November 3, 2021 - 

• Net income was $7.0 million (EPS of $0.16) and Adjusted EBITDA was $17.8 million for the third quarter of 2021. Adjusted EBITDA was the highest third quarter on record for the Company. 75% of sales in the third quarter of 2021 were to North American customers on lower priced legacy contracts, compared to 48% in the first half of 2021.
• The Company has largely concluded 2022 North American sales, with 1.7 million tons booked at $196 per short ton FOB mine, compared to 1.4 million tons in 2021 at $89 per ton. This translates to over $325 million in booked revenue for 2022, and generates Adjusted EBITDA of roughly $190 million, using year-to-date 2021 cash costs, adjusted upward for higher sales-related costs.
• The Company executed an Asset Purchase Agreement with companies owned by Coronado Global Resources Inc. ("Coronado") to purchase what are referred to as the Amonate Assets. The cash consideration for the acquisition is $30 million to be paid at closing, which is anticipated to occur by mid-November. The acquisition will almost immediately be accretive to the Company. It is expected to add 200,000 tons of new low-volatile production in 2022 and ultimately 700,000 tons by the end of 2023. Beginning in June 2022, it will also save millions of dollars annually on avoided trucking costs on all 750,000 tons of existing Berwind production.
• The Company announced that its Board of Directors ("Board") has authorized the initiation of a regular quarterly dividend to be paid beginning in the first quarter of 2022. The amount of the dividend and timing of both the record date and payment date will be set at the Company's Board meeting to be held in early December.
• The Company's principal bank lender, KeyBank, N.A., amended the Company's revolving credit agreement, increasing the overall availability under the credit line to $40 million, from its current $30 million level. There are other modifications to the lending facility reflective of the Company's improved creditworthiness, including extending the maturity date to December 31, 2024.

Ramaco Resources, Inc. (NASDAQ: METC) ("Ramaco" or the "Company") today reported quarterly net income of $7.0 million, or $0.16 per diluted share for the three months ended September 30, 2021, which was almost 250% above net loss of $4.8 million, or $0.11 per diluted share for the three months ended September 30, 2020.

The Company's adjusted earnings before interest, taxes, depreciation, amortization and equity-based compensation ("Adjusted EBITDA") was $17.8 million for the three months ended September 30, 2021, approximately 2,700% higher than the $0.6 million of Adjusted EBITDA for the three months ended September 30, 2020.

Third Quarter 2021 Summary

Year over Year Quarterly Comparison
Overall production in the third quarter of 2021 was 553,000 tons, up nearly 40% from the same period of 2020. Elk Creek alone produced 510,000 tons in the third quarter of 2021. Overall total sales in the third quarter of 2021 were 644,000 tons, up 50% from 430,000 tons in the third quarter of 2020. Cash margins on Company produced coal were $34 per ton in the third quarter of 2021, up 278% from the same period of 2020. Pricing of Company produced coal sold was $105 per ton, which was 35% higher in the third quarter of 2021 compared to the third quarter of 2020. Company produced cash mine costs were $71 per ton in the third quarter of 2021, which were 3% higher than the same period of 2020. Despite higher sales-related costs, as well as modest inflationary pressures, cash mine costs at Elk Creek of $67 per ton in the third quarter of 2021 were equal to the same period of 2020.

Sequential Quarter Comparison
Total sales volume of 644,000 tons in the third quarter of 2021 was down 6% from the second quarter of 2021.

Cash margins on Company produced coal increased by 26% from the second quarter of 2021, due to higher revenue per ton sold in the third quarter of 2021. Cash mine costs on Company produced coal were $71 in the third quarter of 2021 per ton compared to $69 per ton in the second quarter of 2021. Higher cash costs were due to higher sales-related costs, on the back of higher revenue per ton. Specifically, the 3% sequential increase in cash costs per ton was more than offset by 9% higher revenue per ton sold in the third quarter of 2021 relative to the second quarter of 2021.

Other income was $0.8 million in the third quarter of 2021 compared to $3.4 million in the second quarter of 2021, principally due to the recognition of $2.9 million in the second quarter of 2021 for the CARES Act Employee Retention Tax Credit.

Additional Financial Results

At September 30, 2021, the Company had record liquidity of $73.8 million, consisting of $46.7 million of cash on hand plus $27.1 million of availability under its revolving credit facility.

Capital expenditures for the third quarter of 2021 totaled $9.1 million, an increase of 264% as compared to $2.5 million for the third quarter of 2020. This increase was principally due to the continued development of the Berwind complex in 2021.

The Company's effective tax rate for the third quarter of 2021 was 21%, excluding a tax benefit of $0.2 million for legislative changes in West Virginia. The 21% rate is above our first half of 2021 effective tax rate of 9% excluding discreet items. The difference between our first half of 2021 rate of 9% and our third quarter of 2021 rate of 21% negatively impacted net income by approximately $0.8 million and EPS of $0.02. Ramaco expects to continue to pay minimal cash taxes due to tax loss carryforwards.

On July 13, 2021, the Company completed a $34.5 million senior unsecured notes offering. The 9.00% notes mature in July 2026. The notes are listed on the NASDAQ Global Select Market under the symbol "METCL".

