Good day, and welcome to Ramaco Resources' Third Quarter of 2024 Results Conference Call. All participants will be in a listen only mode for the duration of the call [Operator Instructions]. Also, please be aware that today's call is being recorded. I would now like to turn the call over to Jeremy Sussman, Chief Financial Officer. Please go ahead, sir.

Thank you. On behalf of Ramaco Resources, I'd like to welcome all of you to our third 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 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. 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 Web site www.ramacoresources.com. Lastly, I'd encourage everyone on this call to go on to our Web site and download today's investor presentation. With that said, let me introduce our Chairman and CEO, Randy Atkins.

Thanks, Jeremy. Good morning to everyone and thanks for joining the call. The third quarter was easily our strongest operational quarter this year. In a nutshell, we continued to focus on controlling what we can and that is cash cost and volume growth. What we can't control is pricing. Despite a 13% decline in the Australian benchmark price this quarter, we seem to be the only public metallurgic coal group to have maintained essentially the same operating margins for both the second and third quarters. One large reason is that throughout this year, our mine costs have declined by over 25%. We went from a March high of $120 to a September low of only $93 per ton. Quarterly, these costs have dropped from $118 per ton in the first quarter to 102 tons this quarter and we hope to actually improve on that in Q4. In addition to excellent cost control, we also had improved mine productivity as well as both record production and sales. Indeed, this was the first quarter in the company's history where we booked more than 1 million tons of quarterly sales. Unfortunately, the bigger story behind both Ramaco and the entire met coal industry's results this quarter is the drop in met coal prices throughout 2024. The decline is of course a direct result of China's overproduction of steel, which it has then exported or dumped into world markets. This has then resulted in world steel companies both cutting back on their own production and then reducing the price they're willing to pay for their met coals feedstocks. As a result, this quarter alone, we saw a $15 per ton sequential decline in US met coal indices. Both the US low vol and high vol indices fell by roughly 7% this quarter on average…

Thank you, Randy. As you noted, third quarter 2024 operational results were meaningfully better than second quarter operational results, which were also meaningfully better than our first quarter. However, US metallurgical coal indices have fallen throughout the year, thus, negatively impacting financial results. Getting to specifics, Q3 adjusted EBITDA was $24 million compared to $29 million in Q2, third quarter net income of breakeven compared to second quarter net income of $6 million. Q3 net income was negatively impacted by approximately $1 million due to the closure of the Knox Creek, Jawbone mine. Class A EPS showed a $0.03 loss compared to an $0.08 gain in Q2. Closure of Jawbone, negatively impacted Q3 Class A EPS by $0.03. Primary reason for the decrease in both Q3 EBITDA and EPS was simply the $7 per ton sequential decline in realized price per ton due to the continued meaningful fall in US Index prices. Specifically, Q3 realized price per ton came in at $136 versus $143 per ton in Q2. From a margin perspective, the price decline was mostly offset by continued cost improvements. In Q3, cash costs improved to $102 per ton versus $108 per ton in Q2 and $118 per ton in Q1. As we've consistently guided, our cash costs would decline as low cost production ramped up. This was indeed the case at Elk Creek with our Ram 3 mine in the third section at our Stonecoal Alma mine hitting full capacity in August and September. This translated to average cash costs in the mid-90s per ton range for those two months. Our solid cost control led to cash margins per ton of $34 in Q3, which was flattish versus Q2 despite realized coal prices falling $7 per ton sequentially. Q3 non-GAAP cash margin per ton was 25% versus…

Thanks, Jeremy. And thank you to all of you who joined us this morning. As discussed, we continued the strong finish to the second quarter and carried that momentum into and throughout the third quarter. The biggest catalyst in the ramp up of produced tons and subsequent cost reduction was at our flagship Elk Creek complex. Along with the startup of the additional surface mine and underground section, we saw some of our legacy mines complete mining through some of the challenging geology we experienced in the early months of 2024. Also at our Michael Palatin mine, which had been dealing with an acute labor shortage due to the tightness of the labor market, it has been fully staffed and production levels have exceeded our targets throughout the quarter. Finally, we brought on the new section at Stonecoal with high clean tons per foot, higher production as well as the Ram number 3 surface mine. Both mines provide lower inherent production cost and increased total volume. This has driven down operating costs at Elk Creek to levels that we have not seen since late 2022. With all of our production growth behind us at Elk Creek, we should be running at or above a 3 million ton per year production rate for the foreseeable future. At the Berwind complex, we continue to grow the base production at the Berwind Pocahontas number 4 mine. Hiring efforts are ongoing to fill all vacancies at this mine as well as beginning the staffing of our number 3 section, which is scheduled to begin producing late in fourth quarter. The current environment in the coalfield should help on the hiring. We are working closely with State of Virginia on the environmental side on permits required to begin raise-boring, our exhaust intake and elevator shafts…

