Good afternoon. My name is Chad, and I will be your conference operator today. At this time, I would like to welcome everyone to the Warrior Met Coal Fourth Quarter and Full-Year 2019 Financial Results Conference Call. [Operator Instructions]. This call is being recorded and will be available for replay on the company's website. Thank you. Before we begin, I have been asked to note that today's discussion may contain forward-looking statements, and actual results may differ materially from those discussed. For more information regarding forward-looking statements, please refer to the company's press release and SEC filings. I have also been asked to note that the company has posted reconciliations of the non-GAAP financial measures discussed during this call in the tables accompanying the company's earnings press release located on the Investors section of the company's website at www.warriormetcoal.com. In addition to the earnings release, the company has posted a brief supplemental slide presentation to the Investors section of its website at www.warriormetcoal.com. Here today to discuss the company's results are Mr. Walt Scheller, Chief Executive Officer; and Mr. Dale Boyles, Chief Financial Officer. Mr. Scheller, you may begin your remarks.

Thanks, operator. Hello, everyone, and thank you for taking the time to join us today to discuss our fourth quarter and full-year 2019 results. After my remarks, Dale will review our results and additional detail and then you'll have the opportunity to ask questions. 2019 was another record setting year for Warrior in operational performance. Some of the highlights are as follows. Record annual sales volume of 8 million short tons, lowest quarterly cost -- cash cost per ton in the last nine quarters, lowest annual cash cost per ton, best ever annual production volume of 8.5 million short tons, record low safety incident rate, while increasing production volume by 10% year-over-year. The Mine 7's production volume set another best ever record breaking last year's previously achieved record. I will provide more color on these record achievements in my commentary that follows. The company's fourth quarter played out, as we expected and discussed on our third quarter conference call with the exception of higher inventories. So we achieved record sales and production levels for the full-year of 2019. Both sales and production volumes were lower in the fourth quarter compared to any other quarter during 2019. As we indicated previously, these lower volumes were impacted by soft market conditions, low pricing, more holidays during the quarter, additional days out of production to perform routine maintenance and the completion of one longwall move. While we elected to perform this additional routine maintenance and flex up production volumes during these challenging market conditions, we were able to manage to control our cash cost of sales to less than $86 per short ton, the lowest quarterly amount in the last nine quarters. The fourth quarter proved to be the most challenging quarter of 2019 for our markets. Steel producers continued to struggle with…

Thanks, Walt. As Walt commented on earlier, the company's fourth quarter played out mostly as expected and discussed on our third quarter conference call. Those sales and production volumes were lower in the fourth quarter compared to any other quarter in 2019. Another key theme from the fourth quarter was the stock market conditions, which led to low market pricing can significantly impacted our quarterly results, especially compared to the fourth quarter of 2018 when market pricing was very strong. 2019 was a record year in operational performance that generates strong financial results for the company. The company met or exceeded most of its guidance targets. However, the full year of 2019 was a story of two halves, the first half and the second half. The Platts Low Vol Index price began 2019 at $220 per metric ton, an average $205 per ton in the first half of 2019. On the back of strong demand for met coal, but global steel producers. We recorded 75% of its full year adjusted EBITDA in the first half of 2019 and 73% of its free cash flow as a result of high metal prices. A steel production in demand soften outside of Asia during the second half of 2019. The steel margins continued to get pressure from high iron ore product input prices, despite falling Met coal prices. Pricing volatility accelerate in the second half of 2019, as a trade and tariff war with China continued and China began to impose increasingly tighter port restrictions on coal imports during the second half of the year. The third quarter began with the Platts Low Vol Index price at $194 per ton and declined $54 or 28% to the fourth quarter index price of $140 per ton. For the full-year, the Platts Low Vol Index…

