Q4 2023 Warrior Met Coal Inc Earnings Call

Good afternoon, and welcome to the Warrior fourth quarter and full year 2023 financial results Conference call.

Operator: Good afternoon, and welcome to the Warrior fourth quarter and full year 2023 financial results conference call. All lines have been placed on mute to prevent any background noise.

Speaker Change: All lines have been placed on mute to prevent any background noise.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, press star then 1 on your telephone keypad. If you would like to withdraw your question, press star then 2. This call is being recorded and will be available for replay on the company's website. Before we begin, 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. 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 in the Investors section of the company's website at www.warriormetcoal.com. In addition to the earnings release, the company has posted a brief supplemental slide presentation to the Investors section of its website at www.warriormetcoal.com. I am here today to discuss... The company's results are Mr. Walt Scheller, Chief Executive Officer, and Mr. Dale Boyles, Chief Financial Officer. I would now like to turn the conference over to Mr. Scheller. Please go ahead.

Speaker Change: After the Speakers' remarks, there will be a question and answer session.

Speaker Change: If you'd like to ask a question press Star then one on your telephone keypad.

Speaker Change: If you'd like to withdraw your question Press Star then two.

Speaker Change: This call is being recorded and will be available for replay on the company's website.

Before we begin 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.

Speaker Change: 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 at Www Dot warrior met coal Dot com.

Speaker Change: In addition to the earnings press release, the company has posted a brief supplemental slide presentation to the investors section of its website at Www Dot warrior met coal Dot com.

Speaker Change: Here today to discuss.

Speaker Change: The company's results are Mr. Walt Sheller, Chief Executive Officer, and Mr. Dale Boyles, Chief Financial Officer.

Walter J. Scheller III: I would now like to turn the conference over to Mr. Sheller. Please go ahead. Thanks, operator, Hello, everyone and thank you for taking the time to Jordan's today to discuss our fourth quarter and full year 2023 result.

Walter J. Scheller III: Thanks, Operator. Hello, everyone, and thank you for taking the time to join us today to discuss our fourth quarter and full year 2023 results. After my remarks, Dale will review our results in additional detail, then you will have the opportunity to ask questions. Our fourth quarter results reflect the culmination of a highly productive year for Warrior, where we made meaningful progress on our strategic priorities to build significant, sustainable stockholder value, and we were very pleased to end the year on a strong note. We met or exceeded both sales and production volume targets for the year, recording a 34% increase in sales volumes and a 21% increase in production volumes. These are run rates not seen since 2020. We also achieved record annual production at Mine 4 of 2.5 million short tons. Our cash generation from operating activities was exceptionally strong, allowing us to fund a record amount of capital expenditures and mine development. We further strengthened our balance sheet with the early retirement of debt.

Dale W. Boyles: After my remarks, Dale will review our results and additional detail then you will have the opportunity to ask questions.

Sheller: Our fourth quarter results reflect the culmination of a highly productive year for warrior, where we've made meaningful progress on our strategic priorities to build significant sustainable stockholder value and we were very pleased to end the year on a strong note.

Dale W. Boyles: We met or exceeded both sales and production volume targets for the year recording a 34% increase in sales volumes and a 21% increase in production volumes.

Dale W. Boyles: So you can run rates not seen since 2020.

Dale W. Boyles: We also achieved record high annual production in mind for a $2 5 million short tons.

Dale W. Boyles: Our cash generation from operating activities was exceptionally strong, allowing us to ponder record high amounts of capital expenditures and mine development.

Dale W. Boyles: We further strengthened our balance sheet with the early retirement of debt.

Dale W. Boyles: As a quick aside there is one fourth quarter metric total sales volume that could have been better by 129000 short tons at our last two customers vessels made it to the terminal on time that schedule.

Walter J. Scheller III: As a quick aside, there is one fourth-quarter metric, total sales volume, that could have been better by 129,000 short tons had our last two customers' vessels made it to the terminal on time as scheduled. These contracted shipment delays lowered our adjusted EBITDA by approximately $23 million for the fourth quarter. We know that some investors put a significant amount of emphasis on the MSHP production data equalizing sales volumes, which can lead to expectation differences. So it's important to understand the impact of timing differences here and our strategic focus. Our approach to spot volumes is working quite well.

Dale W. Boyles: These contracted shipment delays lowered our adjusted EBITDA by approximately $23 million for the fourth quarter.

Dale W. Boyles: We know the sun versus investors put a significant amount of emphasis on the MTO production data equally sales volumes, which can lead to expectation differences.

Dale W. Boyles: So it's important to understand the impact of timing differences here and our strategic focus.

Dale W. Boyles: Yeah.

Our purchased spot volumes is working quite well.

Dale W. Boyles: As we indicated on our third quarter earnings call, we took a more strategic approach to selling spot volumes in the fourth quarter.

Walter J. Scheller III: As we indicated on our third quarter earnings call, we took a more strategic approach to selling spot volumes in the fourth quarter. Our goal was to leverage our high-quality brands, maximize our cash margins, and build inventories for optimal logistical operations as we prepare for 2024. As a result, we increased our margin per short time by 63% from $70 in the third quarter to $114 in the fourth quarter.

Dale W. Boyles: Our goal is to leverage our high quality brands maximizing our cash margins and build inventories or optimal logistical operations as we prepared for 2024.

Dale W. Boyles: As a result, we increased our margin per short ton by 63% from $70 in the third quarter to $114 in the fourth quarter.

Walter J. Scheller III: In addition, we anticipate that this strategic approach of leveraging our high-quality steelmaking coal to maximize our cast margins will benefit us in 2024 as we expect our spot volume to be lower with higher contracted volume. I'll share more about our 2024 outlook in a little later. First, let's discuss the steel and steelmaking coal markets during the fourth quarter. As expected, steel output from China continued to slow down during the quarter, but net exports from the country remained higher than usual. Additional volumes from China found their way into different geographies, impacting the domestic markets of some customers and putting pressure on steel prices. Demand from India was strong, and customers in India continued to indicate an interest in developing relationships with U.S.-based producers like Warrior.

Dale W. Boyles: In addition, we anticipate that this strategic approach with leveraging our high quality steelmaking coal to maximizing our cash margins will benefit us in 2024, as we expect our spot volume to be lower with higher contracted volumes.

Dale W. Boyles: I'll share more about our 2024 outlook in a little later.

Dale W. Boyles: First let's discuss the steel and steel, making coal markets during the fourth quarter.

Dale W. Boyles: As expected steel output from China continued to slow down during the quarter.

Dale W. Boyles: But net exports from the country remained higher than usual.

The additional volumes from China found their way into different geographies impacting the domestic markets of some customers and putting pressure on steel prices.

Dale W. Boyles: Demand from India was strong and customers in India continued to indicate an interest in developing relationships with U S based producers like warrior.

Dale W. Boyles: Yeah.

Dale W. Boyles: Although over all demand was stable from our contracted customers. We continued to see very little spot activity in our traditional markets compared to India, China and Southeast Asia.

Walter J. Scheller III: Although overall demand was stable from our contracted customers, we continued to see very little spot activity in our traditional markets compared to India, China, and Southeast Asia, where spot demand remained more active. We also experienced higher-than-normal freight rates for our deliveries into the Pacific Basin due to a combination of market, logistical, and geopolitical factors. The availability of premium steelmaking coals, like our Mine 7 low-ball product, remained tight during the quarter compared to the availability of second-tier steelmaking coals, like our Mine 4 high-ball aid product. This was evidenced by the price relativity between both qualities, which remained lower compared to previous years.

Dale W. Boyles: We're spot demand remains more active we.

Dale W. Boyles: We also experienced higher than normal freight rates for our deliveries into the Pacific basin due to a combination of market logistical and geopolitical factors.

Dale W. Boyles: The availability premium steelmaking coal's like our mine seven low vol product remain tight during the quarter compared to the availability of a second tier steelmaking coal's like are more in line for high vol. A product.

Dale W. Boyles: This is evidenced by the price relativity between both qualities, which remained lower compared to previous years.

Walter J. Scheller III: For example, in 2022, second-tier steelmaking coals traded at price relativities in the low to mid-90s, whereas in 2020-2023, price relativities were closer to the mid-80s. Russians still making coal exports into China and India have remained at historic highs and showed no signs of slowing down. Likewise, imported coal from Mongolia into China remains strong, having secured its spot as the largest source of imported coal for the country

Dale W. Boyles: For example, in 2022 second tier steelmaking coal's traded a price relativity in the low to mid nineties.

Dale W. Boyles: Whereas to 'twenty 2023 price relativity, we're closer to the mid eighties.

Dale W. Boyles: So I can still making coal exports into China, and India have remained at historic highs and shows no signs of slowing down.

Dale W. Boyles: Likewise imported coal from Mongolia into China remains strong having secured its spot as the largest source of new protocols to the country.

Dale W. Boyles: U S steel, making coal exports into the Pacific Basin continues to increase as more suppliers targeted growth markets of India, and South East Asia.

