Overview

Ramaco Resources is a metallurgical coal mining company operating in West Virginia and Virginia. The company has 59 million reserve tons and 1.1 billion measured and indicated resource tons of high-quality metallurgical coal.

Ramaco plans to grow annual production to ~7 million clean tons by the medium-term, subject to market conditions, permitting, and capital deployment. The company may also make acquisitions to expand its low-cost reserves and infrastructure.

Ramaco primarily sells metallurgical coal domestically to steel mills and internationally. Pricing is determined by global supply/demand dynamics. Ongoing import bans on Russian coal have tightened supply in some seaborne markets, contributing to price volatility.

Financial Performance

In Q1 2024, Ramaco’s revenue rose 4% year-over-year to $172.7 million on higher coal sales volumes. However, weaker met coal pricing led to lower profitability.

• Coal sales increased 23% to 0.9 million tons. Higher production capacity enabled Ramaco to sell more tons domestically and internationally.
  
• Revenue per ton decreased 15% to $186, driven by weaker index-based pricing on export sales. Export sales are more exposed to market volatility.
• Cost of sales increased 26% to $139.7 million due to more tons sold. Cost per ton increased 3% to $150, impacted by challenging geology and labor availability in Q1.
• Net income declined 92% to $2.0 million. Adjusted EBITDA dropped 50% to $24.2 million. Lower per ton margins drove the profit declines.

Liquidity & Capital Resources

At March 31, 2024, Ramaco had $30.5 million of cash on hand and $65.3 million available under its revolving credit facility.

• Operating activities generated $25.2 million of cash in Q1 2024.
  
• Capital expenditures totaled $18.7 million, largely related to an expansion project at the Maben complex.
• The company paid $8.3 million in dividends and reduced debt by $7.8 million.

On May 3, 2024, Ramaco expanded its revolving credit facility to $200 million (with an accordion to $275 million). This provides additional flexibility to fund growth projects in light of Q1’s lower cash generation.

Ramaco believes it has adequate liquidity from cash on hand, credit facility borrowings, and operating cash flow to fund the next 12 months. However, further weakness in met coal markets could pressure cash generation.

Outlook

Metallurgical coal demand and pricing weakened in Q1 2024 but appear to have stabilized recently. Ramaco expects continued volatility until the global economic outlook improves.

The company is focused on optimizing its mines and infrastructure to support annual production growth to 7 million tons over the next few years. This depends on favorable market conditions and sufficient capital deployment.

Ramaco is also assessing the potential to produce rare earth elements at its Wyoming deposit. Initial analysis indicates the presence of high-value minerals that were recently banned for export by China.

In summary, Ramaco is positioned to grow as a low-cost met coal producer but remains exposed to fluctuations in global commodity markets. The company has taken steps to solidify its financial position and flexibility. Execution of Ramaco’s strategic plan relies on supportive market factors in the coming years.