METC - Earnings call transcript Q2 2021

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Operator

Good day, and thank you for standing by. Welcome to the Ramaco Resources, Incorporated Second Quarter 2021 Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Mr. Jeremy Sussman, Chief Financial Officer. Please go ahead.

Jeremy Sussman

you. Thank Ramaco second to call. quarter of you all I'd our to XXXX Resources, behalf welcome like of On earnings conference me COO. Randy and is this Chairman With CEO; and Atkins, Chris our our Blanchard, morning

are statement. it events. could Before we to results of to as statements required many discussed made, statements like law, subject actual statements XXXX. whether start, results Any the forward-looking revise and Ramaco Ramaco's from the These by Private forward-looking today's constitute result concerning the any statements, Reform undertake events represent forward-looking which does Certain or Act discussed as outside These which or and in normal new speak update call only cause a the of uncertainties share obligation on within of other items which our is differ of forward-looking I'd otherwise. statements of cautionary future any future meaning of Securities to control, expectations statements. Ramaco's risks, Litigation forward-looking to factors, except the as not materially on information, date are

everyone encourage our ramacoresources.com, under call Randy CEO, download to on go website, let presentation With on the our today's to investor that calendar. and Chairman this and events said, I'd introduce Lastly, me Atkins.

Randy Atkins

Thanks, Jeremy.

old discuss of right. like few As goes X always, have through last we an a I apt right, gone going Paul highlights. says, quarter by months in me. second I'd series our since pleasant to it's to our provide There joining thank results. the confuse And to a a call, everyone today want things when in song to Simon, us is line for something which

$XX The last year balance on track printed an the than overall with hopefully, which for had to now EBITDA, very our of for have of and and in coal more some is internally seems by row, a terrific we first we back performance. met budgeted strength market. December. entire frankly half improving cost million higher concluded metrics quarter record We driven strong XXXX a First, X

at second complex a production Elk our record. XXX,XXX Our also of quarter was tons Creek

The of been of million over to tons that's low-vol million strong. even even tons, U.S. nameplate track Elk exceed perhaps since us has production at increased puts on first capacity by The almost Sales X.X and vacations. QX dramatically rather QX. allowing X.X certainly have half Creek benchmark pricing and QX $XX for

abroad, and X.X see XXXX. tons Elk sold world last ahead puts quarterly second improve. a half We we and the the enjoying held record sold At This first XX%. almost a about for have it domestically capacity continued our us general have pricing utilization million about highest economy year. first through making XXX,XXX operations all tons, is to a of XX% quarter, at are companies, by since which almost at we costs both ton. $XX Steel half, at record and the the In $XX Creek, ton,

second time our in the year, increasing sales, release. of and on are operational this guidance CapEx, for on and guidance production and set result reducing marketing are a As we outstanding forth cost results, both these again and

in excess of with year, dry Our are tons of recent the remaining of hopefully, second on running We strong XXX,XXX powder same above. or margins over sales now the still margins most in these place a our have half $XX ton. to

from longer out is unique constraints lack their and may markets indeed copper in still legs. made the As coal supply the catch more sector moves run. We especially we coal This met have and now to feel, have Iron to the playing met think the ore in cycle. turn will early is capital. of room given up

markets continue strength, then met the free which anticipate we of our bottom with if cash we strongest flow. So expect, their year having current line,

and After balance very liquidity. industry a some to for we profiles try manage we bond end of floating to and course, of in of we by as that took strong the million. for cleanest well liquidity the sheets quarter, $XX an the repeatedly, Indeed, raised as have position. liability we we improve as said steps our second unsecured As where offering, cash liquidity, have additional you almost one know,

space years, production, that a tip either was we'd proud optionality through us the to like projects. ideas gives organically or and in to our the in outside deal underwriters. this coal unsecured This of cap to X are first We liquidity debt additional development all some explore of the give over near-term to add

markets As I advantage may and approach cost we Having able think some near-term a a market, strong in having like the with production to we as would see low met to you said that, good be take we of We new see legs. looking said, that production. to any and the both opportunities. some at discipline additional market how we deal of intend exercise multiyear

our I as balance think market and of check that forefront We some ideas the liabilities, discuss we has be keep particularly any keep liquidity analyze occurred sheet we that capital the not do industry, to even intend matters when you we long of in further want might and mention to with at over Our cycle. a be will markets to hope this throw months. much to coming shows more also quarter money which will able not options, always X try end. when and post strength, unfortunately, to tons [zuberts] and in too Ramaco. production Further, the the reputation indiscriminately prudent. adding I We

