Warrior Met Coal, Inc.

Good afternoon. My name is Cole, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Warrior Third Quarter 2024 Financial Results Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded and will be available for a replay on the company's website. I would now like to turn the call over to DeAndre Wright, Vice President of External Affairs and Communications. Please go ahead, sir.

Good afternoon and welcome everyone to Warrior's third quarter 2024 earnings conference call. Before we begin, let me remind you that certain statements made during this call, including statements relating to our expected future business and financial performance, may be considered forward-looking statements according to the Private Securities Litigation Reform Act. Forward-looking statements, by their nature, address matters that are to different degrees uncertain. These uncertainties, which are described in more detail in the company's annual and quarterly reports filed with the SEC, may cause our actual future results to be materially different from those expected in our forward-looking statements. We do not undertake to update our forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required by law. For more information regarding forward-looking statements, please refer to the company's press release and SEC filings. We will also be discussing certain non-GAAP financial measures, which are defined and reconciled to comparable GAAP financial measures in our 2024 third quarter press release furnished to the SEC on Form 8-K, which is also posted on our website. Additionally, we will be filing our Form 10-Q for the quarter ended September 30th, 2024 with the SEC this afternoon. You can find additional information regarding the company on our website at www.warriormetcoal.com, which also includes the third quarter supplemental slide deck that was posted this afternoon. On the call with me today are Mr. Walt Scheller, Chief Executive Officer, and Mr. Dale Boyles, Chief Financial Officer. After our formal remarks, we will be happy to take any questions. With that, I will now turn the call over to Walt.

