Ramaco Resources reported fourth quarter production of 519,000 tons, an increase of 33% from the same period of 2020. The company’s Elk Creek mine alone produced 410,000 tons. Overall total sales were 531,000 tons, down slightly from 541,000 tons in the fourth quarter of 2020. Ramaco develops and operates high-quality, low-cost metallurgical coal in southern West Virginia, southwestern Virginia and southwestern Pennsylvania. The company currently has seven active mines within two mining complexes.
The company reported that its cash margins on the coal it produced were $66/ton during the quarter, up 1,550% from the same period of 2020. The coal was selling for $143/ton during the quarter, which was 79% higher compared to the fourth quarter of 2020. Quarterly cash mine costs per ton were only 1% higher than for the same period of 2020, despite higher sales-related costs, as well as inflationary pressure on overall costs.
“2021 was a remarkable year for us on many fronts,” Ramaco Chairman and CEO Randall Atkins said. “The year began with the remnants of a post COVID-19 hangover and the hope for a more promising year than 2020, a very low bar indeed. 2021 somewhat surprised us by ending with the strongest performance we have had since we became public. That dramatic growth spurt in the second half of the year has now propelled us into an entirely different dimension as a company.”
In 2021, the company generated almost 910% more net income and 328% more adjusted EBITDA than in the previous year.
“This is particularly impressive considering that by the fall of 2020, roughly 66% of our 2021 tons had already been locked in at lower priced sales contracts to North American steel mills,” Atkins said. “We managed to continue to keep our cash mine costs low in 2021, averaging roughly $70 per ton mine costs, which we believe to be among the industry’s lowest levels. This was despite headwinds from both increasing sales related costs and general inflationary trends.”
Last year was also the company’s safest year on record.
“Looking ahead, we are now focused on the dual goals of being the only major coal producer to be in the midst of doubling our met coal production by 2024, while at the same time returning substantial capital back to our shareholders,” Atkins said. “For good measure, we intend to pay for our production increase from internally generated cash flow.”
For the full-year 2022, Ramaco expects to produce 3.2 million tons, maybe more, which would be a 50% production increase from its 2021 level of 2.2 million tons. The company has already locked in roughly 2.3 million tons of total sales for 2022 delivery at an average of $206/ton FOB mine.
The company expects to sell the balance roughly 1 million tons into export markets throughout the rest of the year. “Our most recent booked business has come in at just under $300/ton FOB mine with cash margins estimated at roughly $200 per ton,” Atkins said. “The markets remain strong with current levels for export index-based pricing at $380 per metric ton FOB port for high-vol A coal. Almost all of our high-vol coals have recently been regarded and priced as high-vol A coal.
“Looking ahead, we see continued strength in the 2022 metallurgical coal markets based on basic demand-supply dynamics and the muted supply response both globally and in the United States,” Atkins said. “The forward curve has indeed moved higher even this week. As we sit today, the realized pricing for our overall booked business in 2022 has increased by almost $100 per ton over 2021.”
In related news, Ramaco Resources reached an agreement for its subsidiary, Ramaco Development LLC, to acquire Ramaco Coal LLC, an entity owned by an investment fund managed by Yorktown Partners LLC, and certain members of the company’s management for a total consideration of $65 million.
Ramaco Coal primarily consists of land holding and coal royalty producing subsidiaries, including fee ownership of approximately 42 million tons of metallurgical coal reserves. Most of Ramaco Coal’s holdings are currently leased to the Ramaco Resources. The acquisition will allow the Ramaco Resources to avoid ongoing royalty-related expenses.
Ramaco Coal also owns Ramaco Carbon LLC, whose assets include the 500-million-ton permitted Brook mine near Sheridan, Wyoming, the adjoining Carbon Advanced Materials research center and a wide body of intellectual property (IP) in the field of developing commercial advanced carbon products and materials, using coal as a feedstock. This IP has primarily been developed in multiyear research partnerships with two of the U.S. Department of Energy (DOE) National Laboratories, The National Energy Technology Laboratory, and the Oak Ridge National Laboratory. Ramaco Carbon has also been awarded several DOE grants for development of “coal to products,” using innovation to create high value, environmentally friendly uses for America’s most abundant resource.