Ramaco Resources Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 8, 2023

There are 7 speakers on the call.

Operator

Welcome to the Ramaco Resources Third Quarter 2023 Earnings Conference Call. I would now like to turn the call over to Jeremy Sussman, Chief Financial Officer. Participants are ready.

Speaker 1

Thank you. On behalf of Ramaco Resources, I'd like to welcome all turn the call over to our Q3 2023 earnings conference call. With me this morning is Randy Atkins, our Chairman and CEO in the call over to Chris Blanchard, our Chief Operating Officer. Before we start, I'd like to share our normal cautionary statement. Certain items discussed participants on today's call constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Speaker 1

These forward looking statements represent Ramaco's expectations concerning future events. These statements are subject to risks, uncertainties and other factors, many of which are outside of Ramaco's control, which could cause actual results to differ materially from the results discussed participants speak only as of the date on which it is made And except as required by law, Ramaco does not undertake any obligation to update or revise any forward looking statements, whether as a result with new information, future events or otherwise. I'd also like to remind you that you can find a reconciliation of the non GAAP financial measures that we plan to discuss are participating in our press release, which can be viewed on our website, www.ramicoresources.com. Lastly, participants are

Speaker 2

in the range

Speaker 1

of $1,000,000,000 in the quarter. We are pleased to announce that our

Speaker 3

participants. Thanks, Jeremy. Good morning to everyone and thanks for joining the call. We have a lot of positive developments to unpack this morning since we spoke in August. From the time we started Ramaco, we have generally been somewhat idiosyncratic within our industry.

Speaker 3

For over 5 years before we went public in 2017, we were investing in developing geologically advantaged coal reserves. During most of that time, a majority of the industry was in bankruptcy and certainly not aggressively buying greenfield coal reserves to develop from scratch.

Speaker 1

Participants are in the range

Speaker 3

of $1,000,000,000. Since then, we've continued to invest heavily in a rapid expansion of our business and in production growth. Many of our peers have moved in another direction. Participants are essentially letting their own reserves deplete without investing in new replacement tonnage. To prove the point, Over the last couple of years, we've invested almost $250,000,000 in growth capital for production and acquisition.

Speaker 3

Participants are ready for the company. For a young company in this space, that is a meaningful number. And I wanted to highlight this background because our 3rd quarter We went from being a 3,000,000 to a 4,000,000 ton per annum company. And of course, we're not done in terms of production growth.

Speaker 2

Participants are ready to take questions.

Speaker 3

To step back and frame this a little differently, over the past years, we have done or tried to do several things at once. We have invested to grow production, We have paid off debt and we still have made substantial shareholder distributions. This year, we paid down over $50,000,000 participants are over 50% of our term debt. At the same time, we have grown production by 55% from 2,200,000 tons in 2021 We have been fortunate that our shareholders have seen the positive results of this. Our stock price rose by 38% this quarter And by 3 20 percent over the past 3 years.

Speaker 3

We also have had a total shareholder return over that same period of 4 50%. Are now hopefully getting started down the right track. And turning to Q3, as a result of this quarter's sales surge, participants We grew EBITDA by over 50% from the 2nd quarter. This was in spite of a decline in margins caused by lower index pricing. Also based on Q3 earnings, we expect to reduce our overall term debt down to just $50,000,000 by year end.

Speaker 3

Participants are ready to take questions. For reference, our total debt at this point in 2022 was $125,000,000 Because of both stronger than anticipated third quarter shipments and And increased overseas customer demand, we recently increased guidance on our 23 coal shipments. Participants are participating in the 2020. We also continue to enjoy a working capital benefit over the next few quarters as we expect to continue to reduce and sell down existing inventory As we did in the Q3. Switching gears to operations, I want to complement the work the operating team has done in developing the If this trend continues, we expect Berlin to be among the highest margin and lowest low volmetallurgic largest participants are in the country.

