November 9, 2017 - Ramaco Resources, Inc. (NASDAQ:METC) has announced that it reported a net loss of $6.2 million, or $0.16 per share, for the quarter ended September 30, 2017 compared with a net loss of $1.5 million, or $0.07 per share, for the quarter ended September 30, 2016. The Company had revenues of $14.4 million on the sale of approximately 157,000 tons of coal in the quarter ended September 30, 2017.
“Our key objective during the third quarter was to align our production improvements and mine start-ups with the ability to process coal at the Elk Creek plant. These improvements included advancing our Alma Mine into areas that have advantaged operating conditions, as well as ramping into the dual seam mining area at the Eagle Mine. As we advanced each of these efforts during the quarter, it became clear that we would experience additional delays in the construction of the Elk Creek preparation plant. These delays accounted for most of the increase in our third quarter mining costs and in turn our negative margin. The largest impact of these delays was higher trucking and third-party processing costs,” said Michael Bauersachs, President and Chief Executive Officer of Ramaco Resources. Bauersachs continued, “Late in the third quarter we saw significant production increases at both of our deep mines. Our Elk Creek Eagle Mine has now reached the area where the Eagle and #2 Gas Seams merge, providing approximately 12 feet of cutting height. This combined seam height necessitated switching out most of the mining equipment in favor of large profile production equipment, including 12 CM miners. This work is now mostly complete,” Bauersachs added. “With the alignment of the geology, equipment and an operating preparation plant, The Eagle Mine is poised to give us a tremendous boost in production at very low mining costs. Indeed, during October, both of our deep mines produced coal at the levels that we expect in our 2018 plan. Additionally, our #1 Surface Mine and Highwall Miner operations, which began limited production in late September, are projected to provide us with 600 to 700 thousand annual tons of what will likely be our lowest cost coal.
“During the third quarter, much of our surface mine staff were diverted to other duties, including hauling and preparing stockpiles for raw coal. We closed September with over 161,000 tons of raw coal in inventory. An active Elk Creek preparation plant will also allow us to return to focusing on low cost surface and highwall miner production,” Bauersachs concluded.
For the quarter ended September 30, 2017, Ramaco Resources had coal sales revenues of $14.4 million on the sale of 100,992 tons of produced coal and 55,767 tons of purchased coal. Ramaco Resources has approximately 185,000 tons of coal committed under contract for delivery in the fourth quarter. The Company estimates that it is likely to sell an additional 30,000 tons of metallurgical coal to new coal customers over the balance of the year.
Cost of sales totaled $14.8 million in the third quarter of 2017, resulting in a negative margin of $0.4 million caused by higher trucking and third-party processing costs while construction of the preparation plant and loadout facilities at Elk Creek was underway. In the third quarter of 2016, Ramaco Resources had no coal sales revenue but generated $1.4 million in coal processing revenue from its Knox Creek plant.
Other operating costs and expenses during the third quarter of 2017 totaled $1.3 million compared to $1.5 million in the third quarter of 2016. In 2017, these expenses consisted primarily of general engineering and other outside service expenses of $1.2 million and non-production related processing expenses of $0.3 million. The former reflects the continuing development of our properties, while the latter reflects the Company’s decision not to continue to process third party coal at Knox Creek.
In the third quarter of 2017, Ramaco Resources invested $11.5 million in its planned mining operations and supporting infrastructure. This included $5.6 million for the purchase of infrastructure and mining equipment and $3.7 million for the new Elk Creek preparation plant and loadout.
“We had $29 million of cash and investments at September 30, 2017 which we believe is sufficient to complete our planned 2017 construction and development capital expenditures as well as meet operating cash requirements,” Randall Atkins, Ramaco Resources’ Executive Chairman stated. “As we have consistently said since we went public in February, we view 2017 as our development year. We have now executed on most of the milestones we set for this year and look forward to 2018 when our company begins to reach meaningful production and sales levels. One milestone was to begin washing coal at our Elk Creek preparation plant, which was achieved when it became operational late last month. As we migrate into 2018, this will eliminate a large portion of trucking costs as well as third-party washing and handling costs.
“Our company-wide production ramp-up continues and we now expect 2018 production to be approximately 2.2 million tons. An additional milestone is the commitment of 50% of this production to buyers in both the North American metallurgical and premium thermal coal markets at an average price of more than $76. This positions us well to move our remaining uncommitted 2018 coal into the export market at what we hope are very profitable margins. All of these efforts are also supportive of one of our final milestones, proving out our low cost of production, which we have previously provided guidance on. Cumulatively, we look forward to achieving significant 2018 margins,” Atkins concluded.
Ramaco Resources is an operator and developer of high-quality, low cost metallurgical coal in southern West Virginia, southwestern Virginia and southwestern Pennsylvania.