Warrior Met Coal, Inc. (NYSE:HCC) Q4 2025 Earnings Call Transcript

Warrior Met Coal, Inc. (NYSE:HCC) Q4 2025 Earnings Call Transcript February 12, 2026

Warrior Met Coal, Inc. misses on earnings expectations. Reported EPS is $0.4713 EPS, expectations were $0.62.

Operator: 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 Met Coal, Inc. 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 M. Chopin, Chief Accounting Officer and Controller. Please go ahead, sir. Good afternoon, and welcome, everyone, to Warrior Met Coal, Inc.’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 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 as defined and reconciled to comparable GAAP financial measures in our fourth quarter press release furnished to the SEC on Form 8-K, which is also posted on our website. Additionally, we will be filing our Form 10-K for the year ended 12/31/2025 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. Walter J. Scheller, Chief Executive Officer, and Mr. Dale W. 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 Walter J. Scheller. Thanks, Brian. Hello, everyone, and thank you for taking the time to join us today to discuss our fourth quarter and full year 2025 results. I will start by providing an overview of the quarter before Dale reviews our results in additional detail. 2025 was a transformative year for Warrior Met Coal, Inc. 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 longwall operations of 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 longwall 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 will 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.

Q&A Session

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 7 and Mine 4 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 9,600,000 short tons, a record high and a 21% increase over the prior year. Production volume was 10,200,000 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 have been discussing each quarter for the past two years.

In fact, Chinese steel export volumes for 2025 set a new record high of 119,000,000 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 controls 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 have 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 PLV 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 LV HCC 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 of 2025 and 1% higher than the fourth quarter of 2024. As a result, the relativity of the Australian LV HCC index price to the Australian PLV index price improved from 82% for the third quarter to 85% for the fourth quarter of 2025.

In contrast to the Australian LV 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 of 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 High Vol A 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, demurrage costs were temporarily higher in the fourth quarter due to longer vessel loading queues that were attributed to modernization work on a ship loader at the terminal. And fourth, we continue 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 LV HCC index price and U.S. East Coast HVA index price to the Australian PLV 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 product 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 2,900,000 short tons. This result compares to 1,900,000 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 of 2025, which were contractual volumes sold primarily into Asia.

Our sales by geography for the fourth quarter breakdown is as follows: 57% into Asia, 34% into Europe, and 9% into South America. Our spot volume was 6% for the fourth quarter of 2025 and was 9% for the full year. Production volume in the fourth quarter of 2025 was a record-high 3,400,000 short tons compared to 2,100,000 in the same quarter of last year, representing a 61% increase. Production from our Blue Creek mine was 1,300,000 tons during the fourth quarter and exceeded our expectations. Our coal inventory levels increased to 1,600,000 short tons at the end of December compared to 1,100,000 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 1,500,000 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 4,500,000 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 $69,000,000 of capital expenditures in the fourth quarter and $240,000,000 for the full year 2025 to the Blue Creek project. That brings the total project capital expenditures to date to $957,000,000.

As a reminder, this is on budget and fully paid out of cash flow without any funded debt. Our total project estimate remains unchanged, ranging from $995,000,000 to $1,075,000,000. The remaining capital to be spent on the Blue Creek project is expected to occur by the end 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 the new mine. 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 out of 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 53,000,000 short tons of additional reserves. This 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 will now turn the call over to Dale W. Boyles for the financial results. Thanks, Walt. Our fourth quarter results continued the sequential improvement quarter after quarter throughout 2025.

As Walt discussed earlier, the steelmaking coal markets continue to be pressured in the fourth quarter by the same factors that we have discussed over the last two years. Despite these market conditions, we continue to outperform expectations for 2025 as we met or exceeded our full year 2025 guidance targets on the back of a strong fourth quarter both operationally and financially. Let me first highlight our fourth quarter financial results compared to the third quarter of 2025. Our fourth quarter adjusted EBITDA of $93,000,000 was 31% higher than the third quarter of 2025, primarily due to the following factors: First, our sales volumes were 22% higher in the fourth quarter, including an increase of tons sold from Blue Creek. Second, our average net selling price was dollars per ton lower in the fourth quarter, primarily due to a higher mix of High Vol A volume sold, and that volume was sold into the Pacific Basin on a CFR basis at elevated freight rates.