Speaker 3

Moving to sales and marketing, we took what we call is a prudent approach to our 24 domestic sales business. We have now committed 1,300,000 tons of coal to North American customers next participants are in the range of $167 per ton and an additional 200,000 tons for export price against index. Participants are in the range of $1,000,000 to $1,000,000,000 to $1,000,000,000 to $1,000,000,000 And as a backdrop, when the domestic steel mills came out in early July, we declined the lock in business at what we felt was then a low price near the bottom of the cycle. We have basically decided instead to pivot to increasing the size of our 24 export business to roughly 70% of anticipated production. And while we march on the path to increasing our production to roughly 7,000,000 tons over the next few years.

Speaker 3

I would note that we could continue to produce at our current 4,000,000 to 4,500,000 ton level participants are in the range of $1,000,000,000 with a number of worldwide macro factors dominating the headlines And little clarity in near term economic direction. On 2024 production, we will be providing will either increase or maintain production levels depending on how we see the markets develop. I'd now like to turn to an update on our Western operations in Wyoming. I am pleased to report that last month overall mine development commenced participants are in the same position as the rare earth Brook Mine. We have been working to test from only core samples over the past years.

Speaker 3

We began meaningful mine developments a few weeks ago with an initial goal to obtain larger quantities of material for testing. We will now be moving into a phase of extensive sequential testing of the metallurgic and chemical compositions participants are in the range of the 2nd quarter. This will help us determine the overall nature and extent of the deposit. Participants are in the range of $1,000,000,000. We've now established that the mine has an extremely large unconventional rare earth deposit.

Speaker 3

The figures of its size will no doubt increase as we do more participants may be geologically unique from almost any deposit they have examined. The challenge for us from here participants will be doing this with our consultants at SRK and within APL. We will also be working on some novel technologies in this area with other national labs and we will continually update our progress on this project as it goes forward. On the carbon products front, I want to highlight 2 exciting areas we are focused on involving work at our iCAM Research participants are in Wyoming. As many of you may have seen, China recently decided to both regulate and restrict Opportunistically, Ramaco's multiyear development of a revolutionary electrochemical process for conversion of coal to synthetic graphite participants have now assumed added strategic importance.

Speaker 3

Our work on this innovative technology has been done pursuant to our creative partnership participants are with Oak Ridge National Labs. We have also recently filed an application with the DOE to build a continuous Also, we have developed a low cost process with comprehensive intellectual property rights participants are ready for the production of activated carbon fiber monolith to be used for direct air capture and other filtering applications. Participants are participating in the process of the company's ability to produce the mozzarella and activate them in larger quantities. Participants are ready to take questions. We look forward to updating on the commercialization of these activities going forward.

Speaker 3

And I'd like to finish by reflecting that I believe we were put an inflection point for Amaco. Over the past couple of years, we have spent 7 times more toward production growth participants are in capital acquisitions than we have done compared to paying dividends. Importantly, at this point, I would anticipate in 'twenty four participants will be returning substantially more to shareholders in cash dividend alone than we are currently expecting participants are ready to spend on growth capital for production or M and A. And with that, I'd like to turn the floor over to the rest of our team to discuss finances, operations and markets. So Jeremy, please start with a rundown of our financial metrics and markets.

Speaker 1

Thank you, Randy. As you noted, we enjoyed a strong Q3, especially in light of weaker markets in coal pricing throughout much of the quarter. Participants are in the

Speaker 3

line with our expectations. Specifically, Platts U. S. East Coast Indices

Speaker 1

fell roughly 5% in Q3 versus Q2. Despite this decline, Q3 net income grew more than 100 and

Speaker 2

participants are participating in the Q3. During the Q3,

Speaker 1

adjusted EBITDA benefited by $3,000,000 received from insurance claims proceeds in connection with the Berwind mine outage participants are in the mid-twenty 20 two-eight million received in connection with the Elk Creek silo failure in late 2018. Participants are in the range of $8,000,000 I would note that Elk Creek Insurance proceeds are not reflected in our cash balance as of are in the range of $1,800,000 in are in the range of $1,000,000

