10-Q: Ramaco Resources Reports Q2 Loss Amid Weak Coal Prices, Advances Rare Earth Project

Ramaco Resources, Inc. reported a net loss for the second quarter and first half of 2025, primarily driven by a significant decline in metallurgical coal prices, despite increased production volumes and improved per-ton cash costs, while also making progress on its rare earth elements and critical minerals initiatives.

Summary

• Ramaco Resources, Inc. reported a net loss of $13.974 million for the three months ended June 30, 2025, compared to a net income of $5.541 million for the same period in 2024.
• For the six months ended June 30, 2025, the company incurred a net loss of $23.431 million, a significant decline from a net income of $7.573 million in the prior year period.
• Adjusted EBITDA decreased substantially to $9.005 million for Q2 2025 from $28.799 million in Q2 2024, and to $18.794 million for the six months ended June 30, 2025, from $52.978 million in the comparable 2024 period.
• Total revenue for Q2 2025 was $152.959 million, a 2% decrease from $155.315 million in Q2 2024, while six-month revenue decreased 12% to $287.615 million from $327.991 million.
• The decline in revenue was primarily due to a 16% decrease in revenue per ton sold (GAAP basis) in Q2 2025 ($142 per ton) compared to Q2 2024 ($170 per ton), and a 20% decrease for the six-month period.
• Metallurgical coal price indices fell by an average of 20% during Q2 2025 and 23% during the six months ended June 30, 2025, compared to the respective 2024 periods.
• Tons sold increased by 18% in Q2 2025 to 1,079 thousand tons and by 10% for the six months ended June 30, 2025, to 2,024 thousand tons, driven by increased production capacity.
• Cash cost per ton sold (FOB mine) improved, decreasing 5% to $103 per ton in Q2 2025 and 11% to $101 per ton for the six months ended June 30, 2025, benefiting from efficiencies and operational adjustments.
• The company completed a public offering of $57.0 million in 8.25% Senior Unsecured Notes due 2030 on July 31, 2025, with an additional $8 million option exercised by underwriters on August 1, 2025, to redeem existing 2026 notes and for general corporate purposes.
• A Preliminary Economic Assessment (PEA) for the Brook Mine, prepared by Fluor Corporation, confirmed its commercial and technological feasibility for rare earth elements and critical minerals development.
• The company received a $6.1 million matching grant from the Wyoming Energy Authority for the development of the initial laboratory/pilot plant at the Brook Mine.
• The Board of Directors decided to suspend the Class A stock dividend at its July 2025 meeting, which had been paid in Class B shares for the past three quarters.
• A material weakness in internal control over financial reporting was identified as of December 31, 2024, and continued as of June 30, 2025, due to insufficient qualified personnel and documentation, with remediation efforts ongoing.

Sentiment

Score: 3

Explanation: The sentiment is negative due to significant net losses and a sharp decline in Adjusted EBITDA, primarily driven by weak metallurgical coal prices. While operational efficiencies and progress on rare earth initiatives are positive, the financial performance and the suspension of Class A dividends indicate a challenging period.

Positives

• Increased production volumes by 18% in Q2 2025 (1,079 thousand tons) and 10% for the six months ended June 30, 2025 (2,024 thousand tons), reflecting increased capacity.
• Improved cash cost per ton sold (FOB mine) by 5% to $103 in Q2 2025 and 11% to $101 for the six months ended June 30, 2025, due to operational efficiencies and mine adjustments.
• Successfully completed a Preliminary Economic Assessment (PEA) for the Brook Mine, confirming its commercial and technological feasibility for rare earth elements and critical minerals.
• Secured a $6.1 million matching grant from the Wyoming Energy Authority to support the development of the Brook Mine's initial laboratory/pilot plant.
• Successfully issued $57.0 million (plus an $8 million option) in 8.25% Senior Unsecured Notes due 2030, providing capital for debt redemption and general corporate purposes.
• Maintained compliance with all debt covenants under the Revolving Credit Facility as of June 30, 2025.

Negatives

• Reported a net loss of $13.974 million for Q2 2025 and $23.431 million for the six months ended June 30, 2025, a significant deterioration from net income in the prior year periods.
• Adjusted EBITDA declined sharply by 68.7% in Q2 2025 and 64.5% for the six months ended June 30, 2025, compared to the respective prior year periods.
• Revenue per ton sold (GAAP basis) decreased by 16% in Q2 2025 and 20% for the six months ended June 30, 2025, primarily due to a significant drop in metallurgical coal prices.
• Metallurgical coal price indices fell by an average of 20% in Q2 2025 and 23% for the six months ended June 30, 2025, reflecting a softening global market.
• The Board of Directors suspended the Class A stock dividend at its July 2025 meeting.
• Selling, general, and administrative (SG&A) expenses increased by $4.3 million in Q2 2025 and $4.8 million for the six months ended June 30, 2025, compared to the prior year periods.
• Interest expense, net, increased to $2.818 million in Q2 2025 and $5.048 million for the six months ended June 30, 2025, largely due to the issuance of Senior Notes due 2029.