In addition, demurrage was temporarily higher in the fourth quarter as Walt noted earlier. This result was offset by the increase in the average price indices quarter over quarter. Third, cash cost per ton were $7 lower in the fourth quarter and were primarily attributed to Blue Creek’s inherently low cost structure, which increased our cash margin per ton. And finally, operating cash flows of $76,000,000 were $29,000,000 lower than the third quarter of 2025. This result is attributed to the increase in working capital, primarily for accounts receivable and inventory, as we ramped up the Blue Creek longwall in the fourth quarter. Our spending for capital expenditures and mine development were a combined $20,000,000 lower in the fourth quarter compared to the third quarter of 2025, primarily due to lower investments in Blue Creek.

Free cash flow was about $9,000,000 lower in the fourth quarter. Now let me compare the fourth quarter of 2025 to the prior year fourth quarter results. Warrior Met Coal, Inc. recorded net income of $23,000,000, or $0.44 per diluted share, compared to net income of $1,000,000, or $0.02 per diluted share, in the same quarter of 2024. We reported adjusted EBITDA of $93,000,000 in the fourth quarter of 2025 compared to $53,000,000 in the same quarter of 2024, an increase of 75%. Our adjusted EBITDA margin grew to 24% in the fourth quarter of 2025 compared to 18% in the same quarter of last year, despite the PLV index being 1.3% lower in the fourth quarter of 2025. On a per-ton basis, our adjusted EBITDA margin grew to $32 per short ton in the fourth quarter of 2025 compared to $28 in last year’s fourth quarter.

The primary drivers of these improvements came from 53% higher sales volumes, lower cash cost including the low-cost Blue Creek tons sold, lower variable transportation and royalty cost, and tightly managing and controlling all other production cost. These improvements were partially offset by a 16% lower average net selling price. Total revenues were $384,000,000 in the fourth quarter of this year compared to $297,000,000 in the same quarter of last year. The total increase of $87,000,000 was primarily due to the 53% higher sales volumes impact of $154,000,000, offset by the impact of a decrease in average gross selling prices of $52,000,000 and a higher mix of High Vol A tons sold of $13,000,000. In addition, demurrage and other charges were $6,000,000 higher compared to last year’s fourth quarter.

This resulted in an average net selling price of $130 per short ton in the fourth quarter of 2025 compared to $155 per ton in the fourth quarter of last year. Cash cost of sales were $270,000,000, or 72% of mining revenues, in the fourth quarter of this year compared to $226,000,000, or 77% of mining revenues, in the fourth quarter of last year. Of the $44,000,000 net increase in cash cost of sales, there was a $119,000,000 increase in cost which were attributed to the 53% increase in sales volumes. These higher costs were offset partially by $70,000,000 of lower costs that were driven by leverage of lower-cost Blue Creek tons sold and lower variable transportation and royalty cost on lower average steelmaking coal price indices. In addition, we continue to rationalize and tightly manage our spending on supplies, repairs, and maintenance expenses throughout the operations to maintain our low-cost profile.

Cash cost of sales per short ton, FOB port, was approximately $94 in the fourth quarter of 2025 compared to $120 in the same quarter last year. The 22% decrease was primarily related to lower overall spending at the legacy mines of $11 per ton due to tightly managing our overall spending, lower variable participation royalty cost of $5 per ton on lower steel prices, and $10 per ton from the incremental sales of low-cost Blue Creek tons. These lower costs resulted in higher cash margins per ton. Our fourth quarter 2025 SG&A expenses were $18,000,000 and were less than $1,000,000 higher than the same quarter of the prior year, primarily due to higher employee-related expenses. Depreciation and depletion expenses were $56,000,000, which was higher than the fourth quarter of 2024, primarily due to the additional assets placed into service at Blue Creek and the higher sales volumes in 2025.

We recorded income tax expense of approximately $13,000,000 on pretax income of $36,000,000 in the fourth quarter of 2025. Our full-year 2025 effective income tax rate varied from the statutory federal income tax rate of 21% primarily due to tax benefits recognized for depletion expense, marginal gas well credits, and a foreign-derived intangible income deduction, which exceeded pre-tax book income, resulting in an effective income tax rate of a negative 5% for the full year. Now let’s turn to cash flows for the fourth quarter of 2025. Cash flows from operating activities were $76,000,000 in the fourth quarter of 2025 and were $22,000,000 higher than the previous year’s fourth quarter, despite Blue Creek’s negative impact on working capital.

