HCC

Warrior Met Coal

$89.55 USD 4.7B market cap 2026-02-01

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Warrior Met Coal Inc HCC BUFFETT / MUNGER / KLARMAN SUMMARY

1 SNAPSHOT

Price$89.55

Market CapUSD 4.7B

EVUSD 4.3B

Net DebtUSD -369M (net cash)

Shares52.6M

2 BUSINESS

Warrior Met Coal is a premier producer and exporter of premium metallurgical (met) coal used in steelmaking, operating two underground mines (Mine 4 and Mine 7) in Alabama. The company exports primarily to Europe (38%), Asia (42%), and South America (19%) through the Port of Mobile. Blue Creek, a transformational $1B growth project launching Q2 2026, will increase capacity by 75% to 14 million tons annually.

Revenue: USD 1.53B Organic Growth: 17.5% 5-year CAGR (but cyclical)

3 MOAT NARROW

Cost Advantage: $123/ton cash cost vs industry $140-160/ton; not lowest globally but competitive. Geographic Location: 300 miles from Port of Mobile provides excellent logistics to Atlantic/Pacific markets. Coal Quality: Premium Low Vol (Mine 7) and High Vol A (Mine 4, Blue Creek) command 5-15% quality premiums. Reserve Base: 40+ year mine life at Blue Creek with 69.8M tons recoverable reserves. No true pricing power - price taker on PLV Australian index.

4 MANAGEMENT

CEO: Walter Scheller III (since 2016)

Excellent track record: Funded $716M Blue Creek investment from operating cash flow with no equity dilution. Paid down debt from $340M to $173M while maintaining dividends. No value-destructive M&A. Post-Blue Creek, expects significant cash returns via dividends and buybacks. Management owns ~1.8% of shares.

5 ECONOMICS

16.7% Op Margin

12% ROIC

USD -90M (2024, Blue Creek capex heavy) FCF

Net Cash Debt/EBITDA

6 VALUATION

DCF RangeUSD 95 – 145

Base case: Current operations at normalized met coal prices ($250/ton). Blue Creek case adds $5.4B NPV (35% IRR, 2.3 year payback). Conservative 10% discount rate. Terminal growth 0% (depleting asset). Post-Blue Creek FCF $637M incremental annually.

7 MUNGER INVERSION -31.2%

Kill Event	Severity	P()	E[Loss]
Met coal price collapse (<$150/ton sustained)	-50%	15%	-7.5%
China steel demand structural decline	-40%	15%	-6.0%
Blue Creek execution delays/cost overruns	-25%	15%	-3.8%
Labor strike (repeat of 2021-2023)	-30%	10%	-3.0%
Major mine accident or safety incident	-35%	5%	-1.8%

Tail Risk: Correlated risks: Global recession + met coal collapse + China property crisis could combine for 60%+ decline. Single-geography (Alabama) concentration amplifies operational risks. Long-term structural risk from hydrogen steelmaking (15-25 year timeline).

8 KLARMAN LENS

Downside Case

Met coal prices stay at $150/ton for extended period, China steel demand permanently impaired, Blue Creek comes online into oversupplied market. Earnings cut in half, dividends suspended, stock trades at 6x depressed earnings = $35-40 (-55% from current).

Why Market Wrong

ESG exclusions force institutional selling regardless of fundamentals. Market conflates thermal coal (declining) with met coal (essential for steelmaking, no renewable substitute). Blue Creek's $5.4B NPV not reflected in $4.7B market cap. Pabrai's 37% portfolio concentration signals deep conviction in capital-starved industry. India met coal imports at 6-year highs and growing 9%+ annually.

Why Market Right

Met coal is a commodity with no pricing power. China accounts for 55%+ of global steel demand - if China falters, met coal collapses. Blue Creek launches as industry potentially enters oversupply. Hydrogen steelmaking (long-term) could make met coal obsolete. Geopolitical risks could disrupt export markets.

