February 22, 2019 - Warrior Met Coal is weighing up options to develop its Blue Creek mine in Alabama, targeting expansion into the high-volatile type A (HVA) coking coal market.

Blue Creek "represents one of the few remaining untapped reserves of premium HVA metallurgical coal in the U.S.", the company said, and its development will represent Warrior's next growth phase.

The company is studying the feasibility of a single longwall operation that could produce up to 3mn short tonnes (st) a year, with a mine life in excess of 40 years. This would require an initial capital expenditure of around $550mn-600mn spent over a five-year period.

Warrior's preliminary engineering studies indicate that Blue Creek could support a second longwall that would lift production to 6mn st/yr.

The company controls around 114mn st of reserves at Blue Creek and has the ability to acquire adjacent reserves that would lift the total to more than 170mn st.

Warrior expects Blue Creek to be fully permitted and "shovel ready" by early 2020, at which point it will be in a position to make a decision on how to proceed with its development.

Warrior is not the only U.S. producer looking to expand in the HVA market, which has a robust price outlook given strong global demand and tight supply. Arch Coal said this month that it has started development of its new Leer South mine in West Virginia, targeting HVA output of around 3mn st/yr.

Fob Hampton Roads prices for HVA used to price at a discount to U.S. low-volatile coals, but have enjoyed a premium of at least $10/t for much of the past year, Argus assessments show.

Meanwhile, Warrior produced 1.9mn st of coking coal in the fourth quarter of 2018, up by 20pc year on year. Full-year output hit a record high of 7.7mn st thanks to ramp-ups and increased efficiencies at its No 4 and No 7 mines, which produce low and mid-volatile coking coal.

Fourth-quarter sales volumes were up by 45pc on the year at 2mn st, taking total 2018 sales to a record high of 7.6mn st — up by 17pc compared with 2017.

The company sold its coking coal at a 7pc discount to the quarterly average for fob Australia premium hard low-volatile coking coal index in the fourth quarter.