Warrior Met Coal, Inc.

Good afternoon. My name is Chris, and I will be your conference operator today. At this time, I would like to welcome everyone to the Warrior Fourth Quarter and Full Year 2025 Financial Results Conference Call. At this time, all lines are in a listen-only mode. Following today's presentation, there will be an opportunity to have a question and answer session. This call today is being recorded and will be available for replay once the call is over on the company's website. I would now like to turn the call over to Brian Chopin, Chief Accounting Officer and Controller. Please go ahead, sir.

Good afternoon and welcome everyone to Warrior's fourth quarter and full year 2025 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 ended December 31st, 2025 with the SEC this afternoon. You can find additional information regarding the company on our website at www.warriormetcoal.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 return the call over to Walt.

Thanks, Brian. Hello, everyone, and thank you for taking the time to join us today to discuss our fourth quarter and four-year 2025 results. I'll start by providing an overview of the quarter before Dale reviews our results in additional detail. 2025 was a transformative year for Warrior as Blue Creek began reshaping our production profile, cost structure, and long-term earnings potential. This performance was exemplified by our fourth quarter operational and financial results, which exceeded our expectations. As we previously communicated, the long wall operations at Blue Creek began production during the fourth quarter, eight months ahead of schedule, on budget, and funded by cash flows from operations. In continuing our trend of operational excellence throughout the entire Blue Creek project, the ramp up of the Blue Creek long wall was remarkably smooth, especially for a project of this scale, and delivered a strong operating performance during the fourth quarter. We achieved an annualized run rate of production during the quarter that well supports our increased volume guidance for 2026. I'll discuss our 2026 guidance later in my comments. Our strong performance in the fourth quarter, including a record high quarterly sales volume, wrapped up a remarkably successful year despite weak market conditions for steelmaking coal. We achieved double-digit volume growth in both sales and production volumes for the full year 2025, which were also record high levels of output for the company. This performance continued to reduce our first quartile cash costs, leveraging the inherently lower cost structure of the Blue Creek mine. In addition to the Blue Creek ramp up, both mine seven and mine four continued their high standards of strong performance, which was particularly important to the overall success of the company. Mine 4 set a new record high output for both sales and production volume. Total sales volume for 2025 was 9.6 million short tons, a record high, and a 21% increase over the prior year. Production volume was 10.2 million short tons, also a record high, and a 24% increase over 2024. Now let me turn to more specifics on the market conditions during the fourth quarter. before I share more detail on our operational and financial performance. The primary underlying drivers of the weak steelmaking coal markets for the fourth quarter were a continuation of the same factors we've been discussing each quarter for the past two years. In fact, Chinese steel export volumes for 2025 set a new record high of 119 million metric tons, a 7.2% increase year over year. Chinese crude steel production decreased by 4.4% during the same period, prompting the country to contemplate production control and implement export licenses. Beyond the sustained strength in key markets such as India, which grew its pig iron production by over 6% in 2025, global steel fundamentals have not shown significant improvement in the last couple of years. While global steelmaking coal markets remain challenged, A continuation of trends we've navigated successfully for the past two years, Warrior's disciplined execution and early contributions from Blue Creek allowed us to outperform despite the environment. Our primary index, the POB, FOB Australia, performed above our expectations for the fourth quarter and averaged $182 per short ton, which was the highest quarterly average in 2025. and marked the first time at that level since December 2024. The index average was 9% or $15 per ton higher than the third quarter of 2025 and was 1% lower than the fourth quarter of 2024. As for the main second tier indices, the Australian LVHCC index price continued its recovery from its low point in the second quarter and averaged $154 per short ton for the fourth quarter. This was $17 per ton, or 13% higher than the third quarter 2025, and 1% higher than the fourth quarter 2024. As a result, the relativity of Australian LDHCC index price to the Australian PLD index price improved from 82% for the third quarter to 85% for the fourth quarter 2025. In contrast to the Australian LBHCC index price, the average East Coast HVA index price decreased $6 per ton, or 4%, in the fourth quarter from the third quarter and averaged $135 per short ton. As a result, the relativity decreased from 85% for the third quarter to 75% for the fourth quarter 2025. We achieved a gross price realization of 75% for the fourth quarter