Walter J. Scheller III: U.S. steelmaking coal exports in the Pacific Basin continue to increase as more suppliers target the growth markets of India and Southeast Asia. We expect that 2023 will be a record year for U.S. exports into India, as well as for exports into Indonesia, Malaysia, and Vietnam. Although U.S. exports into China are lower than highs observed in 2021 during the ban on Australian coal imports, they remain strong compared to historical averages. The major indices were fairly stable throughout the fourth quarter, with the exception of some upward volatility in October.

Dale W. Boyles: We expect the 2023 will be a record year for U S exports into India as well as for exports into Indonesia, Malaysia and Vietnam.

Dale W. Boyles: Although U S exports into China are lower than highest observed in 2021, when the ban of Australian coal imports there remains strong compared to historical averages.

Dale W. Boyles: The major indices were fairly stable throughout the fourth quarter with the exception of some upward volatility in October.

Dale W. Boyles: Our primary index the P. L D F O B, Australia ended the fourth quarter at $294 per short ton, which was $8 lower than its October 1st value.

Walter J. Scheller III: Our primary index, the PLV FOB Australia, ended the fourth quarter at $294 per short ton, which was $8 lower than its October 1st value. In sharp contrast, the PLV CFR China increased by $47 per short ton during the same period, closing the fourth quarter at a price of $301 per short ton. It's worthwhile pointing out that the East Coast High Vol A price averaged $250.5 per short term during the fourth quarter, which is one of the primary indices used to price our mine for High Vol A products. According to the World Steel Association Monthly Report, global pig iron production increased by approximately one-half of one percent for the full year of 2023 as compared to the prior year. The positive growth was mainly driven by higher Chinese steel production, which grew by 0.1% in 2023. India's steel production, although lower in absolute terms compared to China, continued to grow at impressive rates, increasing by 7.3% for the same period.

Dale W. Boyles: In sharp contrast, the P. L D C F. Our China increased by $47 per short ton during the same period.

Dale W. Boyles: In the fourth quarter at a price of $301 per short ton.

Dale W. Boyles: It's worthwhile pointing out that the east coast High Vol. A price averaged $255 per short ton during the fourth quarter, which is one of the primary indices used to price our mind for I have all eight product.

Dale W. Boyles: According to the World Steel Association monthly report global Pig Iron production increased by approximately one half of 1% for the full year of 2023 as compared to the prior year.

Dale W. Boyles: The positive growth was mainly driven by higher Chinese steel production.

Dale W. Boyles: Which grew by four 1% in 2023.

India's steel production, although lower in absolute terms compared to China continued to grow at impressive rates, increasing by seven 3% for the same period.

Most of the other large still producing regions of the world experienced production declines compared to 2022.

Walter J. Scheller III: Most other large steel-producing regions of the world experienced production declines compared to 2022. Now turning back to our results, our fourth-quarter sales volume of 1.5 million short tons was 6% higher than the comparable quarter last year. The increase was primarily driven by additional production volumes due to the end of the labor strike, the improved performance by our transportation partners, and the McDuffie Terminal, which enabled us to export more product last year. Our simplified geography in the fourth quarter breaks down as follows: 56% into Europe, 16% into South America, 25% into Asia, and 3% into the U.S. market.

Dale W. Boyles: Now turning back to our results our fourth quarter sales volume of $1 5 million short tons were 6% higher than the comparable quarter last year.

Dale W. Boyles: The increase was primarily driven by the additional production volumes due to the end of the labor strike the improved performance by our transportation partners and the Mcduffie terminal, which enabled us to export more product last year.

Dale W. Boyles: Our sales by geography in the fourth quarter breaks down as follows 56% into Europe, 16% into South America, 25% into Asia, and 3% into the U S markets.

Walter J. Scheller III: As previously noted, demand from the Asian spot market has been growing this year, resulting in full-year Asian sales up 9% year over year to 29% of total sales, while European sales are down 12% year over year to 48% of total sales, primarily due to weak spot markets. Our spot volume was 38% in the fourth quarter, which is much lower than the 44% in our third quarter as we took a more strategic approach to selling our premium products into the spot markets to maximize margin. As we've previously indicated, our spot volume was higher in 2023, primarily due to the incremental volume resulting from the end of the labor strike earlier last year, and to a lesser extent, the change in mine force quality from the mid-vol to With these dynamics in mind, it's important to understand pricing in the Pacific markets and how it differs from our traditional spot markets depending on market conditions. Typically, the Pacific markets are priced based on a CFR basis rather than the PLB, FOB, Australia basis, which is more common in our traditional markets.

As we've previously noted demands from the Asian spot market has been growing this year, resulting in full year agent sales up 9% year over year to 29% of total sales.

Dale W. Boyles: While European sales were down 12% year over year to 48% of total sales primarily due to weak spot markets.

Dale W. Boyles: Our spot volumes, 38% in the fourth quarter, which was much lower than the 44% and our third quarter as we took a more strategic approach to selling our premium products into the spot markets to maximize margins.

Dale W. Boyles: As we've previously indicated our spot volume was higher in 2023, primarily due to the incremental volume, resulting from the end of the labor strike earlier last year and to a lesser extent the change in mind fourth quality from the mid vol to high vol. A product in the second half of the year.

Dale W. Boyles: With these dynamics in mind, it's important to understand pricing in the Pacific markets and how it differs from our traditional spot markets depending on market conditions.

Dale W. Boyles: Typically the Pacific markets are priced based on a CFR basis, rather than the P. L. B F O B, Australia basis, which is more common in our traditional markets.

Walter J. Scheller III: The freight differential is borne by the supplier on a CFR basis whenever the buyer has market leverage, which was the case in the fourth quarter. Turning now to other details on our fourth-quarter performance, production volume in the fourth quarter was better than expected and totaled nearly 2 million short tons compared to 1.5 million short tons in the same quarter of 2022, representing a 34% increase. This was the highest quarterly production output since the first quarter of 2021 and contributed to a record-setting year for Mine 4. Both mines operated at higher capacity levels in this quarter and for the year as a result of the additional employees returning from the labor strike, increasing production volumes 21% year over year. Our headcount was 36% higher at the end of this year compared to the prior year.

Dale W. Boyles: The freight differential was borne by the supplier on a CFR basis whenever the buyer has market leverage which was the case in the fourth quarter.

Dale W. Boyles: Turning now to other details of our fourth quarter performance production volume in the fourth quarter was better than expected and totaled nearly 2 million short tons compared to $1 5 million short tons in the same quarter of 2022, representing a 34% increase.

This was the highest quarterly production output since the first quarter of 2021 and contributed to a record setting year for mine four.

Dale W. Boyles: Both mines operated at higher capacity levels in this quarter and for the year to resolve the additional employees returning from the labor strike.

Dale W. Boyles: <unk> production volumes and 21% year over year.

Our head count was 36% higher at the end of this year compared to the prior year.

Walter J. Scheller III: The higher production over sales volume in the fourth quarter drove our coal inventory up to 968,000 short tons from 489,000 short tons at the end of the third quarter. We're well-positioned heading into 2024 to create incremental value from the global demand for our premium products in the current high-priced environment. During the fourth quarter, we spent $182 million on CapEx and mine development. CapEx spending was $181 million, which includes $128 million on the Blue Creek Project, which I'll discuss more in a moment. My development spending on the Blue Creek project was almost $2 million during the fourth quarter. Moving on to the development of a war quest.

Dale W. Boyles: The higher production over sales volume in the fourth quarter drove our coal inventory up at 968000 short tons from 489000 short tons at the end of the third quarter.

Dale W. Boyles: We're well positioned heading into 2024 to create incremental value from the global demand for our premium products and the current high price environment.

During the fourth quarter, we spent $182 million on Capex in mine development.

Dale W. Boyles: Capex spending was $181 million, which includes the $128 million on the Blue Creek project, which I'll discuss more in a moment.

Dale W. Boyles: Mine development spending on Blue Creek project is almost $2 million during the fourth quarter.

Moving on to the development of a world class Blue.

Walter J. Scheller III: Blue Creek Growth Project, during the fourth quarter, we continue to make excellent progress on the project, and I'm pleased to share that our work remains on schedule and within the cost estimates we outlined previously last year. During the fourth quarter, we continue to make progress on the production slope, service shaft, and ventilation shaft, which will be fully connected in the second half of 2024 to allow our continuous miners to start development. In addition, we continue to make good progress on the construction of the preparation plant, the mine belt structure, the bathhouse, the warehouse, and developing the rail and barge loadout sites during the fourth quarter. Capital expenditures for the development of Blue Creek were $128 million for the fourth quarter and $319 million for the full year.

Dale W. Boyles: Blue Creek growth project during the fourth quarter, we continued to make excellent progress on the project and I'm pleased to share that our work remains on schedule and within the cost estimates we outlined previously last year.

