Good day and welcome to the Ramaco Resources Second Quarter 2024 Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [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. On behalf of Ramaco Resources, I'd like to welcome all of you to our second quarter 2024 earnings conference call. With me this morning is Randy Atkins, our Chairman and CEO; Chris Blanchard, our EVP for Mine Planning and Development; 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 these forward-looking statements. Any forward-looking statement speaks 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, Randy Atkins.

Thanks Jimmy. Good morning to everyone and thanks for joining the call. As we had hoped our second quarter results were much better than our first both on operations and financially. This improvement came in spite of the continued softness in the global coal pricing. Last quarter, we saw US met coal indices dropped by 15% and they're now down 25% since the start of the year. We also made some solid progress this quarter on our RE project in Wyoming, which I will mention later. Turning first to our met coal operations. Importantly, we had record production. This was up about 7% to 900,000 tons in the second quarter. And this increase was largely due to a combination of better productivity, geology and labor availability. As a result of the stronger production and more tons, our cash cost declined 8% or by roughly $10 to $108 per ton in the second quarter. Looking forward both operational and financial results should continue to improve throughout the year as our growth projects come online. In a nutshell, we're expecting to ramp to a year-end run rate in excess of five million tons on both production and sales with costs hopefully at or below the $100 per ton cash cost range. Let me take a moment and walk through our four current production growth projects for this year. All of these remain on track and on budget. Two growth initiatives relate to our high-vol production at Elk Creek, and two relate to our low-vol production at Berwind and Maben. At Elk Creek, we are adding the Ram 3 surface highwall mine and a third section at the third section at the Stonecoal Alma mine. Combined they will increase our overall 24 production by roughly 600,000 high-vol tons on an annualized basis. Both…

Thank you, Randy. As you noted, second quarter 2024 results were meaningfully better than the first quarter 2024 results, both operationally and financially. This was despite US indices declining roughly 15% sequentially. To get into specifics, Q2 adjusted EBITDA was $29 million compared to $24 million in Q1. Second quarter net income of $5.5 million was more than double first quarter levels, which amounted to Class 8 diluted EPS of $0.08 for Q2. The primary reason for the increase in both EBITDA and EPS was the $10 per quarter-over-quarter improvement in cash costs to $108 per ton on the back of stronger production. Second quarter production was a record 901,000 tons, up 7% compared with the first quarter due to a combination of better productivity, geology and labor availability. Quarterly sales volume of 915,000 tons was down slightly from 929,000 tons in Q1. The decline was due to modest transportation constraints in June, which have largely since been alleviated. The realized price of $143 per ton during Q2 was down 8% from $155 per ton in the first quarter, reflecting both weaker market conditions and lower index pricing. I'd point out that our decline in realized pricing was less dramatic than the decline in indices, thanks to our strong domestic book of fixed price business. Looking ahead, we anticipate third quarter shipments of 900,000 to 1.05 million tons. We also expect sales will increase in Q4 and that we'll exit the year above a 5 million ton per annum sales run rate. As Randy noted, we anticipate adding almost 1 million tons of annualized production compared to the first half of 2024 run rates before year-end. Overall, mine costs in the third quarter are expected to remain in the same range as compared to the second quarter. Due to the…

Thank you Jeremy, and to everyone who joined us this morning. As Randy summarized, we had a significant turnaround in the operations during the second quarter. The bulk of the improvement was at our underground operations which frankly had lagged our expectations the last several months. Overall, we saw improvements of slightly over 5% in clean tons per foot quarter-over-quarter underground as our Eagle mine and one of our stone coal sections managed to mine through some lower coal conditions and return to more normalized mining conditions. We've also seen modest improvements in the labor market in the Southern West Virginia area. This allowed us to start the third section of our stone coal mine late in the quarter and also helped to fill a number of vacancies at all of the other mines. This hiring and stabilization of the workforce directly led to achieving 80 more production shifts during the second quarter compared to the first. The combination of all of these positive factors culminated in overall June cash costs below the $100 per ton threshold for the first time in 2024. Regarding the labor market, it remains very tight. There are insufficient experienced coal miners available in Southern West Virginia and Southwest Virginia to fill all the open positions of both our mines and those of our competitors. Although, the turnover rates have moderated throughout the year they are above the levels we want and higher than our historical averages. Hiring training and retaining highly skilled miners remains challenging and is a daily focus of the operations. Moving into the third quarter following the traditional vacation period around the 4 of July, the June momentum has continued. While there are obviously less available shifts to work in July due to the idle periods we have seen continued modest…