Speaker 3

which is reflected in

Speaker 1

our Q3 cash figure. Turning to our key metrics, the largest variance relative to Q2 was on volume. The company shipped 1,000,000 tons of coal, which achieved its previous guidance of reaching a ratable annualized sales in the range of roughly 4,000,000 tons. This figure was up 39% from Q2 as we had been previously shipping at a roughly 3,000,000 ton per annum run rate. The increase to 4,000,000 tons per annum is the culmination of a multiyear investment in taking the Elk Creek Prep Plant capacity Average realized price in Q3 fell 4% versus Q2 to $157 per ton in line with the decline in coal indices.

Speaker 1

Production was down 18% versus Q2 to 719,000 tons and cash cost increased 5% to $114 per participants

Speaker 3

are on track. This was largely

Speaker 1

on the back of the 2 week paid vacation taken in July at Elk Creek due to high inventory levels, quarter which allowed us to ship at a 4,000,000 ton per annum run rate and meaningfully reduced inventory. We anticipate that this trend will continue. Looking ahead, we are refining a number of areas related to our 2023 guidance. First, we now expect to produce 3.1000000 to 3.4000000 tons with the midpoint unchanged from prior guidance. We expect to sell 3.25000000 to 3.5000000 tons, which is unchanged from our mid October update where we increased 2023 sales expectations on the back of both strong Q3 results participants are in the range of $1,000,000 in the range of $1,000,000 in the range of $1,000,000 in the range of fixed price of $173 per ton in the balance price of index.

Speaker 1

We have increased cost guidance to $108 to $112 per ton versus the high end of the previous range of $102 to $108 per ton. The increase is largely due to continued inflationary pressures that the industry is facing as witnessed by the majority of our peers also increasing cost guidance, are in some cases substantially just in the past month or so. Lastly, we have tightened the range on CapEx, SG and A and DD and A, which you will see our guidance tables. The increase in CapEx is largely related to the timing of payments. We would anticipate 2024 CapEx to be down meaningfully versus 2023 and we'll update you all on this front after the 2024 budget is approved by the Board.

Speaker 1

Moving to the balance sheet, the company has liquidity of $98,000,000 as of September 30, double the $49,000,000 level are in the range of $1,000,000 as of year end 2022. I would remind everyone that liquidity has doubled despite the substantial year to date debt repayments, While this concludes my financial remarks, I'm now going to give a brief sales and marketing update. Participants are ready to take questions. Since Randy and I both touched upon our sales commitments, I'm going to focus more on the market itself. Despite challenging conditions in July August, participants are $60 per ton higher today compared to the middle of August.

Speaker 1

This is despite the fact that European steel demand remains subdued participants are in the U. S. Endured almost a 2 month long strike at the major automakers. The good news is that on the supply participants are muted production globally with major downward production revisions from large players in Australia, the U. S.

Speaker 1

And Canada. Participants are in the

Speaker 3

range of $1,000,000,000. These three

Speaker 1

countries collectively account for roughly 75% of seaborne metallurgical coal supply. In our opinion, the reason for these continual production disappointments is simple. The majority of coal companies are not reinvesting in a depleting asset base in large part due to Despite very strong and growing Asian demand. On that front, India has now surpassed China as the largest importing country of seaborne met coal. This is important

Speaker 3

for two reasons. First,

Speaker 1

India has very limited domestic supply of metallurgical coal investors reliant on imports for substantially all of this high quality net coal. 2nd, steel demand has been extremely strong this year in India. Participating in the industry. Specifically, September saw Indian steel production up 18% year over year, bringing the total year to date increase to up 12% year over year. Participants India is not the only bright spot.

