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Investing.com -- Shares of Warrior Met Coal, Inc. (NYSE:HCC) climbed 9% after the company announced a positive update on its Blue Creek steelmaking coal project, which is expected to significantly increase its production capacity and financial metrics.
The update detailed that Warrior Met Coal has increased the nameplate capacity of the Blue Creek project by 25% to 6 million short tons per year from the initial plan of 4.8 million short tons. This expansion is projected to bring an additional $1.3 billion in annual revenue, $735 million in adjusted EBITDA, and $637 million in free cash flows. The net present value (NPV) of the project is estimated at approximately $5.4 billion, with an impressive internal rate of return (IRR) of 35% and a payback period of 2.3 years at the revised capacity.
The company, a leading U.S.-based producer and exporter of high-quality steelmaking coal, is also on track for a shorter production timeline, with the first longwall expected to commence operations no later than the second quarter of 2026. Furthermore, the project is anticipated to be completed within the allocated budget and fully funded by the company’s operational cash flows.
Warrior Met Coal’s CEO, Walt Scheller, expressed confidence in the Blue Creek investment, stating it will transform the company and continue its track record of delivering value to shareholders. He also emphasized the project’s potential to positively impact Warrior Met Coal for decades and benefit a broad range of stakeholders.
As part of the operational progress, Warrior has the capability to further increase the current capacity by 83%, or an additional 0.6 million short tons, to 6.6 million short tons per annum by adding an extra continuous miner unit. However, the company plans to initially operate Blue Creek at 4.8 million short tons per year, adjusting for market supply and demand dynamics.
Despite the adoption of innovative technologies and best practices, Warrior maintains that the project will stay on budget, with total capital expenditures expected to remain between $995 million and $1.075 billion. The investments have been fully covered by the company’s cash flows during the development phase, and Blue Creek is projected to be one of the lowest-cost mines globally.
This operational and financial update has evidently resonated with investors, reflecting in the 9% surge in Warrior Met Coal’s stock price.
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