically digging holes in the ground this past year and now this year. We're in we're in the negotiations for the prep plants, the overland conveyor belt, the barge load out all the big chunks of capital.
So we'll have a better update on total capex expand later this year hopefully once we get into those and get this project contracts signed those particular ones.
Because of the various.
Contractors doing different parts so.
So that we can accelerate and get this project done as soon as possible.
The labor situation for our contractors seems to be pretty manageable.
We haven't had any delays based on labor shortages as we look at the mall and from our standpoint, and we begin running continuous miner units there probably in the third quarter of next year, we'll be we'll be growing that that workforce.
Kind of in fits and starts but there will probably be each quarter, but it'll probably be you know 30 or 40 people at least that are added to that workforce I think we'll be able to manage that pretty well.
That's very helpful. I appreciate the additional color and again best of luck.
Thank you thanks.
Yeah.
And our next question will be a follow up from David Gagliano with BMO capital markets. Please go ahead.
Hi, I just I I I think this may have already been asked but I apologize. If it has I just had a quick question on the on the cash cost guide for 2020 three.
The price assumption embedded in the cash cost and the <unk>.
You know, it's a $10 change in the prices of about how much of a change in the AR and the cash cost.
Yeah, We we said earlier that our mid point of our cost guidance is roughly a 200 dollar.
The index price for the year and then we've also built in some additional inflation into our 'twenty three as well.
Okay, and then just the second part of that like every $10 change in that price was about how much the change in the cash cost.
You know I don't really have that handy David.
You don't kind of track it that closely.
We're looking worried the factors individually and hopefully some of this inflation would turn around a that's been a big driver this year, but.
Yeah, maybe we can get that to slow down.
Okay. Thanks.
Thank you.
At this time there are no further questions I will now turn the call back over to Mr. Schiller for any comments.
That concludes our call. This afternoon and thank you again for joining us today and we appreciate your interest in warrior met coal.
Thank you and that concludes today's conference. Thank you all for participating you may now disconnect your lines.