Good day, ladies and gentlemen, and welcome to Ramaco Resources Third Quarter 2017 Earnings Conference Call. [Operator Instructions] I would now like to introduce your host for today's conference, Mr. Michael Windisch, Chief Accounting Officer for Ramaco Resources. Sir, you may begin.

Thank you. On behalf of Ramaco Resources, I would like to welcome all of you to our third quarter earnings conference call. With me this morning is Randy Atkins, our Executive Chairman; Mike Bauersachs, our President and CEO; and Marc Solochek, our Chief Financial Officer. Before we start, I would like to share our normal cautionary statement regarding forward-looking statements. Certain statements discussed on today's call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent Ramaco's expectations or beliefs concerning future events and it is possible that the results discussed will not be achieved. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of Ramaco's control, which could cause actual results to differ materially from the results discussed in the forward-looking statements. Any forward-looking statement speaks only as of the date of which it was made and except as required by law Ramaco does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. New factors emerge from time to time and is not possible for Ramaco to predict all such factors. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements found in the company's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K and our Form 10-Q. The risk factors and other factors noted in the company's SEC filings could causes its actual results to differ materially from those contained in any forward-looking statements. With that said, let me introduce Randy Atkins, our Executive Chairman.

Thanks, Mike. As always, on behalf of all of us at Ramaco Resources, I want to thank everyone for joining us today. The end of the third quarter marks the one year anniversary of when we went from being a coal reserve company with just a handful of employees and one mine ready to activate to now being the multi-mine producing entity we are today. Before we address some of the metrics of the September quarter, let me offer up a few milestones from our first year. By yearend, we will hire roughly 250 new employees, mostly in West Virginia. We are deeply gratified to be part of helping miners and their families, especially in Southern West Virginia. We will continue to staff up in 2018 and thus far we've had absolutely no issues with securing talented and qualified miners. We began washing coal at our Elk Creek prep plant on October 28. Having our own processing on site will materially help us operationally. It will also save us approximately $15 a ton in trucking and third party wash costs. We also began development mining in our Berwind mine this quarter and we have now placed roughly half of our 2018 production into the domestic market at what we project to be a substantial per ton cash margin. We have now sold coal to most major North American steel groups and coking plants, and we'll be working throughout 2018 to place the balance of the tons primarily into the export markets of what we hope are aggressive pricing. And of course, this year we went public. From a standing start at this time last year, we think overall this is a very solid performance. From a financial perspective, Marc Solochek will be providing some detailed information, which you just saw…

Thank you, Randy. There are indeed a number of updates that we want to provide for the third quarter, as well as a revised guidance for the remainder of the year and 2018. In summary, during the third quarter, we continue to execute on our capital and production build out. We've made a great deal of progress on our new mine startups, and as mentioned by Randy earlier, on contracting for the sale of coal in 2018. I will expand on these efforts later in my comments. Prior to that, I want to remind everyone that during the third quarter, as we have throughout 2017, we continue to operate in development mode. Our productivities and operating costs were negatively impacted by the need to align our production and stockpiles with the completion of our Elk Creek preparation plant. During the third quarter, it was imperative to react quickly to these circumstances outside of our control, namely delay in commissioning the plant. It was all hands on deck to create the necessary stockpile space for the larger amounts of raw coal and to manage inventories to bridge the gap to the opening of our Elk Creek preparation plant. For example, our surface mining crews have been hauling coal to stockpiles, as well as helping create temporary stockpile space. Now that the plant is operational, we should be able to expeditiously work through these types of inefficiencies. By the end of the fourth quarter, we should be well positioned to orchestrate our minds, preparation plant, loadout in concert with one another. Prior to diving in to more operational and marketing details, I would like to convey what I believe are our critical success factors for creating shareholder value in 2018. We will continue to create a safety-focused culture and promote our philosophy…