Dale W. Boyles: During the fourth quarter, we continued to make progress on the production flow service shaft ventilation shaft, which will be fully connected in the second half of 2024 12 hour continuous modest to start development.

Dale W. Boyles: In addition, we continued to make good progress on the construction of the preparation plant and mine belt structure, the bathhouse, the warehouse and developing our rail and barge load out sites during the fourth quarter.

Dale W. Boyles: Capital expenditures for the development of Blue Creek were $128 million for the fourth quarter and $319 million for the full year.

Dale W. Boyles: We've spent $366 million on the development of blueprint since the beginning of the project.

Dale W. Boyles: We remain on track for the first development tons Blue Creek continuous monitoring units in the third quarter 2024, and the longwall scheduled to start up in the second quarter of 2026.

Walter J. Scheller III: We've spent $366 million on the development of Blue Creek since the beginning of the project. We remain on track for the first development of tons from Blue Creek's continuous miner units in the third quarter of 2024, and the longwall scheduled to start up in the second quarter of 2026. We're extremely excited to begin the journey of producing coal from this new asset later this year. We expect approximately 200,000 short tons of production of high-voltage steelmaking coal from the continuous monitoring units in 2024.

Dale W. Boyles: We're extremely excited to begin the journey of producing coal from this new asset later this year.

Dale W. Boyles: We expect approximately 200000 short tons of production of high voltage steelmaking coal from the continuous monitoring units in 2024.

Dale W. Boyles: That's a new preparation plant will not be operational until sometime in the middle of 2025 does not anticipate selling any of those tons until 2025 due to the incremental cost to transport the tons to another preparation plant to be washed.

Dale W. Boyles: I'll ask Dan to address our fourth quarter results in greater detail.

Thanks, Paul.

Dale W. Boyles: Since the new preparation plant will not be operational until sometime in the middle of 2025, we do not anticipate selling any of those tons until 2025 due to the incremental cost to transport the tons to another preparation plant to be washed. I'll now ask Dale to address our fourth-quarter results in greater detail. Thanks, Walt.

Dan: For the fourth quarter of 2023, the company recorded net income on a GAAP basis of $129 million or $2.47 per diluted chair rep.

Dan: Representing a 29% increase over the net income of $100 million or $1.93 per diluted share in the same quarter of 2022.

Dan: non-GAAP adjusted net income for the fourth quarter, excluding the nonrecurring business interruption in other expenses was $2.49 per diluted share.

Dale W. Boyles: For the fourth quarter of 2023, the company recorded net income on a gap basis of $129 million, or $2.47 per diluted share, representing a 29% increase over the net income of $100 million, or $1.93 per diluted share, in the same quarter of 2022. Non-GAAP Adjusted Net Income for the fourth quarter, excluding the non-recurring business interruption and other expenses, was $2.49 per diluted share. This compares to adjusted net income of $1.90 per diluted share in the same quarter of 2022. These increases, quarter over quarter, were primarily driven by 6% higher sales volumes and a 3% higher average net selling price, which were all partially offset by lower results from our gas business. We reported adjusted EBITDA of $164 million in the fourth quarter of 2023 compared to $148 million in the same quarter of 2022.

Dan: This compares to adjusted net income of $1.90 per diluted share in the same quarter of 2022.

Dan: These increases quarter over quarter were primarily driven by 6% higher sales volumes and a 3% higher average net selling price.

Dan: Which were offset partially by lower results from our gas businesses.

Dan: We reported adjusted EBITDA of $164 million in the fourth quarter of 2023 compared to $148 million in the same quarter of 2022.

Dan: Our adjusted EBITDA margin was 45% in the fourth quarter of 2023 compared to 43% in the same quarter of 2022.

Dan: These increases were driven primarily by the previously mentioned higher sales volumes and higher average net selling prices.

Dan: Is that partially by the lower results from our gas businesses.

Dan: Total revenues were $364 million in the fourth quarter compared to $345 million in the fourth quarter of 2022.

Dan: This increase was primarily due to the 6% increase in sales volume plus.

Dan: Plus a 3% increase in average net selling prices.

Dale W. Boyles: Our adjusted EBITDA margin was 45% in the fourth quarter of 2023 compared to 43% in the same quarter of 2022. These increases were driven primarily by the previously mentioned higher sales volumes and higher average net selling price, all partially offset by lower results from our gas business. Total revenues were $364 million in the fourth quarter compared to $345 million in the fourth quarter of 2022. This increase was primarily due to a 6% increase in sales volume, plus a 3% increase in average net selling price, and lower demerit and other charges.

Dan: And lower demurrage and other charges.

Dan: Demurrage and other charges of $3 million lower compared to 2020 twos fourth quarter.

Dan: As you May remember the higher demurrage and other charges in the fourth quarter of 2022 were the result of temporary delays in vessel loadings due to severe weather and port congestion.

Dan: Emerging other charges reduced our average net selling price to $235 per short ton in the fourth quarter of 2023 compared to $227 per short ton in the same quarter of 2022.

Dan: Other revenues, primarily from our gas businesses were 72% lower in the fourth quarter of 2023.

Dale W. Boyles: The merge and other charges are $3 million lower compared to 2022's fourth quarter. As you may remember, the higher demurrage and other charges in the fourth quarter of 2022 were the result of temporary delays and vessel loading due to severe weather and port conditions. Merger and other charges reduced our average net selling price to $235 per short ton in the fourth quarter of 2023, compared to $227 per short ton in the same quarter of 2022. Other revenues, primarily from our gas businesses, were 72% lower in the fourth quarter of 2023, primarily due to a 55% decrease in natural gas prices between the periods. The Platts Premium Low Vol FOB Australian Index price was relatively stable for much of the fourth quarter.

Dan: Primarily due to a 55% decrease in natural gas prices between the periods.

Dan: Yeah.

Dan: The Platts premium low vol F O B Australian index price was relatively stable for much of the fourth quarter.

Dan: The index price averaged $303 per short ton for the fourth quarter.

Dan: Which on average was $50 per short ton higher compared to the same quarter of 2022.

Dan: We primarily target pricing our mindset on premium product from this index.

Dan: Which represents about 70% of our volumes.

Dan: Well mine pours high vol, a product, which is about 30% of our volumes, we primarily target using the east coast Highball, a index price for our traditional markets.

Dan: As we mentioned we transitioned mine poor from a mid ball to a high vol. A product in the second half of 2023.

Dan: As a result of the demand imbalances between the Pacific and Atlantic basins. This past year.

Dan: We have at times used other indices to price our mind for high vol a product.

Dale W. Boyles: The index price averaged $303 per short time for the fourth quarter, which on average was $50 per short ton higher compared to the same quarter of 2022. We primarily target pricing our Mine 7 premium product from this index, which represents about 70% of our volume. Well, mine pours a high vol-A product, which is about 30% of our volumes.

Dan: Such as the CFR Chinese Index, CFR, India index, or the Lowball HCC index.

Price relativity between these indices and the P. L D F O B Australia.

Dan: Can be and have been significantly different depending upon market conditions.

Dan: In addition, as noted earlier the Pacific Basin markets, usually require the producer to cover the freight cost to these markets, which lowers our average net selling prices.

Dan: Cash cost of sales in the fourth quarter of 2023 was $185 million or 51% of mining revenues compared to $179 million or 54% of mining revenues in the fourth quarter of 2022.

Dale W. Boyles: We primarily target the East Coast high vol-A price for our traditional market. As we mentioned, we transitioned Mine 4 from a mid-ball to a high-ball lay product in the second half of 2023 as a result of the demand imbalances between the Pacific and Atlantic basins this past year. We have, at times, used other indices to price our mine for high-vol A products, such as the CFR-Chinian DAG, CFR India, and that, or the Lowball HCC. The price relativities between these indices and the PLVFOB Australia can be and have been significantly different depending upon market conditions, in addition, as noted earlier.

Dan: Of the net $6 million increase in cash cost of sales.

Dan: $10 million was due to the 6% increase in sales volumes offset partially by $4 million of lower transportation costs due to timing.

Dan: Our head count was 36% higher at the end of 2023 compared to last year due to a focus on hiring workers during the labor strike and the addition of employees who retired from the labor strike in the second quarter of 2023.

Dan: Cash cost of sales per short ton Fob port was approximately $121 in the fourth quarter compared to $123 in the fourth quarter of 2022.

Dale W. Boyles: The Pacific Basin markets usually require the producer to cover the freight costs to these markets, which lowers our average net selling price. Cash cost of sales in the fourth quarter of 2023 was $185 million, or 51% of mining revenues, compared to $179 million, or 54% of mining revenues in the fourth quarter of 2022. This represents a net $6 million increase in cash cost of sales. $10 million was due to the 6% increase in sales volume, offset partially by $4 million of lower transportation costs due to time. Our hit count was 36% higher at the end of 2023 compared to last year, due to a focus on hiring workers during the labor strike and the addition of employees who returned from the labor strike in the second quarter of 2023. Smash cost of sales per short ton, FOB port, was approximately $121 in the fourth quarter, compared to $123 in the fourth quarter of 2022. Transportation royalty costs were slightly lower in the fourth quarter this year as compared to the same quarter of 2022.