Speaker 1

Indonesia is set to bring online roughly 20,000,000 tons of metallurgical coke production capacity, which began to ramp up earlier this year. To put this in some context, this figure is larger than the entire United States annual coke production. Jason and his team have continued to do an excellent job placing tons into both new and existing customers. This is increasingly in Asia where the majority of near term demand exists and specifically to those 2 markets I just mentioned. Participants are in the range of $1,000,000,000.

Speaker 1

The bottom line is that in terms of the overall market, while demand remains relatively tepid in the U. S. And Europe, we are increasingly encouraged

Speaker 2

are in the range of $1,000,000 by both continued supply constraints

Speaker 1

and increased Asian demand. In addition, we saw a number of high cost operations either close or materially cut their work participants are in the range of $1,000,000,000 We see a market where we expect prices to remain above historical levels for the foreseeable future. With that said, I would now like to turn the call over to our Chief Operating Officer, Chris Blanchard.

Speaker 4

Thank you, Jeremy, and good morning, everyone. Operationally, it's nice to talk about positive steps and milestones despite all the challenges that are inherent to the industry. Participants are ready to take questions. Randy and Jeremy both mentioned the Berwind mine ramp up and I'll touch on that in more detail. But first, I wanted to start with a comment on Ramaco's safety participants are extremely proud of our team at the Elk Creek Preparation Plant for having earned the Sentinel Safety Award participants are ready for the 2nd consecutive year for their performance in 2022.

Speaker 4

Annually, only 6 coal operations And of those, only 2 preparation plants are recognized across the entire nation. To win as the best large preparation plant in the nation 2 years in a row is not a fluke. As a company, we salute the daily effort that goes press forward safety and compliance from all our employees. Turning to the production and sales step change. Participants are ready to take questions.

Speaker 4

During the Q3, we completed the final pieces of the Elk Creek plant throughput upgrade. As we had previously updated, The plant reached higher feed rates late in the Q2, but additional froth flotation sales and clean coal storage options participants are operating at our higher feed rates of roughly 3,000,000 annual clean times much more consistently. This throughput ramp Coupled with an extended vacation period in July allowed us to dramatically lower the raw coal stockpile levels at quarter of 2024. At the same time, we expect additional production increases at Elk Creek to coincide with the exhaustion of the raw press coal surplus in 'twenty four. As Jeremy and Randy have both mentioned, we'll discuss more concrete guidance on the 24 metrics later this year.

Speaker 4

At our Maven operation, we have settled into a comfortable production cadence of roughly 250,000 annual tons that is somewhat above our initial expectations. Participants are ready to take questions. Now that the initial surface mining spread and the highwall miner have reached their steady state, we are turning to additional areas to permit and mine by these low participants sold through our Berlin plant. As the mines at Berlin continue to grow, we may look to expand Maven's operations and reduce present the Berwind mine in the Pocahontas number 4 seam. During these 1st few months, we've been able to meet our budget targets for production for the mine.

Speaker 4

Participants are ready to

Speaker 3

take questions. We believe

Speaker 4

that current production levels are not only sustainable, but there is some room for continued improvement in produced tons and additional cost reductions participants are ready to begin the year. We plan to construct additional air shafts at Berwind next year, which will enhance ventilation in the mine and allow the startup of a third section participants

Speaker 2

are

Speaker 4

participating in the grow, the wind down of the smaller mines, which we started during 2022 continues. The Triple S surface mine is now idled participants are in the range of $1,000,000 and our Triad number 2 minutee is completing its last few months of its reserves. Ultimately, the equipment and infrastructure from the Triad mine will be used to minimize growth capital associated with the 3rd section at Berwind. We continue to evaluate the rest of the small participants are ready to take questions. This now concludes management's prepared remarks, and I would like to return the call to the operator for the question and answer portion of the call.

Operator

Take our first question. And our first question comes from the line of Lucas Pipes with B. Riley Securities. Please go ahead.

Speaker 2

Participants are ready to take questions.