Working capital increased by $8,000,000 during the fourth quarter as the company ramped up production and sales volumes at Blue Creek. Free cash flow was a negative $28,000,000 due to $76,000,000 in operating cash flows less cash used for capital expenditures and mine development of $104,000,000. Capital spending totaled $94,000,000, which included $69,000,000 spent on Blue Creek as previously noted. Mine development costs for Blue Creek in the fourth quarter were $10,000,000. Now that Blue Creek longwall has started production, we do not expect to incur any mine development cost in 2026. While investments in Blue Creek and other development projects drove higher capital spending in 2025, the company continued to maintain strong liquidity and delivered year-over-year improvements in cost efficiency, positioning Warrior Met Coal, Inc.

for enhanced profitability as Blue Creek ramps toward full production. Our total available liquidity at the end of the fourth quarter this year was $484,000,000 and consisted of cash and cash equivalents of $300,000,000, short-term investments of $43,000,000, and $141,000,000 available under our ABL facility. And finally, let me turn to our current outlook and guidance for the full year 2026 as detailed in our earnings release. We expect steelmaking coal markets to remain generally consistent with 2025 levels. However, we enter 2026 from a position of significant strength with higher contracted volumes, record production capacity, and a structurally lower cost base driven by Blue Creek. While the assumption that prices will remain consistent with 2025 may seem conservative given the recent rally in index pricing, we believe the recent global mining production disruptions and inclement weather events may be temporary.

We expect PLV prices may revert downward following the remediation of these disruptions. We anticipate total sales and production volumes to be significantly higher in 2026 than 2025 as a result of starting the Blue Creek longwall eight months early and reaching new record-high output levels. Overall, company contracted volume in 2026 is approximately 90% of total sales volume. Our sales volume guidance is approximately 0.5 million tons higher than our production volume to reduce our inventory levels to our optimal target level of just below 1,000,000 short tons. And lastly, we expect to spend the remaining construction CapEx of $50,000,000 to $75,000,000 on the Blue Creek project in 2026. From a free cash flow perspective, we expect 2026 to be free cash flow negative due to the ramp-up of sales and production at Blue Creek, increasing our working capital and spending the remaining project capital expenditures in the first quarter.

We expect to be free cash flow positive in the second half of the year. Obviously, expectations are highly dependent upon the steelmaking coal markets’ actual pricing indices. I will now turn it back to Walt for his final comments. Thanks, Dale. Warrior Met Coal, Inc. is exceptionally well-positioned to deliver higher free cash flow and long-term value creation. We expect 2026 sales volumes to be more than 30% higher than 2025 and production volumes to be more than 20% higher than 2025, driven by the contribution of the new Blue Creek mine over the entire year. We expect to reduce our coal inventory levels to just below 1,000,000 tons, which has been reflected in our sales volume guidance. In addition, we have included approximately 4,500,000 tons of production from our Blue Creek mine, which could potentially be higher if we continue to be successful with the trial shipment and engage in more long-term contracts with customers.

Currently, we have 90% of our 2026 midpoint sales volume under contract, including 85% of the Blue Creek volume. As we look at current steelmaking coal market conditions, pricing levels remain notably strong and well above our original expectations. We believe this elevated pricing environment is primarily due to tightness in the premium quality segment as a result of recent supply constraints stemming from Australian weather disruption and mine production-related challenges in Australia. While it is difficult to predict how quickly supply chains will normalize, we anticipate that prices will remain supported through most of the first quarter. However, we believe these disruptions are temporary, and unless global steel fundamentals significantly improve, PLV prices should retreat and continue to be impacted by the same market factors that we have seen over the last two years.

As a result of the recent increase in PLV price, East Coast High Vol A price has become disconnected from the Pacific Basin indices and may weigh down overall gross price realizations due to the abundant supply of that quality of coal. While we have lots of cautious optimism, we run our company to prepare for the downside risk of weak steelmaking coal markets and hope we are conservative on our price assumptions as Dale just noted in his comments. In conclusion, 2025 marked a transformational year for Warrior Met Coal, Inc. The early startup of Blue Creek and the strategic expansion of our reserve base have strengthened the foundation of our long-term growth strategy and significantly enhanced our ability to meet sustained global demand for premium steelmaking coal.

With Blue Creek now contributing meaningfully to our scale and cost structure, we enter 2026 from a position of exceptional strength, supported by expected record volumes, a stronger first quartile cost platform, disciplined capital allocation, and a clear pathway to higher free cash flow generation. Our world-class assets, operational excellence, and commitment to long-term value creation position Warrior Met Coal, Inc. to deliver stronger financial results and increase stockholder returns as we move forward. We appreciate your continued support and look forward to updating you on our progress throughout the year. With that, we will now open for questions. Operator? Operator: Thank you. At this time, I would like to remind everyone that. And your first question today comes from the line of Nicholas Giles with B.