Dan: Transportation and royalty costs were slightly lower in the fourth quarter this year as compared to the same quarter of 2022.

Dan: Our cash cost of production per short ton was slightly higher in the fourth quarter as compared to the same quarter of 2022.

Dan: Spike the incremental cost associated with a 36% higher head count.

Dan: SG&A expenses were about $13 million or three 6% of total revenues in the fourth quarter of 2023 and were slightly higher than 2020 twos fourth quarter, a three 4% primarily due to an increase in employee related expenses.

Dan: Yeah.

Dan: The interest income earned on cash investments well exceed the interest expense on outstanding notes and equipment leases during the fourth quarter of 2023.

Dan: Due to lower interest expense from the early retirement of nearly 50% of our senior secured debt in the third quarter of 2023.

Dan: Our fourth quarter income tax expense reflects expense on pre tax income and includes an income tax benefit for depletion expense and foreign derived intangible income.

Dan: Turning to cash flow during the fourth quarter of 2023 free cash flow was $63 million. This was the result of cash flows generated by operating activities.

Dale W. Boyles: Our cash cost of production per short term was slightly higher in the fourth quarter as compared to the same quarter of 2022, despite the incremental cost associated with the 36 percent higher HIC. SG&A expenses were about $13 million, or 3.6% of total revenues in the fourth quarter of 2023, and were slightly higher than 2022's fourth quarter of 3.4%, primarily due to an increase in employee-related expenses. The interest income earned on cash investments will exceed the interest expense on outstanding notes and equipment leases during the fourth quarter of 2023, primarily due to lower interest expense from the early retirement of nearly 50% of our senior secured debt in the third quarter of 2023. Our fourth quarter income tax expense reflects the expense on pre-tax income and includes an income tax benefit for depletion expense and foreign derived intangible income. Earning cash flow During the fourth quarter of 2023, free cash flow was $63 million. This was the result of cash flows generated by operating activity of $245 million less cash used for capital expenditures in mine development of $182 million.

Dan: $245 million less cash used for capital expenditures and mine development of $182 million.

Dan: Free cash flow was $34 million lower than 2020 twos fourth quarter.

Dan: Primarily due to higher Blue Creek Capex spending.

Dan: Free cash flow in the fourth quarter of 2023 was positively impacted by a $90 million decrease in net working capital from the third quarter.

Dan: The decrease in net working capital was primarily due to a decrease in accounts receivable on lower sales volumes, partially offset by higher inventories and lower net accounts payable and accrued expenses.

Dan: Despite the higher capital spending associated with the Blue Creek project gross project.

Dan: This year, we generate full year free cash flow of $176 million of which $61 million has been returned to stockholders in the form of a special dividend earlier last year on top of the regular quarterly dividends, which increased 17% last year.

Dan: Our total available liquidity at the end of the fourth quarter of 2023 with $846 million, representing an increase of $36 million over the third quarter and.

Dan: And consisted of cash and cash equivalents of $738 million and $107 million available under our ABL facility.

Dale W. Boyles: Pre-cash flow was $34 million lower than 2022's fourth quarter, primarily due to higher Blue Creek CapEx spending. Pre-cash flow in the fourth quarter of 2023 was positively impacted by a $90 million decrease in net working capital from the third quarter. The decrease in networking capital was primarily due to a decrease in accounts receivable on lower sales volumes, partially offset by higher inventories and lower net accounts payable in accrued

Dan: The fourth quarter of 2023 kept off a robust year of building stockholder value. Its full year volumes returned to levels not seen since 2020 and market pricing for our premium products is high.

Dan: This combination led to another year of strong cash flow generation from operations of over $700 million and enabled us to upon an all time record high amount of capital expenditures and mine development of $525 million for the future growth of our business.

Dan: It also allowed us to retire early $162 million or nearly 50% of our senior secured debt.

Dale W. Boyles: Despite the higher capital spending associated with the Blue Creek Gross Project, this year, we generated a four-year free cash flow of $176 million, of which $61 million has been returned to stockholders in the form of a special dividend earlier last year on top of the regular quarterly dividends, which increased 17% last year. Our total available liquidity at the end of the fourth quarter of 2023 was $846 million, representing an increase of $36 million over the third quarter, and consisted of cash and cash equivalents of $738 million and $107 million available under an ABL facility. The fourth quarter of 2023 kept off a robust year of building stockholder value, as four-year volumes returned to levels not seen since 2020, and market pricing for our premium products was high. This combination led to another year of strong cash flow generation from operations of over $700 million that enabled us to fund an all-time record high amount of capital expenditures and mine development of $525 million for the future growth of our business. It also allowed us to retire early $162 million, or nearly 50% of our senior secured debt.

These results demonstrate the significant cash flow generation of our existing operations that we expect to grow tremendously in the near future with the addition of our New Blue Creek mine.

Speaker Change: Now, let's turn to our outlook and guidance for the full year 2024.

Speaker Change: We expect the demand from our contracted customers to remain stable.

Speaker Change: We also expect spot demand to continue to be stronger in the Pacific basin compared to our traditional markets in the Atlantic.

Speaker Change: We will continue to pursue our successful strategy of focusing on contracted customers with value added because spot activity.

Speaker Change: We believe the current tightness in the supply of premium calls like our mine seven Bundwall will persist for some time, which should support higher pricing relative to the second tier steelmaking coal's.

Speaker Change: Our full year outlook and accomplishes this favorable landscape and we believe 2024 should be another strong operational year for warrior, primarily driven by higher volumes.

Speaker Change: We expect sales volumes may exceed production volumes using the midpoint of the ranges by up to a half million short tons in 2024 as we take advantage.

Speaker Change: Age of market pricing and the higher inventories on hand.

Speaker Change: We anticipate our contract to spot volume ratio will be better in 2024 than last year at about 75% contract and 25% spot.

Dale W. Boyles: These results demonstrate the significant cash flow generation of our existing operations, which we expect to grow tremendously in the near future with the addition of our new Blue Creek. Now, let's turn to our outlook and guidance for the full year 2024. We expect the demand from our contracted customers to remain stable.

Speaker Change: This compares to 59% contract and 41% spot in 2023.

Speaker Change: In addition, we expect to hire approximately 250, new employees in 2024 to fill in gaps in the existing mines and ramp up our hiring for the Blue Creek mine later this year.

Speaker Change: Inflationary cost in the mining sector continues to persist and pressure cost structures for labor supplies materials and equipment purchases.

Dale W. Boyles: While we also expect spot demand to continue to be stronger in the Pacific Basin compared to our traditional markets in the Atlantic, we will continue to pursue our successful strategy of focusing on contracted customers with value-added products. We believe the current tightness in the supply of premium coals, like our Mine 7 lowball, will persist for some time, which should support higher pricing relative to the second-tier steelmaking coals. Our full-year outlook encompasses this favorable landscape, and we believe 2024 should be another strong operational year for Warrior, primarily driven by higher volume. We expect sales volumes may exceed production volumes using the midpoint of the range by up to a half million short tons in 2024 as we take advantage of market pricing and higher inventories on hand.

Speaker Change: These additional costs are expected to drive up our cost per short ton in 2024 as outlined in our targeted range for cash cost per short ton.

Speaker Change: Lastly, after considering our total liquidity and our favorable outlook for 2024, we recently announced that the board of directors has decided to increase the regular quarterly dividend by 14%.

Speaker Change: We expect to distribute the dividend on February 26.

Speaker Change: This marks the third consecutive year. The company has raised its quarterly dividend, while developing its world class Blue Creek reserves.

Speaker Change: In addition, we recently announced our plans to distribute a special cash dividend of 50 cents per share in March demonstrating our continued commitment to returning excess cash to stockholders, while driving long term growth of the business.

Speaker Change: I'll now turn it back to Walt for his final comments.

Dale W. Boyles: We anticipate our contract to spot volume ratio will be better in 2024 than last year at about 75% contract and 25% spot. This compares to 59% contract and 41% spot in 2023. In addition, we expect to hire approximately 250 new employees in 2024 to fill in gaps in the existing mines and ramp up our hiring for the Blue Creek mine later this year. However, inflationary costs in the mining sector continue to persist and pressure cost struggles for Labor, Supplies, Materials, and Equipment. These additional costs are expected to drive up our cost per short time in 2024, as outlined in our targeted range for cash costs per short time. Lastly, after considering our total liquidity and our favorable outlook for 2024, we recently announced that the Board of Directors had decided to increase the regular quarterly dividend by 14%.

Walter J. Scheller III: Thanks, Dale before we move on to Q&A I'd like to make some final comments.

Walter J. Scheller III: As Daryl just noted we have a favorable outlook for 2024 orders from customers in our traditional markets suggest stable demand for coal for at least the first half of the year.

