Randy Atkins - Executive Chairman Mike Bauersachs - President, Chief Executive Officer Chris Blanchard - Chief Operating Officer Jeremy Sussman - Chief Financial Officer

Ladies and gentlemen, thank you for standing by and welcome to Ramaco Resources Inc., First Quarter 2020 Earnings Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions]. Please be advised that today’s conference is being recorded. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Jeremy Sussman, Chief Financial Officer. Thank you. Please go ahead sir.

Thank you. On behalf of Ramaco Resources, I'd like to welcome all of you to our first quarter 2020 earnings conference call. With me this morning is Randy Atkins, our Executive Chairman; Mike Bauersachs, our President and CEO; and Chris Blanchard, our Chief Operating 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 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 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 on to our website, ramacoresources.com and download today's Investor Presentation under the Events Calendar. With that said, let me introduce our Executive Chairman, Randy Atkins.

Thank you, Jeremy. As always, I want to thank everyone for joining us today to discuss our first quarter results. There is an old Chinese curse that goes, “yours shall be a life lived in interesting times”. We're all indeed operating under such a curse at the moment, I’m afraid. Before I turn our results, let me comment on essentially what is the thesis of our three legs of the stool strategy for at least the next six months and probably longer: First, we will do all that we can to keep our people safe. This is a rapidly changing landscape, but we will attempt to do all that we can to balance health, safety and continuing operations. Secondly, we already have the cleanest balance sheet in the business on the liability side, as well as some of the lowest cost structure. We're going to work to preserve this balance sheet, but at the same time create as much liquidity as we can prudently, to enable us to take what we're calling a shield and sword approach to the market. We know Ramaco and indeed the whole industry will be tested over the next few months. So we have taken steps to add new liquidity. This is being done through a combination of operational and payroll cuts, new changes in our revolver and some recent borrowing, all of which we will speak about later. We think that the market may deteriorate for at least the next one or two quarters, by how much and for how long are certainly unclear. That market deterioration will no doubt create pit falls, some for us, but plenty for others who are disadvantaged by higher mining costs and debt. We feel that added liquidity, plus the fact that we've already sold forward about 80%…

Thank you, Randy. In terms of first quarter 2020 financial highlights, adjusted EBITDA was $8.4 million, which was a 6% decrease from the fourth quarter of 2019. Frankly, given the fact that our sales price declined to $93 per ton in the first quarter compared to $104 per ton in the fourth quarter, a 6% quarter-over-quarter decline was better than we had anticipated. Chris’s operating team had an excellent quarter with cash costs at Elk Creek of $61 per ton, which compares to $66 per ton in the fourth quarter and $63 per ton in the same period of 2019. Overall company costs which include our Berwind development mine came in at $67 per ton in the first quarter, which was also down both year-on-year and quarter-over-quarter. Rounding up first quarter financial metrics, revenue was $42 million, down 8% from the fourth quarter and down 27% from the same period 2019. First quarter earnings per share $0.05 was in line with fourth quarter 2019 results and compared to $0.17 a year ago. As we noted in our press release, COVID-19 has brought on an unprecedented amount of uncertainty. As such, like most of our peers, we are suspending our forward sales guidance for 2020, with the exception of giving our current annual sales commitment of 1.5 million tons at $93 per ton. However, I do want to touch upon three areas on the financial front where I see differentiation between Ramaco and many of our peers. First, everyone on this call is aware that Ramaco has been in growth mode as a relatively new Med-Coal producer. We are extremely proud of the fact that production has grown over 235% from 2017 to 2019 and that we have added roughly 400 good paying jobs over the past few years. As Randy…

