Yet Another Value Podcast - Matt Warder shares state of the coal markets + $AMR $HCC

Episode Date: March 26, 2024

Matt Warder, @mfwarder on Twitter/X, joins the podcast to discuss all things Coal, including: high level thoughts on coal, investing narrative from last few years, regulation, "greening" of metallurgical coal, $AMR, $HCC, upcoming election's impact on coal investment case and more! You can Follow Matt Warder on Twitter/X @mfwarder: https://twitter.com/mfwarder Range Global Resources Coal ETF: https://rangeetfs.com/coal Chapters: [0:00] Introduction [1:27] High level thoughts on Coal [6:07] Coal's investment narrative from last few years [12:50] "Commodities don't die down, they die up" / down cycle in thermal coal [16:07] Biden admin on coal [21:38] Metallurgical coal ideas [26:17] Global cost curve for metallurgical coal "met coal" / are we mining less efficiently? [35:41] "Greening" of metallurgical coal? [42:53] Domestic coal plays $AMR [48:54] $HCC / Blue Creek Mine [57:17] Does upcoming election matter for the coal investment case [1:00:28] $HCC $AMR valuations [1:06:09] Final thoughts on coal

All right. Hello and welcome to the yet another value podcast. I'm your host, Andrew Walker. If you like this podcast, it would mean a lot if you could rate, subscribe, review wherever you're watching or listening to it, YouTube, Spotify, all that. With me today, I'm excited to have one of the kings, kings, princes, I don't know, of Cole Twitter, Matt, how's it going? It goes pretty well. Thanks for having me on. I've been a long-time listener, obviously first-time guests here. So happy to talk to the community and field any questions you might have. It's a, Cole's a, you know, a real passion project for me just in general. It's kind of where I started my career. And, you know, whether or not I've moved on to general space or, you know, broader metals and mining,

I've always done some component of this. So, you know, the fact that it's at the front of mine for everyone here is just like really, really cool to me personally. And happy to get it to the weeds with you as far as you want to go. Well, you can tell it's front of mine because when I said you were coming on, You can see the response. You can see the enthusiasm about it. We're going to go into a lot of things, but I want to give two disclaimers before we get there. First, disclaimers to remind everyone that nothing on this podcast investing advice.

That's always true, but particularly true today. Matt and I, we were talking before the show. I think we hit seven different coal companies inside of 10 seconds. So we're going to flip through a lot of different coal companies. Remember, some of these are international. Whole companies carries extra risk. International carries extra risk. Please consults financial advisor.

Remember, none of this is investing advice. So, Matt, that out the way, the reason we're really talking today, I should have had you on a long time ago. I think if you look in your DMs like two years ago, it's kind of like, hey, but anyway, our friends at Range Global Resources introduced the coal ETF a few months ago. This is really funny because there used to be a, the ticker at the coal ETF is, you know, good for them, coal. There used to be another coal ETF that closed, I mean, literally at the bottom, December 2020, it shuts down. It would have been up like 25X, but if you wanted broad, base exposure to coal, that would. was there was no way to do it. If you were one of the crazy people who did, our friends at range resources launched the coal ETF. They're like, hey, you guys should get together, talk about coal.

There's a lot of interest. People are really interested in this. So that's what we're talking, the coal atop. I just want to start, look, I'm a generalist. I have friends who are all in on the coal trade. We can talk about the history. We can talk about everything. But just when people come to you and they say, what are your high level thoughts on coal today? What are your high level thoughts on coal today? Well, so broadly speaking, I mean, there are coal, The hard thing that I think most generalists have with coal is that coal isn't just one thing. It's a spectrum of things, a spectrum of products that go across, you know, utilities and industrial sectors. You know, we send coal to power plants to produce power, obviously.

And that's by and large what captures the headlines as far as the energy transition goes and how developed markets are looking to move beyond coal, that whole movement that's really geared toward thermal. There's another side of the business which is metallurgical. Yeah, there's the other side of the business, which is metallurgical coal, which is used as the reductant to produce steel. If you can imagine, you know, we heat up coal in the ampses of oxygen and it basically just makes carbon like charcoal. And then that carbon gets layered into a coke, which is what it's called then, It's basically like charcoal. The carbon serves as the reductants to reduce F-E-O-2 iron ore into F-E-O.

And as that melts, it has to trickle down through all the little nooks and crannies in this, like, you know, baseball-sized coat in order to get to the bottom and then you tap it out. So those coals have very specific properties, mainly that when you heat them up to, you know, a couple thousand degrees, they don't turn into dust. they turn into, you know, charcoal, right? We also have industrial coals that there's a lot of high-caloric value coal that has very narrow specs and is used, for instance, to make cement. So you can use it to make cement, to make chemicals. There's a number of different processes that's used in, you know, foundries for silicon. There are a number of different, you know, sort of industrial uses, aside from just steel,

but industrial coal is a much smaller part of the market. And for the most part, today we're going to be talking about, you know, thermal versus met, the companies that are exposed to that, et cetera. But that's kind of the high level. If you haven't talked about coal before, those are the absolute no things. And then to drill down onto the market side, you know, broadly speaking, we're in a period where natural gas, which coal competes for in the power sector, is extremely low-priced and is probably going lower internationally.

You know, we may get a bounce here domestically as some of that gas moves offshore into LNG, but in general, thermal coal is going to be probably lower priced over the next couple of years, at least, whereas metallurgical coal, which is used to big steel, is far off of its highs, which were, you know, hit during, you know, the combination of COVID restarts plus the Ukraine war, beginning, in February, March of 22. But now we're in this period where, you know, prices have kind of bottomed and stabilized today, much higher range than they are historically.

And most of us who are analysts in the industry believe this is going to actually, you know, follow through for a few years after this. So from an investing perspective over the next year or two, the metallurgical coal space looks much more stable than the thermal coal space. And I say the word stable, you know, given the inequities are off, you know, 20, 30 percent here over the past few weeks because we entered into the shoulder season where not too many buyers are in the market, but, you know, cyclicals do cyclical things, right? So what goes down eventually comes up when buyers come back in. In general, though,

we think we think medical markets are going to be more stable. So you hit on a lot of things that I want to talk about and a lot of really interesting things, but I just want to back up first thing, right? If I rewound to call it or mid-200, 2021 to early 2022. As I think our mutual friend, I won't say his name, but as multiple of people put it out, there were a lot of people on Finchwit in deep value forms who were very bullish the coal companies, right? And they were saying, hey, these guys are trading at fractions of a multiple, you know, one times EBDA, two times EBITA. And they were saying global supplies are very tight.

So yes, these are cyclical companies. I get it. But it won't take much to push them over the edge, right? And then 2022 was, people forget, it was a bad year for the stock market. It was an unbelievable year for commodities and especially for coal companies, right? And a lot of that was Russia, Ukraine, Roar, right? That sends the shortages into a tailspin. Prices go parabolic.

