Warrior Met Coal Inc

NYSE:HCC

Earnings Call Analysis

Warrior Met Coal Faces Market Challenges but Progresses on Growth Plans

In Q3 2024, Warrior Met Coal reported a net income decrease to $42 million ($0.80 per share) from $85 million in the same quarter last year. Revenue fell to $328 million, driven by a 17.5% drop in sales volume and lower coal prices. Despite these challenges, the company is making headway with its Blue Creek project, anticipating 200,000 short tons of premium coal production in H2 2024. They expect annualized production to increase by 4.8 million tons post-startup in 2026. Management anticipates slight price recovery but remains cautious, estimating 2024 production at 7.8 million tons amid fluctuating market conditions.

Current Financial Performance

In the third quarter of 2024, Warrior recorded a net income of $42 million, or $0.80 per diluted share. This marks a significant decline from the $85 million net income reported in the same quarter of 2023, equating to $1.64 per diluted share. The decline can be attributed primarily to a 17.5% reduction in sales volume and a 7% decrease in the average net selling price, which decreased from $185 to $172 per short ton.

Revenue Insights

Total revenues for the quarter amounted to $328 million, down from $423 million year-over-year. The decrease of $96 million was mainly due to a $73 million drop in sales volume, accompanied by a $23 million drop related to lower average selling prices. The company's strategic selectivity with spot sales was reflected in the 23% of sales being from the spot market, significantly lower than previous quarters.

Cost Structure and Margins

In terms of expenses, the cash cost of sales reached $230 million, representing 72% of mining revenues, compared to 62% last year. The cash margin per ton fell to $48 from $70 year-over-year. The adjusted EBITDA for the quarter was reported at $79 million, down from $146 million, with an EBITDA margin decreasing from 34% to 24%. Cash costs per short ton were approximately $123, slightly up from $115 in the prior year.

Operational Developments

Despite the challenging market conditions, Warrior achieved a milestone by producing its first development tons from the Blue Creek project in Q3 2024. This includes an anticipated output of approximately 200,000 short tons of high-vol A coal for the second half of 2024, planned to be sold starting in 2025. Total investments in the Blue Creek project year-to-date stand at $246 million, with expectations to total $325-$375 million for the full year.

Market Outlook

Looking ahead, Warrior anticipates slight improvements in steelmaking coal prices in the fourth quarter 2024, yet expects the overall pricing environment to remain pressured due to global steel market weaknesses. The company is optimistic that demand improvements will stem largely from India, supported by new blast furnace capacity coming online. However, external pressures from increased Chinese steel exports remain a concern.

Guidance and Future Expectations

Warrior is maintaining its operational guidance and has reaffirmed expectations of delivering approximately 7.8 million tons in sales for the full year 2024, with Q4 numbers possibly slightly below Q3 due to fewer operating days. They expect their cash cost per ton for the year to land in the range of $125 to $135, depending on market conditions.

Financial Stability and Investment Plans

The company reported a total liquidity of $746 million, ensuring sufficient capital to support ongoing projects, including Blue Creek. They remain disciplined with capital spending, aiming to stay within the baseline cost estimates while expanding production capabilities at Blue Creek.

Earnings Call Transcript 2024-Q3

[Operator]

Good afternoon. My name is Cole, and I will be your conference operator today. At this time, I would like to welcome everyone to the Warrior Third Quarter 2024 Financial Results Conference Call. [Operator Instructions] This call is being recorded and will be available for a replay on the company's website.

I would now like to turn the call over to D'Andre Wright, Vice President of External Affairs and Communications. Please go ahead, sir.

[D'Andre Wright, executive]

Good afternoon, and welcome, everyone, to Warrior's third quarter 2024 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 different 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 release and SEC filings.

We will also be discussing certain non-GAAP financial measures, which are defined and reconciled to comparable GAAP financial measures in our 2024 third 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-Q for the quarter ended September 30th, 2024, with the SEC this afternoon. You can find additional information regarding the company on our website at www.warriormetcoal.com, which also includes the third quarter supplemental slide deck that was posted this afternoon.

On the call with me today are Mr. Walter Scheller, Chief Executive Officer; and Mr. Dale Boyles, Chief Financial Officer. After our formal remarks, we will be happy to take any questions.

With that, I will now turn the call over to Walt.

