Ramaco Resources Inc - Ordinary Shares (METC) 8 Aug 24 2024 Q2 Earnings call transcript

Ramaco Resources recently held its second quarter 2024 earnings call, highlighting a robust operational and financial performance in a challenging global coal pricing environment. The call, led by Chief Financial Officer Jeremy Sussman, provided insights into the company's operational and financial improvements, growth strategies, and market outlook.

Operational and Financial Highlights

Ramaco Resources reported a record production of 901,000 tons in Q2 2024, a 7% increase from the first quarter. This achievement was attributed to better productivity, geology, and labor availability. The company's cash cost declined by 8% to $108 per ton, reflecting the operational improvements. Looking ahead, Ramaco anticipates operational and financial results to continue improving throughout the year, aiming for a year-end run rate in excess of 5 million tons on both production and sales, with costs hopefully below the $100 per ton cash cost range.

Growth Projects and Market Challenges

Ramaco is currently executing four production growth projects, two of which focus on high-vol production at Elk Creek and the other two on low-vol production at Berwind and Maben. The company is on track with these projects and anticipates that they will significantly enhance its production capacity. However, the global coal market is facing challenges, with U.S. and global met coal indices dropping significantly due to muted overall global economic and steel demand and China's overproduction and dumping of steel in the world markets. Ramaco expects the second half of the year to see improvements in these markets, with demand accelerating in India and possible worldwide tariffs on Chinese steel exports potentially boosting traditional markets.

Critical Minerals Front

Ramaco also discussed its progress in developing the Brook Mine in Wyoming, which focuses on extracting rare earth from unconventional coal and carbon concentrated deposits. The project is currently undergoing chemical, metallurgical, and mineralogical testing, with the technoeconomic analysis of the commercial aspects expected later this year. The company is collaborating with the Fluor Corporation for the demonstration facility, aiming for construction to begin by midyear 2025. The development of a rare earth mine requires extensive testing and planning, including geospatial mapping and novel AI assessment techniques to improve recoveries.

Financial Metrics

Jeremy Sussman provided a detailed rundown of Ramaco's financial metrics, highlighting a meaningfully better second quarter compared to the first, both operationally and financially. Q2 adjusted EBITDA was $29 million compared to $24 million in Q1, and net income of $5.5 million was more than double the first quarter levels. The primary reason for the improvement was the $10 per quarter-over-quarter improvement in cash costs to $108 per tonne.

Looking Ahead

Ramaco is optimistic about its future, despite the challenges in the global coal market. The company is aggressively pursuing growth opportunities, improving operational efficiency, and focusing on cost reduction. The second half of 2024 is expected to see significant improvements in both operational and financial performance, with the addition of the growth projects and the anticipated market improvements. Ramaco's strategic position, with committed tonnage for 2025 and less than 250,000 tons left to place for calendar '24, puts it in a favorable position for the upcoming contract negotiations.