Thank you, Mike. Let's there be any misunderstanding, having started mining coal, we are not and will never be happy to report a loss, which we did for the third quarter. As have been said, 2017 was always going to be a development year. 2018 will be more representative of what we are capable of achieving. Having said that, the delay in completion of the Elk Creek prep plant had a profound negative effect on our operations. It restricted our production, it increased coal handling cost at the mines, it resulted in lower recoveries and it increased our trucking costs. For the third quarter ended September 30, 2017, Ramaco Resources lost $6.2 million or $0.16 per share. We had revenue were $14.4 million on the sale of 157,000 tons; 101,000 tons was company mined coal and 56,000 tons was purchased from third parties. The average realization was $91.89 per ton at point of sale, which includes the cost of transportation from the mine to the point of sale. The net realization FOB the mine for these sales were $72.33. Our reported cost per ton was $94.10, which again includes the cost of transportation as well as mining costs and cost of purchased coal. Our cost per ton FOB the mine thus excluding transportation costs was $74.54 per ton for the quarter. This is substantially higher than we expect in the future. As has been previously discussed, our third quarter costs were impacted by a variety of factors, most notably the delay in placing the Elk Creek preparation plant and service, but also the continuing need to cut more rock at the Eagle mine in anticipation of reaching a location where the Eagle and number two gas seams merge into more favorable geologic conditions and cutting fewer feet of advance per…

Thanks, Marc. This completes our formal remarks for the quarter. And at this time, of course, I would like to open it up to field questions from analysts or the investor community that are out there. So I will turn it back to the moderator.

Thank you. [Operator Instructions] Our first question comes from the line of Jeremy Sussman of Clarkson.

So I just want to make sure I heard some numbers correctly around 2018. So in projecting cash costs in the low 50s, I think $34 million in CapEx, I think you said you expect to be cash positive and have a dividend policy in place sort of this time next year, I guess, first, did I hear those correctly?

You did.

And I guess maybe along those lines, can you first talk about kind of the $34 million figure next year. It's maybe a bit lower -- clearly a bit lower than what you'll be spending in 2017, so I guess sort of maybe the bridge on that front. And then second, as a follow-up, I guess, can you talk about maybe how investors should be thinking about how you view an eventual dividend policy sort of what types of trigger should we be thinking about there?

Jeremy, I'll start maybe to talk about the capital, what will be focused on next year and then maybe I'll let Randy to talk about the dividend policy if that's okay. Our focus next year on capital is going to be at least primarily focused on basically boosting our infrastructure capabilities in and around our Elk Creek preparation plant. We planned very extensive raw coal handling facility that will allow us to, for example, handle five different coals and blend them in more complex ways into our plant. And it also allows us some flexibility to potentially maybe increase some surface production in the future because we will be able to totally segregate in steam coal tons from our metallurgical tons. I think -- when we think about the capital on the clean side, we also want to expand our stockpile space to give us more and more flexibility to continue to both blend but also have larger stockpile space that ultimately could reach 150,000 to 200,000 tons. We think that's going to be a huge advantage going forward and absolutely are committed to expend capital to do that. Elk Creek, of course, will be around for decades and this is going to be a huge advantage. The remainder of the capital, we continue to focus on a couple of mine developments. In particular our Berwind mine will continue to be in kind of development mode for plus/minus 20 to 23 months. And obviously we're committed to add infrastructure, but the majority of capitals in and around the plant. The other piece of capital, it's noteworthy, we have budgeted and it's a bit discretionary, but we continue to believe having access to the Norfolk Southern at Elk Creek is important. I think that the capital that we've included in there makes a lot of sense, it includes a road and a direct ship load out on the NS. So that one will continue to evaluate, but I think it's probably a good thing for Elk Creek to have access to both rail road's. Randy, you want to talk about the dividend?

Yes. I think, Jeremy, as we approach looking at dividends, it's pretty similar to what we discussed earlier this year when we were out on the road. Essentially, we will pay dividends out of free cash flow. We are not interested in going out to borrow money to pay dividends. And by this time next year, we predict that we will have sufficient free cash flow that on a pretty conservative basis we will be in a position to start considering a quarterly dividend at a level which we think is going to be comfortable for us and certainly is predicated of course on whatever CapEx we've got to look forward to, as well as what we think operations look like. And I think candidly with that in mind, that's a little bit of the way we constructed our book in terms of sales, because we were the new kid on the block, we wanted to get out there, we wanted to get some domestic business that we could basically have it somewhat of a foundational book of revenue that would let us first of all get into club, so to speak, domestically and then give us the optionality to hopefully look at some higher numbers on export. So I think we're postured in just about where we wanted to be. Obviously, this year is going to be dinged by virtue of the delay primarily in the plant and also to a certain extent at Berwind with the delay in the permit. But I think next year, as I said, this time we are looking at being able to have that free cash flow that we could start returning some of it to our shareholders. And then we also said, when we did the IPO, if we find ourselves out there with more than sufficient cash flow then we would always be in a position to consider even further means of returning cash back to our shareholders in the form of a buyout. I don't think we'll be there at that point next year with respect to buybacks, but I do think we will probably be there with respect to dividends.

