Welcome to the Ramaco Resources, Inc., Fourth Quarter 2021 earnings conference call. My name is John (ph). I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator instructions) And I will now turn the call over to Jeremy Sussman, Chief Financial Officer. Please, go ahead.

Thank you. On behalf of Ramaco Resources, I'd like to welcome all of you to our fourth-quarter 2021 earnings conference call. With me this morning is Randy Atkins, our Chairman and CEO, Chris Blanchard, our Chief Operating Officer, and Jason Fannin, our Chief Commercial Officer. Before we start, I'd like to share our normal cautionary statement. Certain items 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 concerning future events. These 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 statements speaks only as of the date on which it is made, and except as required by law, Ramaco does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Lastly, I'd encourage everyone on this call to go onto our website, ramacoresources.com and download today's investor presentation under the Events Calendar. With that said, let me introduce our Chairman and CEO, Randy Atkins.

Thank you, Jeremy. We always look forward to discussing results with everyone interested in following Ramaco. As you know now from our earnings release, we have been quite busy during the past month or so. To start, we had our strongest quarter on record in Q4 '21. So far in 2022, we have committed sales on about 70% of this year's production. Through these sales, we have already basically printed year-to-date roughly $270 million of EBITDA, $195 million of net income, which translates to about $440 -- $4.40 of earnings per share. So, after less than two months into the New Year, we have greater than three times more EBITDA and four times more net income than we did for the entire year of 2021. We still have the balance of roughly a million tons of dry powder left to sell for the balance of the year. This will go into export markets with currently record index pricing. We have now essentially de -risked 2022 and are now on track to basically produce our highest annual earnings and sales metrics by several multiples. On our last call, we telegraph that we're on the verge of a very special transition. This is now happening perhaps much sooner and much stronger than we envisioned. I can think of no other public coal group which is currently doubling production, paying forward from internal funds, and simultaneously making meaningful shareholder returns of capital. It is a nice place to find ourselves. First, looking down the road, we hope to move our production up by about 50% this year to roughly 3.3 million tons. We are on track to essentially double last year's 2.2-million-ton production level to roughly 4 to 4.5 million tons by 2024. To re-emphasize for anyone concerned about our capital spending to…

Thank you, Randy. I'll start by going over our fourth quarter and full-year 2021 financial highlights. I am pleased to note that fourth quarter adjusted EBITDA of $62 million was our best quarter on record, up 78% from third quarter adjusted EBITDA of $18 million. Full-year 2021 adjusted EBITDA of 79 million was up 320% from 2020's $18 million figure. I would note that we carried over roughly 75,000 tons into 2022, mainly due to railroad issues outside of our control, which negatively impacted fourth quarter adjusted EBITDA by almost $7 million. Fourth quarter earnings per share of $0.42 was up a 164% from third quarter EPS of $0.16. Full-year 2021 EPS of $0.90 was up over 875% from 2020's loss per share of $0.12. Turning to our forward outlook, I would like to touch on a number of areas in our guidance tables. First, on production and sales, we are guiding to 3.0 million to 3.3 million tons in 2022. I would remind everyone on this call that our legacy [Indiscernible] mind is expected to reach full production sometime in the second quarter. As such, we anticipate production in the second half of the year to be higher than in the first half. Second, on costs, as we start the year coming off 2021, call averaging $70 per ton. We expect to see those numbers increase. We're guiding to $82 to $90 costs per ton for the full year. This is a wider range of the normal and I would expect costs to trend downward throughout the year in line with our production ramp. This is also reflective of the dynamic environment we are in. As it relates to inflationary pressures and sales-related costs, which of course fluctuate with price. The midpoint of our 2022 guidance reflects the $16…