Thanks Chris and good morning everyone. I will share what we are seeing in the markets and our current and forward sales outlook. Although global coking coal markets have weakened from a pricing standpoint, volumes are still well supported. Let me start with an overall global macro recap of the various markets where we sell. We are continuing to see the usual robust inquiries from the Pacific Basin for U.S. coking coals. Atlantic demand remains muted, though we are now starting to see positive momentum for spot deliveries in the region. Integrated mills and coke batteries in the U.S. continue to run strong, despite a decline in finished steel prices. We think this is due to their continued positive profit margins as well as cost advantages for blast furnaces relative to electric arc furnaces. These cost advantages are likely to grow over time as increased power demand and higher electricity prices heat into EAF profitability. We therefore believe demand for U.S. coking coal is likely to remain strong for the foreseeable future. We also continue to expect a moderate rebound in Europe in the back half of 2024 and more so in 2025. Western Europe is clearly a mature market continuing with carbon pricing and the relentless pursuit of decarbonization. By this, we are intrigued by the situation in Eastern Europe with a potential post-war rebuild scenario and result in increase in raw materials demand. Situation in Brazil also looks promising as steel import tariffs will provide the impetus for higher steel production and follow-on increases in coking coal demand in the coming months. In the Pacific, we are likely to see a seasonal rebound in demand from India and China in the back half of the year. The outlook for Indian steel production growth continues to look very favorable…

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Nathan Martin with Benchmark Company. Please go ahead.

Thanks, operator. Good morning, guys. Congrats on the progress in the quarter, especially on the metcoal side. First maybe just something I noticed in the presentation Slide 9 where you guys break out your production outlook on the medium-term production outlook it looks like maybe an improvement regarding your expectations for low-vol production versus last quarter. Can we get addition more details on that update?

Yeah. Its Jeremy. I'll start and then maybe turn it to Chris. So I think as Jason noted obviously in the current environment we think low-vol is extremely tight. So what we've done is we've effectively put the Maben underground expansion into our official medium-term outlook. So at the end of the day in addition to what we're producing now that's over one million tonnes of underground production which effectively takes us to more than 50-50 in terms of low-vol versus high-vol.

And also, that includes the fourth section of Berwind correct?

That we would be putting on yes.

When would that remind me guys that maybe an underground to pension likely get moving forward I guess?

Yes. We've got the optionality to frankly start that next year. The main gating issue for that was the prep plant. And of course we move forward opportunistically last summer or this summer with the purchase of a idled prep plant that we moved up to Maben and have installed it. And frankly, as I mentioned it will hopefully start operations sometime late fall. So, that's really what gated us. And then, of course, we'll look at our budgeting for next year and move accordingly but we can certainly start putting in section by section it will ultimately probably be a four-section mine.

Maybe much is 1.5 million tons but obviously market conditions will dictate that.

Okay. Thank you. And maybe just sticking with the Maben prep plant for a second. Just something else I noticed just broke out in your cash flow statement a separate line item for that prep plant expense. And then I also saw a footnote in your CapEx guidance is that it excludes $3 million for the purchase of that prep plant. So I just want to make sure how we should think about all-in CapEx number for the full year for 2024.

Yeah. Hey, Nathan, its Jeremy. So very good question. So we did break that out for transparency see what we're spending on Maben. $3 million within the cash flow statement is for the purchase price. So when you look at our full year guidance of $53 million to $63 million it effectively excludes that $3 million for the purchase price, but it includes the rest of the spend on Maben a little bit more than half of which has already taken place. So if you think about our full year CapEx outlook call it at the $60 million range excluding the $3 million or so for the purchase price. About $40 million of that is maintenance about $20 million of that is growth. So obviously when you look at the first half spend of call it $40 million less the $3 million so $37 million, frankly, that implies a lot lower spend in the second half. And the reality is that's because when you look at our three or four major growth projects this year the vast majority of that spend has already taken place. So I do think that's something you guys can look forward to in the second half of the year especially in the fourth quarter.

