Ramaco Resources, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Amounts are in U.S. dollars; financial statement amounts are generally in millions unless noted. Ramaco operates metallurgical coal mines in Appalachia and is developing Wyoming CORE initiatives involving rare earth elements, critical minerals, and carbon products.
Financial performance and liquidity
- Revenue: $172.7 million, up 4% from $166.4 million. Coal sold rose 23% to 929,000 tons, while revenue per ton fell 15% to $186. Export markets accounted for 69% of sales.
- Profitability: Operating income was $3.3 million versus $31.9 million; net income was $2.0 million versus $25.3 million. Operating margin was approximately 1.9% versus 19.2%, and net margin approximately 1.2% versus 15.2%. Adjusted EBITDA, a non-GAAP measure, declined to $24.2 million from $48.3 million.
- Costs: Cost of sales increased 26% to $139.7 million. GAAP cost per ton rose 3% to $150; non-GAAP cash cost per ton (FOB mine) rose 8% to $118.
- Cash flow and capital spending: Operating cash flow was $25.2 million, compared with $21.4 million. Capital expenditures were $18.7 million, versus $23.5 million. Cash and cash equivalents were $30.5 million at quarter-end, down from $42.0 million at year-end.
- Debt and liquidity: Total debt was $86.4 million, down from $90.2 million at December 31, 2023; the balance includes $33.4 million of senior notes. Revolver availability was $65.3 million, and working capital was about $34.1 million. The company reported compliance with debt covenants. It repaid $17.0 million of revolver borrowings shortly after quarter-end.
- Margins and interest: Net interest expense declined to $1.3 million from $2.3 million. The effective tax rate was 21%, compared with 18%.
Changes versus Q1 2023
Higher sales volume lifted revenue, but weaker coal pricing—particularly index-linked export pricing—reduced revenue per ton and margins. Management said metallurgical coal prices fell about 20% during Q1, mostly in March, amid muted global demand. Higher per-ton costs also weighed on results; management cited challenging geology and labor constraints. Depreciation and SG&A increased, while interest expense decreased largely because related-party acquisition financing had been repaid in 2023.
Outlook, risks, and notable items
- Outlook and spending: Management targets production growth toward approximately 7 million clean tons annually over the next few years, subject to market conditions, permits, and capital deployment. Expected 2024 capital expenditures are $53–63 million. The Maben preparation plant was expected to be operational before year-end 2024; management anticipated mine-cost conditions improving through the year. No specific coal-price or earnings guidance was provided.
- Financing update: After quarter-end, the revolving facility was amended to a May 2029 maturity, with a $200 million initial commitment and a potential $75 million accordion, subject to conditions. The amended borrowing base and pricing terms also apply. The company said it expects to fund near-term needs with cash, operating cash flow, and revolver borrowings.
- Commitments and litigation: Remaining rail and export-terminal take-or-pay commitments were $30.7 million, including a $1.4 million accrued liability for an expected shortfall. Reclamation and performance surety bonds totaled about $30.2 million. In the Elk Creek silo insurance case, the company’s $7.7 million contract-damages award was paid in 2023; a new trial on additional damages and a determination of attorney fees remained pending.
- Controls: Management concluded disclosure controls were not effective at quarter-end because of a previously reported material weakness involving insufficient documentation of accounting policies, procedures, and controls. A remediation plan was being developed; remediation was not yet complete.
- Other risks: Coal-price volatility, production and geology challenges, labor and transportation constraints, permitting, customer collections, and global economic conditions may affect results and liquidity. CORE exploration remains at an exploration stage and is not a mineral resource or reserve.
Most important facts for investors to verify
- Whether coal pricing and mine costs improve, and how production growth affects realized margins and cash generation.
- Progress, cost, and timing of the Maben plant and the $53–63 million 2024 capital program.
- Availability under the amended revolver, borrowing-base limits, covenant compliance, and scheduled debt repayments.
- Execution of the internal-control remediation plan and subsequent evidence that controls operate effectively.
- Resolution and potential recovery from the pending insurance litigation, and exposure to take-or-pay commitments.