a were additional continue entirely do both as momentum they we to sense unexpected, positive not of While add out year. build the they

against late for Chubb's a from XXXX. plus jury coverage grew Chubb in Creek very of First, we collapse litigation cold won stemming Insurance. decisive a million silo This storage at cost Elk from of victory denial damages in the $XX

position. having this in to forward We finalized. always we possible decision Although court to appeal, decisions are very look subject feel confident our

last been secured had formally we Program our million, the late from week, Additionally, SBA year, $X.X which Protection last forgiven. of Paycheck heard that loan we

the treated we to Although finalized want shareholders, camp. dear since I also close, manner have team is it last year, to To matters comforting to in briefly touch as near which Ramaco's loan this that and well. of this our certainly had on in is management

growth we seen our or to very are in coming continued have as over the We XX a with sustainable dividend months. for always and close production, such over also last flow year certainly fund A price tricky what This has hope our goals, begin become is free to Board this later our also need our about balance growth by XXX% explore and may We rather strength the reach to to and need company stock rise dividend. year-to-date. we XXX% begin that But we have to to by against gratifying, cash grow growing fund a policy. act. and enough making reliable we growth will months production we as in balancing and sure Ramaco

year company, a not As not-too-distant the we a explore this at are future. in point to hope again, this, we later

am that, to to first our with would in our that's half strongest and turn continued to finances With the and just Jeremy I right, floor our produced. bit into I continue to has Ramaco and have the of in I been been what I'd I be a some to whole on to turn hope how delve results. floor that proud wind some to discuss Now detail, will family, operations as operational like go market, more to very Jeremy And year. balance song before now will to of strong execution the financial hope sales what we reiterate back Chris over the things goes for a our I like

Jeremy Sussman

over and Thank another quarter, quarter going I'll XXXX We financial you, our highlights. Randy. start financially. operationally by stellar both second had

year when was up quarter these XXXX only while step coal of the history quarter up than second higher Second $XX.X more met ago. of were in QX adjusted XX% ago, our year a of EBITDA results, quarter second a $X.XX overall was with XXXX. EPS than XX% beating domestic was XXXX, XXX% EBITDA million from contracts in adjusted This from of

adjusted for our XXXX than of EBITDA $XX was higher which EBITDA materially half of was first XXXX. adjusted all The million,

forward outlook. Turning to our

in second of and tons X.X production XXXX. XXXX XXXX sales capital and production while to and decreasing we overall guidance, X.X tons anticipate to quarter, straight previously cost our million million our XXXX the X.X now million million are tons, million increasing compared to tons tons expenditure For from X.X guidance. We up X.X

$XX a We per million, $XX $XX to at cash down million now have capital million $XX down ton per by to now per our million Creek expenditures complex, costs of XXXX XXXX of $XX to and XXXX Elk anticipate expect total previously. sales ton $XX like amount. guidance increased We $XX ton from $XX to previously, from XXXX. from down $XX in We

paying for taxes We the minimal future. continue cash anticipate foreseeable to

In infrastructure. seeing the coal terms massive of economies fiscal global stimulus improve has as in and what we the benefited aimed market, both packages consumption are continued U.S. have to from XXXX throughout pricing global at metallurgical and

these and met in provide We markets conditions coal strong positive expect the to steel Ramaco. for tailwinds continue to

the we market than ton. steel hot-rolled coal XXXX. coil with the for utilization XXXX met head low-vol factors. contracts at hit U.S. to the muted our is record supply since first We see XX% prices supply demand on variety to view annual positioning met high-quality, U.S. have indices steel above capacity time $X,XXX price On for lows. demand will change occurring the steel doubled scarce. of their the be a time, met that same remain per positive COVID-XX negotiations as supply more of coal coal levels we side, produce Domestic that domestic induced mills. At are This recently from into continue nothing for low-sulfur horizon response the

in company have the moving end, of only cash After ended million, pleased a we previously, I from that position of balance Now traded completed quarter to are net be having a to offering. cash of small $X our X% note a June senior unsecured as We we debt we XX. with $XX.X almost coal the million quarter to net shifted net a on $XX of million position sheet. position. publicly U.S. note liquidity. to believe record am We a

first Creek Berwind coal work its both uncovered Creek and are time Big ahead, area. Looking on and in Big having budget, with recently on

We said, rate the excited to a Operating what now With Chris? be like continue that run future Officer, Chief at are call we producing by X ton turn to per Ramaco. holds stated, the million would mid-XXXX. our for Blanchard. to over Simply Chris I expect about very annum to

