Ramaco Resources, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; unaudited. Ramaco operates metallurgical coal mines in Appalachia and is evaluating Wyoming mineral deposits for potential rare-earth recovery and coal-derived products.
Financial performance
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Revenue | $166.4 million | $154.9 million | Up 7% |
| Operating income | $31.9 million | $52.9 million | Down 40% |
| Net income | $25.3 million | $41.5 million | Down 39% |
| Diluted EPS | $0.57 | $0.92 | Down 38% |
| Adjusted EBITDA (non-GAAP) | $48.3 million | $64.1 million | Down 25% |
| Operating margin | 19.2% | 34.1% | Down 14.9 percentage points |
| Net margin | 15.2% | 26.8% | Down 11.6 percentage points |
| Cash from operations | $21.4 million | $77.4 million | Down $56.0 million |
| Capital expenditures | $23.5 million | $19.7 million | Up $3.8 million |
Coal sales were 757,000 tons versus 583,000 tons, up about 30%. Revenue per ton fell 17% to $220; FOB-mine revenue per ton fell 20% to $188. Cost of sales rose 36% to $110.5 million, mainly with higher volumes; total cost per ton increased 5% to $146. Management said cash cost per ton sold, excluding transportation and specified idle-mine costs, was flat at $110. Export revenue was $126.3 million, versus $94.8 million; North American revenue was $40.0 million, versus $60.1 million.
Balance sheet and liquidity
- Cash and cash equivalents were $36.6 million at March 31, 2023, versus $35.6 million at year-end; cash, including restricted cash, was $37.5 million.
- Current assets were $177.7 million and current liabilities $151.2 million, for a current ratio of approximately 1.18.
- Total debt was $138.2 million, versus $127.2 million at December 31, 2022. This includes $32.9 million of senior notes and $30.0 million of related-party acquisition debt. The balance sheet also reports financing lease obligations separately.
- The amended revolving facility has a $125 million initial commitment, a February 2026 maturity and $28.8 million of availability after borrowing-base limits and outstanding borrowings at quarter-end. Ramaco reported compliance with facility covenants. In April, it repaid $15 million of revolver borrowings.
- Operating cash flow was below capital expenditures, resulting in approximately $2.2 million of negative operating cash flow less capital expenditures. Cash from operations was affected in part by a $29.9 million increase in accounts receivable.
Material changes, outlook and risks
- Management attributed lower earnings and Adjusted EBITDA primarily to lower coal-sales margins from weaker pricing, despite increased sales volume. Interest expense more than doubled to $2.3 million, generally reflecting higher debt levels.
- Management reported that U.S. metallurgical coal spot prices in Q2 had declined almost 25% from Q1 averages. If prices remained at those levels for the rest of Q2, it estimated average Q2 pricing could be roughly 10% below Q1. This is a conditional estimate, not formal full-year guidance.
- At quarter-end, contracted fixed-price obligations covered approximately 1.9 million tons at an average $197 per ton, excluding freight, generally for delivery within a year; another 0.8 million tons were under index-based pricing.
- Production at Berwind No. 1 restarted in Q1 after the July 2022 methane ignition and subsequent idling. No injuries or fatalities occurred. Management identifies transportation, customer payment timing, development delays and cost overruns, and weaker coal markets as potential liquidity and operating risks.
- Remaining take-or-pay transportation commitments were $39.9 million, mostly related to a new five-year contract. No liability was recorded for these arrangements. Reclamation and performance surety bonds totaled approximately $26 million.
- A lawsuit over the 2018 Elk Creek silo failure is pending appeal. A jury award was reduced by the trial court to $1.8 million, and the company’s appeal remained pending; no recovery amount is assured.
- The board declared a $0.125-per-share quarterly dividend for payment in June 2023. A June shareholder vote was proposed on a charter amendment that would create Class B tracking stock and give the board specified exchange authority.
- Wyoming rare-earth exploration results described by the company are exploration targets, not mineral resources or reserves. The company cautions that commodity-price volatility, inflation, regulation, mining and geologic conditions, and other uncertainties may cause actual results to differ from forward-looking statements.
Important facts for investors to verify
- Coal pricing, margins and Q2 realized prices relative to management’s conditional estimate.
- Collections of receivables, operating cash generation, capital spending and revolver availability after the April repayment.
- Debt maturities, covenant compliance and remaining acquisition-related payments.
- Berwind No. 1 production progress and the impact of transportation commitments and operating costs.
- Outcome of the pending insurance appeal and the shareholder vote on the proposed share-class structure.
- Any subsequent technical disclosures supporting the Wyoming rare-earth exploration target; it is not yet a reported resource or reserve.