HCC - NYSE

Good afternoon. My name is Cole [ph] and I will be your conference call 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 the replay on the company's website. I would like to turn the conference over to D'Andre Wright, Vice President of External Affairs and Communications. Please go ahead, sir.

[Operator Instructions] And our first question today will come from Lucas Pipes with B. Riley Securities.

That's helpful. I'll turn over to the cost side. If I understood, Dale write in his prepared remarks, he mentioned kind of variable costs on the transportation side. One, could you speak to the sensitivity in transportation to changes in the price? And has all of that benefit kind of flown through at this point or could there be more bearable cost adjustments on transportation in Q4? Would appreciate your thoughts on that. Thank you.

Yes. We -- you know, transportation now resets on a one month lag, Lucas, not a three month like we used to have. So there is a little bit to be gained, maybe possibly in the fourth quarter but I don't see it as significant, depending on the volumes. But there could be a little upside on transportation in the fourth quarter.

And more broadly, on the cost side for Q4, any major moving besides that transportation? Thank you for that color. Any other moving pieces to keep in mind for Q4 on the cost side?

There shouldn't be. We've had a couple of longwall moves in the third quarter. Again, we've managed to get those moves down to zero day or minimal moves. And also the amount of those sections, conditions get a little tougher; so we're out of that. So I don't see any major cost impacts in the fourth quarter, positive or negative.

Walt and Dale, I appreciate all your color, and keep up the good work.

And our next question will come from Nathan Martin with The Benchmark Company.

Thanks, operator. Good afternoon, Walt. Good afternoon, Dale. Maybe just following up on one of Lucas's questions. Clearly, like you guys said, markets kind of remaining depressed, you mentioned exercising some patience with sales, which I think is prudent. But how should we think about this impacting your opportunity to ship coal here in the fourth quarter? Could you anticipate maybe fourth quarter shipments actually being down sequentially, if demand doesn't improve?

I don't believe so. I think we should be -- from where we expected for the fourth quarter, you have to remember, again, as we said, we have fewer operating days. And I think -- as we look at the fourth quarter, our expectations land right in the heart of our full year guidance.

Okay. Well, I appreciate that. So if I say right middle of full year guidance of sales, right, that would be 7.8 million tons. Is that what you're talking about for the full year?

Yes, yes. That would put us -- say fourth quarter could be very similar, maybe slightly -- just slightly below the third quarter.

Yes, that's what I was thinking, Dale. So, it looks like if you're flat, you get to about 7.9 [ph]. Okay, that's very helpful. Appreciate that, guys. And then, maybe just coming back to the 3Q gross price realization, the 93% [ph] -- I know asked about that last quarter. Obviously, Lucas just touched on that as well. But maybe from just the pure math of it, and -- you know, another several investors are out there that maybe appreciate a walk through there. So when people are trying to calculate the average net price for -- really, any given quarter; A) what's the best time period to use so that we can get to that -- your 93% number you guys talked about?

Okay. And I think that might be some of the issues, like -- if I looked at it again, the one month lag, let's say, well, for 3Q, right? So we're looking at, instead of the normal calendar we're looking at June, July, August. I end up with a FOB Australian premium level price about $230 [ph], and it's difficult to get to that 93% realization. Maybe some of it is backing out the demurrage [ph] pieces. I don't know if there's any other things you want to add right now or we can just take it offline?

All right. Yes, let’s take it offline.

Okay, appreciate that. And then, maybe just one final question on the cost side. You guys have said previously the full year 2024 cost per ton guidance range of $125 to $135 assumes roughly a $250 to $260 per metric ton off-sea premium lowball price. Given where markets are today, call it, $200 to $204; could you give us an idea of what cost per ton might look like at that price?

Well, I think we would be in the lower end of that range. If you look on a year-to-date basis, we're at $127. And if you look at the average selling price $198; convert that to metric, then you're looking at an 88% net realization of that versus the $250. So that's why I'm saying we're riding the line today. But if fourth quarter pricing is lower, our cost hopefully will be lower in the fourth quarter. Now, it depends on the volumes, right; the volume impact. So -- but we should be -- you know, if pricing stays lower and we don't have any upticks from here, we should be in that lower end of the range.

Okay. So you still think it's probably in the lower the end of the range; they'll not -- not possibly below pricing [indiscernible]?

It’s possible. It depends then because you're going to have your volume impact, right? So if we cut that volume significantly, that could have an impact on it.

Yes, it makes sense; lower denominator. Okay, perfect. Guys, appreciate the time. And best of luck in the fourth quarter.

[Operator Instructions] Our next question will come from Katja Jancic with BMO Capital Markets.

Hi, thank you for taking my questions. I know next year, second half of next year you're going to start shipping or selling the Blue Creek volume. Are you already in conversations with customers about that volume?

Yes, we are.

And -- what are the conversations? Are you going to be contracting that already or it's going to be more on the spot side?

I think it will be the expectation of contract. I mean, these are going to be -- again, it's a new coal mine, everyone is going to want to see how it works in their coke ovens. So, we're going to be shipping that off to customers to try a couple of holes, or a full cargo of -- but -- you know, we'll be placing that coal with various customers to give them a first try at it.

Yes, just a swag right there. I mean, yes, it may be a little more than that but we need to finalize the budget for next year.

And then, has it started to assume that some of that will put some pressure on the cost side, at least in the first half of the year?

No, not until you sell some of that coal; all that will go to mine development.

Okay, perfect. Thank you so much.