[Walter Scheller, executive]

Thanks, D'Andre. Hello, everyone, and thank you for taking the time to join us today to discuss our third quarter 2024 results. After my remarks, Dale will review our results in additional detail, then you'll have the opportunity to ask questions.

We were pleased with our third quarter results despite weak global demand and high-quality steelmaking coal prices reaching a 3-year low. While we wait for market conditions to improve, we are carefully managing spot opportunities and are strategically exercising patience with certain geographies. Despite the external market factors impacting our results, the third quarter represented a significant and positive milestone for us as we produce the first development tons from our world-class Blue Creek growth project on time and within budget.

With our high-quality asset base, highly flexible cost structure and a high-performing workforce, we are well positioned to capitalize on improved global steel demand when the market turns. And at the same time, we're advancing the Blue Creek project completion with a rigorous focus on cost and execution.

The third quarter turned out to be weaker than we had expected for our markets, primarily driven by a confluence of weaker demand, excess Chinese steel export into our customers' markets and ample supply of steelmaking coals. The reality of higher export volumes of lower-cost Chinese steel has been a growing concern for some time, impacting all steel-producing regions across the world. As such, global steel prices have either extended their downward trend or remained at low values, challenging our customers' margins.

The consequences of excess Chinese steel also impact our own markets. This is because Chinese steel production predominantly relies on domestic coals and landlocked Mongolian coals, which typically do not impact the global seaborne met coal balance. Along with stable production from Australia, the U.S.A. and Canada, these factors have created the lowest pricing environment for steelmaking coal since June of 2021.

Our primary index, the PLV FOB Australia, ended the third quarter at $186 per short ton, which was $26 lower than the end of the second quarter at $212 per short ton. During the month of September, the PLV FOB Australian Index established a low point for the year of $163 per short ton.

Likewise, in September, the PLV CFR China Index also established its low point of the year at $177 per short ton. Similar declines were observed with the second-tier indices, although both indices displayed different levels of volatility in relation to the PLV FOB Australia Index.

We achieved a consolidated gross price realization of 93% in the third quarter, which was a function of product mix, geography and freight rates. At these low prices, we believe that several producers of steelmaking coal have not only experienced significant margin erosion, but may also have experienced realizations below their total cash costs, suggesting that the current pricing environment is not sustainable for extended periods of time. While we expect steelmaking coal prices to improve slightly in the fourth quarter, we believe the pricing environment will remain under pressure due to the persistent weakness in the global steel markets and delayed infrastructure spending in India.

According to the World Steel Association monthly report, global pig iron production decreased by 3.3% in the first 9 months of 2024 as compared to the prior year period. Pig iron production in China, which is the world's largest production region, fell by 4.6% for the same period. The rest of the world's pig iron production experienced a more modest decline of 0.5% for the first 9 months of the year.

India remains a bright spot with a growth rate of 3% and is expected to continue growing with new blast furnace capacity coming online later this year. Several other regions also experienced positive growth for the period, such as Brazil and certain European countries. However, their gains were largely offset by declining production from Japan and South Korea.

Now let me turn back to our third quarter results. Our third quarter sales volume of 1.9 million short tons was 17.5% lower than the comparable quarter last year. As I said earlier, we're carefully managing spot opportunities and strategically exercising patience with certain geographies until the market improves.

Our sales by geography in the third quarter break down as follows: 44% into Europe, 41% into Asia and 15% into South America. The majority of the sales in Asia in the third quarter were to customers in Japan, China and India. As we've previously noted, demand from the Asian steel producers has been growing, resulting in higher sales to that geography. While sales from our traditional markets in Europe and South America remain lower, primarily due to weak spot market opportunities.

Our spot volume was 23% in the third quarter of 2024, which was primarily sold into the Asian market. This percentage was significantly lower than the reported amounts for the first and second quarters of this year, as we carefully manage spot opportunities during this period of low steelmaking coal prices. For the full year, we expect our spot volume to range between 25% to 30% of total sales volume.

Production volume in the third quarter was 1.9 million short tons compared to 2 million short tons in the same quarter of 2023, representing a 3.8% decrease. During the third quarter, we commenced continuous minor development of the first longwall panel at our world-class Blue Creek growth project, producing the first development tons of 39,000 short tons. Our coal inventory increased slightly to 915,000 short tons, which includes the Blue Creek development tons from 895,000 short tons at the end of the second quarter.

