The Baby with the Bath Water

Research evidence excerpt

The Baby with the Bath Water

.35 1.46 1.74 5.92

A Look Into 2Q: Warrior's 2Q earnings should be similar to 1Q as increased shipping costs and low PREV

HVA prices likely put downward pressure on realizations. We expect FCF to have turned positive as

project capex for Blue Creek is now finished, and volumes shipped should have increased in 2Q. The

downside risk to Warrior's earnings beyond 2Q is mostly related to the risk of continued weakness Our Call: We consider Warrior to be

in HVA prices, especially if PLV prices significantly decline. the 'Blue Chip in Coal' due to its

high quality met coal, its good historic

Postioning & Met Coal Outlook: Coal share prices are now below pre-war levels. We believe this

operational performance, its shareholder

weakness is partially due to bearish sentiment regarding energy following the spike in oil prices

friendly capital allocation strategy, and

when the war first began. In the case of Warrior, declining oil prices could be positive for global steel

its strong through-cycle cash flow and

markets and positive for met coal demand, likely offsetting the negative impact of lower thermal

capital returns potential. Following the

coal prices as crossover tonnes shift back into the met coal market. We expect the PLV met coal

recent weakness in Warrior's share price,

price to drift down to $220/t long-term vs $238/t today. We also expect the extreme 40%+ price

we reiterate our Buy rating on HCC as our

discount of HVA relative to PLV to eventually normalize, but we assume a perpetual large discount

top pick in coal.

for purposes of our analysis in this note.

Warrior Full Capacity Estimates at Different PLV Benchmark Prices (US$/tonne)

Normalized estimates $170/t $180/t $190/t $200/t $210/t $220/t $230/t $240/t