Warrior Met Coal Inc

Warrior Met Coal is a leading producer of premium metallurgical coal, which is used in steel production. Years of limited global investment in new metallurgical coal capacity have constrained future supply, which should provide a favorable backdrop when steel demand improves. The company recently completed its Blue Creek development project, positioning Warrior as one of the lowest-cost producers in the industry while allowing substantially more cash flow to accrue to shareholders. Assuming a 'lower-for-longer' metallurgical coal price environment, we estimate the business can generate approximately $300–700 million of annual free cash flow, or roughly $6–13 per share.

Warrior Met Coal's stock experienced significant volatility during the quarter, but the outlook remains positive. The recent gas explosion at a coal mine in Shanxi province has driven met coal prices higher, which bodes well for Warrior. Additionally, the Blue Creek mine is expected to be a key growth driver, with increasing production and sales volume anticipated to boost revenue and EPS growth, even amidst a weaker met coal pricing environment.

Warrior Met Coal's stock experienced significant volatility during the quarter, but the outlook remains positive. The recent gas explosion in a Chinese coal mine has driven met coal prices higher, which could benefit Warrior. Additionally, the Blue Creek mine is expected to be a key growth driver, with increasing production and sales volume anticipated to boost revenue and EPS growth, even amidst a weaker pricing environment for met coal.

Warrior Met Coal's stock experienced significant volatility during the quarter, but the outlook remains positive. The recent gas explosion in a Chinese coal mine has driven met coal prices higher, which could benefit Warrior. Additionally, the Blue Creek mine is expected to be a key growth driver, with increasing production and sales volume projected to enhance revenue and EPS growth, even amidst a weaker met coal pricing environment.

Warrior Met Coal, which currently operates two metallurgical coal mines and has been constructing a third mine named Blue Creek, was also a top contributor during the quarter. The Blue Creek project has been managed on budget and slightly ahead of schedule. Blue Creek recently began production and is expected to reach full run-rate production in the first half of 2026. At full production, Blue Creek will bring about a major step change in Warrior’s production volumes and operate at world-class production costs. Going forward, the looming end of significant capital spending on the construction of Blue Creek should enable Warrior to return to its long-running approach of returning much of its cash profits to shareholders, particularly given the pristine state of its balance sheet.

Warrior Met Coal is positioned for significant cash flow generation as it wraps up its capital investment in the Blue Creek project by early 2026. Despite a challenging Q1 2025 with a 40% revenue decline due to falling met coal prices, the company maintained robust liquidity of $617 million and emphasized the strength of its contracted sales and cost discipline. The existing mines are projected to generate $100-$350 million in annual free cash flow, while the Blue Creek development could add an additional $100-$500 million. This positions Warrior Met to potentially generate $200-$850 million in total free cash flow, translating to a 9-35% unlevered annual free cash flow yield at mid-cycle pricing.

Warrior Met Coal (HCC) is positioned to benefit significantly as it concludes its current capital project, which is expected to lead to substantial free cash flow generation. The company has a fortress balance sheet and is one of the cheapest producers in the market. With met coal demand projected to climb due to economic development in Asia, and a severe lack of investment in the sector, HCC is well-placed to capitalize on these trends. The manager finds the investment extremely compelling and anticipates that the company can buy back stock at lower prices, enhancing shareholder value.

While not an easy decision, we ultimately decided to sell Warrior Met Coal during Q1 while we wait for the trade war to die down. China has already directly targeted US coal in their retaliatory tariffs, and with Warrior being 99% export exposed, we think there’s a decent chance met exports get worse before they get better. I think the latest round of tariff announcements will be devastating for the coal industry and want to wait before adding exposure.

While not an easy decision, we ultimately decided to sell Warrior Met Coal during Q1 while we wait for the trade war to die down. China has already directly targeted US coal in their retaliatory tariffs, and with Warrior being 99% export exposed, we think there’s a decent chance met exports get worse before they get better. I think the latest round of tariff announcements will be devastating for the coal industry and want to wait before adding exposure.