Yeah. Okay. Perfect, Jeremy. And I saw that mention in your release to hopefully things come back down a little bit in the fourth quarter. I guess, sticking with CapEx but shifting over to the Brook Mine. Obviously you saw the release I guess two days ago bringing on a couple of new partners. What kind of CapEx do you guys expect to be involved in the design and build of that refining and processing plant that you're going to be doing with Flour? Will all that spending be responsibility. I think you mentioned the target started in middle of next year. How long could that possibly take the build as well?

Yeah. I mean, our spend frankly out of the Brook Mine has been really very modest. I think, we've spent since inception just a couple of $2 million out there to really get everything moved into position. And as far as the design build as I said, we're going through testing and essentially trying to get the various variables nailed down which will inform essentially how we would design the processing facility to deal with the specific minerals involved in their chemistry. I think in terms of spend for the planning for the design of that I would think of it in terms of several hundred thousand dollars. That's about where we're going to be. And in terms of what the cost for the overall demonstration facility will be, I really don't want to get over our skis now in terms of giving you a number. We'll certainly provide it as soon as we've got the design metrics around it, so we can give you really an informed concept. But remember, the demonstration facility is like an advanced pilot. It's not a pure pilot plant in the sense that we intend to frankly, start selling products from the demonstration facility. So, this will be a revenue-producing plant, as soon as we open it. And we'll expect to probably start doing construction certainly site work on that sometime around the middle of part of next year, once the weather permits out Wyoming. And in terms of the timing, I probably earmark nine months to a year of normal construction, assuming no weather-related issues out there and that's the time frame. So it's probably a 2025 start and a 2026 completion.

Very helpful, Randy. Thanks for the stock. Then, maybe just one more. I appreciate you guys don't really want to call specifics on the domestic contracting season for 2025 as we're still early on there. But any initial thoughts at least directionally on what you think maybe demand from met coal could look like to domestic steel producers, next year versus this year? And I also noticed that Jeremy, maybe this is what you referenced in your prepared remarks that, your domestic tonnage committed in price for 2024 has crept down again, to I think 1.3 million tons now. With some of that, what was getting deferred into 2025?

Yes, Nate this is Randy. I'm going to just tee up one brief comment and then turn it over to Jason. But the demand side, we haven't really seen a real falloff on the demand. The US steel producers are still enjoying pretty good margins, despite the fact that the prices are down. So the demand side has not really been the problem. The problem has been, as I mentioned in my remarks, that we've really seen this sort of flood of Chinese steel hitting virtually every market and that has impacted steel companies' ability to frankly raise their prices. And when you've got low steel prices, you're going to have unfortunately low coking coal prices. So it's really more of a peculiar supply derived situation, based on the Chinese peculiarities, if you call it that. bUt Jason, pick it up and reply on that comment.

Sure. Thanks, Randy. Nate, yes obviously we're in ongoing discussions with some customers now so we won't get into specifics. But yes, as Randy mentioned, certainly hot-rolled spot prices are down globally. Still in the US, they're still the highest in the world. The margins here are still outsized compared to our seaborne customers service centers obviously, a low inventory points at a low point in the market, which would seem odd. As they come back in those spot steel prices are going to move back up. And frankly, Randy referenced the flood of Chinese steel exports, which we probably haven't seen this level in almost 10 years. But protectionism's working. It's working here. It's working in other areas, and they could probably see more of that. But I think one key aspect in terms of, you asked about coking coal demand, you're in North America next year versus this year, you're not seeing anybody slow down even given where hot rolls at and I think that says a lot. And then in terms of the tonnage you mentioned there that Jeremy had commented on earlier we had one North American customer that has an extended force majeure status and rather than lose those volumes we work with them and deferred some into 2025 which worked out for the best for both of us and our customer which is that committed change you see there.

Very helpful, guys. I appreciate all the comments at time. And best of luck in second half.

Thank you, Nat.

The next question is from Lucas Pipes with B. Riley Securities. Please go ahead.

Thank you very much, operator. Good morning, everyone. Good job on the cost side. And I wanted to ask on the cadence for the second half if you could maybe provide a little bit of color for Q3 and Q4. Q3 I always remember minor vacations can have an impact. So I wondered if you could maybe speak to that? And Chris you mentioned in your prepared remarks that some mines have an unacceptable level on the cost side today. What, sort of, tonnage are we talking about? Is that another 200,000 tonnes? Is it more? And how quickly could you redeploy manpower equipment et cetera if you decided to move things around? Thank you very much.

