Overview of Warrior Met Coal (HCC)
Antonio Velardo points out that Warrior Met Coal operates in Alabama and is a major player in the global metallurgical coal market, focusing on exporting coal for steel production. Its strategic location provides access to the McDuffie Coal Terminal in Mobile, making it cost-effective for exporting to key markets. As of now, Warrior operates two mines, Mine No. 4 and Mine No. 7, with a combined nameplate capacity of 8 million short tons per year. In addition to these existing mines, the company is actively developing the Blue Creek project, which is expected to significantly boost production by 2026.
Financial Strength and Stability
One of the key elements that drew Antonio Velardo‘s attention to Warrior Met Coal is its financial strength. The company holds $709 million in cash and only $171 million in debt. This solid financial footing ensures that Warrior can fund the remaining $550 million needed to complete the Blue Creek project without jeopardizing its financial health.
The Blue Creek Project: A Catalyst for Future Growth
According to Antonio Velardo, the Blue Creek project is the centerpiece of Warrior Met Coal’s future growth strategy. Expected to start longwall mining operations in 2026, Blue Creek will significantly increase Warrior’s production capacity while simultaneously lowering its cost base. This positions the company to capture greater market share and benefit from improved margins. Velardo emphasizes that while Warrior’s margins have been compressed due to weaker coking coal prices, the lower cost structure from Blue Creek will enable substantial improvements in profitability once the project is operational.
Why Now Is a Good Entry Point
The stock price of Warrior Met Coal has pulled back slightly in recent months, which Antonio Velardo believes creates an excellent entry point for long-term investors. While the company is currently trading at an EV/EBITDA multiple of 5.0, Velardo highlights that this does not fully account for the growth that will come from Blue Creek. As such, there is a disconnect between the current market price and the future earnings potential of the company.
Conclusion
As an experienced investor, Antonio Velardo believes that Warrior Met Coal is an undervalued opportunity in the metallurgical coal sector. The company’s financial strength, combined with the long-term growth potential of the Blue Creek project, makes HCC a compelling buy for those with a multi-year investment horizon. Velardo advises that the recent pullback in stock price should not deter investors but rather be seen as an attractive entry point. As the company progresses toward its 2026-2027 targets, Antonio Velardo expects to see a significant increase in earnings and cash flow, which will likely translate into higher stock prices and returns for shareholders.
For those looking to diversify into the coal sector and capitalize on a future growth story, Antonio Velardo considers Warrior Met Coal a strong contender. With a solid balance sheet, promising growth catalysts, and a clear path to profitability, HCC is a stock that should not be overlooked.