All these things. I mean, I'm looking at the chart of AMR that, you know, it peaks at about 450 earlier this year. And I think it was trading into single digits in 2021, right? So all these things go crazy. Because my first question I wanted to ask is there's so much interest in coal Twitter. That's because people made good for them. They made a fortune in 2022. Were they, I think a lot of the interest stems from that history.

And obviously, the things are trading tighter. But just if I go back to that history, was that good analysis in 2021, 2021? Or did they kind of get lucky, right? Like supply chains were a lot worse than we thought. Russia, Ukraine War. I don't think anybody was buying AMR in 2021. Like, hey, Russia's going to go invade Ukraine. Like, how do you just kind of think of like the path that's gotten us here over the past two years?

I know that's a weird question. Right. Well, I mean, so the way that I kind of look at 2002 in particular, which is where everything peaked, is we got to see how sort of marginal unit dynamics kind of work in terms of supply versus demand, right? When you run out of available material on your cost curve, you know, what are end users willing to pay for that marginal ton, you know, in this case? For med coal and thermal coal, they both got up around $500, $600. I think med coal topped about $620 or somewhere around there. I mean, just ridiculous numbers. But the bottom line is we were in this period where, you know,

Russia had been sanctioned so they could no longer sell coal into Europe. So it took about six months for, you know, the musical chairs of trade flows to readjust. And during that period where coal was unavailable, that's what shot it to the moon. Now, why the equities, you know, have been able to follow through on that is because they have, you know, periodic contracts that reflect what those spot markets are. So if you sell ahead, you know, you sell generally like three months, six months ahead. So when the price was at, you know, 622 and the bare minimum of analysts are covering the space, I mean, we really have just two or three, you know, analysts that cover the coal space, everybody was behind the curve in realizing that, you know, that a massive amount of cash that they that they booked. in Q2 wasn't going to actually hit their revenue until

Q3, Q4. It's going to come out over time and it looked like a pig going through a Python. So the analysis was right, but the equity peak does not coincide with necessarily the price week. So that's part one of that.

If I can just add, you were mostly right. The other thing I think, no one can predict Russia, Ukraine, but what you can do is you can look and say, oh my God, these markets are really tight, right? If there's a hundred of demand and there's a hundred of supply and there's zero more supply, so I'm almost buying a free option, right? Like, if one negative thing happens and we go from 100 in supply to 99 in supply, we're going parabolic, right?

And you don't know what the match that lights the dynamite is. This wasn't just the match that lit the dynamite. This was dynamite that lit dynamite. But you just say, hey, like I'm getting a free option where these are really cheap. This dynamic is in play. And we all know something bad happens eventually to these supply chains and there's just no more supply. So I actually, I think it was great analysis. I just I do look back and I say, hey, you know, there was, it was really aided by

something, but please continue. Oops, Matt, you did it? Yeah, so, so that's that period. Yeah, it's okay, by my internet connection is a little wonky here. So if it cuts out or whatever, we can make your internet, it's powered by coal.

That's the issue. It's powered by goal. Yeah, unfortunately, I think that not enough coal power to get through three walls here to the office for the time being. But so when we move on to the next phase, so companies have got this giant windfall of money, right? This giant pile of money. And they did, they all pretty much did the responsible thing with it, which was pay off their debt. And after you've paid off your debt and you still have, you know, this historically massive amounts of free cash flow left, There's not much left to do with the money unless you want to grow production. There are a few companies that are doing that.

Or you want to give the money back to your shareholders. And with coal not able to access finance as readily as they used to, the amount of growth that's out there is just not really existed. There are a handful of projects in the MET space. There's really not much at all in terms of thermal coal. So, you know, we wind up in these periods during the cycle. during the cycle where, you know, because, you know, the moving away from coal has been dictated from the top down by political bodies in the Western world, when we go through

those periods like we had in COVID, where prices go, you know, oil went negative, coal went, you know, to double digits for Met Coal, which is, you know, we hadn't seen in years. But when that happens, you know, mine shut down. And when they shut down, particularly in the U.S., these developed markets, they don't come back. So when demand eventually swings the other direction, like the United States used to be the swing supplier to the entire world. And now we're not physically really able to do that anymore. And that's the dynamic, I think, that people sort of maybe miss or don't understand if, let's say coal is a dying commodity. Commodities don't die down. They die up. And that's how

you incentivize, you know, further transition and those sorts of things. But we're still, I mean, we're probably in the third inning of this part of the cycle. That's really interesting. We're going to have another. I like that quote. I don't disagree with it. The quote, commodities don't die down. They die up.

So what you mean is what happens is the prices because you've got some legacy used. And tell me if I'm wrong, you've got some legacy users that can't transition away for X, Y, Z reason. Commodities die up, meaning the prices just keep going up, up, up, up. And, you know, it's not oil goes from 100 to 10 because no one's using it. It's oil goes from 100 to 1,000 to 1,000. and it keeps going up until people are disincentivized from using it completely is what you're saying. Yeah, because the supply goes away and it doesn't, it is not incentivized to come back. Or in the case of coal, it's prevented to come back largely from lack of access to finance.

So, you know, we're in the midst of a down cycle now in thermal coal. You know, so if you're long thermal coal, which, you know, I don't necessarily want to be, or at least not overweight to it at this point in time, you want to be long the lowest cost producers because those are the ones who are going to be able to weather the storm. And really, we're in the quiet period for metallurgical coal. Steel is a very lumpy business as our utilities. Obviously, utilities are stocking up when demand goes down so that they can get their stockpiles ready for summer

when they need to really dispatch. And likewise, steel companies only buy a couple times a year. They buy, you know, basically, like, call it late July, early August through October. And then they buy like late November, early December through February, March, the period that we're just in. And spot prices in the middle of those times tend to go down unless acted upon by some outside forest or we have a supply disruption, those sorts of things. So, like, you know, to move on to sort of thinking about the period now, now we're in a more mature period. where, you know, equity prices are going to, you know, capture probably more of the beta of fluctuations in prices than they normally would. This is a very different environment from 21, 22, where the path to, you know, re-rating was really, really clear.

Now, a lot of these companies have re-rated. Some of them need to re-rate more, and, you know, but others are re-rating through, like, their buyback programs like AMR is. and all of this is going to take a number of years to play out. You know, I tend to think of like, you know, a good coal cycle lasts about for five years. And in those five years, you have one really bad year and one really, really good year, and the other three are sort of average.

And the two things I think are changing are the bad year is going to be higher, the low year is going to be higher, and the average over that period of time, I think is going to be, markedly higher for med coal. For thermal, thermal's more at the mercy of natural gas. And my track record of predicting natural gas prices is unblemished by success, shall we say.

