Good morning, and welcome to the Ramaco Resources First Quarter 2024 Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Jeremy Sussman, Chief Financial Officer. Please go ahead.

Thank you, Operator. On behalf of Ramaco Resources, I'd like to welcome all of you to our first quarter 2024 earnings conference call. With me this morning is Randall Atkins, our Chairman and CEO; Chris Blanchard, our Chief Operating Officer; and also in the room is our new VP of Marketing and Analysis, David Dyer. 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. They are subject to risks, uncertainties, and other factors, many of which are outside of our control, which could cause actual results to differ materially from the results discussed in these forward-looking statements. Any forward-looking statements speak only as of the date on which it is made, 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. I'd also like to remind you that you can find a reconciliation of the non-GAAP financial measures that we plan to discuss today in our press release, which can be viewed on our website, www.ramacoresources.com. Lastly, I'd, of course, encourage everyone on this call to go on to our website and download today's investor presentation. With that said, let me introduce our Chairman and CEO, Randall Atkins.

Thanks, Jeremy. Good morning to everyone, and thanks for joining the call. Our first quarter results were, of course, below our expectations. We printed $24 million of EBITDA in Q1 against twice that amount in Q4. Jeremy will go into detail on the financial metrics, but the main driver was lower realized prices. They dropped by over $55 a ton or almost 20% since Q4. This particularly hit us in March when we shipped almost 50% of our Q1 export business, which was export, which was index-priced. We also dealt last quarter with mine cost issues at Elk Creek from both tough geology and labor conditions. I'm confident that our results will improve throughout the year. This will come from a combination of continued production growth, greater cost discipline, and improvements in productivity. With that expectation in mind, we have continued to maintain our current guidance for the year. As I said in our earnings release, there are parallels with our somewhat bifurcated performance in '23. Last year, we were both a different and much larger company in the second half of the year. Why? Essentially, we grew by 33% from 3 million to 4 million tons of annualized production in the back half. 2024 looks like it may play out in a very similar fashion. We now expect to ramp current sales and production by an additional 1 million tons or 30% by Q4 and end the year at basically a 5 million ton run rate. We will reduce CapEx in '24 by 30% against '23 numbers. In the balance of the year, we will also see a meaningful cost reduction back to guidance levels from a combination of new production and better mining conditions as I will briefly note in a moment. Later, we're also going to talk…

Thank you, Randy. As you noted, first-quarter 2024 results were negatively impacted by lower index pricing, especially in March. We shipped over half of our export tons in March when industries were at their lows. In addition, Q1 mine costs were impacted by challenging geology and labor constraints of Elk Creek, both of which are expected to improve throughout Q2 and especially in the back half of the year. Now to get into some specifics, Q1 adjusted EBITDA was $24 million compared to $48 million in the same period of last year. The primary reason for the year-over-year decrease was the 20% decline in index pricing, which led to a similar decline in our realized pricing to $155 per ton versus $1.88 in Q1 of '23. Overall net income was $2 million compared to $25 million in Q1 of '23. While net income was positive, Class A EPS was 0. Now as a reminder, when calculating Class A earnings per share, net income is reduced by the Class B dividend declared in that quarter. At the same time, our cash cost rose from $109 per ton this time last year to $118 per ton this past quarter. Sales of 929,000 tonnes were up 23% year-over-year on the back of both higher production and sales from inventory. That said, while production of 844,000 tonnes was up 10,000 tons from Q1 of '23, this missed our internal expectations on the back of both challenging geology and labor constraints at Elk Creek, which led to higher costs. Increased purchase calls, especially on the low vol side also negatively impacted our cash cost by a couple of bucks a tonne. We put some metrics behind the production mix. We believe the combination of challenging geology at our Elk Creek complex Stonecoal Alma Mine, coupled…