Risks

• Fluctuations in demand for, and prices of, rare earth and critical minerals could adversely affect growth prospects.
• No assurance that the Brook Mine can be successfully developed into a commercial scale mine or that mineralization can be mined or processed profitably.
• Prices for rare earth and critical minerals are affected by factors beyond control, including interest rates, exchange rates, taxes, inflation, shipping costs, global supply/demand, and political/economic conditions.
• A future change in U.S. federal administration could result in changing policies (trade, tariffs, taxes, regulation) that detrimentally impact demand for rare earth and critical minerals.
• Supply of rare earth and critical minerals is dominated by Chinese producers, who may engage in export bans, quotas, looser environmental standards, or predatory pricing.
• Inability to compete effectively against current and future competitors, particularly Chinese competitors with greater financial resources and lower production costs.
• Industry consolidation in the rare earth and critical minerals sector may result in increased competition and more compelling product offerings or greater pricing flexibility from competitors.
• Volatility in metallurgical coal markets, regulatory uncertainties, and global economic conditions can impact the business.
• Timely delivery of product by rail and other transportation carriers is crucial for operations.
• Late payments of accounts receivable by customers could impact liquidity.
• Cost overruns in equipment purchases needed to complete mine development plans are a risk.
• Delays in completion of development of various mines, processing plants, and refuse disposal facilities could reduce coal available for sale and cash flow.
• Adverse changes in metallurgical coal markets could reduce expected cash flow from operations.
• Potential legal proceedings and regulatory inquiries could result in losses.
• The impact of weather and natural disasters on demand, production, and transportation is a risk.
• Credit and performance risks are associated with customers, suppliers, contract miners, co-shippers, traders, banks, and other financial counterparties.
• Geologic, equipment, permitting, site access, and operational risks are inherent to mining.
• Availability, timing of delivery, and costs of key supplies, capital equipment, or commodities (e.g., diesel fuel, steel, explosives, tires) can fluctuate.
• Timely review and approval of permits, permit renewals, extensions, and amendments by regulatory authorities are necessary.
• The company's ability to comply with certain debt covenants is essential.
• Risks related to the Company's tracking stock structure and separate performance of its Carbon Ore-Rare Earth (CORE) assets exist.
• A material weakness in internal control over financial reporting could lead to material misstatements in financial statements.

Future Outlook

The company expects full-year production volumes in 2025 to range between 3.9 million and 4.3 million tons, with the flexibility to adjust production based on market conditions. Metallurgical coal prices are anticipated to remain volatile in the near term. Longer term, the company believes that limited global investment in new coking coal production capacity, the industrialization of emerging economies, global urbanization, and an eventual return to economic growth will support coking coal markets. The company is continuing the development of its rare earth elements and critical minerals deposit in Wyoming, with no revenues recognized from these initiatives yet. The company anticipates declaring similar quarterly dividends for Class B common stock in future periods, subject to Board approval and business needs. Capital and liquidity requirements for the next twelve months and the foreseeable future are expected to be funded by cash on hand, borrowings under the revolving credit facility, projected cash flows from operations, and potentially capital raised under its shelf registration.

Management Comments

• Our plan is to continue the development of our existing properties and grow annual production over the next few years to approximately seven million clean tons of metallurgical coal, subject to market conditions, permitting and additional capital deployment in the medium-term.
• The Company expects full-year production volumes in 2025 between 3.9 and 4.3 million tons with an ability to vary production dependent on market conditions.
• The Company believes that 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.
• We believe we have meritorious defenses to all claims in the preparation plant purchase matter.
• The Company anticipates declaring a similar dividend for the third 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.

Industry Context

The global metallurgical coal markets experienced softening in 2024 and continued into 2025, primarily due to constrained economic growth in some regions and ongoing international conflicts. This led to slower growth in the global steel market, particularly in China, resulting in elevated levels of Chinese steel exports. Consequently, steel companies have reduced their production and lowered the prices they are willing to pay for metallurgical coal. While near-term steel demand is expected to remain weak, the company anticipates that supply cuts in higher-cost operations, coupled with limited global investment in new coking coal production capacity, industrialization in emerging economies, and global urbanization, will support coking coal markets in the longer term. In the rare earth and critical minerals sector, the company's initiatives are timely, especially given China's export ban on gallium and germanium, highlighting the strategic importance of domestic supply chains for these critical minerals, where China currently dominates production and manufacturing.