So, you know, I'm more of a data, yeah, well, let's borrow that from Rickrull. But the, you know, on the gas side, I tend to be more of a data consumer than a generator of it. And I, you know, rely on a lot of people's outside views to sort of guide me through how I need to be thinking about thermal coal markets because it really is a direct competition between one. Can I just pause you there? So a lot of the questions, and this is a question I had as well, right? It was going to be

hey, Nat gas is really down and Nat gas and coal compete with each other, right? Plants are always running, hey, what's our best source? They'd probably rather, all else equal, they'd probably rather run Nat gas than coal just because Nat gas is cleaner. You've got to incentivize them to run NACA, and there's

other stuff going on. But a lot of people were sending in questions like, hey, Nat gas is basically free in Texas right now, and the Biden administration wants to kill coal. You know, there was an article that came out Friday afternoon that said the Biden administration, I think the quote was, it wants to kill coal, right? And I think the article was a little overblown. It said, hey, if you're not installing cleaners on your coal plant, we're going to shut you down by 2040, but they clearly do not like coal. A lot of people are saying, isn't this a doomsday combo for coal? And I guess maybe, maybe not. But what you're saying is investors, they can go look at coal.

Might be interesting, might not be. You probably need to think a lot about international demand. You're much more focused on metallurgical coal and you think that's where the real interesting self is happening right now. Am I putting words in your mouth or how would you respond to that? For the next couple of years, I think that's right. But, you know, the same way I was talking about, you know, all of the coal industry during COVID, how there reminds it shut down and didn't come back. And then when demand creeped up to the upside, well, there wasn't a coal available when prices went to the moon. You know, the thermal coal market is setting, especially domestically, is setting itself up for that again.

You know, to the comment about, you know, Biden and their regulations at EPA, for instance, that are being proposed for, I think it's for soxinox emission, you know, sulfur dioxide and nitrogen oxide. And for Western plants, you know, unless they retrofitted, which, you know, is economically unsound. you know, that would pull forward to retirement for like 40 gigawatts or something like that of coal fire power plants, which is a lot. And, you know, thinking about, you know, the winter storm in Texas, well, that's all of those coal plants, which were needed in order to provide backup for that, you know, Six Sigma weather event that happened down. So, like, ironically, at the same time that the Biden administration is putting forth this messaging, which by the way is in an election year.

So this is not really, it's not really that in common for liberal-minded Western people to, you know, propose the... You shut down the coal industry and you lose the West Virginia vote by 55 points instead of 50. Like, what's it? That's right. What question on, cool, look, in my mind, I used to cover utilities pretty closely. Coal is generally baseload, right? Not piker. Would coal have...

Now, if the whole thing had been, if all the Texas power plants, had been coal, yeah, it would have really helped in that freeze. But would coal, having a little bit more coal, really have helped that freeze? Because it's not like coals are peaker, so you could just all of a sudden brought them back online in Texas. Well, I mean, you can import power. So you can generate power in other states and then import it down to Texas on an emergency basis. But those plants were really low on stockpots. And that was really obvious that summer, starting in May, I started like a contract for filling in for a friend at my old stomping grounds at Wood McKenzie to model U.S. domestic thermal coal prices. And I looked at the stockpile levels and just kind of went, we don't have enough relative to production.

Rail was still, I mean, we were still getting people back to work for rail. You know, the offices, people weren't in the offices and all those sorts of things. But it was pretty clear that there was a problem. I think I remember looking at the amount of, you know, burn for all that their gas team had used. And it was something like 30% more than the fleet was even capable of providing. And they'd done that to balance out their natural gas forecast because, you know, coal is one of the variables that you can adjust in order to, you know, arrive at the conclusion that you're looking to get. Well, nobody had sort of informed them that, like, well, you can't, you actually. can't do that and when they made those adjustments you got these really ridiculous power prices

which wound up being true uh so yeah all i'm hearing is we should have gone long long irkot futures that's what we needed to do yeah it was it was a really scary setup in 21 we're past that but you know my my sort of caution is that uh you know if any of these sorts of regulations wind up taking place and i think we're going to have a lot of domestic shutdown mind shutdowns just due to price itself. When those go away, they're not coming back. They're not going to be available for domestic markets or for export markets or for anything. And there's one thing we know about the energy transitions that storage at scale is not going to be here for 30, 40, 50 years. It's going to be a long, long time before we see it. Until then, you can't just build out renewables

because renewables aren't dispatchable. You need base load dispatchable power to balance the grid. Because you're redesigned the grid? Sure. But now we're getting into a whole other can of worms. So just you know, you can't go from step one to step 40. You have to go from step one to step two to step three and make your way gradually. And yeah, that's the problem is we're trying

to solve the energy transition through sound bites. And that just doesn't work in practice. Hand in hand, I found hand in hand with the coal trade is the uranium trade, right? Like they go hand and it's not a coincident range resource launch. A

and a uranium ETF, but they go hand in hand, and I'm with you, right? Like, we're shutting down all these nukes, which are playing baseload power, and it's completely insane to me. Let me put that aside. So if I'm hearing our conversation correctly, like, there could be, there can be opportunity anywhere, right? Like, these guys still trade with very low multiples. They've all gotten pretty good religion on buying back stock.

But what I'm hearing from you is more, hey, you can yolo a thermal coal play. Might work out. Might not. probably you got pretty good trends in your friend and you might have a really super normal profit year. But Met Coal seems more interesting to you. I want to talk a little bit more about why Met Coal,

but most of my audience is generous, right? Most of them aren't crazy coal people. If I just looked at the domestic companies, right? There's Alpha Metallurgical Coal, AMR, that's the one that if you pull up a chart, that's the one the Wall Street Journal is going to show, look at how all these coal companies do. There's Arch, there's Warrior Met Coal,

there's C-I-X console energy, There's a few other who are missing off the top of my head. But if a journalist is listening to us and they're like, all right, Matt sounds smart, sounds like Metckel is where I really need to do the ramp up. What are the domestically traded coal socks that they should really be thinking of that lean met coal versus thermal? Because, again, it's in some of their names, but it's not completely obvious.

And these things are, it's very tough to ramp up on a completely new sector, especially one. It seems simple, but it's tough. So which are the ones they should really be focused on, do you think? On the Metcol side, Alpha Metallurgical Resources is a pure-play metallurgical coal company. Warrior Metcull, ticker HCC, is a pure-play metallurgical coal company. Ramico Resources, METC, is a pure-play metallurgical company. And as you start moving into Arch and Peabody, and then if we wanted to include the Australians, the White Havens of the world, those become sort of hybrid to various. degrees. Arch is mostly

met coal from a revenue perspective but they do have very large mine in the Powder River basin which you know produces 70 some million tons a year at like a dollar margin or something like that so it's not really contributing that much

to the bottom line and there are you know and obviously the regulatory risks of Western plants that I just talked about are an issue but you know they get 80 90% of the revenue from the Metcolle side So they're really more a met producer. Peabody and Whitehaven with the acquisition are getting more into the 50-50 territory now.

And those companies sort of broadly speaking are all generally fine to hold through the cycle. They're all going to have varying degrees of success or volatility with regard to price beta. But the one thing I would caution investors now is like the big move is done. Like, that's, that's in the past. That's in the rear view. There are a lot of companies that still do need to re-rate. They're going to do that organically through buybacks. But, you know, I think more about the space right now is kind of like, I mean, they're kind of grandpa stocks now, right?