Catalysts

Blue Creek longwall start Q2 2026 (95% probability), Blue Creek full ramp 2027, met coal price recovery to $250/ton, India steel demand growth, post-Blue Creek dividend increases and buybacks, potential M&A (takeout premium).

9 VERDICT BUY

B+ T3 Adaptable

Strong Buy$65

Buy$75

Sell$140

Warrior Met Coal offers exceptional risk/reward with Blue Creek catalyst imminent. The $5.4B NPV growth project is 90%+ complete, launching Q2 2026, for a company valued at $4.7B. Pabrai's 37% portfolio concentration validates the thesis. Net cash balance sheet eliminates financial risk. Current price ($89.55) offers 25-38% margin of safety to post-Blue Creek fair value. Initiate 2-3% position; increase to 4-5% at $65.

🧠 ULTRATHINK Deep Philosophical Analysis

HCC - Ultrathink Analysis

Deep Philosophical Analysis in the Buffett/Munger/Pabrai Tradition

The Real Question

What problem are we actually solving by investing here?

We are solving for asymmetric payoffs in a hated industry at a cyclical trough, where a transformational catalyst is imminent and widely misunderstood.

The real question is not "Is coal a good investment?" but rather: "Is the market correctly pricing the probability that steel production will require metallurgical coal for the next 20-30 years?"

The answer is almost certainly no. The market prices HCC as if:

Met coal = thermal coal (they are fundamentally different)
Hydrogen steelmaking is imminent (it is 15-25 years away at scale)
Blue Creek is priced in (at $5.4B NPV vs $4.7B market cap, it clearly is not)
ESG exclusion is rational (it is mechanical, not analytical)

Pabrai's 37% concentration is not recklessness - it is recognition that the market has created a rare opportunity where the downside is bounded (net cash, low-cost producer) while the upside is asymmetric (75% capacity increase with 35% IRR).

Hidden Assumptions

What assumptions is the market making that might be wrong?

Assumption 1: "Steel will decarbonize rapidly"

Reality: 70%+ of global steel is made via blast furnaces requiring met coal. Electric arc furnaces (EAF) use scrap, but scrap supply is constrained. Hydrogen direct reduced iron (H-DRI) requires massive green hydrogen infrastructure that doesn't exist. The IEA projects met coal demand persists through 2050 in all but the most aggressive net-zero scenarios.

Assumption 2: "China's steel demand has peaked"

Reality: China's steel demand may have peaked, but India's is accelerating. India's met coal imports hit a 6-year high in H1 2024 (+9% YoY). The shift from China to India is happening, but total seaborne met coal demand is resilient. Warrior's sales to Asia (42%) increasingly go to India, not China.

Assumption 3: "Blue Creek is fully reflected in the stock price"

Reality: At $89/share and 52.6M shares, market cap is $4.7B. Blue Creek's NPV at $250/ton met coal is $5.4B. Even at $200/ton (conservative), NPV is ~$3B. The market is giving almost zero credit to a project that is 90% complete and launches in 4 months.

Assumption 4: "ESG exclusion is permanent"

Reality: ESG mandates are under increasing legal and political scrutiny. The "energy crisis" in Europe showed the folly of blanket fossil fuel exclusion. Met coal for steelmaking is not the same as thermal coal for power. Institutional constraints create forced selling, but private capital (like Pabrai) can exploit this.

The Contrarian View

What would have to be true for the bears to be right?

For the bear case to be correct:

Met coal prices stay below $150/ton for 3+ years - This would require massive Australian supply increases, Russian sanctions lifted, or global steel demand collapse. Possible but unlikely given supply discipline and Indian demand growth.
Blue Creek fails spectacularly - At 90% complete with longwall equipment installed, this is low probability. More likely: minor delays (6-12 months) or modest cost overruns (10-15%).
Hydrogen steelmaking accelerates dramatically - This requires green hydrogen costs to fall 80%+ and massive infrastructure buildout. No credible timeline puts this before 2040 at meaningful scale.
Alabama-specific disaster - Major accident, extended strike, or regulatory shutdown. Company navigated a 2-year strike (2021-2023) without existential damage.