Thanks, Dale. Before we move on to Q&A, I would like to make a few more comments about the year we just completed and our Blue Creek announcement today. We're very pleased with the company's record operational performance and strong financial results in 2019. And we appreciate the support and engagement that we have received from our stockholders, and of course, our employees. Global steel production finished 2019 in an upward trend, but almost entirely on the strength of Chinese production, while South America and Europe continue producing steel at reduced levels. Notwithstanding the global uncertainty posed by the coronavirus outbreak, Warrior has observed signs of improvement across all of our geographic markets as the year starts. Indications are that most steel producers have stopped reducing operating rates, while several of our customers have raised their production or are in the process of planning for incremental increases in the current and upcoming quarters. As a result, we're expecting our sales orders to return to expected levels sometime in the first half of 2020. We're also expecting spot opportunities to increase over the same period. Despite these improvements, we prefer to remain cautious and confirm that recent developments in steel pricing and steel demand can be sustained, especially due to the effects of short-term uncertainty lingering in our markets. We recognize that certain macro economic factors, such as a potential slowdown in regional GDP growth rates and the trade and tariff war with China, the coronavirus outbreak, as well as the reduction in steel demand in Europe, have the potential to create a soft pricing environment for hard coking coal. The coronavirus outbreak to be the largest threat to seaborne met coal prices until we can get more clarity on containment of the virus from China and their businesses get back…

Thank you. [Operator Instructions] And the first question will come from Daniel Scott with Clarksons. Please go ahead.

Thanks. Congratulations, guys. Good quarter in a tough environment and an exciting news on the mine. I have noticed and correct me if I'm wrong, that the estimated cost of Blue Creek $550 million to $600 million, I think that's the same number that you had last time that you did the budget for it a few years ago. Is there anything -- any puts or takes that have changed the profile, or is it just nothing really move?

This is Walt and thank you. Yes, things changed around a little bit, but all in all, it was kind of a wash. So we came back to about the same number, just a different way of getting there.

Okay. Which really, I guess, jumps at is clearly that cost structure being significantly lower. Can you talk about what it is about that mine in particular other than it's just brand new that really pushes the cost down that much?

Well, part of it is the fact that it's brand new. The other part is as we get more exploration, drilling, the coal seam thickness through the -- at least the first 10 years is a little thicker than we had modeled. And that's why we're seeing the increased volume which will drive the cost.

Okay. That makes sense. And then just one more. I know having you on the road that you talked about being able to sequence the construction of this mine. It is a fairly large number. Even over 5 years, maybe you could just kind of comment on that, where -- at what point if the market stayed soft, you could pause?

Right now what we’re starting is the slope for the mine. And it really takes I think it's about 3 years before you get to the bottom of the slope. And at that point, that is where you would begin the continuous miners development. And that's really a -- an obvious break point is, once you start that slope development, you're going to want to complete it. So the purchase of that equipment and the development of the underground mine would be a clear break point. Also, you have the development of the preparation plans and the few things like that that are -- have very well-defined timing to get those constructed. And you're going to base that timing upon which what you see is the market and whether or not you have moved forward on some of the other things. So it's those types of things that, I think, made clear break points in the development.

So it's fair to say that probably year 4 is the shields in the longwall, and that's the max spending here in the first 3 are much more modest?

That's probably not inaccurate. Yes. Dan, here is the -- in the slide presentation that we did on our website, we've kind of laid out the spending by year. Really your third and fourth year is kind of around 20%, 25% in those years. So it's the bulk of the spending is pretty much for the last three years.

That's awesome. Great. Thanks, guys.

Thank you.

The next question will be from David Gagliano with BMO. Please go ahead.

Great. Thanks for taking my questions. I think you may have just touched on the question that I had, but based on some rough math, it looks like you could probably fund most of the Blue Creek development on an annual basis with internal cash flows, assuming, kind of a 150 met environment or better. So two questions, actually. That seem relatively or does that seem accurate to you, not relatively, that’s accurate to you, number one. And number two, if so, why and what kind of external funding options are you considering?

Thanks, David. I think we have a lot of flexibility here. And one of the things that we did point out in our disclosures is, there's a large amount of equipment which you got to purchase for this mind as well that we could look at leasing. So, when you think about cash flows, since the IPO, just in 2.5 years, we generate over a $1 billion of free cash flow. So if you look forward in a pricing environment, call it 150, we're going to generate in excess of $1.2 billion in operating cash flows. And let's just say CapEx, you spend $100 million a year for 5 years, which I think is high -- on the high side. You still have more than $100 million of cushion even if you spend the max amount of CapEx here. So feel very confident that this could be done on free cash flow if we want, but I think we do have other options at our disposal and we plan to take advantage of any market opportunities that may come to us. So, we're going to be flexible on how we look at financing the whole project.