Walter J. Scheller III: We expect markets like India, and southeast Asia to continue to experience an increase in demand with new projects coming online.

Walter J. Scheller III: We're closely monitoring the dual logistical challenges posed by low water levels in the Panama Canal system as well as the geopolitical tensions in the Red Sea.

Walter J. Scheller III: For now the impact warrior has been higher freight cost, especially into the Asian markets, which continue to be above historic averages.

Walter J. Scheller III: While the impact of some of our customers has been longer transit times.

Walter J. Scheller III: It's difficult to predict that this will improve or deteriorate during the next few quarters.

Walter J. Scheller III: We believe it's still making coal pricing will remain bifurcated as the availability of premium low vol. Steelmaking, coal's say tighter than the availability of a second tier still making calls.

Walter J. Scheller III: As such we believe the lower price relativity of the second tier still making Coles will continue for the near future and also depending upon the geography of spot volumes.

Dale W. Boyles: We expect to distribute the dividend on February 26. This marks the third consecutive year the company has raised its quarterly dividend while developing its world-class blue chip. In addition, we recently announced our plan to distribute a special cash dividend of 50 cents per share in March, demonstrating our continued commitment to returning excess cash to stockholders while driving long-term drugs into the distance. I'll now turn it back to Walt for his final comments.

Walter J. Scheller III: While we were well prepared to address a variety of market conditions. We are also extremely excited and laser focused on the disciplined development of our world Class Blue Creek reserves.

Walter J. Scheller III: We expect another year of high capital spending on the project ranging from $325 million to $375 million, which can be funded out of cash on our balance sheet. If the market should turn unfavorable in 2024.

Walter J. Scheller III: As I mentioned earlier, we continue to make excellent progress in developing Blue Creek.

Walter J. Scheller III: We are on track for the first development tons from continuous miner unit in the third quarter 2024, with the longwall scheduled to start up in the second quarter of 2026.

Walter J. Scheller III: Thanks, Dale. Before we move on to Q&A, I'd like to make some final comments. As Dale just noted, we have a favorable outlook for 2024 as orders from customers in our traditional markets suggest stable demand for our coals for at least the first half of the year, while we expect markets like India and Southeast Asia to continue to experience an increase in demand with new projects coming online. We're closely monitoring the dual logistical challenges posed by low water levels in the Panama Canal system, as well as the geopolitical tensions in the Red Sea.

Walter J. Scheller III: We expect approximately 200000 short tons of production of high vol. A product from the continuous monitoring units in 2024.

Walter J. Scheller III: This raw coal production has been included in our production guidance in conclusion, our full year outlook encompasses the favorable landscape and we see 2024, representing another strong year of operational success and growth capital deployment driven.

Walter J. Scheller III: Driven by expected higher steelmaking coal production and sales.

Walter J. Scheller III: For now, the impact on the company has been higher freight costs, especially into the Asian markets, which continue to be above historic averages, while the impact on some of our customers has been longer transit Time. It's difficult to predict if this will improve or deteriorate during the next few quarters. We believe that steelmaking coal pricing will remain bifurcated as the availability of premium lowball steelmaking coals should stay tighter than the availability of second-tier steelmaking coals. As such, we believe the lower price relativities of the second-tier steelmaking coals will continue for the near future and also depend upon the geography of spot volume. While we are well prepared to address a variety of market conditions, we are also extremely excited and laser-focused on the disciplined development of our world-class Blue Creek Reserve. We expect another year of high capital spending on the project ranging from 325 to 375 million dollars, which can be funded out of cash on our balance sheet if the market should turn unfavorable in 2024. As mentioned earlier, we continue to make excellent progress in developing Blue Creek.

Speaker Change: With that we'd like to open the call for questions operator.

Speaker Change: Thank you at.

Speaker Change: At this time I would like to remind everyone to ask a question.

Speaker Change: Please press Star then the number one on your telephone keypad.

Speaker Change: We will pause for just a moment to compile the roster.

Speaker Change: Yeah.

Lucas N. Pipes: And our first question comes from Lucas pipes B Riley Securities. Please go ahead.

Lucas N. Pipes: Hi, Thank you very much operator.

Lucas N. Pipes: Good afternoon, everyone.

Lucas N. Pipes: My first question Walt and Dale is is on on the sales mix for 2024, I Wonder if you could maybe provide a rough breakdown of anticipated.

Lucas N. Pipes: It's kind of on a percentage proportional basis.

Speaker Change: High Vol, a fob port <unk> Port and then also eyeball a P L b.

Speaker Change: Kind of CFR, China, So we can get a better sense of how these are higher freight costs.

Speaker Change: Impact impact realization. Thank you very much.

Speaker Change: Well generally I'll start with the you know our expectation.

Speaker Change: Mine seven we're probably 70% to 80% contracted and those will all be sold.

Operator: We are on track for the first development of tons from continuous miner units in the third quarter of 2024, with the longwall scheduled to start up in the second quarter of 2026. We expect approximately 200,000 shore tons of production of high-volley product from the continuous mining units in 2024. This raw coal production has been included in our production guidance. In conclusion, our full year outlook encompasses a favorable landscape, and we see 2024 representing another strong year of operational success and growth capital deployment, driven by expected higher steelmaking coal production and sale. With that, we'd like to open the call for questions. Operator?

Speaker Change: B.

Speaker Change: Port.

Speaker Change: The remaining 20% to 30%.

Speaker Change: We will be spot tons.

Speaker Change: And those could go either into our traditional markets to those customers or end up going into.

Speaker Change: Some big markets, where we have the CFR.

Speaker Change:

Speaker Change: Issue going into Asia for mine four were I think about 55% contracted this year some of it into traditional markets.

Speaker Change: But I would say from mine for you're probably going to look at at least 50% of that coal going into CFR sales.

Speaker Change: In total probably 70% mine, 730% mine four tons.

Speaker Change: If all that probably answered your question I hope so.

Speaker Change: Whereas a lot of helpful. Tidbits in there I may follow up on some of it but I wanted to circle back on on mine number four.

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 for just a moment to compile the roster, and our first question comes from Lucas Pipes of B Raleigh Securities. Please go ahead. Hi, thank you very much, operator. Good afternoon, everyone.

Speaker Change:

Speaker Change: It sounds like a high vol, a product today to stat.

Speaker Change: Cover it does that description copper all of the output of my number four and should we kind of think of.

Speaker Change: Oh call. It a plots or are similar index as the best approximation for F O B pricing full up my number four today.

Lucas N. Pipes: My first question, Walton Dale, is on the sales mix for 2024. I wondered if you could maybe provide a rough breakdown of anticipated sales kind of on a percentage proportional basis for Hi-Val-A, FOB Port, PLV, FOB Port, and then also Hi-Val-A, PLV, and kind of CFR China so we can get a better sense of how these high freight costs impact realizations. Thank you very much.

Speaker Change: Yeah. It looks this is dale.

Dale W. Boyles: Yeah that is pretty much a high vol a product now.

Dale W. Boyles: And a transition in the second half and I think that's about 30% of our volume and we would typically target the east Coast High Vol. A index.

Speaker Change: Our traditional markets now when you go into the spot markets. It could be a combination of those different indices are outlined in March which as you know it just depends on where its going geography wise. These days.

Walter J. Scheller III: Well, generally speaking, I'll start with the expectation that with MIME 7, we're probably 70% to 80% contracted, and those will all be sold FOB port. The remaining 20% to 30% will be spot tons, and those could go either into our traditional markets to those customers, or end up going into some of the markets where we have the CFR issue going into Asia. For Mine 4, we're, I think, about 55% contracted this year, some of it into traditional markets. But I would say for Mine 4, you're probably going to look at at least 50% of that coal going into CFR sales. I think in total, you're probably 70% Mine 7, 30% Mine 4 tons.

Speaker Change: So you know the markets have really changed we have a lot of demand combined the Pacific basins. This time over the last six months and we see that as kind of the future is where a lot of demand is going to continue to come.

Speaker Change: So we're probably looking at about 65% of our volume going into the Pacific Basin and 24.

Speaker Change: And about 35 into our traditional Atlantic markets.

Speaker Change: Just in total.

Speaker Change: Very very helpful. Thanks, Thank you for that.

Dale W. Boyles: It's all that, if I've answered your question, I hope so. There were a lot of helpful tidbits in there. I may follow up on some of it, but I want to circle back on my number four, um, It sounds like a high-vol A product today, but does that description cover all of the output of my number four, and should we kind of think of, call it a PLATS or similar index as the best approximation for FOB pricing for my number four today? Yeah, Lucas, this is Dale.

Speaker Change: I'll squeeze one in here on the sell side and in terms of the cadence of shipments in 2024 could you provide a little bit of color. It sounded like you had some.

Speaker Change: Tons delayed here at the end of Q4 I would assume that it comes through in Q1, maybe Q1 is a bit of a stronger shipment quarter, but would appreciate if you could frame that up in and when I. When I think when we think of more high level about this.