Speaker 5

Thank you very much, operator. Good morning, everyone. I will keep my comments to a minimum and that is a good job on the 2024 contracts and I'll go over to the questions. But on those 2024 domestic contract, would be really great to get some perspective on the quality mix there. Is it kind of all participants Your standard quality, where is it maybe a little bit more on the higher end spectrum, would appreciate your thoughts on that?

Speaker 5

Thank you.

Speaker 1

Yes. Thanks, Lucas. I'll take that. So it's pretty similar to our overall mix. And frankly, I'll I'd say about sort of 30% of what we've committed is kind of a low vol, mid vol and about, call 70% is high vol.

Speaker 1

As Randy noted, we're kind of working on refining the 2024 budget Probably a little less than kind of 2 thirds. So overall, I mean, certainly, kudos to Jason and his team for a job well done.

Speaker 2

Participants are ready.

Speaker 5

Great. Yes. Good job, Jason. My second question, Randy, you mentioned In your prepared remarks, I don't have your exact wording down here, but you said something along the lines of this is kind of you had a pivotal moment as you transition more towards capital returns. I think that was the essence.

Speaker 5

And I wondered if you can speak to that. I think there are also targets for further debt reduction in 2024. So kind of trying to put it all together, How much of free cash flow should investors anticipate going towards kind of the balance sheet for participants have additional flexibility how much should go back in the form of dividends or buybacks, would appreciate if you could maybe I'll put some additional details about that. Thank you very much. Sure.

Speaker 3

Thanks, Lucas. So I think what I tried to highlight is we've been trying to do a Couple of things at the same time. I mean, we've been trying to grow, obviously, spending a great deal of CapEx, $250,000,000 over the last few years. We've been trying to pay down debt, which we've done and we've gotten it down to about $50,000,000 in term debt that remains. And then we've also, of course, been trying to do distributions, which inclusive of both the cash dividends as well as the value of the tracking stock, I'll Which we did this summer.

Speaker 3

It's been a pretty nice return. I think it's about $160,000,000 So moving forward, I think all participants are in the range of $1,000,000,000. The bulk of our growth CapEx from current projects is in the rearview. So as we look to 'twenty four and out, We are going to have growth CapEx that will be below the level that we anticipate paying out in dividends, cash participants are in the range of $1,000,000 and as far as further types of capital distributions in terms of stock buybacks or anything of that nature, we will have to

Speaker 2

all participants are ready to take questions.

Speaker 3

We've always left the door open to that. We've also indicated that we wanted to get a certain level of cash on the balance sheet before we started Considering that, we're certainly going to be in a cash build position here over the next few years. So That's certainly something that we hope we'll be able to get to here. But I find ourselves frankly in a pretty good position where we're starting to Somewhat reaped the benefits of what we've sowed, where we don't really have to spend too much more on growth CapEx. And indeed, As I indicated, we could pretty much maintain the same level of production just for maintenance CapEx going forward, which 4,000,000 to 4,500,000 tons is not a it's a fairly tightest amount of production.

Speaker 3

So I hope that addressed most of what your question was asking.

Speaker 5

That's helpful. Thank you, Randy, for that. I'll squeeze one more operational one in. A few moving pieces on the Offside during the Q3 and then I think also into year end. But as you look into 2024, what's a good way to think about it, kind of on a normalized level?

Speaker 5

Thank you for any color you can provide.

Speaker 3

All When you say think about it, which cost are you specifically

Speaker 5

That's the production cost per ton on the MedCo side.

Speaker 1

I'll take that Lucas. So yes, I mean just taking a step back for a second in Q3, obviously, overall cash costs were $114 Really, I'd say that the bulk of the increase or frankly all of the increase was driven by the participants We took an extra week's vacation, paid vacation at Elk Creek in July to reduce inventory, which participants are now done. So if I think about sort of August September costs, which are normal kind of non holiday months, all participants Those cash costs averaged about $103 per ton to put that into some context. Now obviously in Q4, you've got 2 months that have a week's holiday in that. So that participants It's got to take that into account.