Like utilities used to be back in the old days, you know, to pay a 5, 6% dividend or something like that. I mean, most of these companies, especially on the Mets side, are going to generate any year somewhere between, let's call it, 8 to 10% on the low end, a free. cash flow, and during the boom year would be like 50, 60, 100 percent in a year where prices go bananas. So, you know, you're really buying it for the yield, free cash flow yield at this point in time, and you're buying it for management's willingness to return that free cash flow back to shareholders rather than, you know, do other things with it. That's largely why, you know, the thesis behind why we're invested in the space at the moment. I just think it's funny you say they're largely grandpa stocks because I understand what you're saying.

Like these are return of capital stories, right? What you want is all of these guys. And they appear for the most part to have gotten religion. I know one who we might mention who I know a lot of shareholders who I really want them to get religion. But you guys are going to generate a ton of capital. This is a sunset industry. But guess what?

It can be a beautiful sunset. You just buy back your stock, return it to shareholders, 20% yields. And as you said, these things tend to die up. It tends to take a lot longer to divorce yourself for. these energy sources than you think. So you can generate 20% returns for a long time. I guess let's say, MetPole, right? One question I frequently get, what is the global cost curve for MetPol? Because it's probably changed a lot over the past few years. As you said, some minds have gone offline. There's been a lot of inflation in across the board. You name it

in what you want inflation. I think people are really questioning, hey, when I'm trying to establish to kind of normalized earnings from one of these players, where do I start looking at global cost curve so I can start determining where my company sits on it. That's a good point. And you know, at least from the little bit of research that I've seen, I don't think that the global research industry has done a real good job

updating costs from year to year. The biggest things that have happened just in terms of that, and I came up as a cost analyst, right? So I did, you know, my level estimates of what cost was going to be. I built up cost curves. I built with McKenzie's poll coverage for

Appalachia, which includes all of metallurgical coal production in the U.S. At the asset level. So, like, this is my thing. This is my bailout. The two things people have to realize are that labor inflation has gone absolutely bonkers to the upside. It's hard to get, because the industry has been so volatile in the past, it is really dramatically hard to attract labor, much less keep it.

So, you know, producers now, like I was driving to see alpha metallurgical resources operations in West Virginia last year and we saw billboards for advertising that Warrior Metcull is hiring in Alabama. That's how competitive the game has been. Alpha has this great recruiting video that they put out on local TV now.

I mean, it's fantastic, it wasn't Sam Elliott, but it's like Sam Elliott overdubbed it. It's really well produced. They're doing everything that they can to attract labor and then moreover, they're trying to do all they can to take care of it from here on out. and that is, that's, that's an underappreciated aspect to the market. The other thing is productivity, you know, especially in the U.S.,

but also in Australia now, generally, it doesn't go up over time, it goes down. So not only are you spending more for labor, but you're mining less efficiently over time. And remember, there aren't any new mines. So what you see is what you get with regard to productivity. Are we mining less efficiently? Because kind of, you know, with oil, we've already tapped the easy oil field. so we're starting to get, is it, hey, we've already tapped the easy met pole, so we're getting harder, or is it because, hey, the labor, I could also imagine, hey, the labor force is aging,

you know, when you've got all your labor forces 30 to 40-year-old men mining, they're going to mine a little bit faster. Now, I know there's machines and stuff, but they're going to mine a little bit faster than when all your labor force is 50 to 60. Is it both? Is it yes, and? Is it more one than the other? I mean, it's mostly incentivizing people that just come into the industry.

you know in west virginia where i grew up coal mining is one of the few jobs you could do if i make six figures and not have a college degree uh and you know that's it's not the case if you want to be you know an engineer or you want to be you know electrician or something like that you either have to have professional certificates for college degree but like if you just want to go run coal you can do that and make a great living in a place where it doesn't cost that much to live uh and have a really you know nice life and if you think about the economic benefits for, you know, the surrounding communities, well, those those high-paying jobs without college degrees are what supports all the local restaurants and car dealerships and, you know, convenience

stores and body shops and that sort of stuff. And I think people, certainly politicians have discounted the second and third order economic effects of those jobs and those communities in the past. And that's, you know, much to my chagrin, even as, you know, probably, you know, one of the few, if only, maybe the only liberal guy in the coal industry, right? Those things are concerning to me because those are my people, you know, where I come from. I don't want to see them, you know, have to suffer. And, you know, if you think about their wives or teachers, you know, that if they have to move to find work, then you have to, we have this huge labor problem in teaching in West Virginia, too.

There are lots of other unintended consequences that come from, you know, kind of selectively pushing down on a lot of those jobs, getting off on a soapbox a little bit here. You are, you are. But look, I don't disagree, and this is why these, if you're elected from these communities, it's like job number one, you go in and you let them know, hey, I will, I don't care about everything else. Like, we're protecting this community. We need to keep it open, and there's a lot of reasons for security.

But I do want to go back to the question I had. But that's a cost break even for Metpole. Yeah, so the labor inflation has been enormous, and a lot of those issues are, are at the root cause. Like incentivizing people to come in has been difficult. You know, the other part of it, you know, Australia has been legislative. Queensland changed the royalty regime from, you know, as high as, you know, 25, 30 percent up to like, it goes up to 60 when prices get that big.

So the cost curve now looks dramatically different at 200 prices than it does at 400 prices. And that, I think, is probably where we're going to be range-bound for a long time. The methodology that we used at Wood McKenzie to kind of figure out what long-term prices are is basically like the 90th percentile cost. So that's a pretty good proxy for where the average is going to settle out for a long time. Unfortunately, over the past 10 years, it's proven really not to be true at all. You know, the 90th percentile cost for years was like 150 bucks, U.S. And that's what, you know, all the banks would put in their decks.

That's what we always had was 150, 155, somewhere around in there. And it came out to that pretty much every year you could set a, you set your watch button. You know, now that number has crept up a lot. You know, labor is probably, oh, I want to say, you know, 40% more expensive than it was, you know, 10 years ago. Productivity in Central Applatch is down really significantly over that time. And not only is productivity down, but recovery at prep plants. Like the thinner the seams go, the more rock you have to mine. And your recovery can go from 50, 40%, like it was back in the day down to, you know,

some of these thin seam mines in West Virginia is like 25%. So you're mine at 75% rock. You're not getting as much coal out of the ground and your labor costs is going up. So you tack on, you know, taxes on top of that. And, you know, you've got a real, you know, fundamental inflationary problem. sitting on the cost side. So, you know, the 90th percentile costs looking backwards from, call it 20, call it like 2008 to like 1998 was pretty good. It was a great methodology. Since then, we've had so many supply problems in Australia.

We ended up to force like the Metcold price up to $300, you know, every few years, whether it's a flood or whether it's an outage or something like that. If you look at the average coal price over the past decade, it's about $270.70. And that's not necessarily congruent with, you know, the long-term price or the 90th percentile cost. But if I had to guess right now, I mean, easy way to do it is just let's take Alpha as a proxy. They've reported their costs at about $110, $150 at the mine gate per short time. It costs about $50 to get it to the port. So let's take the top end of that, just for arguments. say, let's get it to the port.

