10-Q: Ramaco Resources Q3 2025: Coal Losses Mount, REE Progress

Ramaco Resources reports significant Q3 2025 net losses and declining coal revenue amid market softness, while advancing its strategic rare earth elements project with new capital.

Summary

• Reported a net loss of $13.3 million for the three months ended September 30, 2025, and a net loss of $36.7 million for the nine months ended September 30, 2025, a significant decline from prior periods.
• Revenue decreased by 28% to $121.0 million in Q3 2025 and by 18% to $408.6 million for the nine months, primarily due to softening global metallurgical coal markets and lower prices.
• Adjusted EBITDA declined sharply by 64.6% to $8.4 million in Q3 2025 and by 64.5% to $27.2 million for the nine months.
• Successfully raised approximately $188.1 million in net proceeds from a Class A common stock offering in August 2025, significantly boosting cash and cash equivalents to $193.8 million.
• Completed a public offering of $65.0 million in 8.25% Senior Unsecured Notes due 2030 and used proceeds to repay $34.5 million of 2026 Senior Notes.
• Initiated development of the Brook Mine rare earth element and critical mineral operations in June 2025, with construction of a pilot plant beginning in Q3 2025, supported by a $6.1 million matching grant.
• Metallurgical coal production increased by 1% to 2.9 million tons for the nine months ended September 30, 2025, compared to 2.7 million tons in the prior year.
• Full-year 2025 metallurgical coal production volume is expected to be between 3.7 and 3.9 million tons.
• A material weakness in internal control over financial reporting, identified as of December 31, 2024, remains unresolved.
• The quarterly Class A stock dividend has been suspended as of the July 2025 Board meeting.

Sentiment

Score: 4

Explanation: While the company successfully executed significant capital raises and is making strategic progress in the promising rare earth elements sector, its core metallurgical coal business is experiencing substantial financial deterioration due to weak market conditions, leading to significant net losses and a sharp decline in EBITDA. The suspension of the Class A dividend and the unresolved material weakness in internal controls also contribute to a cautious outlook.

Positives

• Successfully completed an underwritten public offering of Class A common stock, raising approximately $188.1 million in net proceeds, significantly enhancing liquidity.
• Cash and cash equivalents increased substantially to $193.8 million as of September 30, 2025, from $33.0 million at December 31, 2024.
• Successfully issued $65.0 million in 8.25% Senior Unsecured Notes due 2030, demonstrating continued access to capital markets.
• Initiated development of the Brook Mine rare earth element and critical mineral operations, marking a strategic diversification into critical minerals.
• Received a $6.1 million matching grant from the Wyoming Energy Authority for the development of the Brook Mine pilot plant.
• Completed a preliminary economic assessment for the Brook Mine, demonstrating the viability of commercial development for rare earth elements and critical minerals processing.
• Expanded internal production projections for the Brook Mine, reflecting enhanced project economics and higher-grade resource quality.
• Metallurgical coal production increased to 2.9 million tons for the nine months ended September 30, 2025, up from 2.7 million tons in the same period of 2024.
• Achieved operational efficiencies, leading to a decrease in cash cost per ton sold (FOB mine) to $97 in Q3 2025 and $100 for the nine months.
• The One Big Beautiful Bill Act, enacted July 4, 2025, includes a 2.5% tax credit for metallurgical coal production starting in 2026, which is expected to have a positive impact on net income.
• Maintained a strong current asset position of $328.7 million, exceeding total current liabilities by $218.2 million.
• In compliance with all debt covenants under the Revolving Credit Facility as of September 30, 2025.

