Ramaco Resources(METC) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q3 2023, net income grew by over 150% compared to Q2, reaching $19.5 million, while adjusted EBITDA increased by more than 50$45 million [85] - Average realized price in Q3 fell by 4% versus Q2 to $157 per ton, in line with declining coal indices [58] - Production decreased by 18$114 per ton [58][85] Business Line Data and Key Metrics Changes - The Elk Creek plant's capacity was increased from 2 million to 3 million tons per year, contributing to a production run rate of 4 million tons per annum [86] - The company has 3.3 million tons contracted, including 2.9 million tons at an average fixed price of $173 per ton [13] - The Berwind Mine achieved an annualized run rate of 500,000 tons per year [5] Market Data and Key Metrics Changes - India has surpassed China as the largest importing country of seaborn metallurgical coal, driven by strong steel demand [63] - U.S. high-vol prices increased by$60 per ton compared to mid-August, indicating a recovery in the metallurgical coal market [118] - Despite subdued European steel demand, global production revisions from major players in Australia, the U.S., and Canada have created supply constraints [89] Company Strategy and Development Direction - The company is focusing on expanding its export business to approximately 70% of anticipated production while maintaining a production level of 4 to 4.5 million tons [80] - Ramaco is investing in innovative technologies for the production of synthetic graphite and activated carbon fiber, with plans for a pilot plant in West Virginia [65][83] - The company aims to return more cash to shareholders in 2024 than it expects to spend on growth capital [84] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the murky economic environment but remains optimistic about supply constraints and increased Asian demand [6][59] - The company anticipates that coal inventories will normalize by the first quarter of 2024, coinciding with production increases at Elk Creek [20] - Management highlighted the importance of ongoing testing and development of rare earth deposits and carbon products [36][139] Other Important Information - The company has liquidity of $98 million as of September 30, 2023, double the$49 million level at year-end 2022 [88] - Ramaco has paid down over $50 million of its term debt, reducing total debt from$125 million in 2022 to 50 million by year-end 2023 [78][108] Q&A Session Summary Question: Can you elaborate on the capital returns and debt reduction targets for 2024? - Management indicated that they are balancing capital returns with debt reduction, with a focus on maintaining flexibility in free cash flow allocation [24][42] Question: What are the expectations for production costs in Q4? - Management noted that cash costs are expected to be in the range of 108 to $112 per ton, influenced by seasonal factors [103][130] Question: Can you provide an update on the rare earth and carbon product initiatives? - Management stated that they are in the testing phase for both initiatives and expect to have more concrete updates in the first half of next year [36][139]