Comparison to Industry Standards

• The company positions itself as an operator and developer of high-quality, low-cost metallurgical coal, aiming to be among the lowest delivered-cost U.S. metallurgical coal producers to domestic and international customers.
• The successful completion of the Preliminary Economic Assessment (PEA) for the Brook Mine by Fluor Corporation indicates the project's commercial and technological feasibility, positioning the company to potentially become a significant domestic producer of rare earth elements and critical minerals, contrasting with the current industry dominance by Chinese producers.

Management Changes

Corporate Governance

Legal Proceedings

• **Preparation Plant Purchase**: Justice Coal of Alabama, LLC filed a complaint against Ramaco, claiming liability for conversion, unjust enrichment, and negligence related to Ramaco's purchase of a preparation plant from EMCOAL, Inc. The case was transferred to the U.S. District Court for the Northern District of Alabama, and Ramaco filed a motion to dismiss on June 24, 2025, which is pending. Ramaco believes it has meritorious defenses.
• **Storage Silo Partial Failure**: An ongoing lawsuit against Federal Insurance Company and ACE American Insurance Company regarding a silo structural failure. The Fourth Circuit reinstated a $7.7 million contract damages verdict and determined Ramaco is entitled to attorneys fees and Hayseeds damages (remanded for a new trial on the amount). The trial date for Hayseeds damages, originally set for July 15, 2025, has been continued, and a new scheduling order is awaited. Ramaco accrued an additional $0.5 million loss recovery asset for attorneys fees in Q2 2025, bringing the total to approximately $4.7 million.

Related Party Transactions

• Legal services provided by Jones & Associates (Jones), a related party, totaled less than $0.1 million for the three months ended June 30, 2025, and zero for the same period in 2024. Mr. Jones subsequently 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 second quarter of 2025.

Stakeholder Impact

• **Shareholders**: Experienced significant net losses and reduced Adjusted EBITDA, leading to the suspension of Class A common stock dividends. Class B common stock dividends continue but are subject to Board discretion. The recent debt offering and shelf registration indicate potential future capital raises that could impact shareholder dilution.
• **Employees**: Stock-based compensation continues to be a component of compensation. Operational adjustments like mine closures (Jawbone) and idling (Rockhouse Eagle) may impact employment levels, though not explicitly detailed.
• **Customers**: Benefit from increased coal production volumes, but face volatile metallurgical coal pricing. The company has outstanding performance obligations for 1.1 million tons at fixed prices and 2.0 million tons at index-based prices.
• **Creditors**: The company is in compliance with all debt covenants under its Revolving Credit Facility. The issuance of new Senior Unsecured Notes due 2030 to redeem existing 2026 notes demonstrates active debt management.
• **Suppliers**: Operational changes, including mine closures and reduced capital expenditures in some areas, may affect demand for supplies and services.

Next Steps

• Continue the development of existing properties to grow annual production towards approximately seven million clean tons of metallurgical coal.
• Proceed with the development of the Brook Mine for rare earth elements and critical minerals, including the establishment of the initial laboratory/pilot plant and related facilities.
• Await a new scheduling order from the court for the Hayseeds damages trial related to the storage silo partial failure lawsuit.
• Continue executing the remediation plan to address the material weakness in internal control over financial reporting, including assessing, redesigning, and implementing control modifications, and hiring/supplementing accounting personnel.
• Redeem all outstanding amounts under the Senior Notes due in 2026 using proceeds from the newly issued 2030 Notes.
• Anticipate declaring similar quarterly dividends for Class B common stock in future periods, subject to Board approval.

Key Dates

Recommendation

The company is navigating a challenging metallurgical coal market, evidenced by significant net losses and a sharp decline in Adjusted EBITDA due to lower coal prices. While operational improvements like increased production and lower cash costs per ton are positive, the immediate financial outlook for coal remains volatile. However, the strategic advancement of the Brook Mine for rare earth elements and critical minerals, supported by a positive PEA and a government grant, offers a compelling long-term diversification and growth story. The recent debt refinancing also improves the company's capital structure. Given the current headwinds in coal balanced by promising future opportunities in critical minerals, a 'Hold' recommendation is appropriate for investors to monitor the execution of the rare earth strategy and potential recovery in coal markets.

Keywords

Metallurgical Coal, Rare Earth Elements, Critical Minerals, Coal Mining, SEC Filing, Quarterly Report, Financial Performance, Mining Operations, Corporate Governance, Risk Management, Capital Expenditures, Debt Financing, Shareholder Dividends, Wyoming Brook Mine, Carbon Ore-Rare Earth (CORE), Market Volatility, Internal Controls, Production Volumes, Cost of Sales