Negatives

• Reported a significant net loss of $13.3 million in Q3 2025 and $36.7 million for the nine months, a substantial deterioration from prior periods.
• Revenue decreased by 28% in Q3 2025 and 18% for the nine months, primarily due to softening global metallurgical coal markets and a significant decline in metallurgical coal prices.
• Adjusted EBITDA declined sharply by 64.6% in Q3 2025 and 64.5% for the nine months, reflecting reduced profitability in the core business.
• Selling, general, and administrative (SG&A) expenses increased by $3.2 million in Q3 2025 and $11.9 million for the nine months, mainly due to higher professional service expenses.
• Interest expense, net, increased to $2.3 million in Q3 2025 and $7.3 million for the nine months, largely due to new senior note issuances.
• The Rare Earths and Critical Minerals segment is currently operating at a loss, with Segment Adjusted EBITDA of $(3.8) million in Q3 2025 and $(12.4) million for the nine months, and has not yet recognized any revenue.
• A material weakness in internal control over financial reporting, identified as of December 31, 2024, remains unresolved.
• SEC Staff comments regarding disclosures related to the Brook Mine's Preliminary Economic Assessment (PEA) remain unresolved.
• The quarterly Class A stock dividend has been suspended as of the July 2025 Board meeting.

Risks

• Fluctuations in demand for, and prices of, rare earth elements and critical minerals, influenced by global economic conditions, interest rates, exchange rates, taxes, inflation, shipping costs, and geopolitical factors.
• No assurance of successfully developing the Brook Mine into a commercial scale mine, as it is a new initiative with heightened risks and uncertainties.
• Potential for increased competition in the rare earth elements and critical minerals industry, including predatory pricing or anti-competitive tactics by Chinese producers who dominate the market.
• Dependence on the ability to achieve consistent product quality at anticipated costs of production to compete effectively against competitors with potentially lower costs.
• Changes in tax legislation, such as the scheduled termination of the 2.5% Advanced Manufacturing Production Credit for metallurgical coal after December 31, 2029, or elimination of other tax preferences.
• Project overruns related to the development of the Brook Mine, including increased costs for extraction and processing of rare earth elements and critical minerals into oxides.
• Timely delivery of product by rail and other transportation carriers.
• Late payments of accounts receivable by customers.
• Cost overruns in equipment purchases needed to complete mine development plans.
• Delays in completion of development of various mines, processing plants, and refuse disposal facilities, which could reduce coal available for sale and cash flow from operations.
• Adverse changes in the metallurgical coal markets that would reduce expected cash flow from operations.
• Litigation risks, including the ongoing preparation plant purchase dispute and the Hayseeds damages trial related to the silo failure.
• Risks related to the company's tracking stock structure and separate performance of its Carbon Ore-Rare Earth (CORE) assets.
• Risks related to weakened global economic conditions and inflation.
• Impacts of trade policy in the United States, China, or other countries.
• Geologic, equipment, permitting, site access, and operational risks related to coal mining, REE, and critical minerals mining.
• Availability, timing of delivery, and costs of key supplies, capital equipment, or commodities such as diesel fuel, steel, explosives, and tires.
• Timely review and approval of permits, permit renewals, extensions, and amendments by regulatory authorities.
• Ability to comply with certain debt covenants.
• The Board of Directors retains the power to change or add expense allocation policies related to CORE, redefine CORE assets, and redetermine CORE's per-ton usage fees at any time, in its sole discretion, without shareholder approval.
• Holders of Class B common stock do not own a direct interest in CORE assets and are subject to all risks and liabilities of the company as a whole.

Future Outlook

The company expects full-year metallurgical coal production volumes in 2025 to be between 3.7 and 3.9 million tons, with the ability to vary production based on market conditions. Metallurgical coal prices are anticipated to remain volatile in the near term. The Brook Mine rare earth elements and critical minerals project is expected to complete its pilot plant construction by mid-2026 and its pre-feasibility study in 2026, followed by engineering and design of a full commercial oxide plant and a two-year shakedown period. The company anticipates declaring a similar Class B dividend for Q4 2025 and future quarters, subject to Board approval. Future liquidity and capital requirements may be met through cash on hand, the revolving credit facility, projected cash flows, or additional capital raises via the shelf registration statement if needed.