That's $165 per short time, okay? So if we move that up to metric, that it'd be $180. So already we're $30 above where the old long-term price was. And that's just, that's with the most important Metcold company in the U.S. Like that's, that right there is a signal that top line number is up. Most important, I think they're maybe not the lowest cost, but they're a lower cost producer and the math you just did was that doesn't give them a return on their investment, right? That's their cash break even cost. These guys need a return on their investment. So let's say the cost of capital for coal is 20%. Whatever. In my mind, you say 180, you add some SG&A, you add a cost capital. I think, obviously they can sell at cash costs for a little bit in a downturn. But I think kind of you're starting to talk about the global. break-even is in the 240 range, if I'm thinking about that incorrectly. If you follow on your comment there, let's add in sustaining cap-ex.

It gets about $10 a ton in Central App. It gets us for $165 to 175. If you want to add in SGA and taxes, that's about another $5 a piece. It gets us for $175 to $185. So now if we convert to metric tons, that becomes 203. All right? So 203, and how much profit did you say? We want a 20%.

I was saying return a capital, 20%. That's not directly congrue it with margin, but yeah. 243 then. That's what the long-term price needs to be to ensure that there's going to be enough production to service the steel industry. Like, that's the map. Let me flip to a completely different one, because I think it's a really good question and it's one's mine.

I'm not a coal expert, but, you know, 10 years ago when I heard people talk about coal, I would hear a lot of people talk about metallurgical, and they'd be like, the great thing about it is you really, really can't green around metallurgical coal, right? You really, if you want coal to cost $500 kajillion per ton, sure, you could do something, but you really need the metallurgic coal in the process. There's no way around it. Now you're starting to see some green peels, and I just want to ask, what is the future of metallurgical coal seal making this greening look like, right? Is it an opportunity? Is it a concern? Is it a risk? I'd love to hear your

thoughts on that? Yeah. So it's a complicated question because what we're really talk about about the energy transition or the, you know, the green movement in steel, we're really just talking about the United States and Europe. I mean, that's, that's really it. You know, Japan's not really going to do it to any degree over the next 10 years. You know, Southeast Asia really isn't. China certainly isn't. In India is growing. They're growing. They're growing. They're blast furnace production. So, you know, the declines that we'll see, and there will be some, you know, in the United States and Europe, for instance, in the U.S., both the Canadian operations up there, Stelco is going to convert, Algoma is going to convert from blast furnace to electric

arc furnace. DeFasco, Marshall Obertal, is going to convert from blast furnace to electric art furnace. Those are all happening within the next three to four years. That's already sort of on the books. It's about, you know, three or four million tons. of steel demand or coal demand and not a whole lot and we know about that in Europe it's a little bit different story like you know in the US we have this

really well developed scrap market that's been around for decades right because you have to if you're going to transition to EAF you have to melt scrap Europe doesn't really have that kind of developed scrap market like we do so they're going to have to and if your iron units for scrap

become higher cost because of that increase in ban relative to your iron units for a blast furnace, then you've got a problem. So can I just back up? Because again, I'm a generalist. I understand most of what you're saying, but some of the words you're throwing out, even I don't know. And I think a real generalist might listen in and be like what that's going on. So let's just back up a second. Blast furnace is your traditional steelmaking process. You toss in a lot of heat, a lot of coal, and you get steel out. The electrification way would be going with an electric furnace. Can you just

tell how is that different? And I think that'll help explain. why the scrap iron is scrap steel prices you're talking about makes such a difference well i mean an electric arc furnace takes scrap steel and it melts it in a big ladle with two electrodes that come in from either side um there's a lot of other smelters that sort of operate in the same way that's that's the one we do for steel um you can take uh you know use steel and re-strengthen it um new course done a great job with that in the u.s for instance um but they're still i mean we have such high safety standards in in the in the u.s for automobiles that we see still need to, you know, custom-make a lot of urgent steel in order to supply that demand.

Similarly, there's a lot of high tensile-strength steel, you know, in plate that's going to be hard to manufacture without, you know, without coal. But out, you know, in Canada, they'll manage to do it a little bit. And then, you know, the other thing I think is, you know, the, I started talking about how how Europe doesn't have a developed scrap market and because of that they'll have to import a lot which could send the prices higher right so blast furnaces use coal electric dark furnaces don't if the scrap price goes too high uh we're got europe is going to need to have more blast furnace production they're going to have to optimize those two uh components uh and so like i think what

happens in europe over time is instead of transitioning those blast furnaces over to the EAFs that are using, instead of scrap, they're proposing to use direct-reduced iron as an iron input. Direct-reduced iron is either reduced with natural gas, which is available, or the greenway is with hydrogen, which isn't available yet. So two avenues by which you could make sort of zero-carbon steel or low-carbon steel. if you move to the DRI EAF part. Well, the problem with that is we don't have a whole lot of DRI pellet capacity either.

So there's going to be a competition for the iron units either way. And so I think what's going to happen, you know, the government's going to pay for these EAFs. I think French government's paying for about half of Arcelor Matal's conversion from blast furnace to electric arc furnace at Dunkirk and Fossier-Mair in France. I think the German government wants to pay for ostensibly all. of Tissencroop's conversion of Deusburg from a blast furnace that uses coal to an electric arc furnace that doesn't. But I think what's going to wind up happening is that both facilities will just exist at the outset of this,

and steel producers will have to optimize both of these assets now in order to meet their downstream demand. So I think instead of like just switching it out one for the other like Canada is going to do and probably have some success at, in Europe I think it's going to be more sort of of a trickle and it'll be a more gradual process over time. I mean, it's going to take 15, 20 years to build a hydrogen infrastructure network over there alone. So I don't even think they can get there. And that's before we get into the questions about whether or not hydrogen is safe to use in. a high heat set, you know, there's a, you know, molten metal and water do not get along, particularly well from a chemical perspective, you know, water plus molten steel equals boom. So, you know, I know I've talked to operators who have kind of safety concerns about,

you know, pushing that movement too fast. So, so I think, I think, uh, that that part of the transition is going to be more gradual than, than people expect, if that makes sense. No, it makes subtle sense. I'm just laughing the first part where you talked about, hey, you know, they're doing all these electric arc furnaces and they're going to have to find the balance between blast and electric arc. You can very easily imagine a story of like regulatory oversight gone wrong where it's like, hey, we electrified the whole European steel industry. It's great. And what actually happens is they blast furnace in India, China, name your low-cost market. They just take all that still that they blast furnace, bring it in. And then they put it into an electric arc furnace. Like I could imagine some crazy story. already gone wrong of that. Which will be powered by Cole. Exactly. Exactly. Let's see. Lots to talk about, I think we at the green. Let me, let's go to, there are a couple companies we've mentioned. AMR, WarMet, HCC, BTU, all of them have interesting angles to it. Let's take one or two and just talk about what you're hearing from investors, how you're thinking about it. I'll let you start. Like, what do you think the most interesting of these

larger. Let's stick domestic whole places to talk about right now. Okay. So, you know, what I would generally say just, you know, from the outset, and I better probably put on my AMR hat to do this. There we go. You've got your AMR sweatshirt on, too. So now you're a real AMR, man. Right. So, you know,