Okay. And then just related question, obviously historically there has been very chunky special dividends that were paid out. Did you comment on, expectations or not expectations, essentially, but thoughts moving forward on the potential for additional special dividends during this period of high CapEx?

Well, like in the past, we really haven't changed our capital allocation policy with the announcement of this project. We've always said to the extent we determine, the Board determines that there is excess cash flows, we will return that to shareholders in various forms. And we've done that and shown that throughout our history so far. Now, most of those big special dividends have occurred in very, very high price environments. So if you're going to be in a 150 environment, that's substantially different than $200. So, we tend and we're still committed to returning capital to shareholders, but we're going to have to balance the two just depending upon price environment during this 5-year construction period.

That's helpful. Thanks.

The next question is from Curt Woodworth with Credit Suisse. Please go ahead.

Yes, thanks. Yes. Hey, Walt, and Dale. And I just wanted to say congratulations on a really remarkable sort of operational turnaround you guys have achieved at this asset. I think a lot of us remember back in the Jim Walter days, some of the variability in the mine and it's pretty amazing what you guys have accomplished. First question is, just with regard to your calculations for NAV for Blue Creek. Are you assuming that the High Vol A production is priced at parity with low vol? And then, on the cost performance being so much lower, is that a fully loaded number at the port? Because I was of the view that maybe logistics could be a little bit higher. It's my first question.

Yes, I guess the answer to your last question first. I mean, that all in cash cost is, F.O.B. port. It's going to be very low cost on the mining production side. And then the transportation should be similar to what the rates we have today. I’m sorry, your first part of that question was …?

The pricing assumptions in terms of the relative discount to …

Well, the way we laid it out Curt here in all of our metrics is just saying, look, if prices are 150 for High Vol, right? Because you're going to have some variability, it's a little bit hard to predict what those differences are going to be, even though we’ve seen historical trends recently be near the Low Vol Index price. So we didn’t want to assume that. We just did more around, okay, if you're looking at an assumed High Vol A of 150, then this is the amount of the returns and the pay back.

Great. And then, I guess when you look at this project and the NAV that you're running, that makes a very conservative 150 number is equivalent to the entire market cap of the company. I don't think I've ever seen like a single project where you could correlate that to the value of the entire market cap. Would -- in an environment if the equity market seems to almost penalize you for this, would you evaluate strategic options, or look at monetizing part of this project to crystallize that value?

Well, it's hard to imagine someone's going to argue with a 30% IRR. If you have something better, please, please call me. It's just -- you're talking about EBITDA margins greater than 50% payback of 2 years. If you've got a better project something quicker, please give me a call -- it's just an incredible project. One, high quality product that is well desired by our customers already. Low cost, very, very low cost, and you can see in the materials we think on a combined basis with existing business that will take us well into the first quartile of the cost curve. And what better returns can you get than that in today's environment?

No, I agree. I guess the question is, if the equity market tends to disagree one way to solve for that would be to sell an interest in the project. We've kind of seen it in copper where strategic buyers tend to award maybe better value. So I guess the question is, are you contemplating at all derisking the project or trying to monetize the project?

Well, again, that would say that you're projecting that we do not have a proven track record on execution risk. I think over the last three years since 2016, as you led off here, we've proven, we've demonstrated that we can grow this business. We manage risk and we believe we can do this. Look at the cash flow generation over the last few years, the strength of our balance sheet, we feel highly confident that we can do this on our own without a partner. And I think the results are there as well as just looking at, as I mentioned earlier, the cash flows -- organic cash flows that we can generate to do this on our own. So we're very confident in this project.

Great. It makes sense. Thanks very much.

The next question comes from Lucas Pipes with B. Riley FBR.

Hey, good afternoon, everybody, and I want to echo some of the earlier congratulations. Truly outstanding operational performance since you've emerged from your restructure.

Thank you, Lucas.

I want to piggyback on some of Kurt's questions, specifically if you think about kind of a cost to capital cost for Blue Creek relative to the market cap versus the alternative of buying back your shares, how did you evaluate that opportunity costs? Would appreciate your thoughts on that? Thank you.