Good morning, everyone. And thank you, Jeremy. Before jumping into some current operational updates and discussing the growth projects that are ongoing. I want to spend just a moment reflecting on our safety performance for 21. As Randy touched on in his opening remarks, 2021 was our best year in terms of employee safety. Not only where our total reportable incident rates the lowest for any year in our history, the total number of all employee incidence was also our lowest. This despite the addition of new mines and expansion that are Berwind division and hiring many more employees. In fact, for the year, our surface mines and plans all operated the entire year without any loss time or reportable accidents. As much improved as 2021 was our goal remains zero-accidents or impacts for any of our employees. And as we move into 2022, safety performance has continued to be strong, but we remain vigilant as the workforce continues to expand and new production is added. Also, as we come out of the fourth quarter and start the first quarter of '22, we are seeing the COVID impacts on our workforce subside and stabilize. We track daily the number of impacted employees and while we're not at zero, we were down to just a handful of employees ill or quarantined on any given day compared with over 5% of the workforce late in the fourth quarter. As a result, we are seeing productivity is starting to improve relative to the end of the past year. The end of '21 was fairly momentous for Ramaco. The closing of the Amonate acquisition, coupled with our historically strong metallurgical market, allowed us to move forward on numerous fronts to realize our long-stated growth potential. Turning first to the area of our current growth,…

Thanks, Chris. And good morning, everyone. In my remarks, I will share an overview of what we're seeing in the market, and discuss our current and forward sales outlook. We continue to see very favorable coking coal market fundamentals, with seaborne pricing remaining at record levels. We also expect to see continued higher-price sub-board, given the ongoing structural supply-demand imbalance. Looking globally, apart from China, global hot metal production continued its post-pandemic recovery. 2021 crude steel production, excluding China, was up more than 13% year-over-year. Total production, including China, reached new record high of over 1.9 billion tons. After taking steps to moderate steel production during late 2021, and with the Chinese New Year, and with Olympics behind them, we expect growth in Chinese steel production for the remainder of 2022, especially compared to the second half of 2021 levels. Indian steel producers continue to push forward with large-scale road projects. The country is currently on a five-months streak of month-over-month increases in steel production. Additionally, we expect steel production in our primary markets of North America and Western Europe to remain robust for 2022. [Indiscernible] sustained strong demand, particularly in their auto sectors. For a variety of reasons, we continue to see an overall imbalance between demand and supply. Even with current muted Chinese demand, seaborne coking coal prices have hit record levels in both the Atlantic and Pacific basins. The supply response, however, remains subdued. Weather-related production and transportation issues in both Australia, in Canada, as well as COVID-19 effects on production in Australia have impacted production and exports for both these major exporters. Similarly, in the U.S. a tight labor market COVID-19 and weather-related impacts to rail service and to a lesser degree, port logistics have further restricted use supply. And most recently, the Russia-Ukraine conflict has…

Thank you. And I'll begin the question-and-answer session. [Operator Instructions]. And our first question is from Lucas Pipes from B. Riley Securities.

Thank you very much. And good morning, everyone and nice job on operations [Indiscernible], also the many strategic initiatives. I first wanted to ask about the deal regarding Remaco coal and it sounds like you will sustainably lower your cost structure with this. And I wondered if you could give us some key metrics on that, like what the royalty is on the mineral rights that you are acquiring and then roughly what percentage of your production this year, next year, 2024 is part of Ramaco coal reserves today. And then I have a few follow-ups. Thank you, very much.

Well, I think this is we said a royalty costs or rather good chunk of our overall mine costs. The whole main rationale behind the deal was to do something on a longer-term basis. Had a reasonably sustainable reduction in our overall cost structure. Particularly, where we saw the market seeming to move into a higher-priced condition for some extended period of time. We will get into a lot of the very specific metrics on cost savings once we've actually closed the deal. But Jeremy, you want to basically give -- look, there's a few more general metrics.