Thanks, DeAndre. Hello, everyone, and thank you for taking the time to join us today to discuss our third quarter 2024 results. After my remarks, Dale will review our results in additional detail. Then you'll have the opportunity to ask questions. We were pleased with our third quarter results despite weak global demand and high quality steel making coal prices reaching a three year low. While we wait for market conditions to improve, we are carefully managing spot opportunities and are strategically exercising patience with certain geographies. Despite the external market factors impacting our results, the third quarter represented a significant and positive milestone for us as we produced the first development tons from our world-class Blue Creek growth project on time and within budget. With our high-quality asset base, highly flexible cost structure, and a high-performing workforce, we're well-positioned to capitalize on improved global steel demand when the market turns. And at the same time, we're advancing the Blue Creek project completion with a rigorous focus on cost and execution. The third quarter turned out to be weaker than we had expected for our markets, primarily driven by a confluence of weaker demand, excess Chinese steel export into our customers' markets, and ample supply of steelmaking coals. The reality of higher export volumes of lower cost Chinese steel has been a growing concern for some time, impacting all steel producing regions across the world. As such, global steel prices have either extended their downward trend or remained at low values, challenging our customers' margins. The consequences of excess Chinese steel also impact our own markets. This is because Chinese steel production predominantly relies on domestic coals and landlocked Mongolian coals, which typically do not impact the global seaborne met coal balance. Along with stable production from Australia, the USA, and Canada, these factors have created the lowest pricing environment for steelmaking coal since June of 2021. Our primary index, the PLV FOB Australia, ended the third quarter at $186 per short ton, which was $26 lower than the end of the second quarter at $212 per short ton. During the month of September, the PLV FOB Australian index established a low point for the year of $163 per short ton. Likewise in September, the PLV CFR China Index also established its low point of the year at $177 per short time. Similar declines were observed with the second tier indices, although both indices displayed different levels of volatility in relation to the PLV FOB Australia Index. We achieved a consolidated gross price realization of 93% in the third quarter, which was a function of product mix geography, and freight rates. At these low prices, we believe that several producers of steelmaking coal have not only experienced significant margin erosion, but may also have experienced realizations below their total cash costs, suggesting that the current pricing environment is not sustainable for extended periods of time. While we expect steelmaking coal prices to improve slightly in the fourth quarter, we believe the pricing environment will remain under pressure due to the persistent weakness in the global steel markets and delayed infrastructure spending in India. According to the World Steel Association monthly report, global pig iron production decreased by 3.3% in the first nine months of 2024, as compared to the prior year period. Pig iron production in China, which is the world's largest production region, fell by 4.6% for the same period. The rest of the world's pig iron production experienced a more modest decline of 0.5% for the first nine months of the year. India remains a bright spot with a growth rate of 3% and is expected to continue growing with new blast furnace capacity coming online later this year. Several other regions also experienced positive growth for the period, such as Brazil and certain European countries. However, their gains were largely offset by declining production from Japan and South Korea. Now let me turn back to our third quarter results. Our third quarter sales volume of 1.9 million short tons was 17.5% lower than the comparable quarter last year. As I said earlier, we're carefully managing spot opportunities and strategically exercising patients with certain geographies until the market improves. Our sales by geography in the third quarter break down as follows. 44% into Europe, 41% into Asia, and 15% into South America. The majority of the sales into Asia in the third quarter were to customers in Japan, China, and India. As we've previously noted, demand from the Asian steel producers has been growing, resulting in higher sales to that geography. While sales from our traditional markets in Europe and South America remain lower primarily due to weak spot market opportunities. Our spot volume was 23% in the third quarter of 2024, which was primarily sold into the Asian market. This percentage was significantly lower than the reported amounts for the first and second quarters of this year as we carefully managed spot opportunities during this period of low steelmaking coal prices. For the full year, we expect our spot volume to range between 25% to 30% of total sales volume. Production volume in the third quarter was 1.9 million short tons, compared to 2 million short tons in the same quarter of 2023, representing a 3.8% decrease. During the third quarter, we commenced continuous minor development of the first longwall panel at our world-class Blue Creek growth project, producing the first development tons of 39,000 short tons. Our coal inventory increased slightly to 915,000 short tons, which includes the Blue Creek development tons, from 895,000 short tons at the end of the second quarter. During the third quarter, we spent $123 million on CapEx and mine development. Of that amount, CapEx spending totaled $116 million, which included $94 million on the development of Blue Creek, Mine development spending on the Blue Creek project was $7 million during the third quarter of 2024. Now that we have started developing the first longwall panel at Blue Creek, our mine development costs will continue to grow during the remainder of the year and until the longwall starts production, which we expect to occur in the second quarter of 2026. Our Blue Creek growth project continues to make excellent progress. During the third quarter, we completed the installation and commissioning of the service cage, slope belt, slope car, and raw coal belt. The completion of these major components allowed us to begin development of the initial long wall panel with the first continuous minor unit. On the surface infrastructure components, we continued to make significant progress on the construction of the preparation plant, which is expected to be online in the middle of 2025. On the coal transportation components, good progress was made on the construction of the approximately 10 mile long clean coal belt structure, with the first mile nearly completed. Steady progress continued during the third quarter on the rail and barge loadouts as well. All of these components remain on schedule. In the near term, we're focusing on increasing our head count at Blue Creek in order to start two additional continuous minor units in the fourth quarter. Currently, we're on track to meet those goals. We're very pleased that the development for the first lawn wall panel started on schedule during the third quarter as originally expected, and we're on track to produce approximately 200,000 short tons of high vol A steelmaking coal in the second half of 2024. As we've said before, the development tons produced from the second half of this year to the first half of 2025 are expected to be sold in the second half of 2025 after the preparation plant comes online. Including the $94 million we invested during the third quarter of 2024, year-to-date development spending on Blue Creek totals $246 million. We expect to invest approximately $325 to $375 million in 2024 on the project. inclusive of the $246 million already invested. With the entire project to date to the end of third quarter 2024, we've invested a total of $612 million. We remain focused on tight capital spending discipline to ensure the project will be completed within our reset baseline cost estimate on the original schedule, including the Lowell Wall startup in the second quarter of 2026. We currently have sufficient liquidity on hand to complete the project within the baseline cost estimate. Blue Creek represents one of the last remaining untapped premium high-quality high-vol-A coal reserves in the U.S., and we anticipate our coal will achieve premium prices. We expect incremental annualized production of 4.8 million short tons of premium high-vol-A steelmaking coal after the startup of the Longwall, which will enhance and strengthen our already strong global cost curve positioning and deliver incremental profit and cash flows. I'll now ask Dale to address our third quarter results in greater detail.