Thank you, Jeremy. Operationally all Ramaco mines ran well in Q1. Cost containment on less than idea sales volume was exceptional at our Elk Creek mining complex. As we sit today, the impacts from COVID-19 continue to take their toll on what was an already weak market place. At all levels Ramaco has gone to great lengths to address health and safety concerns relative to the COVID-19 in our mines and related infrastructure. Chris Blanchard will provide additional details relative to the on-the-ground efforts that we have implemented. I would like to focus the first part of my remarks on the current coal markets and how Ramaco is positioned to respond. During much of Q1, coking coal market fundamentals performed relatively well as the effects of COVID-19 were yet to be felt in the Atlantic Basin. During this period, China's early virus related lockdowns created labor and logistics issues causing a spike in Pacific Basin demand. China's first quarter coking coal imports were up nearly 30% year-over-year. Seaborne pricing followed suit, rising to levels in mid-March nearly 20% above end of year 2019 prices, only to give back most of these gains as Q1 came to a close. With the major impacts of the virus seemingly behind them, and encouraged by stimulus spending, China was able to post year-over-year crude steel and pig iron production gains of 1.2% and 2.4% respectively for the first quarter, while global steel crude and pig iron production excluding China fell 4.1% and 5.4% respectively during the same period a year-over-year. Different regions and countries around the world are now in various stages of dealing with the continued impacts of the COVID-19 pandemic. These impacts have materialized in the downstream auto, manufacturing and construction sectors and have affected consumer confidence and spending habits. The pandemic's…

Thank you, Mike. I think Randy said it best at the beginning; “we are living through interesting times.” As Ramaco continues to navigate through all the uncertainty, our primary focus is on protecting the health and safety of our entire workforce with a particular emphasis on safeguarding our essential coal miners who continue to work and produce coal that will fuel and supply the eventual economic recovery. In this time of COVID-19, Ramaco continues to be proactive and quickly responsive to adapt to the virus to best protect our employees. Early in March we began workplace modifications to adapt to the coronavirus. We staggered shift times to eliminate or minimized congregations of our troops of minors, we implemented extensive cleaning and sanitation of all common areas and mining equipment and we enhanced our sick and our leave policy to provide more flexibility for our employees and their families. As guidelines have changed over the past two months, our policies have evolved to incorporate all of the best practices at the federal, state and local levels. We have adopted best practices in the industry and solicited suggestions from our frontline employees. As we recall miners from the April furlough period, we have also implemented temperature checks for all employees, visitors and vendors on a pre-ship basis every day. We've issued reusable face masks to all of our employees for their use, both at home and at work. We're continuing to monitor events and guidance and will continue to take all steps necessary to protect our miners. Looking back at operational results of the first quarter of 2020, we had one of our best quarters to date in most operational metrics. Our fee per shift at our underground mines is at its highest level for combined company since the Berwind development now…

Thank you. [Operator Instructions] Our first question comes from the line of Mark Levin with The Benchmark Company. Your line is now open.

Great! Thanks very much and congratulations on the good cash cost quarter. Related to that point, should we think of cash cost at Elk Creek in the first quarter of kind of being the high watermark or the best of the year. How should cash cost trend there? I guess demand looks like its pretty uncertain, but I’m just trying to get an idea. I know you aren’t giving guidance, but just kind of how to think about you know Q2. I just want to get a way through that, and then onward, if this demand environment persists for cash cost at Elk Creek. Thanks.

Mark, this is Chris. I think the cash cost that we saw at Elk Creek in the first quarter are indicative of what that complex can run when we are running at full capacity. So it's all volume related. If we're able to run near full utilization, we should see those rates and if the volume tapers off, then we’d expect those to rise slightly.

And Mark, it’s Jeremy. I’d remind everyone that if you look at first quarter production, you know we annualized to about 2.1 million tons for companywide, which was at the high end of the previous guidance that we had given. So, as Chris noted, clearly the mines ran on both volume and cost wise in Q1.

That's very helpful. And then you’d referenced maybe getting from 2 million to 3 million tons, but you know obviously the longer term goal is 4 million tons. I think you're annualizing around 2 million in the first quarter. Can you maybe provide some update in terms of like you know the capital to get from 2 million to 3 million or the incremental capital from this point onward to get from let's say that 2 million ton annualized rate to 3 million tons and then what's the total amount of capital it would take for you to double your production by your estimates to get to 2 million to 4 million tons.

So, let me take the first part of your question Mark. This is Randy. So as I said in the remarks and basically you know we are pleased that we can basically take it from two to three for the $11 million I mentioned. We got just a little bit more to spend obviously on the Berwind slope. As I said we're about five to six months away from that, and then the capital requirements of these two other mines that Chris mentioned, the Triad and the Big Creek are pretty modest. So $11 million all in gets us another, you know roughly 1 million tons, which we think is a pretty attractive proposition, but we're not ready to pull that trigger yet, to do a development project until obviously we're going to get a sense of where the market is.

