Warrior Met Coal Inc. has started development of its Blue Creek reserves into a new, longwall mine located in Alabama near its existing mines. The single longwall mine is expected to produce an average of 4.3 million short tons per year of premium High-Vol A met coal over the first 10 years of production.

It is one of the last remaining large-scale untapped premium High Vol A met coal mines in the U.S., the company said.

“We are extremely excited about our organic growth project that will transform Warrior and allow us to build upon our proven track record of creating value for stockholders,” CEO Walt Scheller said. “Blue Creek is truly a world-class asset and our commitment to this new initiative demonstrates our continued highly focused business strategy as a premium pure-play met coal producer.”

Based on the company’s final feasibility studies, the projected net present value (NPV), at an assumed met coal price of $150 per metric ton, significantly increased over prior estimates primarily due to higher expected production volumes and lower estimated production costs. The projected NPV is greater than $1 billion over the life of the mine with a projected after-tax internal rate of return (IRR) of nearly 30% and an expected payback of approximately two years from initial longwall production, according to the company.

Once fully developed, the company expects Blue Creek to increase Warrior’s annual production capacity by 54% and expand its product portfolio to its global customers, offering three premium hard coking coals that are expected to achieve the highest premium met coal prices in the seaborne markets. Warrior controls approximately 114 million short tons of recoverable reserves at Blue Creek and has the ability to acquire adjacent reserves that would increase total recoverable reserves to more than 170 million short tons.

Blue Creek is expected to have a mine life of approximately 50 years assuming a single longwall operation.

Warrior said it expects High Vol A coals will continue to become increasingly scarce as a result of Central Appalachian producers mining thinner and deeper reserves, which is expected to continue to support prices. Warrior said it believes this creates an opportunity for Blue Creek to take advantage of favorable pricing dynamics driven by the declining supply of premium High Vol A coals.

The company said the combination of a low production cost and the high quality of the High Vol A product, at the expected price realizations, will generate some of the highest met coal margins in the U.S., generate strong investment returns and achieve a rapid payback across a range of met coal price environments.

Warrior expects to invest approximately $550 to $600 million over the next five years to develop Blue Creek with expected spending in 2020 of approximately $25 million to begin the project.

First development tons from continuous miner units is expected to occur in the third quarter of 2023 with the longwall scheduled to start up in the second quarter of 2025.