All right, Lucas I'll try and I'll tackle the first one first a little bit on the cadence of the cost. And right now in the second half we're expecting cash costs to be roughly the same in Q3 versus Q4 as we still have RAM 3 and Stonecoal 3 in the ramp process. So low 100s perhaps, but then Q4 pushing to 100 or a little bit below as those mines are fully operational and we also get the Maben cost savings. So at the low end of the guidance we could see it move down significantly on the cost side but that's sort of where we're guiding to on the costs. And then as far as the number of tons that are unacceptable it's probably in the 200,000 to 300,000 annual ton range. nd those could be redeployed relatively quickly within the third quarter I would say. We'll continue to monitor. We have had some improvement and that's what we saw in June costs and continuing into July, but coal mining can change day to day. So we are monitoring them extremely closely and we have a couple of places that we can move to get our costs continuing to move lower as they need to.

That’s very helpful. Chris, if you expand this across the industry, how many tons would you say are in that bucket in the US and maybe you have a global view as well?

I would guess in the US, if you exclude the big long-haul operators, it's probably 25% of the remaining production is in that questionable and unsustainable range at these prices globally. That's probably a little out of my ski tips to opine on that but maybe Jeremy or Jason has an opinion.

Yes. My quick comment on the global side, Lucas, it’s Jason. You can always look at the forward cost curve and see where that starts to trail off at. And I think that tends to suggest where most folks think that marginal ton lays, I don't know where it is actually 2026, 2027 at this point since we're focused on 2025 right now. But I think that's always a good indicator. Obviously, folks that are above that are on the edge there.

And I think the good and the bad news, as we see some of these producers have to contract, needless to say that opens up some opportunities for us on the labor side because where we operate down in the Southern Appalachian area is always a tight labor market. And to the extent that we see breaks in the action from some of our peers, we're delighted to pick up new people and deploy them because we've got situations where frankly our production has been impacted and hindered by an ability to obtain full labor. So it's kind of a double-edged sword.

Very helpful. Thank you for all that perspective. Randy, in terms of the demonstration processing facility, what product are you currently targeting out of that facility? Would appreciate your thoughts on that. Thank you.

Sure. So as you probably recall from our earlier disclosures on the overall product blend of our various ROEs and critical minerals. We've got call it eight rare earths which are the heavy and medium rare earth, magnetic rare earths. And then we've got two very valuable critical minerals which aren't really categorized as rare germanium and gallium. And so those would be the end products that we would ultimately be aiming to frankly create oxides for which would be able to be separated and sold on an individual basis. As we start a demonstration facility, we'll probably deal with a concentrate which will have probably most, if not all of those, combined in one concentrate. And then as we go further up the food chain, if you will in terms of processing then we'll separate those out, which is obviously, the farther you go up the food chain, the higher the value you receive for being able to sell separated refined elements.

That’s helpful. So first step here would be to demonstrate a concentrate and then, where is the market for that concentrate today either in terms of location or price for bucket? Is there a benchmark?

Yes. I would say the prices, of course, in the rare earth business in general are sort of opaque basket, because there's such dominance by China in the pricing and production process. And frankly, China engineers both in a manner to try to mute and/or eliminate any other production outside of China. So, you can't necessarily always believe the prices that you perhaps would get off of normal benchmarks. But the easy way if you want to start thinking about it as an analyst would be to simply take the breakout prices of each individual element and apply that into a basket concentrate, which we, I think, provided you some slides on in some of our earlier presentations on the rare earth which gives you a notion of what percentage of each one of these we have in our overall mix at least as far as our last exploration target is concerned.

You had that on slide 13.

Okay. And I might add that those numbers will probably change around when we do our further update this fall, because we've got pretty significant amounts of additional data that will be going into this new revision. So expect for those numbers to move around. And of course, we hope they'll move in a positive direction. But we won't comment on that until we actually get all the data collected.

Thank you, Randy. Thank you, everyone for your comments and best of luck.

Thanks, Lucas.

This concludes our question-and-answer session. I would like to turn the conference back over to Randall Atkins, Chairman and CEO.

Again, I'd just like to thank everybody for being on the call today and we look forward to catching up with everybody in several months. Take care and have a great day.

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