Warrior Met Coal, Inc.

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

Good afternoon. and welcome everyone to Warrior's fourth 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 releases 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 fourth quarter press release, furnished to the SEC on Form 8K, which is also posted on our website. Additionally, we will be filing our Form 10-K for the year ending December 31st, 2024 with the SEC this afternoon. You can find additional information regarding the company on our website at www.warriormetcold.com, which also includes a fourth quarter supplemental slide deck that was posted this afternoon. Today on the call with me are Mr. Walt Scheller, Chief Executive Officer, and Mr. Dale Boyles, Chief Financial Officer. After our formal remarks, we will be happy to answer 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 fourth quarter 2024 results. After my remarks, Dale will review our results in additional detail, then you'll have the opportunity to ask questions. Looking at the fourth quarter, we were pleased with how the company performed, despite the current market fundamental headwinds. Our strong operational base continued to differentiate Warrior, driving sales volumes 23% higher and production volumes 7% higher than last year's fourth quarter. When high quality steel making coal prices recover from this past quarter, where they've reached the lowest level since 2021, Warrior is well positioned to capitalize on improved market dynamics. Looking back over the last 12 months, the company had a very successful 2024 as we met or exceeded all guidance targets, achieved sales and production volumes not seen since 2019, recorded the highest annual production from mine four, and produced the first tons from our world-class Blue Creek growth project. We generated cash from operations of over $367 million, which was used to both further the development of Blue Creek and return over $43 million of cash to stockholders via dividends. I'd like to thank all our employees for the successes we achieved in 2024 and congratulate them on delivering strong safety results. The safety of our employees is and remains our number one priority. The current state of steelmaking coal markets provides the backdrop for our recent performance where low prices continued from the third quarter into the fourth quarter. In fact, the markets became weaker over the entire year, reaching their lowest points in the fourth quarter. The primary factors impacting our markets continue to be driven by a confluence of three factors. excess Chinese steel exports into our customers' markets, weak demand, and an ample supply of steelmaking coals. These factors impacting our markets appear to be well entrenched, persisting for the entirety of the fourth quarter and into the beginning of 2025. Our customers remain focused on cost control and profitability due to low global steel prices and thin margins negatively impacting their results. These market factors, in addition to the ample supply and availability of steelmaking coals, have kept all of our pricing industries under pressure and have challenged our profitability. Prices at these levels are especially challenging for other steelmaking coal producers higher on the cost curve than we are. Even the recent mine fires in the sector have had only an insignificant impact on seaborne pricing. Our cost discipline continues to be a key differentiator for us in this environment. Our primary index, the PLV FOB Australia, ended the fourth quarter at $178 per short ton, which was $7 per ton lower than the end of the third quarter, and averaged $184 for the fourth quarter. The PLV CFR China index ended the fourth quarter at $180 per short ton, and averaged $193 for the fourth quarter. Similar declines were observed with the Plath LVHCC index for a high vol A product sold primarily into Asia, which ended the year at $141 per short ton. We achieved a gross price realization of 86% for the fourth quarter and 89% for the full year 2024, which was a function of product mix, geography, tariffs, and freight rates. According to the World Steel Association Monthly Report, global pig iron production decreased by 1.8% in 2024 as compared to the prior year. Pig iron production in China, which is the world's largest production region, fell by 2.3% for the same period. The rest of the world's pig iron production experienced a more modest decline of 0.7% for the full year. India remains a bright spot with a growth rate of 4.4% and is expected to continue growing with new blast furnace capacity expected to come online this year. Several other regions also experienced growth for the period, such as Brazil and certain European countries. However, their gains were offset by declining production from Japan and South Korea. Now let me turn back to our fourth quarter results. Importantly, our strong sales volume was driven by better production volumes from the existing mines. Our fourth quarter sales volume was 1.9 million short tons compared to 1.5 million short tons in last year's same quarter. Our sales by geography in the fourth quarter break down as follows. 