Well, just buying back shares in general. Well, I will say that doesn't seem to work too well recently in the sector. As just looking across the sector, public -- publicly traded coal companies, a lot of money has been spent on buybacks. And I don't think the results show that that's worked very well. So -- and I think it's difficult in this sector to say that that's an absolute these days. So as we've done in the past, we tried to use every tool in our tool belt with special dividends, quarterly dividends, buybacks, and we're going to evaluate those with funding this project. But as you can see in all the metrics, the growth, the size of this opportunity is enormous. So to say a buyback is better, it's going to have to have an incredible return to it.

Okay. Well, thank you for that. And then just two more clarification questions. First, the $65 to $75 cost guidance. Is that per short ton at the port?

Yes, at the port, F.O.B. port.

Great. Very helpful.

Thank you. And then back to the quality side. So think of my number seven is kind of premium Low Vol of the equivalent. Mine number 4 more came to a mid vol. And then Shoal Creek in the same vicinity, more is kind of the High Vol A. Would you be able to kind of put Blue Creek on that spectrum where it would fit in from a quality standpoint?

Very similar to Shoal Creek. It's a very similar quality product that Shoal Creek has.

Great. That’s fair

So it's a low sulfur, high CSR [ph], high Vol A,

Very helpful. Well, those are my questions for now. I appreciate it. And best of luck.

Thanks, Lucas.

Our next question is from Alex Hacking with Citi. Please go ahead.

Hi, good evening. I also have a few questions. I guess, first, do you need any additional port capacity at mobile because you talk about the expansion there in the slides, or is the port -- is the current capacity sufficient to handle the additional volume? Thanks.

The port is doing some upgrades over the next several years, one of them is deepening and widening the channel, which will allow bigger vessels to come in to operate in the area. And we believe the port capacity will not be an issue once the project is brought online.

Okay. I guess my question is, do you need that project, that port project to go ahead or the port could handle the tons today, as is.

As is, they might need to tweak a few things, but not a lot. I think their design, their design capacity is within the range of within the range of what we intend to produce. So I think they have to tweak a few things, nothing major.

Okay. Thanks. So I'm looking at your slide 13 here from the Blue Creek presentation. You talk about, the large majority of High Vol a demand is in your target markets. If I add all that up, it looks like a bit less than 30 million tons of High Vol A demand around the world. And then above that, you've got a bunch of projects that add up to 10 million tons, right, including Blue Creek. Like, am I -- it seems like a lot of supply for that market size or am I like misinterpreting like the slide, I guess.

We just highlighted the biggest markets. We identify the entire marketplace demand for the High Vol A.

Okay. So you're confident that you can -- but you're going to secure off day.

Oh, yes. Yes.

We are confident that the large majority of this will go into our existing markets, but we do think that, with a demand that's going to grow out of India and as we all, I talked in the past India has been talking about this growth for quite some time, but we do believe we’ve seen that recently and that opportunity for us is a market is something we think will happen over the next several years.

Okay, thanks. And then just on to the 2020 guidance, maybe I missed this in the comments in the beginning because I was just a minute or two late. Obviously, your sales guidance for 2020 is lower than 2019. How much of that is market driven and could be adjusted higher if we see a pickup in coal demand. And then how much of that is production and operationally driven? Thanks.

Well, as I stated, we looked at the first quarter and projected the first quarter to be similar to Q4 of last year, in which we did not have our foot fully on the accelerator, pushing the lines as hard as we could. And if we would see the market justify pushing these mines at full speed, we would do that. So I think there is upside from there based on what the market conditions are. As an example, last year through the first nine months of the year, we ran just about every Saturday. So we pushed these months pretty hard. And in the fourth quarter we slowed down a bit. And in the first quarter with inventory levels, we're maintaining that pace.

Okay. Thank you very much.

Thank you.

The next question is from Chris Terry with Deutsche Bank. Please go ahead.

Hi, Walt, and thanks for taking my questions. First question just around Blue Creek. And just relating it to the update you put out the other day around the net operating loss carryforwards, do you assume what sort of tax rates do you assume within the project economics to get to that MPV? And the second part of that is you're saying no cash tax, obviously, in 2020. How long do you think that situation last for on your math? Thanks.

