Analyst Summary
- Nameplate capacity of Blue Creek increased by 25% to 6.0 million short tons per year.
- Blue Creek is expected to generate approximately $1.3 billion of incremental revenues, $735 million of incremental adjusted EBITDA, and $637 million of incremental free cash flows annually.
- Net present value (NPV) of Blue Creek is approximately $5.4 billion with an internal rate of return (IRR) of 35% and a payback period of 2.3 years.
- The first longwall is expected to start no later than Q2 2026.
- Project expected to be completed on time and within budget, and fully paid for by cash flows generated from operations.
Opportunities and Risks
- Opportunity: Increase nameplate capacity by 25% to 6.0 million short tons per year.
- Opportunity: Potential to increase nameplate capacity to 6.6 million short tons per year by adding an additional continuous miner unit.
- Risk: Fluctuations or changes in the pricing or demand for the Company’s coal.
- Risk: Impact of global pandemics on its business and that of its customers.
- Risk: The impact of inflation on the Company, the impact of geopolitical events, including the effects of the Russia-Ukraine war and the Israel-Hamas war.
- Risk: The inability of the Company to effectively operate its mines and the resulting decrease in production.
Potential Implications
Company Performance
- Significant addition of nameplate capacity to address market dynamics.
- Positive impact on Warrior for decades to come.
- Expected to drive Adjusted EBITDA margins of >50% across the cycle.
- Warrior expects a step increase in Free Cash Flow as Blue Creek comes online, providing additional capital allocation upside for stockholders.
Stock Price
- The increased production capacity and positive financial projections for the Blue Creek project could positively impact the company’s stock price.
- The company’s strong record of returning cash to stockholders may also be viewed favorably by investors.