Lucas, great question. And so, a couple of general metrics. As Randy noted about 25% or so of our costs this year will be sales-related and about 2/3 of that, our royalties. If I think about the second part of your question, how much do we mine on Ramaco coal land, it fluctuates. But to give you some guideposts, historically, it's been as low as about 30%, as high as about 40% in terms of our overall royalty payments depending upon where we're mining. So obviously you can do the math and I think get to the conclusion as why we're super excited about this savings in perpetuity for us.

They are helpful and then with the payment terms, with this deal be cash accretive here in year one?

It will probably not be cash accretive, but the way we've structured it is such that it is a very small draw on our cash generation for the year. We think that certainly within the next 36 months that we will probably be in a positive cash-generation situation from the royalties against this deal.

Okay. No, that's helpful. I appreciate that. And then my second topic here is volume growth, $4 million to $4.5 million in 2024. I wondered if you could share with us a bridge by mine level between 2022 and 2024 and then should we think of 2023 as a bridge year somewhere in the middle or maybe higher, lower than that would appreciate your color on those points as well, thank you.

Sure. Sure. Lucas. Thanks. And what I will turn -- before I turn it over to Jeremy to go sort of somewhat granular on your -- I would refer you to the deck that we put out this morning that basically on Slides 7 and 8 does a pretty good job of explaining where our growth will be over the next like 24 to 36 months. So, Jeremy, you want to pick it up from there?

Thanks. I think -- look, even if you go back to Slide 6, we kind of give you a breakdown by year since obviously our capital expenditure guidance certainly reflects really the finishing of the build-out of really our long-term stated goal of getting to 4 million to 4.5 million tons and of course, we can go higher than that. But this year, we're looking at 3 million to 3.5 million tons in 23, again, as you can see on Slide 6, just like you suggested, it's basically a bridge between this in 2024. For kind of at about 3.7 million tons. And then in 2024, that's when we're going to be at that kind of 4 million to 4.5 million ton rate. And as we've said, when we're at that 4 million to 4.5 million ton rate, you're basically looking at Elk Creek somewhere in the 2.5, 2.5+ range, Berwind in the 1.5, 1.6 range and then the rest will come from our Knox Creek Mining Complex. And again from a cadence perspective, the additional tonnage at Elk Creek comes online when the plant expansion is complete, which will be mid-year, next year. So hopefully that helps give you some color.

That's very helpful. I appreciate your color and continued best of luck. Thank you.

Thanks, Lucas.

Our next question is from David Gagliano from BMO Capital Markets.

First of all, thank you for the extensive update and slide presentations. As always, it's very helpful. Just a really quick question on the capital allocation and it's a philosophical question. But it's a good problem to have, obviously even after the deal and the higher, relatively speaking, higher cash costs, obviously going to generate a lot of cash. And the commentary continues to be about buybacks. How do you balance the focus on buybacks with the low free flow?

Well, I think the way I would look at this David, is we have -- the flow has principally been quote, "constrained " by the capital structure we created when we started, which was -- that we were essentially an outgrowth of a private equity, two private equity groups had funded us to get started. And then when we did our IPO, obviously we began to put shares into the market. Both of those PE shops have held these investments in this for a considerable length of time. And probably overtime will also begin to sell down their positions. That's a natural phenomenon which we believe we have expected since day one. Indeed, I think publicly Energy Capital Partners, one of our large shareholders, filed a shelf last fall that they would be doing a sale of some of their shares. Yorktown as -- sold shares as well last fall. So, we can expect, I think, over time that we will find that there is greater float in the markets as our two principal institutional investors began to distribute more shares out to their individual limited partners. I think that colors our view on share buybacks as we move forward. As we get a larger float, I think that becomes perhaps a more compelling financial tool in our kit aside from just making increasingly larger cash dividends.

And some others in the industry have opted from a balanced or sort of kind of a split between cash, special dividends, and buybacks. I'm just curious why only the buyback angle?