Riley. Please proceed. Nicholas Giles: Thanks, operator. Good evening, guys, and congrats on the progress. You have come out with some really robust guidance here in 2026, and costs are being guided to a range of $95 to $110, fairly wide. But just my first question was what is the PLV price assumption you are using? And then, given that costs in the fourth quarter came in below the low end of this range, what would prevent that level of cost being repeated in the first half year? Thanks. Dale W. Boyles: Good question. The PLV assumption there is a range of $185 to $215. So it is a little wider just thinking about the potential increases related to transportation and royalties with the elevated pricing here early in the year. Uncertain as to how long that will continue throughout 2026, but we do expect the PLV prices to come back down.

On the cost side, good question there. Strong cost performance from the existing mines and Blue Creek—what is going to keep it that low would be prices staying this low. Right? Because if we have elevated pricing, which we will have in the first quarter, it appears, then obviously, our transportation and royalty costs go up. So the cash cost of production should be fairly steady, but transportation and royalties would be higher. Nicholas Giles: Got it. No. I appreciate that detail, Dale. Just to confirm, you said $185 to $215, that is on a short ton basis, correct? Dale W. Boyles: Correct. Nicholas Giles: Second one was I think you alluded to some of this in your prepared remarks, but how should we be thinking about working capital over the course of 2026?

Is it fair to assume you will build kind of early in the year here? And then same thing on the tax side. I think you had a tax benefit in 2025, but what should we be penciling in for cash taxes in 2026? Dale W. Boyles: On the working capital side, definitely the ramp-up of accounts receivable and inventory, because we will be selling more of the Blue Creek tons this year. So expect that. But as we said in our prepared remarks too, we are going to try to take our overall inventories down 500,000 tons. That is probably going to come more evenly over the year. So the first half, the first quarter, will weigh heavily on working capital. And we should get a little relief in the second quarter, definitely in the second half of the year. From a tax standpoint, that really depends on pricing.

And you know that the 45X credit kicks in in 2026, and we have said that is about a $40,000,000 benefit to Warrior Met Coal, Inc. So with these price assumptions, I would say we might not be a cash taxpayer in 2026. If prices stay at a higher level, we will be, but just not a large amount, I do not think. Nicholas Giles: Got it. Really helpful. One last one, if I could. You have been really successful in adding some federal leases here in the recent months. I think you made—there was one more tranche since we last spoke. And so I was just wondering if you could remind us what those payments look like. I think they are spread out over a number of years. Dale W. Boyles: Yeah. That is right. Total, it is four years, they are about $9,000,000 a year.

So there are four payments left. Nicholas Giles: And that would be reflected in the guide or outside the scope of the guidance? Dale W. Boyles: That is all in there. Nicholas Giles: Got it. Okay. Well, guys, I really appreciate all the detail. Turn it over for now. But continue best of luck. Dale W. Boyles: Thanks. Operator: And the next question is from George Eadie with UBS. Please proceed. George Eadie: Yes, good day, gents. Can I just go back to guidance again? I mean, you came in 600,000 tons above original production of sales for 2025 and $20 a ton above the original midpoint price. These cash cost numbers, even on my estimates in putting in that PLV range you said, still seem very conservative. I mean can you talk through maybe how you came there still year on year?

Like, I struggle to see, even running $195 PLV a short ton, how you can not be looking for big guidance again? Thanks. Dale W. Boyles: Okay, George. Yeah. I mean, we built into the guidance, you know, just some conservatism that we said in our comments here. And hope we are wrong on the price assumptions. So specifically, I am not really sure what you are targeting other than we tried to match the cost guidance with kind of where prices might be for the year in that range, but you may have some of that early in the year and if they do trend downward, you would have some impact. Now one of the things you have to remember, that was a PLV assumption. And if you looked at the relativities of the Low Vol HCC to the PLV, that was about 85%. And here in the fourth quarter, it has been running about 80%.

So very similar to what we have seen in 2025. On the flip side though, the U.S. East Coast index is running at about 65% relativity. Anything we sell into the Atlantic is going to have, you know, some margin offset there because of that. So those are some of the factors that we have just tried to consider here and be conservative on because we do not know why the trend on the East Coast High Vol A index is so disconnected from the other indexes. So I am just trying to think about how that might trend the rest of this year. George Eadie: Yes. Okay. No. Thanks, Dale. Just your comment earlier about being free cash flow positive in the second half. I mean, to the comment from working capital before, if I assume a sort of net neutral working cap position in second quarter, hard to not see you free cash flow positive in the second quarter, obviously depends on prices as well.