For the bear case, ALL of these would need to occur together. The probability of this conjunction is low.

Simplest Thesis

The investment case in one elegant sentence:

You can buy the world's cleanest exposure to premium metallurgical coal at 9x 2027 earnings, with a net cash balance sheet, from a seller (the market) that cannot distinguish between coal for power and coal for steel.

Why This Opportunity Exists

The deeper truth about why this mispricing might persist or correct

Why It Persists:

ESG mandates are mechanical, not analytical. Index funds and pension plans cannot hold "coal" regardless of type. This creates persistent forced selling.
Commodity businesses are structurally undervalued. Investors prefer "growth" and "technology." Boring commodity producers trade at low multiples even when generating superior returns.
Complexity masks value. Understanding the difference between thermal and met coal, the steel value chain, and Blue Creek's economics requires industry expertise most generalists lack.
Short-term earnings mask long-term potential. 2024's depressed results (weak met coal prices + heavy Blue Creek capex) obscure the 2027+ earnings power.

Why It May Correct:

Blue Creek is a date-specific catalyst. Q2 2026 longwall start is imminent. Production ramp-up is measurable. Results will be undeniable.
Superinvestor accumulation creates a floor. Pabrai's concentrated position (3.76% of company) means a well-capitalized buyer supports the stock.
Cash generation will speak. Post-Blue Creek FCF of $600-800M annually will fund dividends and buybacks, forcing market re-rating.
Private market arbitrage. If the public market refuses to value Blue Creek, a private buyer (BHP, Glencore, private equity) might pay the NPV.

What Would Change My Mind

The specific evidence that would invalidate this thesis

Hard Sell Triggers:

Blue Creek longwall delayed beyond Q4 2027 - A 2+ year delay signals fundamental execution problems.
Total project cost exceeds $1.3B - A 30%+ overrun indicates Blue Creek economics are impaired.
Met coal prices below $140/ton for 12+ consecutive months - Sustained prices below breakeven indicate structural oversupply.
Major breakthrough in hydrogen steelmaking - If green hydrogen costs fall to $1/kg and H-DRI technology scales, the bear case accelerates.
Management departure or accounting irregularity - Trust is foundational.

Soft Concerns (Monitor, Don't Sell):

Short-term met coal price weakness (cyclical, not structural)
Temporary production disruptions (logistics, weather)
Single-digit customer losses (normal churn)
Political noise about "coal" (ESG virtue signaling)

The Soul of This Business

What makes this company's competitive position inevitable or fragile?

What Makes It Inevitable:

Steel is civilization. Every building, bridge, car, ship, and machine requires steel. There is no substitute for steel in construction, infrastructure, and transportation. To make steel, you need iron ore + carbon (coke from met coal) in a blast furnace. This has been true for 5,000 years. It will remain true for at least another generation.

Warrior owns exceptional rocks in the right place. The Blue Creek seam is one of the last large-scale, untapped met coal reserves in the United States. Premium High Vol A quality commands premium prices. 300 miles from a deep-water port provides logistics advantages. 40+ year mine life provides duration.

The market has handed you a gift. When Pabrai concentrates 37% of his portfolio in a single stock, he has found something the market profoundly misunderstands. His track record - Fiat Chrysler, Micron, Rain Industries - suggests these concentrations precede multi-bagger returns.

What Makes It Fragile:

Commodity businesses have no pricing power. Warrior is a price-taker on the PLV Australian index. If Australian producers flood the market, Warrior's margins compress regardless of operational excellence.

Single-geography concentration amplifies risk. All operations are in Alabama. A major accident, extended strike, or regulatory change could halt 100% of production.