of 2025 compared to 83% in the third quarter of 2025. While the average of both main pricing indices increased in the fourth quarter compared to the third quarter of 2025, our lower gross price realization was primarily driven by a combination of four factors. First, our sales mix of high vol A quality was 8% higher. Second, that higher sales mix of HVAA quality was primarily sold into the Pacific Basin. We sold 18% more volume into the Pacific Basin in the fourth quarter than the third quarter of 2025. Third, the merge costs were temporarily higher in the fourth quarter due to longer vessel loading queues that were attributed to modernization work on a shiploader at the terminal. And fourth, we continued to experience elevated freight rates into the Pacific Basin. As we continue to ramp up Blue Creek production and sales volume, our quarterly gross price realization may be volatile, depending upon the relative index price, product mix, geography, tariffs, and freight rates to the Pacific Basin. However, on a long-term basis, including Blue Creek, we expect our annual gross price realization to be approximately 80% to 85%, assuming the relativities of the Australian LVHCC index price and U.S. East Coast HVA index price to the Australian PLD index price historical averages. However, this may not be achievable in 2026 and not until the overall market fundamentals of supply and demand become more balanced across the regions of the world. While Blue Creek products mix will influence our long-term average net selling price, Blue Creek's significantly lower cost structure is expected to more than offset this and drive substantial margin expansion for the company. Strong contractual demand combined with excellent performance from our legacy mines and the additional contribution from Blue Creek enabled Warrior to achieve a record high quarterly sales volume in the fourth quarter of 2.9 million shore tons. This result compares to 1.9 million tons in the same quarter of 2024, representing a 53% increase. We sold 881,000 tons of Blue Creek steelmaking coal during the fourth quarter 2025, which were contractual volumes sold primarily into Asia. Our sales by geography for the fourth quarter break down as follows. 57% into Asia, 34% into Europe, and 9% into South America. Our spot volume was 6% for the fourth quarter 2025 and was 9% for the full year. Production volume in the fourth quarter of 2025 was a record high, 3.4 million short tons compared to 2.1 million in the same quarter of last year, representing a 61% increase. Production from our Blue Creek mine was 1.3 million tons during the fourth quarter and exceeded our expectations. Our coal inventory levels increased to 1.6 million short tons at the end of December compared to 1.1 million tons at the end of September 2025. The increase in inventory reflects the early startup of Blue Creek's longwall production. The early startup of the Blue Creek longwall was a major contributor to the higher volumes and profitability in the fourth quarter and for the full year 2025. As I noted earlier, the ramp-up of production went smoothly and has already achieved a quarterly run rate of 1.5 million short tons. However, given the expected weak market conditions for steelmaking coal in 2026, We will start the year with an expected production level of 4.5 million short tons from Blue Creek. We plan to sell the excess inventory that was built up in the fourth quarter before we ramp to a higher production level. We plan to ramp production in line with increases in contractual volumes to ensure we support pricing discipline while maximizing long-term value. Financially, we dedicated another $69 million of capital expenditures in the fourth quarter and $240 million for the full year of 2025 to the Blue Creek project. That brings the total project capital expenditures to date to $957 million. As a reminder, this is on a budget and fully paid out of cash flow without any funded debt. Our total project estimate remains unchanged, ranging from $995 million to $1.75 billion. The remaining capital to be spent on the Blue Creek project is expected to occur by the end of the first quarter of 2026. The remaining work is primarily related to finishing the barge loadout, finishing a third storage silo at the rail loadout, paving roads, completing storage and shop buildings, and other final project details. None of this final work should have any impact on production from new mines. Let me take a moment to step back and summarize a few key highlights for the year 2025. First, we were able to start the Blue Creek Longwall eight months ahead of schedule, remain on budget, and fund the entire project at a cash flow from operations. Second, adding Blue Creek to our production profile adds significant scale to our operations and significantly further improves the company's first quartile cost curve position, which is expected to drive margin expansion in the future. Third, we were successful in strategically expanding our total reserve base by finalizing two federal coal leases to obtain 53 million shore tons of additional reserves. It's also created access to other additional privately owned reserves. Fourth, while we made significant investments in Blue Creek, we managed our costs and spending to meet or exceed all of our guidance targets for 2025. I'll now ask Dale to address our fourth quarter results in greater detail.