38% into Asia, 36% into Europe, and 25% into South America. Most of the sales into Asia in the fourth quarter 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. This shift in sales by geography is evidenced by sales into Asia growing from 25% of our geographic mix in last year's fourth quarter to 38% in this year's fourth quarter. Most of that shift was from sales into Europe, which decreased from 56% in last year's fourth quarter to 36% this year. Our spot volume was 17% in the fourth quarter 2024, which was primarily sold into the Asian markets. This result marked the fourth consecutive quarterly decrease in spot volume sales during 2024, coinciding with a decline in pricing index. For the full year, our spot volume was 27% of total sales volume. Production volume in the fourth quarter was 2.1 million short tons, compared to 2 million short tons in the same quarter 2023. Mine 4 had an outstanding year and reached a new record high annual production volume of 2.8 million short tons for the year. In addition, our continuous miner units at our newly developed Blue Creek mine produced 170,000 short tons during the fourth quarter, which is included in the quarterly total. The combination of our existing mines continuing to perform well in production of Blue Creek drove a 7% increase in production in the fourth quarter. Our coal inventory increased slightly to 1.1 million short tons at the end of the fourth quarter from 915,000 short tons at the end of the third quarter, primarily due to the Blue Creek production volumes. During the fourth quarter, we spent $142 million on CapEx and mine development. Of that amount, CapEx spending totaled $131 million. Mine development costs for the Blue Creek project were $11 million during the quarter. Now that we've started developing the first lawn wall panel at Blue Creek, we expect our mine development costs to continue to grow throughout 2025 and until the lawn wall production starts. which is expected to occur no later than the second quarter of 2026. Looking further at the transformational Blue Creek growth project, we continue to make excellent progress while remaining on budget. Our excitement for the project is increasing as we move closer to starting the lawn wall production. As we had previously disclosed, production began in the third quarter on time as expected. By the end of the fourth quarter, we had commenced two additional continuous minor units for a total of three of Blue Creek and produced 209,000 short tons for the year. In the fourth quarter, we continued to make strong progress by building out the surface infrastructure of Blue Creek. We completed the installation of the clean coal silos at the rail loadout, began construction on the dry slurry processing system, and made considerable progress on the preparation plant, the overland clean coal belt, and the barge loadout. We invested over $104 million in the fourth quarter in the continued development of Blue Creek, which brings the full year 2024 project investment to $350 million. As of year end, the total project investment to date was $717 million, which has been 100% funded from internally generated cash flows from the existing operations. The project team continues to do an excellent job of managing the capital spending and staying on schedule. All remaining key development progress milestones remain on track. We've started to take delivery of the lawn wall shields and we expect to have all shields on site in the first half of 2025. In addition, all major preparation plan equipment is on site awaiting installation. The preparation plan is expected to be completed in the middle of 2025. After the preparation plant starts up, we expect to begin selling Blue Creek steelmaking coal in the second half of 2025. We were incredibly pleased to start two additional minor units of Blue Creek by the end of the fourth quarter as scheduled. These additional units will ramp up to full production in 2025, and we expect to produce approximately one million short tons of high vol A steelmaking coal from all three continuous minor units. As we continue to ramp up continuous minor production, prepare for the start of the long wall, and complete the surface infrastructure over the next year and a half, we expect to hire an additional 250 to 300 people by the time the long wall starts no later than the second quarter of 2026. Despite the current weak market conditions, we believe we have sufficient liquidity on hand to complete the project. We remain focused on tight capital spending discipline until the very end of the project. The total of $717 million invested in the development of Blue Creek to this point is more than two-thirds of the expected total project capital expenditure. And this spending has been 100% funded from internally generated cash flows. Absent any unexpected or unusual event, we continue to believe that we will deliver the project on schedule, as planned, and be completed within our total project capital expenditure estimate of $995 million to approximately $1.1 billion. Blue Creek represents one of the last remaining untapped premium, high-quality, high-volume coal reserves in the U.S., and we anticipate our coal will generate strong margins. We expect incremental annualized production of at least 4.8 million short tons 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. Since we launched the project back in 2022, there have been significant improvements to the project scope, inflationary cost increases, and changes in the outlook for steelmaking coal prices. We expect to provide an update on the original long-term project economics in the near future that we expect will demonstrate significant value creation for our stockholders from Blue Creek. I'll now ask Dale to address our fourth quarter results in greater detail.