Management Comments

• The overall outlook of the metallurgical coal business is dependent on a variety of factors such as pricing, regulatory uncertainties, and global economic conditions.
• For 2025, overall steel demand will likely remain weak in the near term; however, supply cuts may occur for higher cost operations absent a significant upward movement in pricing.
• Longer term, limited global investment in new coking coal production capacity, the industrialization of emerging economies, expansion of urbanization globally, and an eventual return to economic growth will support coking coal markets overall.
• The metallurgical coal markets are volatile in nature; therefore, the company prioritizes managing its financial position and liquidity, while managing costs and capital expenditures and returning value to its shareholders.
• We expect full-year production volumes in 2025 between 3.7 and 3.9 million tons with an ability to vary production dependent on market conditions.
• The company continues to make significant progress on the development of the Brook Mine rare earth elements and critical mineral project.
• The company was requested by various arms of the Administration to consider both the expansion and acceleration of the Brook Mine project.
• This additional capital provides a significant funding source towards the development of our rare earth elements and critical minerals platform at the Brook Mine.
• We expect to proceed to engineering and designing the full commercial oxide plant, with a construction period to be validated and updated upon the completion of the pre-feasibility study to be followed by a subsequent two-year shakedown period for the plant to be optimized to reach full steady-state capacity.
• At this time, we are unable to estimate the potential financial impact to future periods [from the Rare Earths and Critical Minerals segment].
• Mine costs for the third quarter of 2025 benefited from efficiencies gained from increased production versus the same period in 2024.
• The company anticipates declaring a similar dividend for the fourth quarter of fiscal year 2025 and on a quarterly basis in future periods; however, future declarations of dividends are subject to Board of Directors approval and may be adjusted as business needs or market conditions change.
• If future cash flows were to become insufficient to meet our liquidity needs or capital requirements, due to changes in macroeconomic conditions or otherwise, we may reduce our expected level of capital expenditures for new mine production and/or fund a portion of our capital expenditures through the issuance of debt or equity securities, new debt arrangements, or from other sources such as asset sales.
• Senior members of management do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud.

Industry Context

Global metallurgical coal markets experienced softening in 2024 and continued into 2025 due to constrained economic growth in some regions and ongoing international conflicts. Slower growth in the global steel market, particularly in China, led to elevated Chinese steel exports and a reduction in metallurgical coal prices. Longer-term, the company anticipates support for coking coal markets from limited global investment in new production capacity, industrialization of emerging economies, global urbanization, and an eventual return to economic growth. In the rare earth elements and critical minerals sector, the U.S. government has prioritized domestic production as a matter of national security and economic resilience, leading to increased engagement with various government departments. China currently dominates global rare earth element production and manufacturing, with recent industry restructuring centralizing control by state-owned enterprises, which could impact pricing and competition.

Comparison to Industry Standards

• The company believes its coal is among the lowest delivered-cost U.S. metallurgical coal to its domestic customer base, North American blast furnace steel mills and coke plants, as well as international metallurgical coal consumers.
• The company's insurance policy provides liability coverage for directors, officers, employees, or agents that is considered reasonable and customary compared with similarly situated companies, as determined by the Board.
• Performance stock units are valued relative to the total shareholder return of a peer group, though specific peer companies are not named.
• Chinese competitors in the rare earth elements market may have greater financial resources and strategic advantages, including lower labor, compliance, and production costs due to less stringent environmental and governmental regulations.
• The China Rare Earth Group, formed by merging three state entities, has enhanced pricing power for key rare earths like dysprosium and terbium, impacting the global supply chain.

Management Changes

Corporate Governance

Legal Proceedings

• **Preparation Plant Purchase:** Justice Coal of Alabama, LLC filed a complaint on November 15, 2024, alleging the company is liable for conversion, unjust enrichment, and negligence regarding a $3 million plant purchase from EMCOAL, Inc. The company filed a motion to dismiss on June 24, 2025, which is currently pending. The company believes it has meritorious defenses.
• **Storage Silo Partial Failure:** Ongoing litigation with Federal Insurance Company and ACE American Insurance Company regarding a 2018 silo failure. A jury awarded $7.7 million in contract damages and $25 million in Hayseeds damages in 2021. The court later reduced the award to $1.8 million and vacated Hayseeds damages. On appeal, the $7.7 million contract damages were reinstated, and the company was deemed entitled to attorneys fees and a new trial for Hayseeds damages. The trial date for Hayseeds damages (originally July 15, 2025) has been continued. The company recognized a $7.8 million gain in 2023 from the contract damages and accrued an additional loss recovery asset of less than $0.1 million in Q3 2025 for attorneys fees, bringing the total loss recovery asset to approximately $4.7 million.