Thanks, Chris. And good morning, everyone. Today, I'll share our views on coking coal and steel markets, as well as our current and forward sales outlook. Global coking coal markets have continued to weaken. From a pricing standpoint, index averages were down approximately 7% in Q3. Prices rebounded materially at the end of September due to optimism around Chinese stimulus measures but this momentum faded in October. Chinese authorities now appear willing to support their economy, including the real estate sector, which is a significant driver of their steel demand, but we'll have to wait and see what and how these stimulus measures play out in the real economy. Contractual volumes and spot demand in the seaborne market continue to be well supported. This is mostly due to robust demand growth in the Pacific. Chinese and Indian imports in particular have seen import growth of 23% and 6% year-over-year so far this year. Looking ahead, we're anticipating more demand growth from India in 2025. Pig iron production in India is only up 3% this year whereas we believe the long term growth rate will likely be double that in the 6 plus percent range through 2030. As India continues to develop incremental blast furnace capacity, demand for coking coal imports is likely to grow substantially. The restocking season in India has been disappointing likely due to below trend steel production along with sufficient current coking coal inventories. However, we're anticipating a pickup in Indian demand and buying next year. In 2025 alone, we see an incremental 16 million tons to 17 million tons of additional hot metal production in India from new blast furnaces. This amounts to over 10 million tons of incremental new coking coal consumption. We are continuing to look at new opportunities in India and are actively…

[Operator Instructions] At this time we will take or first question, which will come from Nathan Martin with Benchmark Company.

Jason, I appreciate your market comments there. Obviously, a lot of discussion during earnings season around the current weakness in the met and steel markets, especially on the high vol side. It seems like price realizations are reflecting maybe some higher than normal discounts. You just talked about maybe some of the advantages your products have. Maybe just a few more additional thoughts there or even a representative net back calculation would also be really helpful.

I mean, doing quick math on where the current indices are at and pulling out a typical -- rail import cost, you're probably around 130 net back, flat to the high vol indices average currently, I'd say in that range. And yes, as I mentioned, Ramco is really unique in terms of all our products are low sulfur and particularly in the high vol space that plays a big part in Elk Creek's pricing. So certainly we see folks taking business at levels like you mentioned. Fortunately for us, our products demand, I'd say, stronger relativity just based on those attributes, particularly when we saw which we're going back in history a little bit when the Russian coal was pulled out of Europe and became available only to very select markets, that coal is very low sulfur as well. We've stepped in, actually a lot of the newer business we've had last year and this year has been folks replacing that type of coal.

Maybe any additional color you can provide on the variable cost, I mean you mentioned rail costs, I'm sure there's also some sales price related cost too in that calculation. Is there a sensitivity there?

Yes, certainly those will ebb and flow basis the indices. They're very I'd say prompt in terms of which indices they reference. So the market's up, they'll trend up slightly with it almost at the same time and the same thing when it's moving downward. So they track pretty closely with where the market is at essentially.

And Nate, of course also I'd point out obviously our sales and marketing costs are rather a quick pass through as well. So obviously, in the declining market we're going to be experiencing lower costs there.

And maybe along those lines, I mean I appreciate you guys are probably still going through the budgeting process for next year. But given the meaningful improvements you continue to make on the cost per ton front, including some of that lower cost production coming online and then obviously reduced trucking costs associated with the Maben prep plant ramping up. Do you feel pretty confident in your ability to maintain that expected sub $100 dollars cost per ton year end run rate into next year?