But is it a quite good chance even if sort of prices trending a bit lower, we could see a lot of free cash in the second half and second quarter? Dale W. Boyles: Yes, I think we could, given where the prices have been recently. If they stay that way in the first quarter, we could see the second quarter breakeven. But still too early to tell there, but I do think the second half we will be generating a lot of cash. George Eadie: Yeah. And just on that, Dale, so cash $300,000,000. Is that still a nice minimum buffer? And should we start thinking from second half all that cash growth gets given back to shareholders? And can you remind us how to think about returns from the second half? Should all that come back out the door? Or if not, why not?

Dale W. Boyles: Well, I think our cash level right now at $300,000,000 plus the investments, I guess, is about $342,000,000. So that is about where we want to see it on a long-term basis, maybe slightly higher. So we might build some cash just a little bit there. But I do expect us to start returning cash to shareholders in the near future. Now is that this year in the second half? It is dependent on pricing, but I would expect that we would start returning that cash. Now in what forms, I think what we have said and been pretty consistent about, we think that will be through a higher fixed quarterly dividend because we are going to be a significantly larger company with all the volume increases, and then we would supplement that with some special cash dividends and maybe some selective stock buybacks to take advantage of opportunities there.

So I think we would see a combination of those forms. George Eadie: Alright. So just on that, Dale, the share price is below 86 today. I think you and I both think that is cheap. Why not start going now with the buyback and getting ahead of that before the stock gets more expensive? I think you think also the shares are probably going to get higher; why not go early on the buyback? Dale W. Boyles: Well, it is a possibility. I am not going to commit to a particular stock price. We will just have to look at what are the cash needs of the business at the time and what is the best distribution or the best way to distribute that cash to shareholders. Thanks. Operator: And the next question is from Katja Jancic with BMO Capital Markets. Please proceed.

Katja Jancic: Hi, thank you for taking my questions. You mentioned earlier that there is a big disconnect between High Vol A and the PLV markets. With more High Vol A volume coming to the market over next year, is there a risk this disconnect could actually at least stay or even potentially become wider? Walter J. Scheller: I think you are right. I think it will stay for a while. When we look at the tons that have been brought into the market with Metinvest bringing their mine back online, Leer South coming back online, and Blue Creek coming online, that is quite a few tons that need to be absorbed. That is going to take some time. So I think that we are probably looking at a market that is fully supplied for the time being. I think that will get absorbed; just over what time it takes for that to happen, I am not quite sure, but I think, given some of the things about where growth is occurring, those tons will get absorbed and we will get back to a more balanced market.

Katja Jancic: And then maybe I missed this, but Dale, you talked about working capital build in the first half. How much of a build could we see? Dale W. Boyles: Well, really, it depends on prices, Katja, because that influences our receivables quite a bit, and how quickly can we bring down our inventories. But it could be upwards of $50,000,000 or better in the first half. Katja Jancic: Okay. Thank you. Operator: The next question comes from Chris LaFemina with Jefferies. Please proceed. Chris LaFemina: Hey, thanks, operator. Hi, guys. Thanks for taking my—most of my questions have been answered, but I just have maybe one or two follow-ups. So the first is back on the point of capital returns. You comment on maintaining that level of cash on the balance sheet, but you also have a net cash position.

So you have financial capacity to use some debt. I understand in mining, in particular in coal mining, balance sheet is sacred, but you will be a low-cost producer and if prices fall you will be an even lower-cost producer and you can weather the storm pretty much no matter how bad it gets. So the question is, would you consider using balance sheet for buybacks in an environment where prices were a lot lower? I know it is a lot of hypothetical situations there, but would you use balance sheet? And if not, why would you not? That is my first question. Dale W. Boyles: Yeah. No. Good question, Chris. I mean, we have kind of done things a little different than the rest of the industry in the past. So if prices were to decrease quite significantly, to me, if we have that cash on the balance sheet, that would be an opportunity, a real opportunity, for us to take advantage of a buyback.

So I think that would be a good situation that we will look to do that. Chris LaFemina: Okay. Good. I will leave it at that. Thanks a lot. Good luck. Operator: And the next question is a follow-up from Nicholas Giles with B. Riley. Please proceed. Nicholas Giles: Hey, thanks so much for taking my follow-up. There have been a lot of questions around the realizations, but just for the avoidance of any doubt, can you just remind us what you said on what you are assuming for the relativity as it relates to your guidance? Obviously, there is a relative assumption attached to that cost guidance. So just curious what those are. Dale W. Boyles: Yeah. In just overall gross price realizations, we are looking at about 75% for the year. So hopefully we are conservative there.

