May 8, 2019 - Ramaco Resources, Inc. (METC) ("Ramaco," "Ramaco Resources" or the "Company") today reported first quarter net income of $6.9 million, or $0.17 per diluted share for the quarter ended March 31, 2019, as compared to a net income of $5.3 million in the quarter ended March 31, 2018. The Company's adjusted earnings before interest, taxes, depreciation, amortization and equity-based compensation expenses ("Adjusted EBITDA") was $13.7 million for the three months ended March 31, 2019, as compared with Adjusted EBITDA of $9.2 million for the three months ended March 31, 2018. For frame of reference, without the negative impact from lower priced carryover tons resulting from November's silo failure, first quarter 2019 net income would have been approximately $9 million and Adjusted EBITDA would have been approximately $16 million. Despite this, Adjusted EBITDA from the first quarter of 2019 was the Company's second highest quarter since operations began.
First Quarter 2019 Summary
Year Over Year Comparison
First quarter 2019 revenues were $57.5 million, an increase of 3% compared to the first quarter of 2018. Company production was 478,000 tons in the first quarter of 2019, an increase of 26% compared to 380,000 tons in the first quarter of 2018. Cash margins on Company produced and sold coal at Elk Creek improved by 39% from approximately $28 per ton in the first quarter of 2018 to approximately $39 per ton in the first quarter of 2019. Cash mine costs per ton on Company produced and sold coal at Elk Creek were $63 in the first quarter of 2019 compared to $62 in the first quarter of 2018. First quarter pricing per ton of $104 on overall Company produced tons, while a quarterly record, was negatively impacted by approximately $5 per ton due to carryover tons from 2018 that were priced well below 2019 levels.
Quarter over Quarter Comparison
First quarter 2019 revenues were up 30% from the fourth quarter of 2018. Company production of 478,000 tons in the first quarter of 2019 was up 16% from the fourth quarter of 2018. Cash margins on Company produced and sold coal at Elk Creek improved by 26% from approximately $31 per ton in the fourth quarter of 2018 to approximately $39 per ton in the first quarter of 2019. Cash mine costs per ton on Company produced and sold coal at Elk Creek were $63 in the first quarter of 2019, which is flat versus fourth quarter 2018 results.
Randall Atkins, Ramaco Resources' Executive Chairman remarked, "I am extremely proud that we've emerged from the operational challenges of the November silo failure at Elk Creek as an even stronger and more resilient company. We managed to produce our second-best quarter of Adjusted EBITDA ever. This was despite the carryover headwinds which we knew would cause the Elk Creek prep plant to run below capacity in the first quarter. We were also dealing with a massive coal stockpile situation at Elk Creek from the fourth quarter which curtailed full production capacity. The plant at Elk Creek still remains on track to be functioning at full capacity before the end of the second quarter of 2019. This will then mostly alleviate the operational burden and financial impacts we have been dealing with since early November. Since we are well underway, I am also pleased to say that although we still have seven weeks to go, we now expect that the second quarter Adjusted EBITDA will be the highest on record for Ramaco Resources. I also anticipate Ramaco will be generating substantial cash flow throughout the rest of the year."
Additional Financial Results
The Company ended the quarter with approximately $1.9 million of cash on hand, $27.3 million of accounts receivable and $19.5 million of availability under the Revolving Credit Facility. Free cash flow generated during 2019, as well as borrowings available through the Revolving Credit Facility, are expected to be used to fund working capital, mine expansion and related capital expenditures.
In the first quarter of 2019, the Company recorded income tax expense of $1.4 million for an annual effective tax rate of approximately 16.5%. Actual cash taxes payable for 2019 are expected to be less than $0.2 million.
Capital expenditures totaled approximately $8.2 million during the first quarter of 2019. This figure compared favorably to capital expenditures of approximately $8.3 million during the fourth quarter of 2018, and approximately $12.8 million during the first quarter of 2018, which is a 36% year over year decline.
Michael Bauersachs, Ramaco Resources' President and CEO commented, "The operating team at Elk Creek has done a tremendous job in overcoming the challenges of the November silo failure. Our first quarter 2019 cash costs came in at $63 per ton at Elk Creek despite our prep plant and stockpile issues. Our Elk Creek costs are easily in the first quartile of the U.S. metallurgical coal cost curve. Given our ability to control costs this quarter in the face of such challenging operational issues, we are now guiding to an overall lower 2019 cash cost per ton outlook at Elk Creek from $63-$69 per ton to $63-$67 per ton."
"On the pricing front, Ramaco's coal continues to be well received by both legacy and new domestic and international customers alike. For 2019, we now have over 1.7 million tons committed and priced at $113 per ton versus roughly 1.6 million tons committed and priced at $113/ton at the time of our year-end 2018 results. We also have an additional 0.3 million tons committed at index pricing for sale in 2019."
"In terms of our Berwind development deep mine, we continue to anticipate that by mid-2020, we should reach the more prolific Pocahontas #4 low-vol coal seam, with ultimate full annual production of approximately 750,000 tons. Given seam thickness we anticipate future cash mine cost in that seam in the $80 per ton range, with the potential for future logistical cost improvement. As a reminder, in 2019 we still expect to mine approximately 250,000 tons at Berwind in the thinner Pocahontas #3 seam."
Randall Atkins noted that, "As Berwind ramps up production, and Elk Creek continues to produce as expected, we hope to reach a 2.5 million ton annual production rate in 2020, even without any proposed new development activities. This level should increase to approximately 4.5 million tons by 2023 through capital investments in organic growth at our existing properties. Having emerged from the silo failure as a stronger company than before, we will be discussing with the board of directors the possibility of accelerating some new attractive opportunities to increase production, that we had originally planned for development in later years. These include a possible expansion of the Elk Creek preparation plant to add an additional 500,000 tons above the current nameplate capacity, with a corresponding increase in production. We are also exploring putting in a new High Vol A mine at our Knox Creek complex which will mine in the Tiller and Jawbone seams. We expect this new mine to provide the potential for an additional 500,000 ton per annum at full production. We would note that our 2019 capital expenditure guidance of $35-$40 million does not reflect the expenditures for any of these projects. As we proceed in the analysis and approvals for these projects, we will provide further guidance."
About Ramaco Resources, Inc.
Ramaco Resources, Inc. is an operator and developer of high-quality, low cost metallurgical coal in southern West Virginia, southwestern Virginia and southwestern Pennsylvania. Its executive offices are in Lexington, Kentucky, with operational offices in Charleston, West Virginia. The Company has five active mines within two mining complexes at this time.
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