Speaker 1

But as I kind of think about next year, obviously, we are going through the kind of the budget sort of I'll put you on the negative side, there's certainly continued labor and inflationary pressure. I think participants are in the comments of our peers and just the overall economy, that's not a surprise. But that should be offset by stronger production from a full year of the Berwind mine producing at 2 sections and a full year of the Elk Creek prep plant and at kind of 3,000,000 tons per annum. I'll We'll give some more refined guidance certainly after the budget is baked. But hopefully, that gives you a little bit of kind of context kind of where we're coming from and where we hope to go.

Speaker 5

Thank you. So, with low $100 per

Speaker 1

I mean, that's certainly where we were in August September. So I would hope that that's repeatable, especially with the positive variances that we talked about. But again, you've got some inflationary pressures. Participants So we'll come out and kind of get you guys some more refined numbers over the next month or so. Yeah.

Speaker 1

I'll turn

Speaker 3

the call back over to Tom. I think, look, as we've got a pretty good handle on what we can control ourselves, what we have, as I alluded to, it's a fairly Murky economic environment we're operating in today. So we're not quite sure where a few pivots may go that would externally drive costs. Participants are in the range of $1,000,000 but hopefully we'll be able to get some general thoughts on that that we'll be able to articulate to the market here within the next month or 2.

Speaker 5

Participants are ready to take questions.

Speaker 1

Thank you, Lucas.

Operator

Participants are from the line of Nathan Martin with The Benchmark Company. Please go ahead.

Speaker 6

Thanks, operator. Good morning, guys. Thanks for taking the questions. Maybe just one quick one for clarification on the cash cost per ton guidance, the $108,000,000 to $112,000,000 for the full year. Is that still the way you guys expect to frame your expectation for the Q4 as well?

Speaker 1

Yes, I mean, so I think obviously, Nate,

Speaker 3

it's at

Speaker 1

the midpoint, I think the answer is yes. Obviously, with the range, you can get kind of lower than that in the Q4 and even a little bit higher. I'd just remind you that Q4 always is kind of the one with the most variability with the 2 weeks' worth of paid vacations, For Thanksgiving and Christmas. So hopefully that answers the question.

Speaker 6

Yes, perfect, Jeremy. Appreciate that. And then Maybe just stick on the full year 'twenty three guidance for a second. On the sales side, as you guys mentioned, that seems to imply shipments of around 800,000 tons at the low end and $1,000,000 at the high end or maybe $1,000,000 plus. So kind of what gets you to the high or low end of the range?

Speaker 6

The ability to move more inventory you guys seem to anticipate just would be great to get your thoughts there too.

Speaker 3

Yes, I think we've got A nominal amount of open tonnage that's left for the year, Nate, which we're going to try and obviously push out before the year end.

Speaker 2

Participants are open.

Speaker 6

Perfect. Thanks, Randy. And then maybe sticking with the stockpiles just real quickly, I think Chris mentioned Hopefully getting to normalized levels, maybe the Q1 of next year. I think you're down to maybe 900,000 tons plus or minus. What's kind of normal there for you guys for Hill Creek?

Speaker 4

Chris, go ahead. Yes, Nate, all participants are ready to take questions. The inventory levels that we've put out are sort of combined clean and raw, but just from a run of mine raw standpoint, participants are ready to take questions. The size of Elk Creek is we'd like to be running somewhere around 200,000 tons. So we have some flexibilities for the ebbs and flows of production without impacting the preparation plant, but never in the position where we're having are ready to re handle coal or have any concerns about it sitting.

Speaker 4

So if that answers your question.