Chris Blanchard

Thanks, Jeremy.

and did worked with who and counsel the technical update is attention, thank case. entire the time operational We thank litigation. outside their to turning and team to complex jury in a back the a Ramaco to want and briefly This wise I Before the rendering long issues, process care throughout fair Switching operations, a on focus. in-house what our the for and for court was their of and safety our compliance primary decision. remain and believe course, Chubb we

as track compliance We the back to at the to year. growing XXX. pandemic report said, now to the on side, running year-end for happy This increased All we Ramaco capacity are hope continued experienced year. have the by throughout has now performance and that half our within the have quarter period July, Our the production rates workforce Similarly, last to reached of in first continue to half grow and the safety we under we our impacts despite just months quality country. the positivity the near that near operations ahead XXXX XXX of statistics that of XX.X% related in is early into our employees water throttle workforce environmental first existing the of to are the opposed the move slightly at our XXXX. end for seen with of in for second COVID-XX fact same line we up and

preventative all so behind and kept until have the our to We in clearly place pandemic is measures operations plan do of us. across our

experienced finding the We tracking the and miners. coal labor market local also stress monitoring in are on increased

able accommodate experienced Big our start-up operations, our turnover To the adverse successfully Elk existing closely. second workforce continue Creek to to as fill not to to increasing we in and see impact we the our modestly operations, we quarter at rates have have well. but grow have While date, any the productivity monitor rates been in our situation vacancies Creek started at

at levels areas the Elk operations same at all quarter Elk Turning the now second XXXX existing the would should to vacation mines We our Creek I for with although where anticipate everyone does ended to operate for of approximately that the operating contain Creek. we productivity of the continue fourth the continue traditional the preparation the throughout. third on remind quarter weeks and the into quarter. third plants mines, of that quarter one call our in

a cash costs see mine for our and due levels, was increase this in cash second coal in and While the spot anticipated included we to our course, only of index-based to increase our did modest costs realization higher in the sales. quarter, welcome

modest seen and long anticipate continue the our suppliers material to remain increases commodity have as from strong. We as raw cost prices these

that the believe ranges have cover we these will However, cash pressures. that provided projected inflationary cost we

Moving our to new operations.

moving Randy Jeremy forward and both speed. are at As full these noted, projects

surface Creek the of through sediment worked Big mine pre-mining and second majority Our construction on control. the quarter

having currently day moved anticipate September. we uncap mine and shifts in did coal surface into we the although staffed fully producing August. mentioned, Jeremy As start operating first X one we and We the July, per per have status, only mine our as ship day in

mining at year. Creek very this operation in to clean or this Vol the tons Big XXX,XXX the anticipated clean tons of annual should end of of begin end its run the system -- High rate approximately October, by Our mine quarter bringing early at full

our will in to is continues infrastructure At #X current forward month the days and reach look this Equipment X/X the At in, excavation from slope and production we We the days tunnels that final time. Berwind construction anticipate the Berwind approximately in will will next coal to potentially of in our first we ramp project coming be at first early X slope process shipments and expect rates, the mine, mine begin at in complete. the the we October. moved Pocahontas and or of Seam September.

clean It expect At quarter the Assuming second Berwind rate the remarks. in the time which and call. should like of this discussed. the mine, X Creek run annual of pace Operator? fourth million concludes Berwind And With operator promising to markets, PX clean from that, point, quarter producing for production Creek, XXXX. is rate, and ton Elk ton a operational XXX,XXX to metallurgical an the Q&A is management's indeed previously it exceed we budgeted mine the end and of up the to now return I exciting to the Ramaco by start-up in a the at fully the as for have XXXX Big prepared this annual have that currently combined of Ramaco. coal the call we time portion would

Operator

[Operator Pipes Your of comes from first Instructions] question line the Lucas from B. Securities. Riley

Lucas Pipes

the really costs, about if a on half. question projects and first on terms wondered the congratulations roughly strong remind And of My of what first production be the in coal, quality perspective of in could additional the that. I then on is or in the you'd kind thinking shipments test of you Elk anticipate and growth Thank us your test strategy. no you commercial of customers shipments for very Should establishing with for you you'll ahead are market that delay we much of sufficiently time? with terms kind

Randy Atkins

question production? our current relates Lucas, to So your

Lucas Pipes

the on projects. growth No,

Jeremy Sussman

want projects. to and you -- Creek about growth The Big talk Guess yes.