Speaker Change: That's the production output in Q4 versus tons sold is that instead of a reflection of weakness if additional markets or.

Dale W. Boyles: Yeah, that is pretty much a High Vol A product now, and it transitioned in the second half, and I think that's about 30% of our volume, and we typically target the East Coast High Vol A index for traditional markets. Now, when you go into the spot markets, it could be a combination of those different indices outlined in my remarks, which, you know, just depends on where it's going geography-wide these days. So, you know, the markets have really changed with a lot of demand coming out of the Pacific Basins this time of year, and we see that as kind of the future, where a lot of demand is going to continue to come. So we're probably looking at about 65% of our volume going into the Pacific Basin in 24, and about 35% into our traditional Atlantic market. Very, very helpful.

Were there any any other complications moving those tons. Thank you very much.

Speaker Change: No all the all the contracted tons moved to those customers as expected what we did as we said in.

Speaker Change: In the third quarter, we moved more into the spot market and we decided in the fourth quarter to take a little more strategic approach and maximize <unk>.

Speaker Change: Margins. So we held off on any business that we felt that would hinder that and so that's how we ended up there in terms of cadence for sales Lucas.

Speaker Change: The problem with that is in any given quarter you can have something happen in one week at the end of the quarter that can adjust that.

Speaker Change: Downward by as much as 200000 tons.

I think the best.

Speaker Change: We try to match production and sales, but that's that's about I can't give you much more guidance than that and if you look for the year are we kind of give you what we think for the year, but I can't tell you which quarter any.

Walter J. Scheller III: Thank you for that. I'll squeeze one in on the sales side, in terms of the cadence of shipment and other complications moving those tons. Thank you very much.

Speaker Change: Reduction in inventories will come in.

Speaker Change: Yes, we're just we're really focused on just what the year is in the quarters just kind of fall.

Walter J. Scheller III: No, all the contracted tons moved to those customers as expected. What we did is, we said in the third quarter that we moved more into the spot market, and we decided in the fourth quarter to take a little more of a strategic approach and maximize margins. So we held off on any business that we felt would hinder that, so that's how we ended up there. In terms of cadence for sales, Lucas, the problem with that is in any given quarter, you can have something happen in one week at the end of the quarter that can adjust that downward by as much as 200,000 tons. We try to match production and sales, but that's... That's about it. I can't give you much more guidance than that.

Speaker Change: Yes, because the ships arrive in us.

Speaker Change: No complications arise with bad weather deport and everything that's.

Speaker Change: Yeah, that's less important to us and our full year targets.

Speaker Change: We really don't manage to the quarter results remains a long term.

Speaker Change: Understood. That's helpful. So maybe maybe to just put it a little differently to help me with the modeling.

Speaker Change: You have one longwall move in in Q1.

Speaker Change: So.

Speaker Change: It kind of fair to assume that production, maybe touch lighter than in Q4.

Speaker Change: Then you.

Speaker Change: You mentioned you are looking to match sales with production has has that occurred and spot for Q1 are you currently matched.

Walter J. Scheller III: And if you look for the year, we kind of give you what we think for the year, but I can't tell you which quarter any reduction in inventories will come in. Yeah, we're just really focused on just what the year is and the quarters just kind of fall as they did, you know, as the ships arrive in those, you know, complications arise, you know, with bad weather in port and everything that. Yeah, that's less important to us than our full year target. We really don't manage to achieve quarter results that are managed long-term.

Speaker Change: Oh, well you were right on target for where we wanted to be year to date.

Speaker Change: And with the longwall move kind of slightly less in Q4 on production makes sense.

Speaker Change: It does makes sense.

Speaker Change: Alright, well. This is this is helpful. Thank you I'll turn it over.

Speaker Change: Thank you.

Speaker Change: Smart company.

Speaker Change: Okay.

Speaker Change: Nathan you all of you there.

Speaker Change: My apologies our next question comes from.

Nathan: Gotcha Janick with BMO capital markets.

Gotcha Janick: Hi, Thank you for taking my questions.

Janick: First starting on the Blue Creek Capex. So original project Capex cost is about 700 million and then adding the scope gets you to 828 30 a M.

Walter J. Scheller III: understood. understood. No, that's helpful.

Walter J. Scheller III: So, maybe to just put it a little differently to help me with the modeling. You have one long, long move in Q1. So it's kind of fair to assume that production may be a touch lighter than in Q4. And then you mentioned you're looking to match sales with production. Has that occurred? For Q1, are you currently matched?

Janick: Now on top of that there's inflationary pressures, so I get up to about a billion and are my calculation is correct.

Janick: That's the general trend and Theres really been no update or change to those initial.

Janick: Updates and we add back in the summer. So yes targeted inflation, we haven't seen any reduction in labor labor materials supplies and equipment purchases that inflation is pretty much stuck in this sector.

Walter J. Scheller III: We're right on target for where we wanted to be here today. And with the long one, we've kind of slightly less than Q4 on production, which makes sense. It does make sense.

Speaker Change: Yeah, it depends on what particular item, but a range of 25% to 35% or so if you just take the mid point.

Walter J. Scheller III: All right. Well, this is helpful. Thank you. I'll turn it over. Thank you. SmartComp.

Speaker Change: 30% on your 700 million plus a 130 million scope change out youre right around $1 billion.

Operator: Apologies there. Our next question comes from Katja Janik with BMO Capital Markets. Hi, thank you for taking my question. First, starting on the Blue Creek CAPEX, the original project CAPEX cost is about $700 million, and then adding the scope gets you to $820 to $830 million. Now, on top of that, there's inflationary pressure, so I get up to about a billion. Are my calculations correct?

Speaker Change: Okay, and I think Dale you said youre going to be hiring more miners later in the year for Blue Creek.

Speaker Change: Is that already included in your cost guide.

Speaker Change: Yes.

Speaker Change: And how many miners do you have to add this year.

Dale W. Boyles: We're adding in total 250 to the company and somewhere around 100 ish.

Dale W. Boyles: Blue Creek.

Dale W. Boyles: That.

Speaker Change: Okay. Thank you I'll hop back into the queue.

Speaker Change: Thank you and our next question comes from Nathan Nathan Martin with the benchmark company.

Katja Janik: That's a general trend, and there's really been no update or change to those initial updates that we had back in the summer. So, yes, target inflation, we haven't seen any reduction in labor, materials, supplies, and equipment purchases. That inflation is pretty much stuck in this sector. You know, it depends on what particular item, but a range of 25 to 35 percent. So if you just take the midpoint,

Nathan Martin: Thanks, Operator, guys can you hear me Okay now.

Nathan Martin: Yes.

Nathan Martin: Okay perfect Hum.

Nathan Martin: What I was trying to say is that I think you were talking again to lucas's questions around logistics and obviously you guys pointed out the two blade vessels in the fourth quarter affecting shipments there and you mentioned I think you have a little low water on the Panama Canal Red Sea issues.

Nathan Martin: We also have the Demopoulos lock outage right now so I guess it would be great to hear you know how these are or are not affecting water. Obviously it sounds like transportation costs were elevated but you know how you guys are working through or around some of these issues.

Dale W. Boyles: 30% on your $700 million plus your $130 million scope change, yeah, you're right around a billion dollars. Okay, and I think Dale, you said you're going to be hiring more miners later in the year for Blue Creek. Is that already included in your cost guide? Yeah. And how many minors do you have to add this year?

Speaker Change: The issue around the marvelous has not impacted us today, we have.

Speaker Change: Our rail service has been very very strong.

We hope that continues and we have other options to get Dakota market. If we start to run into issues with the rail our expectation of the Marcellus right now.

Dale W. Boyles: We're adding in total $250 to the company and somewhere around $100-ish for Blue Creek out of that. Okay, thank you. I'll hop back in.

Speaker Change: Core of engineers has been down there looked at the problem, they're estimating may start up in Demopoulos I don't know, if that's reasonable or not but we're making sure that we have options to go to a coal to market otherwise in terms of.

Operator: Thank you. And our next question comes from Nathan Martin with The Benchmark Company. Thanks, Operator. Guys, can you hear me okay now?

Speaker Change: The increased costs that we were talking about for if we're talking about CFR. It shifts. The you know with the potential additional distances coal has to travel transportation costs are just up and it's also with the issues in the Red Sea its costs freight costs to go up considerably.

Nathan Martin: Yeah. Okay, perfect. What I was trying to say is, Dale, you were talking again to Lucas about logistics, and obviously, you guys pointed out the two late vessels in the fourth quarter affecting shipments there. You mentioned, I think, low water in the Panama Canal, and Red Sea issues.

Speaker Change: Yeah.

Speaker Change: I appreciate that wall and then maybe sticking with the cost for a second again just mentioned, obviously that the the 125 to $135 cost per ton guidance for the year.