Structural decline is real, just slow. Met coal demand will decline over 20-30 years as EAF capacity grows and (eventually) hydrogen steelmaking scales. This is a "harvest the cash flow" business, not a growth compounder.

Capital cycles turn. Met coal is capital-starved today because ESG mandates prevent new investment. But if prices stay high, Australian and Mongolian capacity will eventually respond. The current supply discipline may not persist.

The Patient Investor's Path

When and how to act

Entry Strategy:

Current price ($89.55): Initiate 2% position. Good entry, not great.
$75 (-16%): Add to 3% position. Solid margin of safety.
$65 (-27%): Build to 4-5% position. Excellent entry.

Holding Strategy:

Hold through Blue Creek ramp-up (Q2 2026 - Q4 2027)
Reinvest dividends during accumulation phase
Ignore short-term met coal price volatility
Monitor Blue Creek execution quarterly

Exit Strategy:

$140 (+56%): Trim 25-50% of position
$175 (+95%): Exit entirely (fully valued)
Thesis break: Exit immediately if sell triggers hit

The Munger Test:

"If this dropped 50% tomorrow, would I be excited to buy more or panicked?"

At $45/share, HCC would trade at:

1.1x book value
6x 2027 earnings
13.5% FCF yield (post-Blue Creek)

I would be excited to buy more. The business hasn't changed. The rocks are still in the ground. Blue Creek is still launching. Only Mr. Market's mood has changed.

Final Reflection

Warrior Met Coal is not a business I would normally find compelling. It is a commodity producer in a hated industry with a narrowing moat and structural headwinds. By every traditional Buffett/Munger criterion - durable competitive advantage, pricing power, predictable earnings - it falls short.

And yet.

When Mohnish Pabrai puts 37% of his portfolio into a single stock, I pay attention. When a $5.4B NPV project trades for zero in a $4.7B market cap, I pay attention. When an entire industry is excluded from capital markets not because of business fundamentals but because of ESG virtue signaling, I pay attention.

The opportunity here is not "coal is a great business." The opportunity is: the market has created a mispricing so severe that even a narrow-moat commodity producer offers asymmetric returns.

Charlie Munger said: "All intelligent investing is value investing." The value here is not in the business quality - it is in the delta between price and intrinsic value, amplified by an imminent, measurable catalyst.

Buy HCC not because coal is the future. Buy it because Blue Creek is already built, the market hasn't noticed, and someone with a 30-year track record just bet 37% of his wealth on this exact thesis.

"The big money is not in the buying and selling, but in the waiting." - Charlie Munger

Wait for Blue Creek. Then wait for the market to recognize what Pabrai already knows.

EXECUTIVE SUMMARY

Investment Thesis (3 Sentences)

Warrior Met Coal is a premier producer of metallurgical coal essential for steelmaking, trading at 2.2x book value with a transformational growth project (Blue Creek) about to launch. The Blue Creek mine, now operational with longwall production starting Q2 2026, will increase capacity by 75% and could add $5+ billion in NPV. Mohnish Pabrai's 37% portfolio concentration signals extreme conviction in a capital-starved industry hated by ESG mandates.

Key Metrics Dashboard

Metric	Value	Buffett Test
Current Price	$89.55	-
Book Value/Share	$40.29	2.2x P/B
P/E (2024)	18.7x	4.8x normalized
ROE (2024)	12.0%	Depressed by capex
ROE (5yr Avg)	17.2%	PASSES 15%
Net Debt	-$369M	NET CASH
FCF (Normalized)	~$300M	6.4% yield
Dividend Yield	0.9%	Growing
Beta	0.66	Low volatility

Decision and Sizing

Recommendation	Price Target	Position Size
BUY	Current ($89.55)	2-3%
Strong Buy	$65	4-5%
Accumulate	$75	3-4%
Sell	$140	Trim

Primary Catalyst and Timeline

Blue Creek Longwall Start (Q2 2026) - The longwall is expected to begin production in Q2 2026, ramping to 6M tons/year by 2027. This single catalyst could add $5.4B in NPV to a company currently valued at $4.7B.