Randy Atkins

with and Creek, project Lucas, a XXX,XXX or Big So mid-vol so annual that's product tons, it's primarily. mid-vol the or a start clean

$XX full cost expect the expect it's run at established in to that's us, range. we Then be in costs, an upper low low/mid-vol be to low-ash, that XXs range. low-sulfur, turning more the the that say, of once to in product We for Berwind, rate

Jeremy Sussman

And an Lucas, said, the of it's Jeremy strategy, here, so terms low-volume commercial Berwind, market. established in Chris it's

could the So ground had inquiries say, we've tons we needless more on to sell. than that

you there, challenge. while needless certainly, supply but have coal up, I mid-vol, in short be first that's be a that's we'll to in low-vol of tight so test going Obviously, to very also and we Clearly, shipments obviously, to want will So Big here get is say, ramping product. -- that not Creek don't will think established don't an and that's the supply. of in type a be

first coal Obviously, having that. on step. a in-bounds first receiving good been we've uncovered So is

quick So to up possible. of start as to mines running and the say, get hands get want in I customers needless shortly samples think these and as we'll we to

Randy Atkins

other of in one just Lucas, thing, terms And strategy.

we think with I our like -- high-vol look as B this heavy component, we pretty So out started portfolio, a of we're now and overall at sort moving. is

into be next terms going probably we're certainly mid-vol. X/X So A's of year, to XXXX, in by and probably low-vol

the will probably examine that's we direction options. think I as to start production we look of our some

Lucas Pipes

the coal be at And on then, what from would What And decision remarks, maybe discussion elaborate of return exciting that returns on the influence Randy, the to question? balance sheet? and topic your in metrics, your looking turning you wondered in your prepared today, from you're either you if very mentioned certainly industry I what capital space. sort to capital or could

Randy Atkins

got to progress position talk the don't too get from We're on I Board we're want going We've through I now. good to in skills year. right record to than right as said, space few about because, this there later in far that with very need the to a my a out we are as the now. nailed end the obviously We things we even sit There position that still stronger be year liquidity. hope a in down. are

is a understand XXXX to to look how from domestic standpoint. have business We the going

increase we're got and We explore both. And into externally, further production pipeline some we're a a the of in little that projects half. have now the looking projects that as got couple visibility bit we've we've couple of on to just second Organically, ideas, well. some beginning really market, a got obviously, get at we've to to our

feel assuming priority, we're that requirements what are telegraph unmindful would in cash very of a that the sustained of something sort flow dividend dividend dividend. level sustainable a to support is a balance growth of able wanted So be we comfortable, decent I not of our to I that that production generation can a our think high free make we would that we is profile getting to and a

So you'd down in nailing year really that's like, with over of specificity but the that it to but will think evolves. that the later here nail lip the we're discussing a position the as as probably it we for just not I the sit we don't quarter second be down again, year,

Lucas Pipes

is all detail appreciate Really luck. best the this of Randy, super continued and helpful.

Randy Atkins

to thanks that discounts. did And they us placement efforts Riley Lucas. for Thanks, the the helping in underwrite B.

Operator

of from Nathan Company. [Operator Instructions] Your next The Benchmark line question from the Martin comes

Nathan Martin

Congratulations on million have start export tons now X.X of like It pricing. about $XX. the a performance. of Maybe sales I'll looks committed guys you with at price

XXX,XXX I that about of incremental $XX that but do end math, pricing up around shipped. obviously, at was have versus think some If funds tons $XXX, XQ. at can include that an guys already at you you I come

I that margin over comment of right maybe made seeing now $XX is there close out think the to better. Randy, you a or you're what

about So are talk seeing East a environment could end export I the at relative pricing just some where products was indices. idea the back the Coast of more to little pricing published you the hoping and us half bit you're maybe U.S. your today, give

Jeremy Sussman

and Nate, off turn it's to Randy. then start it I'll Jeremy.

is ton that -- is certainly comments math pricing low-vol in your on QX. as his reported a So Randy, things. you yes, last said, would we couple today up is $XX One, is, a correct. since of I note where

So than prices clearly, seeing have anything we're higher we previously that today shipped.

and semi-soft Slide average bit gave We you were XX, good that of there XXX,XXX the everything the, second low-vol, skew time little so the A/B, can lumpiness a on tons that is, some there it, cetera., or a bit. the in high-vol so, get et of of of kind any in a thing think there. call semi-soft I little breakout

on don't to quarter-to-quarter kind any I have if other speaks So cadence comments pricing? and that you know of the Randy,

