Release Date: May 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ramaco Resources Inc (METC, Financial) plans to ramp up current sales and production by an additional 1 million tons or 30% by Q4 2024.
- The company expects to reduce CapEx in 2024 by 30% compared to 2023.
- New production initiatives are on track and expected to lower average mine costs to well below $100 per ton.
- The Maben prep plant is expected to be fully operational before year-end, eliminating about $40 per ton of current trucking costs.
- Ramaco Resources Inc (METC) has increased its revolver facility from $125 million to $200 million, with an additional $75 million accordion feature, extending the term to 2029.
Negative Points
- First-quarter 2024 results were below expectations, with EBITDA dropping to $24 million from $48 million in Q4 2023.
- Lower realized prices, particularly a $55 per ton drop since Q4, significantly impacted financial performance.
- Mine cost issues at Elk Creek due to tough geology and labor conditions led to higher costs and lower production.
- Cash costs rose from $109 per ton in Q1 2023 to $118 per ton in Q1 2024.
- Production of 844,000 tons in Q1 2024 missed internal expectations due to challenging geology and labor constraints.
Q & A Highlights
Q: Randy and team, my first question is on your growth this year, and I wondered are you kind of fully locked and loaded on this equipment we're hearing from some of your peers is still hard to come by. Is all of that equipment procured and on-site are you waiting for that to come in? And then on the labor side it sounds like there is some easing, but do you have to keep staff already hired and ready to go? And then anything on the market side that could change plans at this stage, could you hear the market is stabilizing, but wondering how you think about that? Thank you very much.
A: (Randall Atkins, CEO) Equipment wise, we have just recently purchased a good deal of new underground equipment. On labor, we've had a very tight market, but it's loosening. We have baked this production in, because we've essentially sold all the tons. (Christopher Blanchard, COO) We fulfilled all of our '24 needs on underground equipment and rebuilds and locked in our slots for '25 and '26. The labor market has moved back to a more healthy position.
Q: Chris, one quick follow-up on the equipment side. Is it new or rebuilt equipment? And when would you expect it to be delivered if it's been procured recently? Thank you.
A: (Christopher Blanchard, COO) It's rebuilt equipment. We've taken delivery of two of the six pieces and expect to take delivery of the remaining four within the next six weeks.
Q: Jeremy, you know how it works, right? The release comes out, you update your contract book, we compare that to the prior hedge position and I backed into $146 per short ton on your export tons incrementally sold during the quarter. And first, does that seem about right versus where you've been selling tons? And today, how would your average export sales compare to that figure? Better, about that same level, worse, would appreciate your thoughts on that? Thank you.
A: (Jeremy Sussman, CFO) Yes, I agree with the math. Over half of our export tons were shipped in March when indices were at their lows. On a go forward basis, our Q1 realizations were lower than you would expect on a quarterly basis. If prices hold, you've got to take the indices into account when looking at our realizations for Q2.
Q: First, on the retreat mining, when and for how long does that occur? Obviously, that is very efficient, so trying to get a sense for what the potential benefits there. And with the idlings you've seen across the industry, any way to quantify the potential impact on 1,000s or 1 millions of ton basis? Thank you.
A: (Jeremy Sussman, CFO) On room and pillar, usually you advance for a few months and then you retreat for a few months. At our Stonecoal mine, we will be retreat mining for the remainder of '24 and into '25 on one of the sections. (Randall Atkins, CEO) Southern Central App, West Virginia production was down about 14%, Virginia production was down about 21%.
Q: Given the volatile spreads we've seen so far this year between the Australian indices and U.S. Indices, any way we could kind of get a breakdown of how you guys expect your remaining seaborne contractor position to kind of be split between those Aussie and U.S. Indices?
A: (Jeremy Sussman, CFO) About a third of our coal will go domestic this year and then two-thirds will go export. Europe and Asia are pretty equal, both about 30% of our business, and the remaining 10% goes into South America. Europe and South America is all going to be against the U.S. indices. A lot of the Asian business is priced off of either the Aussie PLV or some other Aussie index.
Q: Given current market conditions, what kind of capture rates are you guys getting versus some of those U.S. Indices, High Vol A, High Vol B, and are you seeing any discounts in the marketplace?
A: (Jeremy Sussman, CFO) The U.S. Low Vol market itself is quite tight, so any discounts there are pretty small. The High Vol markets are a bit more oversupplied. (Randall Atkins, CEO) The decline in production in Central App will likely impact pricing and availability on the High Vol markets in the back half of the year.
Q: Any comments on how the Baltimore port outage has indirectly impacted your rail service to Hampton Roads?
A: (Christopher Blanchard, COO) We didn't see too much impact. Service from both of our railroads has been pretty much just in time.
Q: Any early thoughts on how new mines coming online and the Maben prep plant could translate into what to expect for cost in '25?
A: (Randall Atkins, CEO) The exit rate is a good way to look at next year. Q1 will certainly be our highest cost quarter. Q2 is still going to be above the high end of the range. As we layer in all the new mines, it will lead to a step change in the back half of the year and certainly exiting the year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