PHASE 0: OPPORTUNITY IDENTIFICATION (Klarman)

Why Does This Opportunity Exist?

ESG Exclusion - Coal is the most hated industry. ESG mandates force institutional selling regardless of fundamentals. This creates forced selling by index funds and pension funds.
Misconception About Coal Types - Investors conflate thermal coal (energy) with metallurgical coal (steelmaking). Met coal has no renewable substitute - you cannot make steel without it or hydrogen (decades away at scale).
Cyclical Trough - Met coal prices at 3-year lows ($163-186/ton vs $300+ peak). Market prices HCC as if these prices are permanent.
Capex Masking Earnings - 2024 FCF was negative due to $488M Blue Creek investment, not operational weakness. Operating cash flow was $367M - the business generates substantial cash.
Superinvestor Concentration - Pabrai increased his position by 144% in Q4 2024 at ~$64/share. His 37% portfolio concentration is extraordinary and signals deep conviction.

Mohnish Pabrai's Thesis

From his public commentary:

"This isn't thermal coal. This is metallurgical coal - the kind you need to make steel."
"A stock at low PE, with FCF catalysts around the corner, in an industry people hate or are bound by ESG pressures."
"Warrior offers the cleanest exposure to high-grade met coal with a fortress balance sheet."

PHASE 1: RISK ANALYSIS (Inversion)

"All I want to know is where I'm going to die, so I'll never go there." - Munger

Top 10 Risks

#	Risk	Severity	Probability	Expected Loss
1	Met coal price collapse (<$150/ton sustained)	-50%	15%	-7.5%
2	China steel demand structural decline	-40%	15%	-6.0%
3	Blue Creek execution delays/cost overruns	-25%	15%	-3.8%
4	Labor strike (repeat of 2021-2023)	-30%	10%	-3.0%
5	Major mine accident or safety incident	-35%	5%	-1.8%
6	Regulatory/permitting challenges (EPA)	-20%	10%	-2.0%
7	Transportation disruption (port/rail)	-15%	15%	-2.3%
8	ESG-driven customer defection	-20%	10%	-2.0%
9	Technology disruption (hydrogen steel)	-30%	5%	-1.5%
10	Single-geography concentration (Alabama)	-25%	5%	-1.3%

Total Expected Downside: -31.2%

Bear Case Summary

If I were short this stock, my 3-sentence bear case would be:

"Met coal is a declining industry as steel production shifts to electric arc furnaces using scrap. China's steel demand has peaked and Indian demand won't fully offset. Blue Creek is coming online just as the industry enters structural decline, and the $1B capex will never earn its return."

Pre-Defined Sell Triggers (Non-Price)

Thesis Break: Blue Creek longwall delayed beyond 2027 or capex exceeds $1.3B
Management Failure: CEO departure or accounting irregularities
Moat Erosion: Loss of major customers (>20% of volume) to Australian/Russian suppliers
Financial Distress: Net debt exceeds 2x EBITDA or covenant breach

Can I State the Bear Case Better Than Bears?

Yes. The bear case ignores:

Met coal demand from India growing at 9%+ YoY
No viable hydrogen steelmaking at scale before 2040
Warrior's low-cost position ($123/ton cash cost) means profitable at $150 met coal
Blue Creek's 35% IRR requires only $200/ton, not $300

PHASE 2: FINANCIAL ANALYSIS

Income Statement Summary (5 Years)

Year	Revenue	Op Income	Net Income	Op Margin	Net Margin
2024	$1.53B	$255M	$251M	16.7%	16.4%
2023	$1.68B	$541M	$479M	32.3%	28.5%
2022	$1.75B	$640M	$575M	36.5%	32.8%
2021	$1.34B	$288M	$238M	21.4%	17.7%
2020	$0.68B	-$95M	-$90M	-13.9%	-13.2%

Note: 2020 was COVID crash + strike year (anomaly). 2024 was depressed by weak met coal prices ($186 PLV vs $300+ in 2022).