Speaker 6

Got it. Yes, just trying to figure out how much more there was to go. And I think you guys mentioned as well, hopefully kind of a working cap tailwind for the next few quarters because of that. Participants Okay. And I think,

Speaker 3

Nate, to add

Speaker 1

on a little bit to Chris. I mean, we've had

Speaker 3

kind of a funny year because of the fact that we had sort of built up inventory in participation of flicking the switch at our prep plant to knock the production of 5,000,000 tons from 2,000,000 to 3,000,000 tons. Participants are in the range of $1,000,000,000. So that's what caused the inventory. And I think in general, we will certainly refine it. But at the moment, our expectation is we'll have that inventory back down to normal levels probably just after the Q1 of next year.

Speaker 6

Great. Appreciate the thoughts there, guys. And then maybe just thinking about a little bit intermediate term. Randy, you made the comments you guys are are very comfortable where you are now, maybe a 4,000,000 ton plus kind of run rate next year. Looking at next year, we don't know what all projects are you looking at?

Speaker 6

Maybe what kind of growth CapEx would that entail?

Speaker 3

Yes. I think basically, Nate, We have, as I indicated, baked some optionality into next year, depending upon how we see the market. We can kind of continue generally about the same, call it, 4,000,000 ton level. We could ramp that up without Bringing on much new growth CapEx at all to a higher level. I won't give you the exact tonnage right now, which we'll probably try to provide a little bit more clarity on after our budget, but we could wrap that up reasonably substantially next year, if we saw the demand there.

Speaker 3

And I think going forward, we were kind of a company that hits mostly singles and doubles as opposed to participants I'm trying to go for grand slams in terms of production increases. We've got a number of projects out there on the horizon, one of which we've talked about participants are taking that into a deep mine production, which attendant prep facilities, etcetera, but that's down the road. We're not there yet. But we have a ramp that I think Jeremy has put in our presentation, which gets us to about 6,500,000 to 7,000,000 tons over the next couple of years and we're very comfortable that that can be accomplished with nominal growth CapEx.

Speaker 6

Got it. That's helpful. Again, it used to be nice to see that chart in there as well. It kind of broke out the CapEx. So that's what I Randy, I appreciate your prepared remarks on both the RE and carbon product initiatives.

Speaker 6

Participants Can you maybe give us an update on the timetables there? Kind of what stage are you at in each of those? And how long do you think it could take before you do have a Partially available payable product for either.

Speaker 3

Yes. I think, Nate, the way I'd like to answer that is, peculiarly, I'll press The rare earth business is an entirely different type of mining exercise in coal mine. In coal mining, you're dealing with bulk. Participants You can find, see and touch a lump of coal. When you're dealing with rare earth, you're dealing with microscopic metal deposits that are measured in parts per million.

Speaker 3

So the real challenge is once you found a sufficient level of rare earth participants define it in areas of concentration, which you could economically extract from and then to figure out what would be the appropriate sort of processing refinement techniques that would be able to get those minerals out. All participants are ready to go. We've got some very interesting things going on. We're doing some deep coring now because we think that there's a possibility that there may be some deposits which we've missed since we've pretty much only used cores that have been originally developed from our coal mining exploration, which was Generally fairly shallow in the couple 100 feet, 1 to 200 feet levels and we're going to have to go down to a lower level to really test I'll press How much might be down there, much lower. So I think that's a roundabout way of saying what we're going to be involved in is More testing not only on the dimension of the deposit, but more importantly on sort of the chemical and metallurgic characteristics, which really define the ultimate economics.

Speaker 3

So I don't want to put a timeframe on it But I'm hopeful by next year, probably sometime in the first half participants will be able to have some pretty solid preliminary thoughts on where we are in terms of finding that deposit. And of course, we're getting a lot of help from the National Labs, not only our friends at NETL, but we've got a host of other national labs we're working with as well on not only just The deposit aspect, but also on some of the aspects of processing and frankly magnetic production down the road, Because if the deposit bears out to be the size and conformity that we hope, it could be a very important deposit from a national standpoint. So that's kind of where we are on rare earth. On the carbon products, what we're trying to do is we've identified sort of 2 areas That we think have a lot of promise and could potentially use a lot of coal and we've got some very interesting pretty novel intellectual property that we've been able to develop around these with the National Labs. Again, one is sort of taking Coal and using it to make really a carbon fiber type activated carbon where we could use that as A form of direct air capture, which is kind of interesting.

