This error occurs when the path for the output model does not exist. This is an error that happens at the compile stage and will happen if you are compiling straight from WWMT or by compiling manually from the batch file.

When you export a model via WWMT it exports the QC, SMDs and compiler batch file to your Source SDK directories. That is not the final path for the destination model (.mdl file). When you run the compiler (studiomdl.exe), the compile makes the model (MDL) from the QC and SMDs; it saves it to the game directory (as opposed to SDK directory) that mirrors your SDK directory. If the game model's folder does not have a path that matches your Model Folder Path, the compiler will fail.

• Always make sure that the folder path you create for your model exists in the target game model folder. For example, if you have set the Model Folder Path in the WWMT UI to myprojects/thisproject/props then you must make sure that the folder C:\Program Files (x86)\Steam\steamapps\myusername\MYGAMEMOD\models\myprojects\thisproject\props exists before compiling since studiomdl.exe won't create the path for you.
• Please see Understanding How to Set Up Paths for WWMT.