HCC - Warrior Met Coal: Un-Caving A Pure Met Coal Play

2024-06-12 04:00:50 ET

Summary

• Warrior Met Coal’s Blue Creek Facility is poised to generate significant cash flow increases starting in 2026.
• Warrior Met Coal has competitive advantages in the metallurgical coal market, including low-cost production and superior profit margins compared to competitors.
• The company exhibits strong financial stability, with a net debt position of -$500 million and $700 million in cash and equivalents.
• The growth potential and proven track record of delivering string results leads us to believe HCC is an attractive deep value investment.

Investment Thesis

Warrior Met Coal’s ( HCC ) strategic expansion of the Blue Creek Coal Mine is poised to significantly bolster the company’s future cash flows. This development is a cornerstone of the investment thesis, highlighting the potential for substantial financial returns. Scheduled to commence primary operations in 2026 , the Blue Creek mine will access one of the largest untouched reserves of high-quality metallurgical coal in North America. The expansion is projected to yield a 27% Real Internal Rate of Return after tax and a payback period of just 2.4 years under the base assumption of $150 per metric ton while current Australian Premium Coking Coal is trading at $250/mt with 2025 futures are all trading above $275/mt, underscoring its profitability....

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