Maybe just as a quick follow up. I think in your opening remarks, you'd mentioned success with the majority of your domestic mills or coke plants. And sort of just very, very rough math that I'm doing off the top of my head, seems like you probably locked in kind of somewhere in the mid 20s per ton cash margins, assuming your low 50s cost guidance. So can you maybe just kind of talk through the process and how those conversations went and all of that?

Well, I think, your bunny has a good nose in terms of the margin. I think in terms of the process, we've had of course, Joe Czul, out there doing our primary domestic marketing. I think we were, as we've said all along, we were dinged by the fact of the coal that we were providing to a lot of these domestic customers was essentially being washed by a third party. We were getting some of the recoveries in qualities that we really wanted, which I think will obviously be remitted when we start running it through our own plant. And we have been aggressively starting to now ramp up our marketing with respect to export customers as well. And once again, we are in the process of getting a lot of test shipments to -- Mike was just down at the mine here this week, I'll let him maybe give a little bit more color with one of our export customers. So Mike you want comment at all on the marketing efforts?

Yes, I'll just chat a little bit about the domestic stuff. Obviously it was a pretty interesting process and it all happened very quickly. We were fortunate to be able to hear our potential customers had a good view of the operations and what was coming. And as you can see, we had pretty good success in convincing them that the quality of coals that we will have and the infrastructure will have and the advantages will have on our operations will play well for them in the future. I will say that we reached out for quite a bit of business, and in many cases we actually didn't get as many times as we want it and there were actually a couple pieces of business that we lost, because of where we kind of maintain our levels. Internationally, it's been the same sort of thing -- actually had a potential customer, who I think we may convert to a customer in the next couple weeks, on site, on Monday, and also had the ability to take that specific customer underground at our Eagle mine and while is nothing anymore impressive than being underground at a cap mine with 12 CMs in it and that looks like you're in the basin that's mining metallurgical high quality, which is the highest quality coal we have by the way; high-quality metallurgical coal. So in any event, I spend a real good week actually.

Let me make 1 other point, Jeremy, because I know there's been a little grumbling amongst our peers, which has been publicly reported about our pricing for '18 on some of the domestic business. I think the one thing that people lose side of is our cost structure again lined up against most of our peers. To your earlier comment on margin, I would just point to our investor group that, we are able to sell at lower numbers than our peers and still make very, very nice margins. That's not the case with everybody else; we're lucky, again, a lot of that is geologically driven, but I think that's one factor to keep in mind when you look at our marketing efforts.

Our next question comes from the line of Mark Levin of Seaport.

Just a quick question. I want to go back to your last pricing comment, Randy. So when you think or when you have discussions with Joe, as you try to move the remaining 50% into the export market, do you feel like you will have to discount those tons maybe to where the market is at all, just given you're a new entrant to the market. I think, I'm modeling somewhere along the neighborhood of a 15% or so discount to the benchmark price. Would that number or should we expect that number or A, is that number right, and then B, should that number be wider in 2018 or 2019 as you move coal to new places than maybe would you expect longer term?

I'll make a couple of quick comments and then let Mike chime back in. So I think our experience out there has been that of course the benchmark is more geared to players that are focused on the Asian market a little bit more than the European and South American markets. So we see a little bit softer pricing in Europe and South America than we would at a straight benchmark. But I think as far as the approach, needless to say the domestic pricing has been lower than export, because it's term business; you kind of have probably agreed to take a lower price for the stability of the longer-term. I think on export, we don't really feel we've got that same need to accept dramatic discounts by virtue of the fact that we're basically doing that on spot business. I think at some point, the international markets may evolve into more of a term or quality-term type business perhaps with indexing, but I think for the time being it's not there yet, and I think again we don't expect to have too much of a discount issue with respect to export. Mike, you want to chime in here.