And then Randy, to get to the incremental $4 million, so to double your production, you know that sense that you get from two to three is $11 million and then what you get from three to four?

Chris, you want to pick up on the last million tons of so to speak?

And Chris, before you go, for those that are on the call, we added a new slide, slide 8 which kind of goes through what we’re kind of calling these three phases of growth. So Randy talked about Phase 1 and Mark, basically what you’re asking is sort of – the last incremental, million tons, which is Phase 2 and 3, Jawbone and our Elk Creek expansion, which Chris, you want to give a little color on that?

Alright, so we’ve talked about both the Jawbone at our Knox Creek operation and expanding the Elk Creek preparation plant and each would provide about a 0.5 million tons annual production once we started these projects. Just rough numbers, you know somewhere between $10 million and $12 million for the Elk Creek plant expansion and a little bit more than that primarily related to mining equipment for the Jawbone expansion, when we green light these projects.

Got it, very helpful. And then my last question just goes back to liquidity for a second, and Jeremy some of the comments that you had made. So where is liquidity? I guess you guys gave a cash and availability at the end of the first quarter. Where is it maybe today and then ultimately I think you referenced a 40-something number. Can you just provide a little bit of clarity as to how you would get there or when you might get there?

Yeah, it’s a great question Mark. So as of March 31, you know we had $15.3 million of cash-on-hand and another sort of $13.5 million of availability under our revolver. Subsequent to that, in April we've taken on about - well over $13 million of new debt. So $4.75 million of that was equipment debt with KeyBank and about $8.4 million of that is from the Payment Protection Program. So that’s subsequent to the number that we of course have as of March 31. We referenced a $40 million number in our prepared remarks. So clearly $13 million of that is coming from the additional debt that we are taking on. I also referenced and Randy as well about $10 million to $11 million of additional availability under the revolver. So what we did in February was we amended and extended our revolver which functionally gave – it was a $30 million revolver beforehand and it's a $30 million revolver today, but it functionally gave us the full $30 million of capacity, so call it an additional $10 million bucks. Then the next phase is to grow the CapEx cuts, which lets call it about $6 million to $7 million and then the remaining $10 million is you know a couple of us referenced a combination of G&A cuts and also some cost cuts like the furloughs. Sohopefully that gives you a bit of a flavor of how we come up with that.

That's great. Thanks very much. I really appreciate it.

Sure.

Thank you. Our next question comes from a line of Scott Schier with Clarksons. Your line is now open.

Good morning everyone. Thanks for taking my questions. I appreciate all the commentary around the new growth projects. I was hoping you can kind of walk us through what market conditions you've been looking for before giving the green light to these investments.

Sure. I don’t think that there’s a magic number. Obviously we're looking for the general benchmark to get reasonably significantly above where we are right now. I would love to say that as soon as we start to see a 150 benchmark and above, that life begins to look a little bit rosier. But I think we are also going to have to take a look at not only the price, but also the demand equation, because as you see right now there's a little bit of strength and pricing seems to be coming out of Asia. You know anecdotally there's maybe some demand in China. We obviously don't do too much business in China. So it's really what business is going to be coming from, not only our traditional domestic customers, but the Atlantic seaborne markets, both of which are weak at the moment. So we're going to have to see some underlying strength in our own markets before I think we feel comfortable moving ahead.

I guess probably also likely that we will have seen domestic business for 2021 probably finished up before we would pull the trigger on some of the stuff just to provide more certainty and what's coming at us in the next year you know.

I will say through Scott, you know the one thing we like is because these are pretty near term projects, I mean you know spreading it within a six month time span, you know we could essentially ramp up north of 1 million tons of production, which gives us the optionality when we start looking at our book for ‘21 to talk to some of our customers about you know a significantly larger low-vol component to the extent that we can be comfortable on pricing and demand.

That’s very helpful, I appreciate that. Switching gears to I guess more of a broader market question, I think you have about 0.5 million comps committed and priced into the export market. It looks like you committed a little bit more over the quarter. Can you give us a little bit of color around where these tons are going and the demand picture that you're seeing from a seaborne market, as well as any kind of pushbacks from any customers that you're getting on some of these shipments?