AMR is already paid off their debt. They're in the midst of a buyback. They're going to be profitable for a long time. I talked about the resilience. of what I think the coal price is going to be relative to costs and I think we're moving in this area where producers are going to be much

more responsive to changes in price so I do think we'll see announcements of production cutbacks and things like that as prices go lower and we're in the shoulder season now AMR is trading below are they below 300 today? They're not 305 but

over the course of the next couple of months if prices come down a lot we could see you know, AMR trade down around, oh, you know, $250, $265, somewhere around in that area. And that, to me, would be a big scream and, you know, buy signal. Like, this is a good place to sort of establish it. Well, why 250? Let me just ask why 250, right? We picked a number.

Obviously, everybody would like a 20% discount on their stock. But what is it about 250 that says, hey, this is the level for AMR where it's really interesting? Probably easier to show than to tell. But if you looked at a chart of AMR from, say, like, 2020 until present, you know, we had to, we had a run up in 21 and 22 up to around $150 per ton, or sorry, $150 per share level. And then we kind of went sideways as the buyback chewed through, you know, 30% or so of their float. And then by the time that we got to the next year and they report earnings, you know, on that year-on-year comp, the share count had gotten so low that estimates were incredibly light. And so they basically engineered their re-rate through last year's, you know, through last year's reporting.

So the stock price went from that 150 level, basically up to, you know, $250 pretty quickly from, I want to say from May, of 23, up through September, October, you know, went straight from 150 to 250 to 250. and then corrected back down to like 218. But that's the range where I think if, you know, the markets go in the doldrums that we could correct back down and test to in the short term. And, you know, if that does, then, you know, then it's time to sort of jump back in.

So let me, let me ask, so right now AMR is at about 300, right? That gives them an EV. I'm just looking at Bloomberg. I don't have my full model put up. That gives them an EV just under $4 billion. and I'm seeing about 700 million in EBITDA estimates for this year. So let's call it five to six times EBITA estimates. If I looked at it at your level that you're talking about, that's down 20%, so now we're

talking four to five times EBITA estimates. Yeah, let's stick with AMR for now. Let's say I'm right roughly those math, five times EBITDA now, four times is where your buy level. Why is that four times EBITDA the buy level for you, right? Like we can talk about free cash flow. Do you think this EBDA is, is this year's EBDA depra? so it's going up?

What is it about that number that screams fundamental value? I mean, the fact that they bought back 40% of the float and that number is just going to keep going up as long as they keep on keeping on with the buyback. So, you know, valuation for AMR is approaching arbitrary levels here. You know, when you get to the point where you're not only, you know, cannibalizing your own shares

in the way that they've been doing for the past couple of years, but then, you know, you also have, you know, perhaps some price appreciation in the, during the, like the, the big value add from this last cycle up was, like if you looked at their registry, you'd see Renaissance technologies and the momentum algorithms, which had really glommed on to basic materials and, you know, particularly the small cap, mid-cap variety, as the markets sort of melted up from October through, you know, here a couple of months ago. I think what I'm hearing is, look, every value investor decries, hey, I've got a company that sells widgets. And there's a competitor that sells widgets. The competitors in S&B 500 and my company's not. And the competitor trades for three times the multiple and it just keeps going higher. And guess what? That's because they have the index flows. And what you're saying is AMR is bigger. They've squeezed their side and they keep buying back more and more and more so they get the benefits of momentum. And again, it's not like we're talking about paying through the nose

for multiple here. Let me provide a slight pushback. When I talk to my friends and we've got a lot I'm mutual friends. I think you know several of the ones I'm thinking of here, including some who I texted to prep. Warrior Metcull, HCC, is the one I keep hearing. And the two things I hear from them are, hey, we're playing 2x EBITDA cheaper for Warrior Metpole, probably similar-ish asset quality. And why can't Warrior Metpole AMR themselves, right? Yes, they haven't done it yet. But look at the cash flow, and we can talk about Blue Creek. They've got this big Blue Creek mine. Again, I know shareholders who want to go in with the proverbial shotgun and say,

you can do Blue Creek and a buyback at the same time, but they're saying, just look out two years. Blue Creek is going to be a great project, and then they can start buying back their stock. And yeah, we have to wait a year or two, but we're going to get AMR'd eventually in Warrior Metcall. So I threw out a crazy amount at you, but I'll just toss it over to you to respond to those feelers. That's right. I mean, that was going to be the second equity I talked about anyway, right? because the way I sort of look at it, you know, if you're going to invest in coal, you have to have, you know, two barbells kind of on either side, you know, one on the buyback and one on the growth side. To me, they're horses and horses.

AMR is further along in their buyback process than is Warrior, but we know what the path is, I think, is more to the point, right? And I think, you know, Warrior has kind of been, let's say unjustly punished here over the past few sessions, you know, partially because they haven't really committed to a buyback. And they're a little bearish, you know, on their calls. But I venture to guess, and, you know, my friend Kowala has talked about it on Twitter a couple of times where he's mentioned that, you know, if Walton Dale would, you know, just sit on a call like, look, we get your emails, we know. We know everybody wants a buyback.

But, like, you know, we're in charge of delivering this project, which is going to add the ability to do that. We need to make sure that this goes off without a hitch so that we can turbocharge a shareholder return program after the fact. But if this mind doesn't get here, then whatever program it is we decide to do is going to be lackluster in comparison.

I think if they just said that to the masses, then people go, all right, fine, okay, that's cool. The mine that you're talking about is Blue Creek, and I think they're putting in over a billion dollars. I can't remember the exact numbers into the Blue Creek. But let me just, do you think Blue Creek is going to be a successful project in terms of, forget if they produce coal? Is it going to deliver an attractive return on investment for that huge amount of money they're spending into it?

Oh, yeah. I mean, it's a needed quality in the world. There is a, so the, for metallurgical coal, and this needs some context as well, because this isn't something generalists you're going to know. We rate thermal coal based on heat content in BT. or in kilocalories. So you have really low, you know, heat coal like Indonesian coal at 4200 K cows. You have really high heat coal like U.S. coals, which are, you know, call it to 7,000 K cows,

8,000 K cows, about twice as much or more in terms of heat content than Indonesia. On the metallurgical coal side, we value the products by rank. And one of the ways that we measure that is with a volatile. volatile content. So, like, if you imagine coal is 100%, you know, a low volatile coal will have 20% of its composition that is like not carbon. And a high volatile coal will have like 35% of its composition that is not carbon. So back in the day, way back when that 15% delta is also played out in price usually. Because you're trying to hit a blend sort of in the middle. Like the seal industry was built on mid-volatile coal, but we don't have too much of that

in the United States. So we started having to mix qualities and start this whole process. Europe does that too. Now, the quality that Blue Creek is going to produce is a really top quality high ball that shrinks in in Coke ovens when you put it in. So you can now, that allows Coke makers to use a wider variety of low volatile coals that may expand that are a little bit cheaper. So it allows them to sort of keep their costing. And there hasn't been enough of that type of coal in the market for years to the point where like one of the most well-received papers I wrote at Wood McKenzie was talked about what we called at the time crossover coal, which is high volatile B coal now, the B-grade coals.