Yes. First of all, I think, I can pretty much agree with your 15% number. We see guys like Walkers more like 5%, but the quality of our coals and that sort of thing, I think that's probably pretty good. I will say that as we add more and more customers to the list, there is always -- being the first time here in the marketplace, there's always a little bit about I think pressure to, I would say, pull in those customers, because we want customers that we have for 20 years, not 1 year, and I think we're going to do our very best to expand that customer list. We have approximately six new customers that we can count in our portfolio today in North America and we hope to have four or five new customers internationally. So you'll see us do a little bit of test up, Mark. These guys want to hold, maybe they want 20,000, 30,000 tons. We'll probably be a little more aggressive with those, but I think when people see our qualities overall for the year, I think they're going to want to do business with us.

And the second question, just want to make sure I understood correctly, so you were sitting here, I guess in November -- almost mid-November and it sounds like to me by Q1 of 2018, we will begin -- or we will have seen cash costs that will be somewhere in the 50s maybe low 50s even. I just want to make sure that I heard that correctly and so your visibility around that number sitting here only a couple of months away from Q4, I assume, is pretty high. What could go wrong between now and that very short period of time that would keep you from being where you want to be in the first quarter?

Mark, just to kind of give you the road on guidance, I would foresee our costs in the fourth quarter, of course, not experiencing all of those pluses being more in the 60s and I think you will see us migrate into the 50s in the first quarter and then lower than that as time goes on as everything kind of kicks in. Things that could go wrong continue to be something unforeseen at a coal mine, but what I can tell you is, I've been in the mines. The conditions are just fantastic right now. So I don't anticipate any real negative things coming out of existing deep mines. We're starting up two mines -- two additional deep mines, as we work our way into next year at Berwind and number two gas mine; we could always have some startup issues. Surface mine, everything we've seen there should be lined up with our production. So I feel we are good about the production side. I think that we like others are concerned about transportation. We have a little bit more limited stockpile space today than we will have as we in 2018. So trying to make sure that we can coordinate and shuffle transportation and stuff for me as probably is bigger concern as anything, making sure we can move the tons and we continue to work at bugs in the plant, but the good thing is, I mean, the plant even delayed is a great piece of work. So over time in next couple of decades, it is going to be great for us.

And our next question comes from the line of David Gagliano of BMO Capital Markets.

I got a few questions, first on the operating side and then on the marketing side. On the operating side, I heard a lot in the prepared remarks, thanks for giving more detail, I think embedded in that was the reduction in production targets for the year went from 720,000 to 530,000 tons. Did I hear that correctly?

Yes, that's correct, David.

So can you clarify how much of that 25% cuts in the full-year target, obviously in just 3 months. How much of that is tied to the prep plant issues versus the mining issues?

Well directly or indirectly all [have it]. You can imagine with having 300,000 tons of stockpile space at the mines, with that any number of times where we've actually had to [idle] the mines because they've been gobbed out in the stockpiles. As you can tell, I made a point to make sure that I mentioned that our surface mining crews have absolutely not been focused on surface mining, which is a huge chunk at those times, David. We will be more or like 25,000, 30,000 tons from those guys, not over a 100,000 tons. So it's -- we have had everybody focused on things that likely in a better situation they wouldn't be focused on. So indirectly or directly, it's all been focused on the problems that the plant being [downtime].

And then just so, I know for sure are the prep plant problems now resolved?

I can give you a little more feedback on the plant. So the plant is operational. We continue to work through, a few bugs here or there. Every time you start up a plant, you're going to have times when it goes down for some sort of issue and it takes well over a year to build something; there is always going to be something, that's an issue. But we are, for the most part, running at the feed rates that we want to see. We have one clean coal stacking to complete and they're finishing up the link to the loadout, which should be complete this week. So everything should be in place to load a train. I will say that there is virtually no sheeting on the plant, Dave, that our refuse belts are not in place but we have the ability to load refuse in trucks and take those to the impoundment. But as far as operational, yes; optimum levels, no. But every day we make improvement there and I think as we look in the next week or two, we should be, from a feed rate standpoint, doing really well. And we just need to continue to finish up all those things around the edges, which will take another couple of months to do. But really good looking plant if you look at the components and all of that stuff. So we're happy with that. We just wish it was done it two to three months sooner.