Sure. I spoke about some of the positive things that have occurred as you know reconnecting with some different types of calls, with some customers that we've had in the past and sending some high-vol coals to Europe has been – you know is a positive thing that happened in the last four months or so. Shipping, a test shipment actually to what could be a potentially large customer in South Korea was a very good, very good thing for us. It's also I think positive that we’ve gotten qualified into Brazil and the other mills that are in South America. So we've got a number of different things that I think could result in some term business and longer term relationships, but what I can tell you is that the demand right now has been fairly weak when we look at spot type deals that have been out there, that’s been reduced volumes from what were normally in the past and it makes sense with the shape that the, you know the economies are in and the Atlantic Basin which is our, you know which is our primary focus. But we remain very optimistic that Asia can be a big component of what we do going forward, and I might add our sales guys are both very familiar with that market place and have had great successes there in the past. So pretty tough right now though, is really the bottom line to gain volume anywhere.

But I will say Scott, one think that we did within the last few months as Mike pointed out in his remarks, we've added another very senior guy on our marketing and sales team. So we, you know for our size have got two pretty senior sales guys, because it’s – you know we told the Board we are going to from 2 million to 4 million or 5 million tons over the next few years. So we want to make sure we got as broad based marketing efforts as we can put in place. So I'm comfortable that we're sort of positioning ourselves for the next phase of our growth, albeit which again market permitting, we're in the position to execute on in a reasonably short period of time.

Great! I appreciate all that color. Congratulations again on the solid cost control over the quarter and good luck on the quarter. Thanks.

Thanks Scott. I appreciate it.

Thank you. And our last question comes from a line of David Gagliano with BMO Capital Markets. Your line is now open.

Great! Thanks for taking my questions. I just want to drill down a little bit further on the commentary regarding force majeure. So obviously you've got I think 1.5 million tons committed for the rest of 2020, but how much of that is actually you know kind of really firm and how much of the volume has been exposed to these force majeures and the customer's pushing back in deferrals and that kind of thing.

What we can say Dave is that, you know to-date we're writable in that business. We – you know in this sort of setting we can look sort of 30 days forward. Really it’s about all of the sort of the guidance even we get from our customers, which is why we’ve basically taken guidance down and it's difficult for our customers, it’s difficult for us, it's all really contingent on what sort of recovery and you know what happens in the key segments that our customer service. So it's difficult to tell what's going to happen. But I can say looking 30 days out we also appear to be writable. We think our calls go to some customers and their plants that seem to be sort of key plants. So we’ll how everything develops. Force majeure, that is of course don’t mean that people are canceling business. It means that the business is likely to be shuffled around and we expect to see some of that. You know that being said, again we think the places where our calls go will be somewhat resilient, so.

Okay, and so just on a near term basis here, I understand guidance not for the year, but you know we are pretty much halfway through the second quarter and what are volumes, shipment volumes so far through the second quarter.

Dave, its Jeremy. I think we are just, we – there is a lot of uncertainty obviously. We wish we could give guidance, but like others we pulled guidance, so I think we’ll just kind of leave it with Mike’s comments on that front.

Okay, and then in terms of the CapEx cuts, as we look into 2021, excuse me, it sounds like, again I know there’s the visibility is zero here. But for the cuts that happened in 2020 as we are thinking about the 2021 volumes, roughly how much of an impact would that have on – if things you know kind of get back to normal and let's say in the fourth quarter what sort of the delay if you know CapEx ramps up again in Pocahontas and how much volume comes out of 2021 given that situation.

Yeah, I think Dave if I understood your question correctly, it relates mostly to our Berwind slope and we've probably got another $5 million or $6 million to spent at Berwind to get to our Pocahontas 4 Seam. So we have stopped that spent, and when we turn it on we got another kind of a five to six months’ worth of work to get to that seam. So you know round it up, call it $1 million a month, round numbers, once we decided to green light that. And as I said, we are not – you know we are in pretty good shape there. Just a question that you know we decided, let's keep our liquidity options at the front of the queue here as opposed to our spend options and so we can turn that switch back on when we need to.

Okay, alright, I will leave with that then. Thank you very much. I appreciate it.

Sure, thanks Dave.

Thank you. And this concludes today's question-and-answer session. I would now like to turn the call back to Randall Atkins, Executive Chairman for further remarks.

Okay. Once again we appreciate everybody being on the call, on these unusual times. Everybody please stay safe and we'll look forward to catching up with how did it go, again I guess in August. So take care and thanks again.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.