Those are a little bit lower rank. They don't cook quite as well. but she can use them and 10, 15% of the blend. That came into the market, got pulled out of the thermal coal market, got put into the MET market, and it's there now.

The more high volatile A production we bring on, the less B production will need. So Coke strength is going to get, you know, more strong over time, you know, with the advent of that coal. So it's going to be in really, really high demand regardless. And probably the losers on the other side of the situation, you know, may come out of the market during this downturn,

which are people who produce mostly thermal coal with a little bit of met or something like that. So there will be a balance in the market. That coal is really needed. It will fetch a really good price. Just from a free cash flow perspective, like even at pretty bearish long-term outlooks for Blue Creek, you know, Warrior's going to be free cash flow,

$600, $800 million a year. once that mine's on, you know, relative to, I mean, they could do that now in really high price environment, but in a lower price environment, they're more like half that. So it's a, it's a big change for them. And it is, it's one that's really needed. In my view, the growth versus buyback is, they're kind of just different sides of the same coin, really. So I was talking to a, this was a cable company, but I would always bang that. them and I'd say, hey, guys, like, rough numbers, your stock trades for 2,000 a home pass and you're building out homes at $2,500 per homes pass.

And I'd be tearing my hair out. You need to be buying back stock. And they, one time somebody sent me out, I was like, look, I hear what you're saying, okay? But do you think that these homes were building at $25 per home pass are attractive returns? It'd be like, yeah, sure. And you and I are, we're on the same page, right?

the high teens, low 20% IRA, cost of capital is, you know, obviously equity is a commoner cause, but yes, anybody would like a high team's 20% return IRA. Like, all right, we game this out. We cannot stop building this week to buy back stock and then start building next week because our stock's gone from 2,000 holes, a 3,000 hole in pass, so it makes more sense. We have to decide on a five-year view, does this make sense, commit to it, and go through it. Now, that doesn't mean if we got into distress, we couldn't stop, but we can't just start. And for Warrior Met Coal, I've come to kind of see the same thing, right?

They say, hey, this is a great project. You can tell me what return on investment you think they're going to get. Let's say it's 20%. That actually might be a little low for a coal company's on their cost cap. But it's a great project. We can't, because our stock goes from 70 to 50, stop this project for two months and buyback stock. We just have to say, is this a good project or not and build it? And obviously, if our stock was two, maybe it's a different component, but we've got to build it.

So I wouldn't, do anything you want to add there or I kind of hopped on a soapbox? Yeah, that's okay. I mean, the way I kind of view HCC is like future AMR. You know, they're building a project now that's going to take them up to, you know, kind of around that same level of production. And then they're going to have all this free cash flow and nothing left to do with it. So, you know, I don't think the value of Blue Creek is fully appreciated into four-year share price yet. And, you know, certainly it hasn't been rewarded with, you know, the same sort of multiple upgrade because it hasn't been in the market, you know, participating in buybacks the way that AMR has.

That's really the only difference in my mind. And that's why I was trying to say, like, the valuation is kind of arbitrary. Like, the market's only given these companies credit for like three years of production when they have 20 or 30 left. So if even if we're, you know, if we're mining these out the terminal value, then you're buying it for three years you're buying it at a tenth of what it's worth really to you over the longer term and that's kind of how I think

people sort of need to think about it more so than what's the multiple or what's the valuation or whatever it's really it's driven by two things it's driven by what percentage of free cash flow can you generate and what's the denominator you know what are you dividing that and if you can continue to reduce that denominator that multiple is going to go up and up and up

buying back share is that four times free cash flow is a hell of a drug. We're in an election year. Obviously, we talked a little bit about Biden administration doesn't like coal. They might be doing it for a little bit of points. Do you Trump administration, Biden administration, third party administration, obviously it changes how the regulatory response. Do you think it matters for the investment case? Like I could imagine you tell me, hey, Biden administration would be better because it continues

to discourage capital in these guys to the get sustained price power. I could imagine you saying, hey, Trump administration will be better because he's going to roll back all the regulations and taxes are going to end. Does it matter? How do you think about that? I mean, I asked a good friend in the industry that exact same question, you know, a while ago at dinner. And, you know, the response from them was because, you know, keep in mind that they're closer to the front lines, you know, than we are. You know, and the one thing he said about a Trump win was it would really galvanize morale because. guys are not going to worry for their jobs like they would otherwise. And that's meaningful, you know, that really, really is. You know, me thinking, you know, in terms of second and third order effects is that, you know, I'm thinking, well, the energy transition and democratic policies have been amazing for coal investors because they don't necessarily understand what it is that they're legislating and how they're bringing about or what kind of transition.

they're bringing about and at what pace. So as long as they continue to ignore the pacing of the transition in general, commodity prices, I mean, not just coal, but commodity prices in general are going to be crazy. I'm laughing because every time Donald Trump gets up and say, we're going to drill baby drill. I'm sure if you're a energy employee, especially on the front lines, you're happy about it, job security.

But as an energy investor, I like crying. So I'm like, no, no more drill. Please, God, no. That's right. And so, like, you know, like, I don't really view either one as particularly bad or particularly good. But my sort of sense with the Democrats is they'll talk, they'll say one thing, but then the goals, the goalposts are just going to get, you know, pushed out. The closer they come to realize, like, well, we're not going to meet.

You know what I mean? If you run into, you just run into a physics hurdle, right? Like, unfortunately, these energy investments, it takes a long time. These are really complicated systems and it sounds great, but, you know, I've spent a lot time with airlines and yeah, it sounds great. Let's decarbonize the industry. You can't fly a plane on a battery, unfortunately. It just takes a really long time.

I just want to come back last question of Warrior Metcol, right? You and I are talking stock is around $54 per share. I realize it's really hard to ascribe a fair value to something where Blue Creek's coming online. We don't know if MetPoll is going to, you know, trade 200 per ton or 500 per ton next year. I realize it's hard. But when a fundamental investor is looking at this, like just give a range of what a fair value you think were Metpole where you'd be like, I'd be neutral to owning this versus the index or something else. So the way I kind of think about that is, you know, I think that the companies that have

growth projects coming on are probably doubles or doubles-ish from here. I think Warrior should probably trade it about 120. Can you just give me a little bit of bathtub?

I need to relight higher up into mid-toos. Just give me a little bit. Why Warrior 120? Like, what forms that in your mental model? Why do you think 120? All right. I do need one data point if you don't mind looking it up because my internet, my internet's been unstable here.