Walter J. Scheller III: You know, we also have the Demopolis lockout right now, so I guess it'd be great to hear, you know, how these are or are not affecting Warrior. Obviously, it sounds like transportation costs are elevated, but, you know, how you guys are working through or around some of these issues. The issue around Demopolis has not impacted us to date. We have, you know, our rail service has been very, very strong. We hope that continues, and we have other options to get the coal to market if we start to run into issues with the rail. Our expectation of Demopolis right now is that the Corps of Engineers has been down there and looked at the problem. They're estimating a May start up in Demopolis. I don't know if that's reasonable or not, but we're making sure that we have options to get our coal to market otherwise. The increased cost that we were talking about for, if we're talking about CFR, it's just the, you know, with the potential additional distances the coal has to travel, transportation costs are just going up, and it's also, with the issues in the Red Sea, it's caused freight costs to go up considerably. Appreciate that, Walt.

Speaker Change: Some of that additional labor I'm, just curious is there a met price or met price range that you guys are assuming in that our full year cost guidance range.

Speaker Change: Yeah were around between $2 50 to 60 gross index P. L. P index.

Speaker Change: Very helpful. Bill I appreciate that and then maybe just one more kind of going back to the capture rate and you guys did a good idea and she's the guys did a great job of kind of explaining the shifts you've seen you know contract to spot and you're back to maybe a normal higher level of contract cold this year versus 23 Hum.

Speaker Change: Also talked about obviously the high vol. A shift in my mind for but with the increase in Pacific Basin sales you guys called out versus typical Atlantic markets. How should we think about in your capture rate going forward. As you know the last few quarters. It has lagged and been below your kind of historical level, let's call it 90% plus or minus.

Speaker Change: Yeah, I think Nathan as you know, it's a little hard to predict just given all the different things that are happening, but what we're targeting is call. It at 85% to 90% of the appeal knee index.

Speaker Change: It could do something simple because obviously with mindful of pricing at all these other indices.

Dale W. Boyles: And then maybe sticking with the cost for a second, I just mentioned, obviously, that the $125 to $135 cost-return guidance for the year includes some of that additional labor. Just curious, is there a met price or met price range that you guys are assuming in that full-year cost guidance range? Yeah, we're around between $250,000 and $260,000 gross index PLVM. Very helpful, Dale.

Speaker Change: You get a you'd get a different result than it doesn't price off of PLD anymore.

Speaker Change: So you know and that's been it.

Speaker Change: Acerbate by those price relativity, when you talked about earlier.

Speaker Change: Where they were closer to the nineties mid Ninety's now they were more like in the eighties this past year.

Speaker Change: So some of that has been you know the the demand imbalances some of the supply issues.

Dale W. Boyles: I appreciate that. And then, you know, maybe just one more, kind of going back to the capture rate. And you guys did a good job kind of explaining the shifts you've seen, you know, contract to spot, you're back to maybe a normal higher level of contract coal this year versus 23, and also talked about, obviously, the high volet shift at mine 4.

Speaker Change: But we think those relativity will come back.

Speaker Change: It just may take a little time, but.

Speaker Change: Think of it as you know 85 to 90, when we try to maximize our margins like we did in the fourth quarter, where we increased our margin 63% from Q3.

Speaker Change: Now how to deal and I appreciate that I'll leave it there best of luck to you guys in 2024.

Speaker Change: Thank you thanks.

Speaker Change: Our next question comes from Chris <unk> with Jefferies.

Dale W. Boyles: But with the increase in Pacific Basin sales, you guys called out versus typical Atlantic markets, you know, how should we think about your capture rate going forward? As you know, the last few quarters, it has lagged and been below your kind of historical level, let's call it 90% plus or, Yeah, I think, Nathan, it's a little hard to predict, just given all the different things that are happening. But, you know, what we're targeting is, call it, 85 to 90 percent of the PLD index. It's to do something simple because obviously, with 9-4 pricing and all these other indices, you get a different result, and it doesn't price off the PLB anymore.

Chris: Hey, Thanks, guys. Thanks for taking my question so.

Chris: I wanted to ask you about my number seven but first on the Capex profile. So if we have a $1 billion of total Capex for Blue Creek based.

Chris: Based on your 2024 guidance by the end of this year, you'll have spent a little more than $700 million does that mean $300 million more in 2025 and then in addition to kind of you know.

Chris: General sustaining capex looking into 2025 Capex budget of between 400 and $500 million is that roughly correct.

Speaker Change: It's probably a little aggressive in 'twenty five I think you'll have some of that spending will.

Dale W. Boyles: So you know, and that's been exacerbated by those price relativities that we talked about earlier, where they were closer to the 90s, mid-90s, and now they were more like in the 80s this past year. So some of that has been the demand imbalances, some of the supply issues, but we think those relativities will come back. It just might take a little time, but think of it as, you know, 85 to 90 when we try to maximize our margins like we did in the fourth quarter, where we increased our margins 63% from Q3. Got it, Dale.

Speaker Change: Play out in 2006 and completion of the project.

Speaker Change: <unk>.

Speaker Change: But that's but youre right, we will be up over $700 million by year end, and probably north of 200 million or so next year and finishing up in 'twenty six.

Speaker Change: And is there a reason why you haven't explicitly changed the Capex guidance for Blue Creek.

I mean, you've talked about a 25% inflation, but you haven't actually formally adjusted the numbers. You are you are you working on specific contracts around that or are there. Other reasons why you might not have formally changed that number yet.

Dale W. Boyles: Appreciate that. I'll leave it there. Best of luck to you guys in 2024. Thank you. Our next question comes from Chris LaFemmina with Jeffrey. Hey, thanks guys, thanks for taking my question.

Speaker Change: Well that is the number of pretty much Chris So I mean, that's the math.

Speaker Change: But there are gosh dozens of contracts that are yet to be signed to finished grading work in all kinds of different things I mean, we're only.

Chris LaFemmina: So, I wanted to ask about my number seven, but first on the CapEx profile. So if we have a billion dollars in total CapEx for Blue Creek. Based on your 2024 guidance, by the end of this year, you'll have spent a little more than $700 million. Does that mean $300 million more in 2025? And then, in addition to kind of, you know, general sustaining CapEx, looking at a 2025 CapEx budget of between $400 and $500 million? Is that roughly correct? That's probably a little aggressive for 25.

Just barely two and a half years into this thing. So we've got a long way to go and you know there's hundreds of contracts on this thing so.

Speaker Change: Right now we're just that's the trend and that's.

Speaker Change: Where we're headed.

Speaker Change: And I think that.

Speaker Change: That's based on our current expectation in terms of inflation and I think one of the reasons, we haven't given a real update is because we don't we can't determine exactly what the inflationary pressures will be so we've kind of left that.

Speaker Change: We recognize that getting that could change in.

Speaker Change: In either direction right now I understood.

Dale W. Boyles: I think some of that spending will play out in 26 with the completion of the project. But you're right, we'll be up over $700 million by year end, and probably north of $200 million or so next year, and finishing up in 26. And is there a reason why you haven't explicitly changed the CAPEX guidance for Blue Creek? I mean, you've talked about 25% inflation, but you haven't actually formally adjusted the numbers.

Speaker Change: So my question on mine number seven soon.

Speaker Change: At what point does the depletion of reserves there start to impact your production volume and unit costs, you have seven or eight more years of production. There is it later this decade, where you start to see kind of more cost pressures and potentially lower volumes as a result of depletion or is it possible to even extend the life beyond that time.

Dale W. Boyles: Are you working on specific contracts around that, or are there other reasons why you might not have formally changed that number yet? Well, that is the number pretty much, Chris, so I mean that's the math, but there are, gosh, just dozens of contracts that are yet to be signed to finish grading work and all kinds of different things. I mean, we're only, just barely two and a half years into this thing, so we've got a long way to go, and there are hundreds of contracts on this thing, so right now, that's the trend, and that's where we're headed. And I think one of the reasons we haven't given a real update is because we can't determine exactly what the inflationary pressures will be, so we've So, my question on number seven: So, at what point does the depletion of reserves there start to impact your production volume and unit cost?

Speaker Change: Frame.

Speaker Change: Yeah, our life actually but we have right now is just in our reserves were probably at 13 years I believe it is in resources goes beyond that and we continue to.

Speaker Change: Oh look at what we have and what we can get to continue the Oh. The total reserve for that coal mine. Okay. Great. Thank you very much good luck.

Yeah.

Speaker Change: As a reminder to ask a question press Star then one.

Speaker Change: Our next question comes from Lucas pipes, B Riley Securities.

Lucas N. Pipes: Thank you very much operator, thank you for the follow up question I wanted to ask kind of on capital returns and how you think about that why not.

Lucas N. Pipes: Maybe.

Lucas N. Pipes: We do have a little bit on the buyback side versus just a special would be kind of interesting interested how you think about that thank you.

Speaker Change: Yeah look it's a really nothing's changed their capital allocation priority is Blue Creek and to the extent, we have excess cash we'll continue to do it in the manner. We have I don't see that changing until I'm Blue Creek is up and running at the earliest.