Related Party Transactions

• Legal services from Jones & Associates (a related party) totaled less than $0.1 million for both the three and nine months ended September 30, 2025. Mr. Jones became the company's General Counsel on May 1, 2025.
• Professional service fees with three other aggregated related parties totaled less than $0.1 million during the third quarter of 2025.
• A charitable cash contribution of $0.5 million was made in the third quarter of 2025 to the Ramaco Foundation, an unconsolidated not-for-profit organization whose board includes several members of the company's management and board of directors.

Stakeholder Impact

• **Shareholders (Class A & B):** Negative impact from significant net losses and the suspension of the Class A dividend. Class A shareholders experienced dilution from the recent equity offering. Potential long-term benefits from the rare earth elements project and future tax credits. Class B shareholders' dividends are subject to the Board's sole discretion.
• **Employees:** Operational efficiencies and mine closures (Jawbone, Rockhouse Eagle) could imply workforce adjustments. Increased labor costs in the REE segment indicate new hiring or increased investment in personnel for that division.
• **Customers:** Softening metallurgical coal markets and lower prices generally benefit customers. The company has outstanding performance obligations for 0.6 million tons at fixed prices averaging $164/ton and 1.2 million tons at index-based pricing.
• **Creditors:** The successful issuance of new senior notes and maintenance of debt covenants provide comfort. The strong cash position also enhances the company's ability to meet its obligations.
• **Suppliers/Contractors:** Reduced trucking costs at the Maben complex indicate changes in logistics or operational structure. Continued capital expenditures for mine development and the REE project suggest ongoing demand for supplier services.

Next Steps

• Complete construction of the Brook Mine processing laboratory/pilot plant by mid-2026.
• Complete the pre-feasibility study for the Brook Mine project in 2026.
• Proceed to engineering and designing the full commercial oxide plant for Brook Mine, with a construction period to be validated and updated upon completion of the pre-feasibility study.
• Optimize the commercial oxide plant during a subsequent two-year shakedown period to reach full steady-state capacity.
• Remediate the identified material weakness in internal control over financial reporting.
• Address unresolved SEC Staff comments regarding Brook Mine disclosures.
• Await a new scheduling order from the court for the Hayseeds damages trial.
• Seek the court's determination and award of attorneys fees in the silo failure litigation.
• Assess the impact of the 2.5% tax credit for metallurgical coal production, which becomes effective in 2026.
• Potentially declare a similar Class B dividend for the fourth quarter of fiscal year 2025 and on a quarterly basis in future periods, subject to Board approval.
• Potentially fund a portion of capital expenditures through the issuance of debt or equity securities, new debt arrangements, or from other sources such as asset sales, if future cash flows become insufficient.

Key Dates

Recommendation

The company faces significant headwinds in its core metallurgical coal business due to weak market conditions and declining prices, leading to substantial losses and reduced profitability. The suspension of the Class A dividend and unresolved internal control issues are concerning. However, the successful capital raise provides a strong liquidity position, and the strategic investment in rare earth elements and critical minerals at the Brook Mine offers significant long-term growth potential, supported by government initiatives. The company is in a transition phase, balancing a struggling core business with a promising, but nascent, new venture. A 'Hold' recommendation reflects the current challenges offset by future potential and strong liquidity.

Keywords

Metallurgical Coal, Rare Earth Elements, Critical Minerals, Mining, SEC Filing, Form 10-Q, Financial Results, Coal Production, Brook Mine, Capital Raise, Debt Offering, Corporate Governance, Risk Factors, Wyoming Energy Authority, Advanced Manufacturing Tax Credit