What's the current share count of Warrior? Warrior has per share, 52 million shares. Okay, so 52 million shares versus Alpha is at 12.9, right? So I believe that's correct. Right. So at 800, you know, basically at 800 million per year of profit, you know, they're kind of, they'll kind of wind up being the same, sort of level, BTU as well.

So now really the only difference is whatever the denominator is. So in my mind, they're similar enough that that should sort of be what the comp is. So, you know, I guess the, you know, Alpha's stock, alpha has, what? It's 13 divided by 502. call it four times office got a fourth of the shares outstanding yeah i think that math is perfect actually yeah so uh so if they if warrior were to double uh in value uh and then they were to buy back you know 75 percent of their shares that theoretically they should be right around the

same uh level as where alpha is it's right so if i could just so what what i heard from you is hey, I think both Warrior and Alpha on a like kind of mid-cyclist number would do about $800 million and I think that was free cash flow per year is kind of what you're saying. And obviously that would take Warrior bringing Blue Creek on, I believe, but that's kind of the number that I'm hearing from you, $800 million. Yeah. And let me make sure that's the case. I'm just going to open up my model for each of them.

Great. And as you say that, I'll just. So 800 million divided by Warrior 52. So you're saying, hey, Warriors at 50, the low 50. they're trading for under four times free cash flow, A&R at 800 divided by 13. I'm sure listeners love hearing math. At 300, they're trading for about six times free cash flow, five times free cash flow. So go ahead.

Ibidah, sorry. That's Ibidah. So actually there is some capbacks, but it's still quite low. Maybe we'll call it five times free cash for a warrior, six times for Alpha. And the question there is just, hey, do you want Warrior with you get a one-turnish discount? They're not quite to the share of buybacks yet, but you've got Blue Creek coming online, which can kind of juice this and gives them a little bit, maybe longer runway. Or do you want Alpha, which, yeah, the stock is up a ton, but guess what?

They're buying back shares. They're going to keep buying back shares. And you get that sweet, sweet. We are the largest player. We are the player everyone invests in. You get that sweet kind of momentum flow going. Am I kind of thinking about that correctly? Yeah, that's right.

So, you know, for each of them, for 2024, you know, I have Alfa, about $800 million in EBITDA. and I have Warrior about $800 million in EBITDA. We're going to get a little Blue Creek here at the end of the year. Warrior has a higher percentage of low volatile coal, and they have lower costs because they're closer to the port. That's really the only difference. Like the revenues are pretty, going to be pretty similar at those levels. The costs for Alf are going to be a little bit higher,

but they produce a little bit more tons. by the time you get to Blue Creek and there will be some changes I think in Alpha's product mix at that point in time but they're just going to look really similar so really the only difference at that point is what's the share count and you know that could be

you know let's say AMR by 2027 AMR will probably buy back another 25% of its equity which would bring him to what, 10 million shares and Warrior will be at

9 million shares and Warrior will still be at 50-something with the same amount of EBITDA. The Cheap-O-in-me the Cheap-O-Mee loves the Warrior story because every share order I talk, again, wants to take the proverbial shotgun and just be like buy the shares back. Stop these mini special dividends, buy the shares back. And I love having that story on the column, especially with Blue Creek, which, you know, the people I talk to you and several others think it's going to be a fantastic

project, and I love that. But the, you know, the experience of me has taught, hey, the larger player who's already down the runway of just retiring, you know, the famous what happens when you retire the last year, the player that's there, even if you pay up a multiple or two for them, it kind of does tend to work up better. So I'm trying to, I'm just having the value investors pay as cheap as you can for the good news on the come versus, hey, you've already got the story. Sure, the stock is up literally 35 times. over the past four years, but, you know, there's a lot more to come because they've got the cap flow, and they've kind of just strapped themselves to the wheel up. The cash comes in,

and out it goes to the shareholders. So, yeah, Matt, this has been fantastic. I know you have a hard stop. We've gone way over an hour. Any last thought you want to wrap up with? No, I mean, you know, if you understand that, you know, that's probably better than thermal for the next couple of years, you know, if you understand that, you know, if you're a U.S.-based investor and you're not owning foreign equities, then it's probably like, AMR and HCC, you know, is your first two barbells and then, you know, probably arch and BTU or your next two after that. You've gotten most of what you need out of our conversation, you know, with the others.

Yeah, I mean, you know, aside, and, you know, if you want broad exposure, there's an ETF now that we have access to, you know, the needs of liquidity. It is, you know, is creating shares. And it's structured in a way that is sort of 50-50. And so the way that I view, like my portfolio is like the range index is what we want to be, you know, to generate alpha over the rest of the sector. You know, the way that I think you do that is just leverage more mech cold than thermal since the index is 50-50 and you're going to be most of the way there. But, you know, those are the, those are the companies that we want to look at here for good entries over the foreseeable future. But, you know, you can just also, I mean, I buy it in my 401K.

So I make little purchases, you know, every time I get paid. and you know I'm dollar cost averaging in over time and I don't I don't really care at this point you know it mattered to me when when we got that big rate and then we had a you know six months worth of volatility like where I you know turn into a pretty much a degenerate trader that point but you know since then since we've gotten this this new sort of cycle up and you know there's been some some difficulties in the thermal coal market I really sort of pulled back more to the investor side and just you know what, we're good, I'm good with this positioning, and we're just going to add to it over time proportionally to the rest of the portfolio, and sort of leave it at that. But it's, you know, the bottom line is it's not our grandpa's coal industry anymore. You know, the management takes these growth projects and the buybacks really seriously. You know, they want to keep their labor, so they're going to have to pay them. The cost curve is supportive of higher prices. And also, it's, I think these last few years have kind of

of, you know, injected a jolt of life into the sector that I haven't really seen in my career. And it's nice to see, you know, these guys who were traditionally close to the vest kind of open up and, you know, welcome in retail investors, which you've never really had before. So it's just, there's a lot of exciting things about it. And, you know, all of us on cold Twitter try to be friendly and approachable. And, you know, as always, if you have any questions about, you know, anything, you know, your followers are welcome to just reach out and ask us directly on Twitter because we love talking about this stuff. And we can do it clearly all day if needed. No, again, and you can tell it's a great place. Unlike some of the

other places, I haven't seen cold Twitter get too toxic, which is fantastic. And as you said, it's a really nice place and they're open and they're like, hey, four times even out with the buybacks, the water is warm. Whoever wants to come on in, come on in. But Matt, this has been fantastic. As you can tell, we had a lot to talk about and we could probably have gone for a lot longer. So we'll have to have you back on for a follow-up, but I really appreciate you coming on. Matt Warner, thanks to range resources. Coal ETF for putting us in touch and getting us out there and we'll chat soon. A quick disclaimer. Nothing on this podcast should be considered an investment advice. Guests or the hosts may have positions in any of the stocks mentioned during

this podcast. Please do your own work and consult a financial advisor. Thanks.