Randy Atkins

No.

some the sales we've think is, really of We market, netted got done the structure probably lagged surprised strengthening we're in figure I the into that's further thing a with frankly, at got that the has or not thesis think iron and structures. has looking because lot margins at. would China of legs. met our only as coal we mine. go cost really the what supplies some steel be $XXX take where pricing situation you look was feedstocks into ore, second said, I coal Nate, kind think referenced the at market as even Australia, like other that see out have plus the range pretty, if a the us met and politically you've dampened had perhaps somewhat And to back it's I I I think I XXXX is is, which because, the half a we've that in of

think spells but over -- catch I I'm -- in not see met and in few the to sure on change year we're I copper happened So earlier will don't begin I do up that iron causal next think months, -- Australia-Chinese that going is the to to ore. would what's any the that coal I

Nathan Martin

your just you're Appreciate to thoughts Okay. East high-vol line your if on cetera? with indices, of drill B, down kind thoughts there, of my discount Coast and or guys, et part last A, any getting question, roughly on the high-vol U.S. in

Randy Atkins

discounts, like if premium. a it think I better don't be talk I would you lot about Nate,

Nathan Martin

you Maybe where progressing was talking could idea seeing. today, think be if much year a is just the an guys, could given, domestic I time? how we're your tight you given contracting with that ago pricing on market much higher we're what season it extremely thoughts, up us give is possibly again, than about pricing, during year-over-year this where Could actual it how get

Randy Atkins

much to think best at of is today, August expect point. difficult. in here that I just for start sort and that the it's going a to closer get sit this but Well, I of we have come horizon pricing when the release, could pricing. that the we quite I continued robust see more September, be as as at see pricing, give it. sitting little the And expect sort year on I guess, the in you XXXX we And to I as least is trend clear, not handicap upward there September, in to we'll I sometime some don't I up dance is think earnings pricing to will guidance -- what than here impede anything said remarks, in the my

Nathan Martin

I cash ask, are you position. Obviously, guys in mean my I obviously. Lucas, on bigger now picture had to touched question. that

to got deposit Creek in cash You've especially of failure. related coming of vertical million. again, cash, quarter door about in of more Elk silo substantial for related the some row. guidance hopefully lowered $XX the current Again in a balance your the amount And second money, you CapEx to

So again, maybe just there? ask a little of any guys bit differently, some you what have for hand? would are going be thoughts your other this to first use, on you think, that cash Just extra

Randy Atkins

Yes. Well, the a conservative first we're relatively thing, bunch.

don't -- count cash we receive before we So want it. certainly to cash

on haven't much some borrow we the fond check did received I'm And against debt hanging around. just money, we judgment of not of and yet course, So cashed Chubb. too the having that we

nature, So not it's of of cash, and certainly we look paid of our course, high liabilities priority be free at is to repayment out talking on that about money, things point. vantage from from going dividends list. at my borrowed of least And when

would little domestic we'll And is think dynamic saw quickly And So we a seen a forward I rise. some whenever now they look once which right into And of We're into strong you've do on like a it's typically, a think, capital there's probably, indications XXXX, this side fortunately the industry later beyond extremely as can't we just visibility the seeing And We'll production would constraints on have some industry in all new a XXXX. our bit a take would equation. We'll our lot a luxury be that to or they're new position of would visibility, who have is like in is from lot great. on going season. mines market add steel what the X to from we find the that is be may to sales I little inside have different that to but to I take to be production money in add to how what going which produce some time, production. X try a where steel XXXX, for We want don't thoughts industry we'll producing year. the well adding have in try look in also, the better more think into to have years other markets look XXXX year. this I a going we see an of at take we're to that interesting mines are to a cycle, rush the the people looking said, think coal are real that we we're to coal, itself so. to like which build-out. that tons a think of because tons, position is We near-term at

And so strength. we can take advantage of the market

Operator

Atkins. Please to [Operator back to conference Randall sir. Instructions] go I am like turn showing ahead, now no further questions at Mr. would this time. the I

Randy Atkins

second and October again, or you. to you care. in speaking Thank questions most are to addressed morning. sometime Take that look forward certainly half, And as the we've everyone's looking you've We attention forward appreciate we, had, to and Okay. hope we we always, strong and time November. this of a

Operator

today's This call. Thank for conference concludes participating. you

disconnect. now may You

Ramaco Resources (METC) 7 Aug 212021 Q2 Earnings call transcript