During the third quarter, we spent $123 million on CapEx and mine development. Of that amount, CapEx spending totaled $116 million, which included $94 million on the development of Blue Creek. Mine development spending on the Blue Creek project was $7 million during the third quarter of 2024. Now that we have started developing the first longwall panel at Blue Creek, our mine development costs will continue to grow during the remainder of the year and until the longwall starts production, which we expect to occur in the second quarter 2026.

Our Blue Creek growth project continues to make excellent progress. During the third quarter, we completed the installation and commissioning of the service cage, slope belt, slope car and raw coal belt. The completion of these major components allowed us to begin development of the initial longwall panel with the first continuous miner unit.

On the surface infrastructure components, we continue to make significant progress on the construction of the preparation plant, which is expected to be online in the middle of 2025. On the coal transportation components, good progress was made on the construction of the approximately 10-mile long [ clean ] coal belt structure with the first mile nearly completed. Steady progress continued during the third quarter on the rail and barge loadouts as well. All of these components remain on schedule.

In the near term, we're focusing on increasing our headcount at Blue Creek in order to start 2 additional continuous miner units in the fourth quarter. Currently, we're on track to meet those goals. We are very pleased that the development for the first longwall panel started on schedule during the third quarter, as originally expected, and we're on track to produce approximately 200,000 short tons of high-vol A steelmaking coal in the second half of 2024. As we've said before, the development tons produced from the second half of this year through the first half of 2025 are expected to be sold in the second half of 2025 after the preparation plant comes online.

Including the $94 million we invested during the third quarter of 2024, year-to-date development spending on Blue Creek totals $246 million. We expect to invest approximately $325 million to $375 million in 2024 on the project, inclusive of the $246 million already invested. For the entire project to date through the end of third quarter 2024, we've invested a total of $612 million.

We remain focused on tight capital spending discipline to ensure the project will be completed within our reset baseline cost estimate on the original schedule, including the longwall start-up in the second quarter 2026. We currently have sufficient liquidity on hand to complete the project within the baseline cost estimate.

Blue Creek represents one of the last remaining untapped premium high-quality high-vol A coal reserves in the U.S., and we anticipate our coal will achieve premium prices. We expect incremental annualized production of 4.8 million short tons of premium high-vol A steelmaking coal after the start-up of the longwall, which will enhance and strengthen our already strong global cost curve positioning and deliver incremental profit and cash flows.

I'll now ask Dale to address our third quarter results in greater detail.

[Dale Boyles, executive]

Thanks, Walt. Despite the weaker global demand for steelmaking coal in the third quarter of 2024, we continue to deliver strong operational and financial performance by leveraging our high-quality assets and strong operational competencies.

For the third quarter of 2024, Warrior recorded net income on a GAAP basis of $42 million or $0.80 per diluted share compared to net income of $85 million or $1.64 per diluted share in the same quarter of 2023.

Non-GAAP adjusted net income for the third quarter, excluding the non-recurring business interruption expenses, was unchanged at $0.80 per diluted share. This compares to adjusted net income of $1.85 per diluted share in the same quarter of 2023. These decreases quarter-over-quarter were primarily driven by the 17.5% lower sales volume and a 7% lower average net selling price. This reduced our cash margin per ton to $48 per short ton in the third quarter of 2024 from $70 per short ton in the same quarter of last year.

We reported adjusted EBITDA of $79 million in the third quarter of 2024 compared to $146 million in the same quarter of last year. Our adjusted EBITDA margin was 24% in the third quarter of 2024 compared to 34% in the same quarter of last year. Our adjusted EBITDA margin per ton was $42 per short ton for the third quarter of 2024, as compared to $65 per short ton in the same quarter of last year. As I previously mentioned, these decreases quarter-over-quarter were primarily driven by the 17.5% lower sales volume, a 7% lower average net selling price and slightly higher cost.

Total revenues were $328 million in the third quarter of this year compared to $423 million in the third quarter of 2023. This overall decrease of $96 million was primarily due to a $73 million decrease in sales volume, combined with a $23 million decrease due to the lower average net selling prices plus lower demurrage and other charges.

As Walt noted earlier in his comments, the decrease in sales volume was primarily driven by our selectivity with spot sales and our patience in waiting for market conditions to improve in the near term. Demurrage and other charges were $3 million lower compared to the third quarter of 2023 and resulted in an average net selling price of $172 per short ton in the third quarter of 2024 compared to $185 per short ton in the same quarter of last year.