Short answer is yes. I think we've got a strong slate of oncoming production next year that we've already kind of got baked in, which is the growth in our Berwind mine into the third and then perhaps hopefully the fourth section depending upon market conditions. We've got Maben, which we of course have the prep plant that's now operational. We can take a look at perhaps expanding there into deep production, which ultimately would be as much as another 1 million tons. And then we've got our eye on a couple of additional projects. So I think in terms of ‘25 costs, I think we're going to -- the good news is in a down market, you try to exercise as much discipline as possible to go back and really sweat out all the areas of potential cost savings that you can from normal operations. And I think we've done an outstanding job on the operational front of doing that. Obviously, dropping our cost from a high of 120% down to 93% is a huge drop percentage wise, I'd hold that up against anybody else in our space. I don't know that we're going to continue to drop at that same rate but we will certainly continue to try to squeeze everything out that we can.

And then maybe just one last kind of taking a step back here to the fourth quarter. So you guys tightened up your full year shipment guidance range. What does it take to kind of get you to the low end or the high end of that updated guidance? Is it mainly logistics, is it demand? Just would be great to get some thoughts there.

So yes, obviously the implied range is about 1.2 million to obviously 1.25 million , which is that kind of 5 million ton exit rate. I'd say the high end of guidance assumes nothing really slips into 2025 in terms of carryover tonnage that we continue to reduce inventory. The low end assumes a reasonable amount of slippage into next year. Obviously, demand isn't great right now but we'll just have to see how the cards shake out. But that's kind of the reason for the range.

And our next question here will come from Lucas Pipes with B. Riley Securities.

My first question is on the volume side for 2025. Jeremy, you just mentioned there the kind of exit rate Q4 expectations. How should we think about 2025 off of that base?

So we've got a kind of budget meeting coming up with the Board in a couple of weeks. And then of course, the early December Board meeting where we'll certainly release guidance in line with historical practice. But I’d kind of point you to -- I think, it's Slide 15 where you can effectively see that for each of the last five quarters we've effectively increased our production guidance or our actual production every quarter. So I mean we're certainly excited to exit the year at hopefully 5 million ton per annum sales run rate at the high end of the range. We'll see where market conditions lie and get back to you guys kind of in line with the normal cadence within a month or so.

And I think you can also do some pretty easy math from points we made, such as the Berwind third section will be running at a $300,000 run rate, we've got the fourth section we can also start. We've got Maben that will be obviously at full tilt with the possibility of adding some deep tonnage, which should probably not happen until later in the year. But we have additional tons that we'll be able to start bringing on throughout the year. But I don't want to get ahead again, as Jeremy said, of what the Board slates for what we want to look at for '25 production, but those are some low hanging fruit.

And in the context of the Jawbone idling, I wondered if you could maybe speak to the broader supply situation of Central App. In the current market environment, how many mines or percentage of supplies loss making, how quickly might they respond to that pricing?

Chris, why don't you go ahead and take a first stab at that?

So just anecdotally down in the coalfields, Lucas, we've heard of a number of mines shutting down that probably similar to Jawbone or perhaps even worse that just can't be sustained in this market, particularly with as tight as labor has been throughout really '23 and '24. So we've heard a number of these come off. There are a number of processes that are running right now looking for sales for operations that are distressed. So if I was going to handicap, I would guess probably 10% or 15% is on the chopping block right now and there's probably a little bit more than that where our competitors where the plan is that hope things get better. So maybe that same amount that's treading water and hoping for better days. So as much as 20%, 25% of the total production is probably code orange or code red.

I'll try to squeeze one last one in. On the domestic pricing for next year, I believe specialty coals were still outstanding. Could you speak on what additional volumes you look to put under fixed price for 2025 and how should we think about kind of the weighted average once all the dust is settled?

Obviously, we've got a few negotiations ongoing at this moment, so can't get into too much detail there. Certainly given the nature of the product, it will bump up that current average number of 152, as Randy mentioned in his remarks. And likewise given it's -- we're talking about more than one customer here, the volumes could -- frankly, could fluctuate somewhat too. I know that's not a hard and fast answer but it's probably the best one I can give with a lot of up in the air currently.

Good news, Lucas, is two things. One, the number will go up and the price will go up.

And this concludes our question-and-answer session. I'd like to turn the conference back over to Randall Atkins for any closing remarks.

Great. Well, thanks again for everybody for being on the call. And we look forward to catching up on our next call, which will be next year. Thanks again.

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