Yes. Thanks, Chris. As far as NOLs, we -- in these particular metrics, we have not assumed any use of the NOLs in the project economics. What we've assumed is a 14% tax rate. We believe that will be approximately the rate in that project because of the incentives that we will be able to get relate to that projects. So that I think there was a little over 17%. So it will drop down more than that 14% to 15% range once this projects is up running full production. So if you look at the expected life of our NOL, in these last two or three years, price has been really high. So the life of the NOL can certainly come down. But if you assume a 150 price over the next several years, we probably got six to eight years of NOLs still available to offset the cash taxes. So that kind of coincides with the timing of the project.

Okay. Thanks. Thanks, Dale. So it is possible, depending on the pricing whether that may overlap into Blue Creek and therefore improve the economics beyond that 30%, which is obviously at 150 met coal. But if you believe that pricing you could get upside to that.

That's correct.

Okay. Thank you. And I just wanted if you could comment just a little bit more on that announcement from the other day, I think Feb 14, the loss carryforward announcement? Thanks.

Yes, what we did is adopted -- an NOL right plan. Just another layer protection for our NOLs based on this cumulative ownership change. The rules around -- the tax rules around Section 382 very complex. And as you may remember we had this chart or have this chart restriction in place. It was three years from the IPO and it expires in April. So last year we put it up for about to extend it through April of 2023. And there was a few shareholders that voted against that proposal. And under Delaware law, they cannot be held to that chart restriction. So in order to kind of plug that hole, you had to put in place this NOL right plan to just prevent that. So really just another layer of protection. It has sunset provisions. It's really not -- it's not a poison pill. It's just to protect us in a well. Just another layer protection.

Okay. Thank you. And the last one from me, just coming back to the project and how the market is interpreting. Just interested in your feedback is, is most of skepticism around the Met coal market itself and therefore the market not wanting you to add additional tons and rather to keep the market tight or is the skepticism around the project itself? Thanks.

I'll start and I'll let Walt add some comments here. I think there's always a lot of risk around large projects like this that take time, right? You have execution risk, you have price risk, you have a lot of different risks. And 550 to 600 means a lot of money. So -- and over five years, projects have cost creep. Things go wrong. I would just say, look, look back at our history since the first to 2017. I think what you will see is we really have a good, strong, proven track record. We went from just under 3 million tons produced to now 8.5 tons produced this past year. We've grown that capacity each and every year, continue to do things to keep our costs low and increase that production. As we noted in our comments, this year was our lowest annual cost per ton amount in three years. The fourth quarter itself demonstrates how we can control our cost by flexing production. That was our lowest quarterly cash cost in nine quarters. All that to me should demonstrate that really we can handle this. We know what we're doing. As I said earlier about the cash flows, we feel very comfortable that we can do this without anyone else. And we think this is just an incredible opportunity for this company and that we can manage those risks sufficiently and deliver.

I'll just echo what Dale said. I think it's purely execution risk and getting through the project and coming out the other end of it, ready to operate.

Thanks very much, guys. That's it for me.

Thank you.

[Operator Instructions] Next question comes from Matthew Fields with Bank of America Merrill Lynch. Please go ahead.

Hey, guys. I wanted to focus on the CapEx and the funding of it for Blue Creek. Appreciate that you sort of put out that kind of guidance about equipment financing for a little over $100 million. But with your bonds, trading well above par and sort of callable at the end of this year, what's the calculus on doing a kind of terming out debt and increasing the size of that issue to sort of help, prefund part of Blue Creek and kind of make your maturity now outside of the project completion?

Yes, thanks, Matt. Yes, certainly we're looking at those options. We're just going to have to see what's available and what's -- what we have access to as I said earlier, be opportunistic in the capital markets that change every day. So certainly looking at extending those maturities, possibly increasing the size or even just taking it out altogether. Those are all options that we'll continue to look at because we do want to optimize our capital, our capital structure, and we'll be continually monitoring that, but we feel very good about this year. It's $25 million of spend, which we can handle very easily with our free cash flow.

Okay. That's it for me. Thanks and good luck.

Thank you.

Ladies and gentlemen, at this time, there are no further questions. I would now like to turn the call back over to Mr. Scheller for any closing comments.

That concludes our call this afternoon. Thank you again for joining us today. We appreciate your interest in Warrior Met Coal.

Thank you, sir. That concludes today's conference. Thank you all for participating. You may now disconnect.