On July 16, 2021, the Company was awarded a $32.7 million jury verdict in its lawsuit related to the November 2018 silo failure against Chubb INA Holdings, Inc. ("Chubb Insurance"), which has not yet been paid and is subject to potential appeal and post-trial motions.

On July 29, 2021, the Company was informed that the SBA had forgiven an approximately $8.4 million PPP Loan which had been granted to the Company in 2020.

Outlook and Comment

Randall Atkins, Ramaco Resources' Chairman and Chief Executive Officer noted, "This has been a transformative year for Ramaco. As the year has progressed, the markets have served to reward the hard work our team has done to position the Company to take advantage of what we feel will be a multi-year cycle of strength in the metallurgical coal markets. We have been able to achieve new milestones both operationally and financially. Indeed, having started less than five years ago from literally scratch, today we now stand as a company with roughly a $800 million market value.

Through our recently concluded 2022 North American coal sales, the markets have now propelled us into an entirely new financial realm.

As previously announced, we recently concluded 2022 fixed priced sales to our North American customers of 1.67 million tons at an average price of $196 per short ton FOB mine. Through these sales, we have essentially now booked for 2022 over $325 million of revenue and roughly $190 million in Adjusted EBITDA.

In addition to these booked sales we have retained almost half of our planned 3.1 million tons of production for 2022 to be sold into export markets, at what is currently higher index-based pricing. The impact of these sales will provide us with new levels of cash generation and financial optionality that we have not previously enjoyed.

Further, we expect continued underlying strength in the steel and metallurgical markets to provide the underpinning for longer term met coal demand and elevated pricing over the next few years. As we have said before, met coal is a proxy for steel and steel in turn is a proxy for a country's economic condition. The U.S. economy is now accelerating at a historically high level and nominal GDP this year has grown at a rate of almost 8%.

I view the current macro environment as it applies to us as somewhat like the four legs of a stool. First, on the demand side, all of the developed economies are rebounding from the COVID-19 impact at roughly the same time. Second, there has been fiscal stimulus injected into these economies on a scale we have frankly not seen before. More may indeed come. Third, this expansion of the world's money supply has had the predictable effect of creating conditions for an inflationary impact that will no doubt affect pricing in hard assets like coal for an extended period. These three legs create a natural underlying demand for steel and, hence, metallurgical coal. The fourth leg is the supply equation. Perversely, coal as a commodity is in an existential period. Despite its continued strong worldwide demand, there are financial and regulatory forces that have created an arbitrary constraint on both new capital availability and, hence, new supply. We do not anticipate these conditions changing any time soon. Nor, do we sense there will be any near-term supply response sufficient to balance demand for the foreseeable future.

Turning to another recent milestone, I am delighted that we have announced the purchase from Coronado of what are referred to as the Amonate Assets. This $30 million purchase will almost immediately be accretive to the Company. It is expected to add 700,000 tons of new low-volatile production by the end of 2023, including 200,000 tons in 2022. It will also save millions of dollars of avoided trucking costs on all existing Berwind production beginning in June 2022. Specifically, instead of trucking the raw Berwind coal almost 25 miles to our Knox Creek prep plant, we will simply belt the coal by conveyor to the adjacent Amonate prep facility less than half a mile away.

On the financial front, in recognition of our significantly increased revenue anticipated in 2022, our principal bank lender, KeyBank, N.A., has agreed to increase the overall availability under our revolving credit line to $40 million, from its current $30 million level. We view this successful transaction as continued validation of both our creditworthiness, as well as our conservative financial strategy since inception, to maintain minimal net debt and asset retirement obligations.

Lastly, when Ramaco went public in 2017, we said that we anticipated returning capital to our shareholders by becoming a regular dividend paying company. Our gating requirement would be a subjective point when we felt we had both reached sufficient scale and felt comfortable we would continue to generate sustainable free cash flow. I am pleased to report that our Board of Directors has now authorized the initiation of a regular quarterly dividend to be paid beginning in the first quarter of 2022. The amount of the dividend and timing of both the record date and payment date will be set at the Company's Board meeting to be held in early December. We hope to regularly increase this dividend in the years ahead as we continue to grow.

All of the above has created a uniquely positive outlook for Ramaco as we look forward to both the balance of this year and beyond into 2022. We remain positioned to benefit from a number of factors. These include the future doubling of our low-cost/high-quality production capacity to meet near and medium-term demand growth, a continuing period of strong index-based pricing, a formidable balance sheet and the impending roll-off of much lower priced 2021 domestic met coal contracts.

We still maintain over 100,000 tons of high-quality met coal production to sell at today's elevated pricing into the balance of 2021. Yet, given our recently announced new sales, we cannot wait for 2022 to arrive. We will be starting out of the gate in the new year with nearly 1.7 million tons already booked for sale at almost $200 per ton, against year-to- date 2021 cash costs of $67 per ton, and an almost equal amount of remaining unsold production to sell into one of the strongest markets we have seen.

2021 promises to be our strongest year of free cash flow since we became public. 2022 already is expected to be a multiple of that. We should reach a point next year where we will generate sufficient free cash flow to be completely self-financed to execute our organic growth plans to grow Ramaco to roughly 5 million tons of production. Indeed, over the next few years we expect a continued period of significant free cash flow generation and a commitment to continue a regular return of capital to our shareholders."

To see the full results with financial figures included, click here.