Walter J. Scheller III: You have, what, seven or eight more years of production there? Is it later in this decade where you start to see kind of more cost pressures there and potentially lower volumes as a result of depletion, or is it possible to even extend the life beyond that time frame? Yeah, our life, actually, what we have right now is just in reserves.

Speaker Change: We have significant state Nols and all the rules and restrictions that I've talked about for the last seven years still apply to those rule to the state Nols and we'd have about 900 million.

Walter J. Scheller III: We're probably at 13 years, I believe it is, and resources have gone beyond that. And we continue to. I'll look at what we have and what we can get to continue the..., the total reserve for that coal mine. Okay. Great. Thank you very much. As a reminder, to ask a question, press star then 1.

Speaker Change: Dollars stayed in a while it's less so.

Speaker Change: Yeah, we still got plenty of runway on some of these nols to utilize them.

Speaker Change: So again right now Blue Creek has the focus and extent, we have a lot of extra cash.

Operator: Our next question comes from Lucas Pipes with the Raleigh Security. Thank you very much, operator. Thank you for the follow-up question. I wanted to ask kind of on capital returns and how you think about that. Why not maybe do a little bit on the buyback side versus a special. It would be kind of interesting to hear your thoughts on that. Thank you. Yeah, Lucas. Really, nothing's changed there.

Speaker Change: We'll spend that so and.

Speaker Change: Most likely it'll be more like special until we get further along with Blue Creek.

Speaker Change: That's very helpful and Andy I'll, just just to make sure I understood. You right you have about 900 million of state Nols and.

Speaker Change: At the current level of profitability.

Speaker Change: <unk> call. It Q4, how how long would you expect those nols to kind of laugh.

Lucas N. Pipes: Capital allocation priority is Blue Creek, and to the extent we have excess cash, we'll continue to do it in the manner we have. I don't see that changing until Blue Creek is up and running at the earliest. Again, we have significant state NOLs, and all the rules and restrictions that I've talked about for the last seven years still apply to those rules, to the state NOLs. And we have about $900 million of state NOLs left. So, you know, we still have plenty of runway on some of these NOLs to utilize them.

Speaker Change: Wow, that's that's the $64000 question there Lucas it depends on what prices are.

You know in profitability over the next several years. So I mean, those Nols go out until 2034 or something like that when they start expiring so.

Lucas: Yeah. They they have a long life on them right now, but if we have more profitable years like the last two years will.

Lucas: We'll burn through them really fast potentially.

Dale W. Boyles: So, you know, again, right now, Blue Creek is the focus to the extent that we have a little extra cash. You know, we'll spend that, so, and most likely it'll be in more like specials until, you know, we get further along with Lucas. That's very helpful, and Dale, just to make sure I understood you right, you have about 900 million in state NOLs, and at the current level of profitability, call it Q4, how long would you expect those NOLs to kind of last? Well, that's the $64,000 question there, Lucas; it depends on what prices are and profitability over the next several years. So I mean, those NLLs go out until like 2034, something like that's when they start expiring. So they have a long life left on them right now.

Lucas: With Blue Creek up and running.

Speaker Change: Gotcha and so in terms of like when I think about call. It 2024.

Speaker Change: Cash flow impact from the Nols I like what what is what is the kind of net impact on your effective tax rate like how much how much cash benefit are you seeing from the Nols This year 2024 versus not having them.

Speaker Change: Well I mean, the benefit is basically what you're saying tax rate is five 6%. So that's your benefit on the state side.

Speaker Change: Got it got it that's that's very helpful. Thank you.

Speaker Change: For that.

Speaker Change: And then maybe just one.

Speaker Change: Quick follow up on the on the Blue Creek.

Dale W. Boyles: But if we have more profitable years like the last two years, we'll burn through them really fast, potentially, with Blue Creek up and running. Gotcha. And so in terms of, like, when I think about, call it 2024, the cash flow impact from the NOLs. What is the net impact on your effective tax rate? How much cash benefit are you seeing from the NOLs this year 2024 versus not having? Well, I mean, the benefit is basically what your state tax rate is, five, six percent.

Speaker Change: Capex front, you mentioned earlier that.

Speaker Change: Lot of things are kind of still still to be finalized.

Speaker Change: Yes that range out of 25% to 30% what gives you the confidence in that number given given that you still have to finalize the contract or some such what would appreciate the additional color. Thank you.

Speaker Change: Yeah, I think if you go out there and look at any construction index, you'll see that labor supplies and materials.

Dale W. Boyles: So that's your benefit on the state side. Got it. Got it. That's, that's very helpful. Thank you. Thank you for that. And then maybe just one quick follow-up on the Blue Creek CAPEX front. You mentioned earlier that a lot of things are kind of still to be finalized. You have that range of 25 to 30 percent.

Speaker Change: <unk> pretty much been averaging that and that's that's what stuck in this sector. It's easy to read the Wall Street Journal and say well, it's come down to three 4% well that has.

Speaker Change: It has nothing to do with the mining sector, where there's been a tremendous increase in la.

Speaker Change: Labor and supplies and materials and just we've talked about it over the last three years just quarter after quarter of the inflation in this sector. So.

Dale W. Boyles: What gives you the confidence in that number, given that you still have to finalize contractors and such? Would you appreciate the additional color? Yeah, I think if you go out there and look at any construction index, you'll see that labor, supplies of materials, pretty much have been averaging that, and that's what's stuck in this sector. It's easy to read the Wall Street Journal and say, well, it's come down to 3.4 percent. But that has nothing to do with the mining sector, where there's been a tremendous increase in labor and supplies of materials, and we've talked about it over the last three years, just quarter after quarter of inflation in this sector. So I don't see that changing. And it's possible, you know, that we go through a period where there's a little less inflation, or there's a little more. We just can't predict it at this point.

Speaker Change: Don't see that changing and it's possible that we go through a period, where there's a little less inflation or there's a little more where we just can't predict at this point, we're only halfway into this thing barely end.

Speaker Change: We still got a lot of runway to go this is not.

Speaker Change: A handful of fixed price contracts has to stop away.

Speaker Change: These contracts are are developed.

Speaker Change: Developed no contractors don't sit there and say well more fixed mop steel prices at X and then they go wildly higher and you know he he said, it's not going to do that.

Speaker Change: So you have those pass throughs, and we tried to limit that and work with them on those contracts, but there's just a whole lot of things going on here to manage a project of this size.

Speaker Change: And it's you know.

Dale W. Boyles: We're only barely halfway into this thing, barely. We still have a long way to go. A handful of fixed-price contracts, that's just not the way these contracts are developed. No contractor is going to sit there and say, well, I'm going to fix my steel prices at X, and then they go wildly higher, and he's just not going to do that.

Speaker Change: And quite frankly, it would be kind of unwise of us to go and say, it's well, it's going to be $968 million and $538000. I mean, if anybody can predict that I mean, you're a little bit of a hole. So yeah, I think you've got to be reasonable as what can happen over the next two and a half three years.

Speaker Change: And I was just going to be some changes, but to the extent there isn't an update we'll give people enough by but we said look there is no update at this point, that's the trend and that trend continues.

Dale W. Boyles: So you have those pass-throughs, and we try to limit that and work with them on those contracts, but there's just a whole lot of things going on here to manage a project of this size, and it's, you know, and quite frankly, it'd be kind of unwise of us to go say, well, it's going to be $968,538,000. I mean, if anybody can predict that, then they're And so, yeah, I think you've got to be reasonable as to what can happen over the next two and a half, three years, and know that there's going to be some changes, but to the extent there is an update, we'll give people an update, but we said, look, there is no update at this point.

Well noted I appreciate that and maybe just to put a bow on it.

Speaker Change: With all of that.

Speaker Change: You feel 25% to 35% is the right range.

Speaker Change: For now yes.

Speaker Change: Alright, well I appreciate it good luck. Thank you.

Speaker Change: Alright. Thanks.

Speaker Change: At this time there are no further questions I would like to turn the call back over to Mr. Schiller for any closing comments.

Daniel Scott: That concludes our call. This afternoon. Thank you again for joining us today and we appreciate your interest in warrior.

Schiller: Thank you. Thank you all for participating you may now disconnect.

Dale W. Boyles: That's the trend, and that trend continues. I appreciate that, and maybe just to put a bow on it, with all of that, we feel 25-35% is the right rate. That's all for now. All right, well, I appreciate it. Good luck. All right, thank you. At this time, there are no further questions. I would like to turn the call back over to Mr. Scheller for any closing comments. That concludes our call this afternoon. Thank you again for joining us today, and we appreciate your interest in Warrior. Thank you. Thank you all for participating. You may now disconnect. The Ultimate Parody Site! BF-WATCH TV 2021

Yeah.

Schiller: Okay.

Schiller: [music].

Schiller: Yeah.

Schiller: [music].