Cash cost of sales in the third quarter of 2024 was $230 million or 72% of mining revenues compared to $259 million or 62% of mining revenues in the third quarter of 2023. Of the $29 million decrease in cash cost of sales, $45 million of the decrease was primarily driven by the 17.5% decrease in sales volumes and lower variable transportation and royalty costs. These decreases were partially offset by $16 million of higher production costs for employee wages and incentives associated with a higher headcount and higher supply and maintenance costs.

Cash cost of sales per short ton FOB port was approximately $123 in the third quarter of this year compared to $115 in the third quarter of 2023. Although higher than last year's third quarter, our third quarter cash cost per ton this year was similar to the second quarter of this year and is running slightly below the midpoint of our full year guidance. Cash cost per ton remains on track for the full year and in line with our average net selling price year-to-date.

As a reminder, when we established guidance for the full year of 2024 back in February, we included additional costs for hiring approximately 250 people and operating the mines at a higher capacity rate after the labor strike ended in the first half of 2023.

Our cash cost of production for the third quarter of 2024 was 66% of our total cash cost per short ton compared to 62% in the same quarter last year. Overall, transportation and royalty costs were 34% of our cash cost of sales per short ton in the third quarter this year on lower average net selling prices compared to 38% in the same quarter last year. As a result of the lower average net selling price and changes in our cash cost, our cash margin per short ton was $48 in the third quarter this year compared to $70 in the same quarter of last year.

SG&A expenses were about $11 million or 3.5% of total revenues in the third quarter of 2024 and were slightly higher than the third quarter of last year of 2.6%. This is primarily due to an increase in employee-related compensation expenses.

The interest income earned on our cash investments was lower in the third quarter of this year, primarily due to lower average cash balances and lower rates of return. Our interest expense was lower primarily due to the early retirement of debt in September of 2023 and the capitalization of interest related to the development of Blue Creek. Our low effective tax rate continues to reflect an income tax benefit for depletion expense and foreign-derived intangible income.

Turning to cash flow, during the third quarter of 2024, free cash flow was a negative $61 million. This was the result of cash flows generated by operating activities of $62 million, plus cash used for capital expenditures and mine development of $123 million.

During the third quarter, we invested approximately $50 million of cash into longer duration fixed income securities with maturities greater than 12 months in advance of the Federal Reserve lowering interest rates. These amounts are reflected in the balance sheet as long-term investments and are considered a part of our total liquidity.

Our total available liquidity at the end of the third quarter was -- of 2024 was $746 million and consisted of cash and cash equivalents of $583 million, long-term investments of $50 million and $114 million available under our ABL facility.

Now let's turn to our outlook and guidance for the full year 2024. After another strong quarter of operational and financial performance despite weak demand and pricing in the global markets, we have reaffirmed our outlook and guidance for the full year, as outlined in our earnings release. While we are trending toward the midpoint and higher end of our guidance ranges on volumes, we remain cautious, especially on spot opportunities until market conditions improve. Also, as a reminder, the fourth quarter contains more holidays and fewer available production days.

I'll now turn it back to Walt for his final comments.

[Walter Scheller, executive]

Thanks, Dale. We continue to expect our markets to improve over the next quarter or 2, hopefully above cost curve economics, although we believe pricing may remain below averages we've seen in recent years. Improvements in demand are expected to come mainly from India, and a few select countries. China's recently announced stimulus package and actions are notable, but we're cautious in judging the potential to boost demand in our markets and we'll need time to analyze the total impact. Overall, we expect steelmaking coal supply to be somewhat tighter in the last quarter of this year, as the market feels the full impact of losing the Grosvenor supply, as Australia enters its typical wet season.

In conclusion, despite near-term challenges, we're on track to continue to deliver strong operational and financial performance by leveraging our high-quality assets, strong balance sheet and best-in-class operations.

With that, we'd like to open the call up for questions. Operator?

[Operator]

[Operator Instructions] And our first question today will come from Lucas Pipes with B. Riley Securities.