Balance Sheet Summary

Metric	2024	2023	2022
Total Assets	$2.59B	$2.36B	$2.14B
Cash & Investments	$542M	$738M	$830M
Total Debt	$173M	$173M	$340M
Net Cash/(Debt)	$369M	$565M	$490M
Total Equity	$2.09B	$1.88B	$1.57B
Book Value/Share	$40.29	$36.13	$30.46
Debt/Equity	0.08x	0.09x	0.22x

Fortress Balance Sheet: Net cash of $369M, debt paid down from $340M to $173M while investing $716M in Blue Creek.

Cash Flow Summary

Year	Operating CF	CapEx	FCF	Dividends
2024	$367M	$457M	-$90M	$44M
2023	$701M	$492M	$209M	$80M
2022	$580M	$235M	$345M	$42M
2021	$320M	$85M	$235M	$28M
2020	$45M	$55M	-$10M	$0M

2024 FCF Negative Due to Blue Creek: Excluding Blue Creek capex (~$325M of the $457M), maintenance FCF was ~$235M (5% yield).

ROE Decomposition (DuPont)

Year	Net Margin	Asset Turnover	Leverage	ROE
2024	16.4%	0.59x	1.24x	12.0%
2023	28.5%	0.71x	1.25x	25.4%
2022	32.8%	0.82x	1.36x	36.6%

Analysis: ROE fluctuates with met coal prices (margin-driven). At normalized prices ($250/ton), ROE approaches 25%+.

Owner Earnings Calculation

Net Income (2024):                    $251M
+ Depreciation:                       $159M
- Maintenance CapEx (~$130M):        -$130M
- Working Capital Changes (~$0):       $0M
= Owner Earnings:                     $280M
= Owner Earnings/Share:               $5.35

At 10x owner earnings: Fair Value = $53.50 (conservative floor) At 15x owner earnings: Fair Value = $80.25 (normalized)

Post-Blue Creek Owner Earnings (2027E):

Projected Net Income:                 $500M+ (doubling)
+ Depreciation:                       $200M
- Maintenance CapEx:                  $180M
= Owner Earnings:                     $520M
= Owner Earnings/Share:               ~$10.00

At 10x: Fair Value = $100 At 15x: Fair Value = $150

Valuation Summary

Method	Value	vs Current ($89.55)	MOS
Graham Number	$62	-31%	0%
Book Value (1.5x)	$60	-33%	0%
Owner Earnings (10x)	$53	-41%	0%
Owner Earnings (15x)	$80	-11%	0%
DCF (Base)	$95	+6%	6%
DCF + Blue Creek NPV	$145	+62%	38%
Private Market Value	$120-150	+34-67%	25-40%

Key Insight: Current price ($89.55) appears fair on trailing metrics but dramatically undervalues Blue Creek. Adding $5.4B Blue Creek NPV to $4.7B market cap implies 2x upside.

PHASE 3: MOAT ANALYSIS

Moat Sources

Source	Strength	Evidence
Cost Advantage	MODERATE	$123/ton cash cost vs industry $140-160; but not lowest in world
Geographic Location	STRONG	300 miles from Port of Mobile; excellent logistics to global markets
Coal Quality	STRONG	Premium Low Vol (Mine 7) and High Vol A (Mine 4, Blue Creek)
Reserve Base	STRONG	40+ year mine life at Blue Creek; 69.8M tons recoverable
Switching Costs	LOW	Met coal is commodity; customers can switch suppliers
Scale	MODERATE	Mid-sized producer; not dominant like BHP/Glencore

Moat Rating: NARROW

Warrior has a Narrow Moat based on:

Cost position is good but not industry-leading
Quality premium for premium coals (5-15% above commodity)
Transportation advantage from Alabama location
No true pricing power - price taker on PLV index

Moat Durability Assessment

Threat	Severity	Timeline	Company Mitigation
Technology (hydrogen steel)	4/5	15-25 years	Low-cost position survives longer
Regulatory (carbon tax)	3/5	5-10 years	Export markets less regulated
Competition (Australia)	3/5	Ongoing	Quality differentiation, logistics
Customer power	2/5	Ongoing	Diversified customer base
Labor unions	3/5	Ongoing	Recent strike resolved; relationship improved

10-Year Moat Trajectory: NARROWING slowly due to energy transition pressures, but met coal demand persists for steel production. India's growth offsets China's decline.