Speaker 3

And you're essentially using coal to capture CO2. And the other one is the idea that we would be able to basically do some other forms of Development on graphite where the Chinese just put the kebab on export of graphite. Well, we've been working for have been working on developing synthetic graphite, essentially from coal char. And so that has taken on a little bit more importance urgency and we were actually thinking about trying to get a prep plant built, affirming a pilot plant built in West Virginia to be able to exploit that. So in terms of the sort of the near term commercialization of those 2, again, I would probably say give us about 6 months or so participants are in the same store.

Speaker 3

Okay. And then, I'll turn the call back to the operator to review

Speaker 2

the

Speaker 6

Perfect. Yes, we'll be waiting for more info on that for sure. And then I guess just curious real quickly, the feedstock and the carbon products initiatives, would you plan to use your own production there or no?

Speaker 1

In terms of the coal that would go into the carbon product feedstock, Nate? Correct. Yes, correct. Yes. That's a great question.

Speaker 3

So the answer is we would be going production. Participants We've been doing our testing on synthetic graphite from our low vol coal at Berwind. And indeed, that's where we're sort of currently contemplating we'd build a pilot plant. And in terms of the sort of the melt blown activated carbon That we would use for direct air capture, we've been using our Wyoming goal,

Speaker 1

and we've got plenty of that.

Speaker 3

Our general thesis is as time goes by, my bandwagon has been the use of coal for higher value products under the theory that coal is too valuable to burn and if you can use it to make something else with it, It might be more valuable to those of us in the industry who would go in that direction. So that's kind of where we are on that.

Speaker 6

Got it. So just wanted to confirm that could possibly be yet another avenue for your products to move into. Okay, Perfect. Guys, I really appreciate the time and information and best of luck in the Q4.

Speaker 3

Thanks, Nish. Thanks, Nish.

Speaker 2

Participants are in the line with us.

Operator

This concludes the Q and A portion of today's call. I would now like to turn the floor over to Randall Atkins for additional or closing remarks.

Speaker 3

I'd just like to, as always, thank everybody for being on the line with us today. Hopefully, we've participants have been able to enlighten you. We've had a pretty good quarter. We will look forward to catching up with anybody again after the 1st of the year are ready for our year end results and everybody have a good day.

Operator

Ready. Thank you. This concludes today's Ramaco Resources Third Quarter 2023 Earnings Conference Call. Please disconnect your line at this time

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Key Takeaways

  • Ramaco grew Q3 shipments to a 4 million tons per annum run-rate and delivered over 50% EBITDA growth quarter-over-quarter despite a 5% decline in coal indices, while reducing term debt by $50 million this year to end the quarter with $98 million of liquidity.
  • The company has invested nearly $250 million in growth capital since 2021 to expand production from 3 million to 4 million tpa and maintain a 4–4.5 million tpa base case, with optionality to ramp toward 6.5–7 million tpa over the next few years at modest incremental capex.
  • For 2024, Ramaco has locked in 1.3 million tons of domestic sales at an average of $167/ton and plans to pivot to roughly 70% export exposure amid robust Asian demand—India is now the largest seaborne met coal importer—and tightening global supply.
  • Operationally, development of the Berwind mine’s second section is underway with additional ventilation shafts planned, Elk Creek’s prep plant won the national Sentinel Safety Award for a second year, and Maven continues at ~250 ktpa with further cost-reduction opportunities.
  • Ramaco is advancing high-value coal uses with national labs, commencing rare earth deposit testing at its Wyoming Brook Mine and pursuing DOE-backed R&D in electrochemical coal-to-synthetic graphite plus activated carbon fiber for direct air capture.
AI Generated. May Contain Errors.
Earnings Conference Call
Ramaco Resources Q3 2023
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