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Production impact from strike worse than height of pandemic, Warrior Coal says

The labor strike at Warrior Met Coal Inc. forced the Alabama metallurgical coal miner to produce less coal than it did at the height of the coronavirus pandemic, the company acknowledged Aug. 4.

In April, the expiration of Warrior Met's labor agreement with its miners led to workers walking off the job and starting a strike that has taken its No 4 Mine completely offline. The strike has cost Warrior $17.9 million in expenses from idling its mines, safety measures, labor negotiations and the general interruption of its business, the company stated in its second-quarter earnings report.

Warrior reported only producing 1.2 million tons of coal during the second quarter, roughly one million tons lower than the miner produced in the second quarter of 2020, a period of significant market volatility due to the coronavirus pandemic. This was despite improving to a net loss of $4.7 million compared to a net loss of $9.2 million in the second quarter of 2020 and a $44.9 million increase in EBITDA year over year.

Approximately 4.9 to 5.5 million tons of existing customer commitments will be meet through a combination of its existing inventories and "expected production for the remainder of the year," according to the filing.

Warrior Met CEO and Director Walter Scheller opened an Aug. 4 earnings call by saying executives would decline to answer questions from analysts about the strike. The company has been trying to keep as many workers employed as it can while "ensuring the company remains financially stable in a particularly volatile coal market," Scheller said.

"We understand that many of you have questions about the status of the UMWA negotiation, estimates of potential outcome and possible timeline. Unfortunately, we cannot speculate at this time on any of those topics for various reasons," the executive said.

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When pressed on the call, analysts got a few answers from Scheller on how the strike was impacting company performance. The executive said producing another quarterly total like 1.2 million tons later in the year would be "probably pretty aggressive" for the company to achieve because it included one full week of work before the strike.

"We're looking at where our inventory levels are, and we feel confident that we can make our customer commitments and hopefully have a little extra coal to sell to some other opportunities," Scheller said.

They are trying to make sure the company can keep "every one of those people working for the entire five years" that would be given under a new labor contract, Scheller said. "That's our goal, to take care of these folks and make sure that they have fair compensation. And that we're also protecting the company at the same time."