Thank you, Jeremy, and thanks, everyone, for joining our call this morning. As Randy and Jeremy both alluded to, the first quarter was extremely challenging operationally on several fronts. First and foremost, exiting '23, the labor market for experienced and skilled underground coal miners was extremely tight. While our turnover rates have moderated from unsustainable levels in the previous year, we were not as successful as typical in filling some vacancies at our operations. This shortage was the most acute amongst the scarcer skilled positions. While all of our complexes saw this trend, the bulk of the impact was at our Elk Creek operations, which are in Logan County, West Virginia, and in close proximity to several of our peers. However, the recent precipitous drop in the coal pricing indices has had one positive effect. Some of the higher-cost operations in the region have been scaled back or outright idled. As a result, we are seeing an overall loosening in the labor market with both more quality applications received as well as a reduction in our natural turnover. To put some metrics to the effects of these vacancies on the operations, we entered the year at Elk Creek running with approximately a 15% vacancy rate from our targeted staffing levels. By the end of the first quarter, staffing vacancies are less than 10% at Elk Creek and our annualized voluntary turnover rate has decreased by approximately 4% overall as well. This is critical, in particular, at one of the main mines at Elk Creek, which was understaffed for its budgeted production levels for the first several months of the year. It is now almost fully staffed with production levels rising to meet our expectations. At the corporate level, we are taking a measured look at each mine and at each…

[Operator Instructions] Our first question will come from Lucas Pipes with B. Riley.

My first question is on your growth this year. And I wondered, are you kind of fully locked and loaded on this equipment 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 plants at this stage if you hear the market is stabilizing, but wondering how you think about that.

So Lucas, I'll take a stab at a couple of your questions, and then I'm going to turn it over to Chris to give you maybe a little more granular detail on equipment and labor. So just in somewhat order equipment-wise, interestingly, you asked that we have just recently purchased a good deal of new underground equipment really within the last few weeks. So I'll let Chris detail that, but we're ahead of the curve on that game. On labor, again, I'll let Chris detail, but we've had a very tight market as many of our peers have noted as well. That's loosening. We've had particularly at the Elk 1 mine and especially that was frankly understaffed. And that understaffing has led to obviously lower productivity as well as production numbers. We're getting those spots filled. And as I said, that hopefully will result in a turnaround moving forward. And in terms of our sort of overall market plans, we have baked this production in because we've essentially sold all the tons. And so it's not as if we're hanging out there with a great deal of unsold production moving into the balance of '24. We have retained some optionality probably through maybe 1 or 2 tweaks and maybe some purchase coal to take our guidance numbers up to the higher end or maybe even a touch above that as we progress in the year. But obviously, we're not going to do that unless we see the market behaving in a manner in which we would be encouraged to move in that direction. So Chris, why don't you fill in a little bit more detail on equipment and labor?

All right. So Lucas, as Randy noted, and you did equipment, mobile equipment, particularly for underground is extremely scarce. We were fortunate enough to fulfill all of our '24 needs on underground equipment and rebuilds really and sort of locked that in, in the last month. Moving forward, also within the last, I think, 2 weeks, we've locked in our slots for '25 and '26, so that we can have a secure position going forward. But we don't have any material CapEx left to spend for any of the expansion mines that we've talked about. And of course, fortunately, we're pushing them as fast as we can, but they are going to be our lower cost profile than what we're currently running. So we'll have some optionality there based on what the market dictates.

I skipped your labor question. I was going to mention that we have seen the labor market -- I wouldn't say it's softened exactly, but it's moved back to a more healthy position as far as miners moving around and the availability of skilled miners. And like our peers, I'm sure we have ramped up our training efforts for new electricians and new miners as well internally.

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?

So rebuilt equipment and in the out years also, that's just for rebuild slots. We've taken delivery of 2 of the 6 pieces that we acquired and expect to take delivery of the remaining 4 within the next, call it, 6 weeks.

Great. For my second question, 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, those sets seem about right versus where you've been selling tons. And today, how would your average export sales compare to that figure? Is it better about that same level worse? Would appreciate your thoughts on that.

Sure. Good question, Lucas. So yes, I agree with the math, obviously, when you look at our Q4 release versus the incremental, call it, 500,000 tons or so that's been priced since then. I think as Randy kind of noted in his comments, half of our -- over half of our export tons just by sort of luck of the draw, were shipped in March when indices were at their lows. So I mean, when you look at it on a go-forward basis, I would say our Q1 realizations were lower than you would expect on a quarterly basis. Now the bad news, of course, is since Q1, spot high-vol is down another, call it, 13% or so. So I mean we're not in the prediction game in terms of predicting where the spot market goes. But obviously, if prices hold, you've got to take the indices into account when looking at our realizations for Q2.

I'll try to squeeze one last one in. First, on the retreat mining, when or how long does that occur? Obviously, that's very efficient. So I'm 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 thousands or millions of tonnes basis?