PHASE 4: MANAGEMENT & INCENTIVE ANALYSIS

Leadership

CEO: Walter Scheller III (since 2016)
CFO: Dale Boyles (since 2016)
Tenure: Both executives have led through COVID, strikes, and Blue Creek development

Capital Allocation Track Record

Year	Operating CF	Use of Cash
2024	$367M	Blue Creek ($325M), Maintenance ($130M), Dividends ($44M)
2023	$701M	Blue Creek ($320M), Debt Paydown ($162M), Maintenance ($170M), Dividends ($80M)
2022	$580M	Blue Creek ($235M), Maintenance ($100M), Dividends ($42M), Cash Build

Assessment: EXCELLENT

Paid down debt from $340M to $173M
Funded Blue Creek from operating cash (no equity dilution)
Maintained dividends through cycle
No value-destructive M&A

Insider Ownership

Management owns ~1.8% of shares
Institutional ownership: 113% (due to short interest)
Mohnish Pabrai: 3.76% of company

Munger's Question

"If I were management with these incentives, what would I do?"

Execute Blue Creek on time and budget (career-defining project), maintain cost discipline, return capital to shareholders through dividends/buybacks after Blue Creek completes. Management incentives align with shareholders.

PHASE 5: CATALYST ANALYSIS

Catalyst	Timeline	Probability	Impact
Blue Creek longwall start	Q2 2026	95%	+30-50%
Blue Creek full ramp-up	2027	85%	+50-100%
Met coal price recovery	2025-2026	60%	+20-30%
India steel demand growth	Ongoing	80%	+10-20%
Dividend increase post-Blue Creek	2027+	75%	+10%
Share buybacks	2027+	65%	+5-10%
M&A target (takeout premium)	2027+	25%	+30-50%

Primary Catalyst: Blue Creek (Q2 2026)

Blue Creek is the most significant catalyst in recent memory for a commodity company:

Incremental Revenue: $1.3B annually (85% increase)
Incremental EBITDA: $735M (150% increase)
Incremental FCF: $637M (200%+ increase)
NPV: $5.4B (vs current market cap $4.7B)
IRR: 35% (exceptional for any project)
Payback: 2.3 years

PHASE 6: DECISION SYNTHESIS

Position Sizing Formula

Position Size = Base (3%) × (MOS/Target) × (Quality/100) × (1-Risk) × Catalyst

Where:
- MOS = 38% (DCF + Blue Creek)
- Target MOS = 30%
- Quality Score = 75/100 (commodity business, narrow moat)
- Risk Score = 0.31 (31.2% expected downside)
- Catalyst Multiplier = 1.2 (strong, imminent catalyst)

Position Size = 3% × (38/30) × (75/100) × (1-0.31) × 1.2
             = 3% × 1.27 × 0.75 × 0.69 × 1.2
             = 3% × 0.79
             = 2.4%

Recommended Position: 2-3% of portfolio

Expected Return Probability Tree

Scenario	Probability	3-Year Return	Weighted Return
Bull (Blue Creek + Met Coal Recovery)	25%	+100%	+25%
Base (Blue Creek Success)	45%	+50%	+22.5%
Bear (Blue Creek OK, Met Coal Weak)	20%	+10%	+2%
Disaster (Blue Creek Fails)	10%	-40%	-4%
Expected Return	100%		+45.5%

