US-based Warrior Met Coal has unveiled plans to restart the development of the Blue Creek hard coking coal project in Alabama, US, following a two-year delay.
The project was delayed owing to the Covid-19 pandemic, along with a labour strike and market conditions.
Following improved market conditions and growth in cash generation, the company made its decision to proceed with the development.
Over the next five years, the mining company will invest around $650m to $700m to develop the Blue Creek reserves, including $45m to start the project this year.
Warrior said in a statement: “Since the initial announcement, inflation in steel and other commodity prices, including labour costs, have increased the total capital spending requirements of the project.
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“However, during a refresh of the project, the company has identified potential production increases of approximately 10% and anticipates being able to accelerate the start of longwall production by approximately 15 months based on design modifications and projected stronger available liquidity to fund the project.”
The project is expected to strengthen the firm’s position as the premier pure-play producer of premium metallurgical (met) coal products in the US.
Expected to produce 4.8Mtpa, the Blue Creek mine is anticipated to start the initial development tonnes in the third quarter of 2024 and reach full production capacity in 2026.
Warrior said it could acquire reserves adjacent to the mine to increase its total recoverable reserves.
With the inclusion of all coal reserves, resources, and adjacent properties, the life of mine reserves is expected to reach around 170 million short tonnes.
The expanded mine plan is anticipated to increase the Blue Creek mine’s operational life to nearly 50 years, assuming a single longwall operation.
Warrior CFO Dale W Boyles said: “We plan to be opportunistic in evaluating funding alternatives for Blue Creek, which we view as very manageable given our current liquidity position and ability to utilise existing free cash flow and equipment financing.
“Finally, we believe the company’s strong balance sheet, liquidity and free cash flow generation provide us the ability to pay for the project fully in cash and significant flexibility in how we ultimately choose to finance Blue Creek longer-term.”
