By Olivia Kalb

August 15, 2019 - Ramaco Resources reported one of its strongest quarters yet driven by its focus on metallurgical coal sales and a strong domestic portfolio, executives said Wednesday.

"There is an old Chinese curse which goes, 'Yours shall be a light lived in interesting times,'" Ramaco founder and executive chairman Randall Atkins said on the second-quarter earnings call. "I think the events in the last few weeks in both the financial and coal markets certainly bear this out. But despite turbulence, we are happy to discuss today that we have printed our most financially successful quarter since we got started."

The producer sold about 525,000 st of coal in Q2, down about 20% from Q2 2018.

Revenue per ton was $116/st, compared with $93/st in the year-ago quarter.

Over the first and second quarters this year, Ramaco sold about 1 million st of coal, down 11.8% from the year-ago period.

Revenue per ton was $111/st, compared with $93/st.

Ramaco coal sales revenue totaled about $65.8 million in the second quarter, up 0.7% from the year-ago quarter. During Q1 and Q2, revenue was $123 million, up 1.6% from the 2018 period.

"The good thing is we're working on just a huge, solid domestic position," Christopher Blanchard, senior VP and COO, said. "We have the ability to back down. And of course, our future growth prospects really are focused on the international markets...you would probably not see us dip below 60% domestic, but we're prepared to at least go to that point."

Domestic sales made up $39.5 million, while export sales in Q2 totaled $26.2 million, compared with $34.4 million and $30.9 million in the year-ago quarter, respectively. Over six months, domestic revenue was $76.1 million, and export was $47.1 million, compared with $60 million and $61 million in the year-ago period.

"While exports are currently a small part of our current business, we still intend to grow that business," Michael Bauersachs, president and CEO, said. "Depending on how pricing develops with North American customers, our outsize domestic business could be modified downward in favor of more exports."

Net income was $10.6 million, up 4% year over year. Over the first two quarters, net income totaled $17.5 million, up 13% from the corresponding 2018 period.

In 2019, the producer expects to produce 41% high-vol A and high-vol B coal, 13% of low-vol met and 4% of thermal coal. In 2020, Ramaco projects 46% high-vol A, 31% high-vol B, 20% low-vol and 3% thermal.

"Although we see some choppiness in the near term financial and coal markets, we feel the intermediate outlook is still good," Atkins said. "We have just experienced our best quarter and are essentially sold out through the balance of 2019 at very attractive prices. We expect this will produce a record year on earnings for us as the balance of the year plays out."

Market Sentiment

"This summer, we have seen a riptide with some unusual and severe stress in the coal space," Atkins said. "It feels like not a week goes by that we don't see another coal company here filing for bankruptcy, auctioning assets, reorganizing or announcing a senior resignation or management change."

However, the recent turmoil may have some benefit to producers such as Ramaco.

"I think there's a very good chance that there could be 1 million or 2 million tonnes that basically go off the radar," Bauersachs said. "And when you look at how really tight things are and when you look at the spectrum of really high-quality coals, I think that there are quite a few of them that are in those higher-cost coal mines. And so, 1 million or 2 million tonnes coming out of the market could have a big impact on pricing and availability of the fast quality coals."

About 2 million st are committed for 2019, with over 1.8 million st priced at about $115/st. Of those tons, about 1.52 million st are for the domestic market, and about 310,000 st are for export. In total, Ramaco expects 2.2 million st of sales this year.

The company expects to have production of 4 million-4.5 million mt by 2022-2023, Atkins said.