Lucas, I'll jump on the retreat mining and then hand it off on the impact on the idling. But as you know, on room and pillar, usually, you advance for a few months and then you retreat for a few months. At our Stonecoal mine, in particular, that we mentioned, just the way that mine was laid out, we basically advanced for about 3 years, and we will be retreat mining there for the remainder of '24 and actually into '25 on one of the sections and the second section will be retreat mining for about half of the year. So it will be an abnormally high amount of retreat mining after an abnormal amount of the more expensive advanced mining. So I hope that answers your question. The rest of the mines at Elk Creek are more or less on that same schedule.

And Lucas, to your second part of your question about the idling, I mean, I gave you some macro numbers for the quarter for sort of Southern Central app. West Virginia production was down about 14%. Virginia production was down about 21%. So that gives you some general notion of sort of directionally where the production figure is going to shake out. And obviously, in Virginia is an example where we've got a number of operations, a 20%-plus decline is a fairly meaningful one.

Our next question will come from Nathan Martin with Seaport Global.

It's actually with the Benchmark Company, but thank you, operator. I want to start out on the pricing front as well. As mentioned, production is essentially fully committed at this point. But 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 contracted position to kind of be split between those Asian U.S. indices?

Yes, Nate. So I'll give you some color on that. So first of all, in terms of our overall cadence, about 1/3 of our coal will go domestic this year, and then 2/3 will to go export. I'd say within the export side, Europe and Asia is pretty equal, let's call both about 30% of our business, and then the remaining, call it, 10% or so goes into South America. Europe and South America is all going to be against the U.S. indices, both low vol and high vol. A lot of the Asian business is actually -- not all of it, but a fair amount of it is priced off of -- I mean as we said in our remarks, the U.S. low-vol market itself is quite tight. So any discounts there are, if there are, they're pretty small. I'd say the highball markets are certainly a bit more oversupplied than lowball. But as Randy noted, I mean, that's really where you're seeing a lot of the higher cost operations step down. So certainly, from our standpoint, we're certainly optimistic about kind of the cadence throughout the year between the combination of kind of supply shutdowns and also the fact that we don't think that the U.S. low-vol indices frankly reflect the current tightness.

And Nate, one other point, which again is maybe a somewhat obvious one. But I think in terms of the decline in production that we're seeing in the Central App area, there's probably going to be, call it, a quarter lag in terms of how that starts to impact pricing and availability on particularly the high vol markets. But I do think it's coming. So I would look toward the back half of the year is firming up, frankly, for a number of the reasons we cited on a macro basis. But on the supply side in Central App, I think that's when you're going to start to see a little bit of impact, particularly as it relates to, of course, export shipments.

Nate, on the low side, I'd even mentioned that there have been some domestic inquiries lately. So again, we think that market is -- we feel good about that market today. And as Randy said, we certainly feel good about the high bull market in the future. I will give you an anecdote, Nate, when you see one trading group asked for a bid.

The rate of around 100 or maybe even less. So any early thoughts on how these items could kind of translate into what to expect for costs in '25? Like how much could those improve versus this year's guidance of, what is it, 105 to 111?

Yes. I mean Nate, so I think, obviously, we're a long time away from our '25 budget and if we just take sort of the, call it, 5 million ton exit rate, don't layer in any tonnes or anything like that, honestly, the exit rate is a good way to look at next year. I mean, obviously, I think Q1 will certainly be our highest-cost quarter. Q2 is still going to be above the high end of the range, really more just due to the fact that some of the labor and geology issues persisted into April, but those are behind us. And so as Chris noted, once we layer in all these kind of, call it, $85 to $ 95-tonne cost mines throughout the course of the year, that's what really gets you to a step change in the back half of the year and certainly exiting the year when all of that's online.

Yes. And Nate, as we've said several times before, obviously, we're on a growth trajectory to get probably the 7 million to 7.5 million tons over the next few years. Obviously, we can calibrate that depending upon -- and we'll calibrate depending upon market conditions. So to look forward into '25, we will still be in growth mode, assuming that the market is there. And as we grow more tons, just by the merger of the math, if nothing else is going to help us on cost.

This concludes our question-and-answer session. I would like to turn the conference back over to Randall Atkins for any closing remarks.

Again, as always, we thank everybody for joining us today, and we look forward to catching up with you after the end of the next quarter. Take care.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.