8-K: Ramaco Resources Reports Strongest Quarter of 2024 Despite Metallurgical Coal Price Decline

Ramaco Resources announces its fourth quarter and full-year 2024 financial results, highlighting record tons sold and low cash costs despite weaker metallurgical coal prices.

Summary

• Ramaco Resources reported its financial results for the fourth quarter and full year ended December 31, 2024.
• The company achieved its strongest quarter of the year in terms of Adjusted EBITDA, despite the weakest metallurgical coal price indices of 2024.
• Record quarterly tons sold exceeded 1.1 million tons, accompanied by the lowest quarterly cash costs of 2024.
• Adjusted EBITDA was $29.2 million for the quarter, a 24% increase compared to $23.6 million in the third quarter of 2024.
• Non-GAAP cash cost per ton sold declined by $6 per ton or 6% to $96 per ton in the fourth quarter, compared to $102 per ton in the third quarter of 2024.
• Net income for the fourth quarter was $3.9 million, compared to $(0.2) million in the third quarter of 2024 and $30.0 million in the fourth quarter of 2023.
• Class A diluted EPS was $0.06 for the fourth quarter, compared to $(0.03) for the third quarter and $0.60 for the quarter ended December 31, 2023.
• Metallurgical coal indices fell another $12 per ton quarter over quarter, representing a 6% decline in the fourth quarter of 2024 versus the third quarter, and an $80 per ton decline, or 30% versus the fourth quarter of 2023.
• Non-GAAP cash margins per ton sold in the fourth quarter held at $33 per ton, down just $1 per ton quarter over quarter.
• For 2025, total sales commitments are currently 3.5 million tons as of February 28, which equates to 80% of the midpoint of 2025 production guidance.
• 1.6 million tons are committed to North American customers at an average realized fixed price of $152 per ton.
• 0.3 million tons are committed to seaborne customers at an average fixed price of $111 per ton.
• 1.6 million index-based tons are committed to seaborne customers.
• The company reiterates all prior guidance, with the exception of increasing the expected tax rate by 5% to 25-30%.
• Tons sold in the first quarter of 2025 are anticipated to be 850,000-950,000, with second quarter of 2025 shipments anticipated to rise by roughly 33% quarter over quarter.
• The company continues to progress on additional mining and testing at its rare earth and critical mineral sourced carbon ore Brook Mine in Sheridan, Wyoming, at a minimal cost to shareholders.
• The company anticipates that it will release further information on the project in the second quarter, including a Preliminary Economic Analysis from the Fluor Corporation and an updated Exploration Target Report from Weir International.
• Based upon the current results the Company intends to commence by July the full-scale mining for rare earth and critical mineral material to supply the pilot demonstration facility.
• The company had record year-end liquidity of $137.8 million as of December 31, 2024.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive. While the company faced challenges with declining coal prices, it managed to improve operational efficiency, increase sales volume, and maintain healthy cash margins. The progress on the rare earth and critical minerals project also contributes to the positive outlook.

Positives

• The company achieved its strongest quarter of the year in terms of Adjusted EBITDA.
• Record quarterly tons sold exceeded 1.1 million tons.
• Non-GAAP cash cost per ton sold declined to $96 per ton in the fourth quarter.
• Adjusted EBITDA increased by 24% to $29.2 million in the fourth quarter compared to the third quarter of 2024.
• Net income increased significantly to $3.9 million in the fourth quarter.
• The company has sales commitments of 3.5 million tons for 2025 as of February 28.
• The company is making substantial progress on its rare earth and critical mineral project.
• The company had record year-end liquidity of $137.8 million as of December 31, 2024.
• The company received a recommended $6.1 million matching grant from the Wyoming Energy Authority for the Brook Mine.
• Mine costs dropped from $120 per ton in March 2024 to $94 per ton in December, an almost 25% decline throughout the year.

Negatives

• Metallurgical coal indices fell by $80 per ton, or 30%, versus the fourth quarter of 2023.
• Quarterly pricing was $129 per ton, which was 26% lower compared to $175 per ton in the fourth quarter of 2023.
• Cash margins were $33 per ton during the quarter, down from $68 per ton in the same period of 2023.
• Tons sold in the first quarter of 2025 are anticipated to be 850,000-950,000 due to weather conditions and inventory build-up.
• The company increased the expected tax rate by 5% to 25-30%.

Risks

• Unexpected delays in current mine development activities.
• Failure to successfully ramp up production at the company's complexes.
• Failure of sales commitment counterparties to perform.
• Increased government regulation of coal in the United States or internationally.
• Further decline of demand for coal in export markets.
• Underperformance of the railroads.
• The company's ability to successfully develop the Brook Mine, including whether the increase in the company's exploration target and estimates for such mine are realized.
• Weak steel demand may impact met coal prices in the near term.

Future Outlook

The company expects to increase production and sales in 2025, with sales commitments of 3.5 million tons as of February 28, 2025. The company is also progressing on its rare earth and critical mineral project and expects to release further information in the second quarter of 2025. The company anticipates costs per ton sold to come in towards the high end of the full-year guidance range for the first quarter of 2025.

Management Comments

• Randall Atkins, Ramaco Resources Chairman and Chief Executive Officer commented, 'The fourth quarter saw the continued Chinese overproduction of steel combined with its below market sale into both to the developed and developing world.'
• Randall Atkins also stated, 'Despite this macro headwind on pricing, Ramaco's fourth quarter results were our strongest operational and financial quarter of the year.'
• Randall Atkins noted, 'We anticipate the same positive operational progress in 2025, excluding results from the Q1 weather events.'
• Randall Atkins said, 'Our rare earth and critical minerals development remains a unique opportunity as we methodically work to realize its commercial potential.'

Industry Context

The report highlights the impact of Chinese steel overproduction on metallurgical coal prices. It also mentions potential supply cuts due to bankruptcies and operational issues at other mines. The company believes that potential tariffs on steel imports could increase domestic metallurgical coal demand.

Comparison to Industry Standards

• The company believes its cash margins were almost 50% higher than the next highest Central Appalachian public peer for the average of both the third and fourth quarters of 2024.
• The report mentions that Australian producers are having a difficult start of the year, having some of the lowest volumes shipped from Queensland in at least 6 years.

Stakeholder Impact

• Shareholders: The company's improved operational performance and progress on the rare earth project are positive for shareholders.
• Employees: The company's success is likely to benefit employees through job security and potential bonuses.
• Customers: The company's ability to maintain production and sales volume ensures a reliable supply of metallurgical coal for customers.
• Suppliers: The company's continued operations support its suppliers.
• Creditors: The company's strong liquidity position reduces the risk for creditors.

Next Steps

• The company will hold its quarterly conference call and webcast on March 11, 2025.
• The company intends to release further information on the Brook Mine project in the second quarter of 2025.
• The company intends to commence full-scale mining for rare earth and critical mineral material by July 2025.
• The company will design and construct the pilot demonstration facility beginning in late summer 2025.

Key Dates