But if you look at the East Coast index, it is 65 today. And so that has a big significant impact. And like I say, it has been decreasing. It decreased in the fourth quarter $66 a ton. So that went from 85 to 75%. So a big swing during the third quarter to the fourth quarter. Walter J. Scheller: Got it. But I do think we need to be careful about how we look at relativities. And remember that right now, our assumption is High Vol A is pretty well supplied, and for relativity to improve, that means the Low Vol price has to come down to it. So I prefer to see the relativity stay apart if the High Vol price is not going to increase. Nicholas Giles: Understood. No, I appreciate that perspective, Walt. And maybe just one more if I could. Looks like sustaining CapEx ticked up by maybe $20,000,000 or so.

Not a huge step change just given you do have a new mine coming online. What should we be assuming in kind of 2027 and beyond for sustaining capital? Walter J. Scheller: Well, I think where we are looking at CapEx for this year, that is going to be pretty normal for where we are right now. I think we will see an uptick of $20,000,000 to $30,000,000 a year. And I do not know how quickly that will occur, but as we continue to run Blue Creek and have replacement capital for continuous miners and longwalls and things like that, we will see an uptick of $20,000,000 to $30,000,000. Dale W. Boyles: Yeah. That is right, Nick. So, sorry, I was going to add something to that. So if you factor in Blue Creek, at $20,000,000 to $30,000,000, you are probably looking at $110,000,000 to $140,000,000 somewhere roughly on a run-rate basis.

Nicholas Giles: Okay. Understood. Dale W. Boyles: We can pull that down depending on the price environment. But you are going to be—each year is going to increase for a while because of Blue Creek as more and more things need to be replaced, etcetera, going forward. Nicholas Giles: Okay. Okay. And I lied. I promise this will be my last question. But just anything more to add on the contracting activity? I think you spoke to it, but where do things stand from a contracting perspective for Blue Creek? Could any incremental contracting activity limit the volatility in your realizations, or are you really at the mercy of the market, if you will? Walter J. Scheller: I do not think it is going to limit the volatility any more than we see. The High Vol A price volatility is going to be the only limit on the Blue Creek price volatility.

And in terms of volumes and percentages contracted, right now we are, I think, about 80%, 85%. And as we see that number increase, and we see that inventory level come down, that is where we will start to see the opportunity to start to increase production levels because what we have seen, we can clearly do that. Nicholas Giles: Okay. Well, kudos to Charles and his team on that front and, guys, congrats again on all the progress. Thanks so much. Walter J. Scheller: Thank you. Dale W. Boyles: Thanks, Nick. Operator: Our next question comes from Nathan Pierson Martin with The Benchmark Company. Please proceed. Nathan Pierson Martin: Thanks, operator. Good afternoon, gentlemen. Question on Mine 4, running at record levels, really above its nameplate capacity, I think, the last few years.

Are you guys expecting that to continue? And then related, could you break down full year sales guidance of 12.5 to 13.5 million tons by mine? I think it would be helpful when trying to understand how to think about the potential quality mix. Walter J. Scheller: Well, I think we will see Mine 4 running about the same level it did this past year and Mine 7 running about the same level it did this past year, and then we will see the 4.5 from Blue Creek. In terms of Mine 4, Mine 4 has done an outstanding job of managing their production up and at the same time their spending and their costs down, and I would expect that to continue. They achieved very, very well last year and I do not see a reason why that will change. Nathan Pierson Martin: Appreciate that, Walt.

And then I noticed some questions on shareholder returns. So maybe taking a step back, how should we think about your priorities for free cash flow overall? Dale W. Boyles: Well, I think the priorities once we get past Blue Creek would be to return cash to shareholders. You know, until these markets change and demand any further growth on volumes, we would be focused on shareholder returns. Nathan Pierson Martin: Alright. Very helpful, guys. That is all I had left. Best of luck in 2026. Operator: And at this time, there are no further questions in the queue. I would now like to turn the call back over to Mr. Scheller for any final comments. Walter J. Scheller: That concludes our call this afternoon. Thank you again for joining us today. We appreciate your interest in Warrior Met Coal, Inc.

Operator: Thank you. This concludes today’s conference. You may now disconnect your lines and have a pleasant day.