[Lucas Pipes, analyst]

And good to hear about all the progress at Blue Creek and also your solid realizations during the quarter. My first question is on the commercial side. And Walt and Dale, if I heard you right, spot exposure was 23% in Q3, and you're still looking at kind of 25% to 30% in 2024. And I wondered, first, could you comment on the Q4 outlook in terms of spot pricing? And then more broadly, as you compete in Asia for business with Europe, Latin America still on the softer side. What are some of the competitive dynamics, as you kind of price or look to put in place term business? Is it against the -- is it on the basis of the Australian PLV High-Vol A discounts to that of any sort would appreciate any thoughts you might be able to share?

[Walter Scheller, executive]

Thanks, Lucas. Lucas, as we look out into Q4 and our spot expectations, what we're doing is, as we've said a couple of times, is that we're really carefully watching exactly where the market is and what type of market is, whether it's CFR or FOB. And the vast majority of Asian spot sales are CFR. So we're monitoring that very carefully. And while we could move more tons, we're going to be pretty careful about when and where we decide to move them because of that.

I think that term business in Asia outside of the term business, we have term business in Japan. But as you look into China and others, term business is kind of difficult to come by at reasonable pricing. So right now, we're just being very careful about what we commit to and making sure that we're protecting what we think are outstanding assets and outstanding coal qualities until the market is able to recognize that value.

[Lucas Pipes, analyst]

Walt, this is super helpful. So on my numbers, you came in at about 90% realization in Q3 versus PLV. Is that a reasonable assumption for Q4 given your discipline on the score?

[Walter Scheller, executive]

I think you have to be really careful with it. As we've said before, we've projected that we'd be in the mid-80s to [ 90% ]. And I think when you see us up in the 90s, where we were, it's a reflection of a falling market. And I think we have to keep that in mind. If the market stays flat, I would expect the number to be a little lower than that [ 93% ]. I could be wrong, hopefully. And if the market goes up, I would expect that number to drop more considerably because remember, that all trails by about a month. So it's kind of difficult to really predict exactly where that will end up, but be careful with that [ 93% ] because it is a falling market.

[Lucas Pipes, analyst]

That's helpful. I'll turn over to the cost side. If I understood, Dale, right in his prepared remarks, he mentioned kind of variable costs on the transportation side. One, could you speak to the sensitivity in transportation to changes in the price? And has all of that benefit kind of flown through at this point? Or could there be more variable cost adjustments on transportation in Q4? I would appreciate your thoughts on that.

[Walter Scheller, executive]

Do you want to take that?

[Dale Boyles, executive]

Yes. So yes, we -- transportation now resets on a 1-month lag, Lucas, not a 3-month like we used to have. So there is a little bit to be gained maybe possibly in the fourth quarter, but I don't see it as significant depending on the volumes. But there could be a little upside on transportation in the fourth quarter.

[Lucas Pipes, analyst]

And more broadly on the cost side for Q4, any major moving -- besides that transportation, any other moving pieces to keep in mind for Q4 on the cost side?

[Walter Scheller, executive]

There shouldn't be. We've had a couple of longwall moves in the third quarter. Again, we've managed to get those moves down to 0 day or minimal moves and also, at the mouth of those sections, conditions get a little tougher. So we're out of that. So I don't see any major cost impacts in the fourth quarter, positive or negative.

[Operator]

And our next question will come from Nathan Martin with The Benchmark Company.

[Nathan Martin, analyst]

Maybe just following up on one of Lucas' questions. Clearly, like you guys said, markets kind of remaining depressed, you mentioned exercising some patience with sales, which I think is prudent. But how should we think about this impacting your opportunity to ship coal here in the fourth quarter? Could you anticipate maybe fourth quarter shipments actually being down sequentially if demand doesn't improve?

[Walter Scheller, executive]

I don't believe so. I think we should be from where we expected for the fourth quarter -- you have to remember, again, as we said, we have fewer operating days. And I think as we look at the fourth quarter, our expectation is to land right in the heart of our full year guidance.

[Nathan Martin, analyst]

Okay. Well, I appreciate that. So if I say right in the middle of the full year guidance of sales, right, that would be 7.8 million tons. Is that what you're talking about for the full year?

[Dale Boyles, executive]

Yes, yes. So that would put us, say, fourth quarter could be very similar, maybe slightly -- just slightly below the third quarter.