Well, I think from our perspective, the buybacks really return more value back to the company. I think a lot of hedge players, of course, like pure large special cash dividends. But those -- that doesn't really do anything long-term for the company, just simply does a one-shot cash returned back to certain types shareholders. So, I think we're always going to focus on our shareholder return in a way which builds value for the company and its remaining shareholders.

Okay. I appreciate I was just curious in terms of the full philosophy. Thanks. I appreciate it.

Sure.

Your next question is from Nathan Martin from The Benchmark Company.

Hey, good morning, guys. You've definitely been busy, congrats on some of the new initiatives.

Great. Thanks, Nate.

Maybe I'll drill down a little bit on costs and specifically kind of looking forward at some of your growth projects. If I assume a flat sales price to [Indiscernible] will add the equation. How might these new projects affect your overall cost structure?

Sure. I'll let Jeremy handle that one.

Sure. So, Nath, I think let's use 21 as side of the base year, obviously, you can see our average realization just above 100 bucks a ton, so sort of a normalized long-term price, i.e not elevated like '22. So, the way I would look at that as we ramp up Elk Creek and certainly, we ramp up the Berwind operations. Sales-related costs aside, we should be -- we should have a six handle in front of us. Long term, I would remind you, again as Chris kind of said in his remarks, when the Berwind prep plant is fully up and running, or at least 50% operational sometime in the third quarter, and then obviously fully operational sometime there after. That's going to lower our trucking costs by double-digits on a per ton basis from the Berwind complex to Knox Creek. So again, sales-related costs aside, we will have that important event and catalysts to get our costs sustainably lower at Berwind. And of course, with the deal that was announced this morning, we went through some of the royalty math with Lucas. Clearly that's going to help keep our long-term costs at both complexes at a very, very comfortable level. Bottom line is most of the increase in '22 that you're seeing is sales-related.

Mid sets very helpful, Jeremy, appreciate that. And then you guys have mentioned thousand tons, I think carried over here to the first quarter from the first quarter to the first quarter from the fourth quarter. Most of your peers have noted transportational logistics issues, leading to some delays as well. You guys also said you're sold out in this quarter, essentially sold out for the first quarter. How confident are you that those turns can move on time on how service kind of progressing growth at quarter, when do you think? Since crude improved to levels? And as you feel comfortable with into hit the high end of your guidance at 3.3 million tons. Thanks.

I'm going to let Jason handle that on the logistical side, of course, will like everybody else in Central Appalachia. We've had issues with our rail carriers, some have been better than others and some have been able to work through their issues better than others. But I think we're confident we're going to be able to deliver to our customers on time. So, Jason, you want to go ahead and pick that up for me?

Sure, Randy. Yes. So, we've -- we certainly had those tons carryover and out of '21, they're like, those tons have shipped early this quarter and accounted for. As far as being booked out for this quarter and what we've got projected to load and timing of that. It's going to move, I think within the quarter, certainly. Like everyone else as Randy mentioned here, and we've seen delays both on rail service side and deplores as well due to the Qs. And of course delays at the wagons getting through the boards. And we are starting to see that subside to some degree now already is the Omicron wave is starting to subside as well. Certainly, there's been weather impacts like last year and earlier this year that have added to that slow down, that we are starting to see some improvement. Then again, I think what -- what we've got booked this quarter, in my mind, is going to move this quarter. We deliver.

Got it. Thanks for those thoughts, Jason. My other big picture questions have pretty much been addressed, so I guess I'll leave it there. Appreciate the information, guys, And best of luck in '22.

Okay. Thanks, Nate.

I'd like to turn the call back over to Randy Atkins, CEO, for final remarks.

Okay. Great. Again, as always, we thank everyone for joining us. We -- we're happy to say we think we're off to a remarkable start for '22, and we look forward to the year as it progresses and keeping everybody abreast of our progress as we go forward. So, thank you very much again.

Thank you, ladies and gentlemen. This concludes today's call. Thank you for participating and you may now disconnect.