And then moving onto the 2018 plan 2.2 million tons, little lower than what we had thought -- it's about 200,000 to 300,000 tons that we had expected lower. And then there was some commentary that there is a potential 200,000 to 300,000 tons if met prices warrants. So, was there a decision to defer the second service mine, is that what's happened in the 2018 plant over the last few months?

Yes, I mean we deferred that out of 2018 and there are number of reasons, but if you recall my comments on capital, one of the things that we think we needed in place was to just have more handling capabilities on the raw and clean side and that's where the capital is being spent. We also would like to have that outlet in place on the Norfolk Southern before we turn that second surface mine loose. What I will say is, we've been lucky to get a couple of deep mine permits, which will be fairly easy to face up and bring online, if we choose to -- another one in the number two gas as a matter fact . So those additional potential tons are basically deep mine tons that we think we could very quickly bring, online and indeed the surface mine, we just think it's the right decision from a coordination of all of our different qualities and stuff online. It's -- the steam tons, of course, have been a surprise for us from a pricing standpoint, but again, you definitely don't want to intermingle steam tons with metallurgical tons and with the capabilities we have onsite, David that we think it could be a little bit difficult to do that and we're going to wait and see what the infrastructure looks like and how it functions and when you have five or six different raw coal piles in addition to three raw coal silos, you have got a great deal of building to handle stuff differently then. So the right answer, I think, is to wait.

So we'll be removing that also from 2019 and 2020 that's really around going in this question, 200,000 to 300,000 tons?

Removing the surface mine entirely -- the second surface mine?

Yes, since it's been removed from the plan in 2018, since we are seeing pretty consistent issues here with production and expectations. Is it more realistic or reasonable to remove that surface mine from 2019 and 2020 expectations as well?

I don't think that's true, David. I think there are couple of things we're looking at, for example, if we look at 2019 and 2020, would we start a second surface mine and still only utilize one high wall miner, which would be maybe half of what we said we would produce and do it with right sized capital. I think you can tell just from that comment that we continue to look at the possibilities. So I think what might be more reasonable is to cut it in half as far as expectations for '19 and '20 and let us continue to evaluate it.

And then just switching over to the marketing questions. Couple questions. In prepared remarks you said the net back price is in the, I think you said, high $70s to mid $90s with goal over $130 to $150. I just want to clarify, was that for domestic mines or is that what you think the net back price will be for export volumes?

No export.

That was export. I'll follow up with you offline on that one.

Basically what we're doing is, we are deducting obviously transportation costs, quality differential, handling cost, et cetera, is that where it is coming from...

Yes, but [Indiscernible] come from, it's all different than what we had previously. I am just trying to..

I'm think you are starting to cover that from a fairly low future looking, not benchmark, but really fairly conservative pricing internationally. In anyway, we can talk about that more offline there.

And then just a very last question strategically here. Obviously, you made some comments about your cost structure versus your peers and how that helps you compete on pricing versus your peers. But strategically in your view, is selling at lower prices versus your peers is it a good strategy longer term?

No, I think our cost structure of course gives us a huge advantage and of course being in startup mode, Dave, we felt like it was extremely important. And unlike what you have seen from some of our competition to have a good chunk of our production place domestically. And remain to be seen whether others who haven't chosen to place that many tons domestically will be right or wrong, but for us, in the mode we were in, it was a risk we were unwilling to take. And we thought strongly about making sure that we had a good chunk of North American demand in our portfolio. That being said, as time goes on, I think that changes a bit for us. So I think you'll see us, especially with established customers, being able to be more aggressive in the future.

[Operator Instructions] And I'm showing no further questions. I'd like to turn the call back to Randy Atkins for closing remarks.

Thank you. Again, on behalf of all of us, we appreciate you being on the line here with us this morning and we'll look forward to catching up again in a few months. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the call. You may now disconnect. Everyone have a wonderful day.