[Nathan Martin, analyst]

Yes. That's what I was thinking, Dale. Yes, because it looks like if you're flat, you get to about 7.9 million tons. So okay. That's very helpful. I appreciate that, guys. And then maybe just coming back to the 3Q gross price realization, the 93%. I know I asked about that last quarter. Obviously, Lucas just touched on that as well. But maybe from just the pure math of it, and I know there are several investors out there that maybe appreciate a walk through there. So when people are trying to calculate the average net price for really any given quarter, a, what's the best time period to use, so that we can get to that 93% number you guys talked about?

[Dale Boyles, executive]

Well, we just take the averages of the -- what our realization is of the PLV during that period, right? And that's really the simple math about it. You have to take out the demurrage and all those things in our average net selling price. So that's really -- it's that simple, really.

[Walter Scheller, executive]

And you're really looking at -- for instance, for the fourth quarter, you're really looking at coal pricing from September, October, November, not October, November, December because of the 1-month lag. So you really need to go back to September pricing, October pricing and November pricing to figure out, where we're likely to be.

[Nathan Martin, analyst]

Okay. And I think that might be some of the issues because if I look at, again, the 1-month lag, let's say, Walt for 3Q, right? So we're looking at instead of the normal calendar, we're looking at June, July, August, I end up with an FOB Australian premium low-vol price of about [ $230 ], and it's difficult to get to that 93% realization. Maybe some of it is backing out the demurrage pieces. I don't know if there's any other things you want to add right now, or we can just take it offline.

[Walter Scheller, executive]

Yes. Let's take it offline.

[Nathan Martin, analyst]

Okay. Appreciate that. And then maybe just one final question on the cost side. You guys have said previously the full year '24 cost per ton guidance range of [ $125 to $135 ] assumes roughly a $250 to $260 per metric ton obviously premium low-vol price. Given where markets are today, call it, $200, $204, could you give us an idea of what cost per ton might look like at that price?

[Dale Boyles, executive]

Well, I think we would be in the lower end of that range. If you look on a year-to-date basis, we're at $127. And if you look at the average selling price, $198 convert that to metric, then you're looking at an 88% net realization of that versus the [ $250 ]. So that's why I say we're right in line today.

But if fourth quarter pricing is lower, our cost hopefully will be lower in the fourth quarter. Now it depends on the volumes, right, the volume impact. So -- but we should be -- if pricing stays lower, and we don't have any upticks from here, we should be in that lower end of the range because you're going to have your volume impact, right? So if we cut back volume significantly, that could have an impact on it.

[Nathan Martin, analyst]

Yes. Makes sense, lower denominator.

[Operator]

[Operator Instructions] Our next question will come from Katja Jancic with BMO Capital Markets.

[Katja Jancic, analyst]

I know next year, second half of next year, you're going to start shipping or selling the Blue Creek volume. Are you already in conversations with customers about that volume?

[Walter Scheller, executive]

Yes, we are.

[Katja Jancic, analyst]

And what are the conversations? Are you going to be contracting that already? Or it's going to be more on the spot side?

[Walter Scheller, executive]

I think it will be the expectation of contract. I mean, these are going to be -- again, it's a new coal mine. Everyone is going to want to see how it works in their coke ovens. So we're going to be shipping that off to customers to try a couple of holes or a full cargo of, but we'll be placing that coal with various customers to give them a first try at it.

[Katja Jancic, analyst]

And then this year, I think you mentioned you're going to be hiring about 250 people or you're on track to hire 250. Looking to next year, how much -- how many more people do you need to hire?

[Walter Scheller, executive]

I think next year for Blue Creek, we're probably going to be in -- we're still doing the budgeting process, but the 100 range, I would say, something like that. I don't know for sure. But for some reason, I just feel like that's going to be -- that's going to be around the number. But again, we're in the budgeting process right now. So I don't -- really don't have -- that's just a...

[Dale Boyles, executive]

Yes, just a swag right there.

[Walter Scheller, executive]

Yes.

[Dale Boyles, executive]

I mean, it may be a little more than that, but we need to finalize the budget for next year.

[Katja Jancic, analyst]

And then is it fair to assume that some of that will put some pressure on the cost side, at least in the first half of the year?

[Dale Boyles, executive]

No, not until you sell some of that coal, all that will go to mine development.

[Operator]

And at this time, there are no further questions. I would like to turn the call back over to Mr. Scheller for any closing remarks.

[Walter Scheller, executive]

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

[Operator]

Thank you. And that does conclude today's conference. Thank you, all for participating. And at this time, you may now disconnect your lines.