Annualized Expected Return: ~13-15%

Price Targets

Level	Price	P/E	Trigger
Strong Buy	$65	13.5x	27% below current
Buy/Accumulate	$75-89	15-18x	At current levels
Fair Value (Post-Blue Creek)	$120	12x 2027E	Blue Creek ramp
Sell/Trim	$140	14x 2027E	+56% from current

FINAL RECOMMENDATION

┌─────────────────────────────────────────────────────────────────┐
│                     INVESTMENT RECOMMENDATION                    │
├─────────────────────────────────────────────────────────────────┤
│ Company: Warrior Met Coal          Ticker: HCC                  │
│ Current Price: $89.55              Date: 2026-02-01             │
├─────────────────────────────────────────────────────────────────┤
│ VALUATION SUMMARY                                                │
│ ┌─────────────────────────┬─────────────┬─────────────────────┐ │
│ │ Method                  │ Value/Share │ vs Current Price    │ │
│ ├─────────────────────────┼─────────────┼─────────────────────┤ │
│ │ Graham Number           │ $62         │ -31% (NO MOS)       │ │
│ │ Book Value (1.5x)       │ $60         │ -33% (NO MOS)       │ │
│ │ Owner Earnings (10x)    │ $53         │ -41% (NO MOS)       │ │
│ │ Owner Earnings (15x)    │ $80         │ -11% (NO MOS)       │ │
│ │ DCF Base Case           │ $95         │ +6%                 │ │
│ │ DCF + Blue Creek NPV    │ $145        │ +62% MOS            │ │
│ │ Private Market Value    │ $120-150    │ +34-67% MOS         │ │
│ └─────────────────────────┴─────────────┴─────────────────────┘ │
│                                                                  │
│ INTRINSIC VALUE ESTIMATE: $120-145 (post-Blue Creek)            │
│ MARGIN OF SAFETY: 25-38%                                         │
├─────────────────────────────────────────────────────────────────┤
│ RECOMMENDATION:  [X] BUY  [ ] HOLD  [ ] SELL  [ ] WAIT          │
├─────────────────────────────────────────────────────────────────┤
│ STRONG BUY PRICE:         $65 (42% MOS)                         │
│ ACCUMULATE PRICE:         $75 (33% MOS)                         │
│ FAIR VALUE:               $120-145 (post-Blue Creek 2027)       │
│ TAKE PROFITS PRICE:       $140                                   │
│ SELL PRICE:               $175                                   │
├─────────────────────────────────────────────────────────────────┤
│ POSITION SIZE: 2-3% of portfolio                                 │
│ CATALYST: Blue Creek longwall Q2 2026 (95% probability)          │
│ PRIMARY RISK: Met coal price collapse (<$150/ton sustained)      │
│ SELL TRIGGER: Blue Creek delay beyond 2027 OR >$1.3B overrun    │
└─────────────────────────────────────────────────────────────────┘

Why BUY Now?

Blue Creek is 90%+ complete - The risk of non-delivery is minimal
Longwall completion imminent - Q2 2026 (4 months away)
Pabrai's 37% concentration - Extreme conviction from one of the best value investors
Met coal at cyclical lows - $186/ton vs $300+ peak, mean reversion likely
Net cash balance sheet - Zero financial risk
Capital return optionality - Post-Blue Creek FCF enables buybacks/dividends

What Would Change My Mind

Blue Creek capex exceeds $1.3B
Longwall delayed beyond Q4 2027
Met coal prices fall below $140/ton for 12+ months
Major mine accident or extended strike
Management departure or accounting issues

SOURCES

Primary Data (MCP Tools)

AlphaVantage: Income Statement, Balance Sheet, Cash Flow, Company Overview
Earnings Transcripts: Q3/Q2/Q1 2024, Q4 2023

Web Research

Superinvestor Research

Analysis generated using Investment Analysis Framework v2.0 Quality Grade: B+ | Tier: T3 Adaptable