Ramaco Resources, Inc. quarterly report, Q3 FY2023

Ramaco Resources, Inc. — Q3 2023 Form 10-Q

Business context and period: Unaudited results for the three and nine months ended September 30, 2023, compared with the corresponding 2022 periods. Ramaco operates and develops Appalachian metallurgical coal mines and is also pursuing rare-earth and coal-based carbon-product initiatives in Wyoming.

Financial performance and liquidity

Metric	Q3 2023	Q3 2022	9M 2023	9M 2022
Revenue	$187.0 million	$136.9 million	$490.8 million	$430.5 million
Operating income	$16.1 million	$36.7 million	$58.0 million	$132.3 million
Net income	$19.5 million	$26.9 million	$52.3 million	$101.7 million
Adjusted EBITDA	$45.4 million	$50.7 million	$123.7 million	$172.6 million
Operating cash flow	Not stated separately	Not stated separately	$119.5 million	$158.8 million

Q3 operating margin was approximately 8.6% versus 26.8% a year earlier; net margin was approximately 10.4% versus 19.6%. For the first nine months, operating margin was approximately 11.8% versus 30.7%, and net margin approximately 10.7% versus 23.6%.
Coal sales volume rose 64% in Q3 to 996,000 tons and 39% for the nine-month period to 2.467 million tons. Revenue per ton fell 17% in Q3 to $188 and 18% year to date to $199. FOB-mine revenue per ton declined 22% in both comparisons, to $157 in Q3 and $169 for nine months.
Cost of sales per ton increased 11% in Q3 to $145 and 7% for nine months to $144, which management attributed largely to inflation. Cash cost per ton sold, FOB mine, rose 15% in Q3 to $114 and 6% year to date to $112.
At September 30, cash and cash equivalents were $42.9 million; remaining availability under the revolving credit facility was $55.3 million. Current assets were $169.2 million and current liabilities $142.5 million.
Total debt was $105.4 million, including $43.5 million outstanding on the revolver and $33.2 million of senior notes. The facility’s collateralized borrowing base was $98.8 million; the company reported compliance with its covenants. It repaid $14.0 million of revolver borrowings in October.
Nine-month capital expenditures were $64.9 million. Management expected full-year 2023 capital expenditures of approximately $70–$75 million. Cash dividends paid in the first nine months totaled $18.0 million.

Material changes versus prior period

Higher sales volumes lifted revenue, but lower realized prices and higher per-ton costs reduced operating income, net income, and Adjusted EBITDA compared with 2022.
Export revenue increased to $111.8 million in Q3 from $58.5 million; for nine months it was $322.2 million versus $199.1 million. The company said the larger export and index-priced sales mix increased exposure to price variability.
Operating cash flow declined year over year. The filing cites, among other factors, a $22.5 million increase in accounts receivable; the 2023 period also benefited from an $11.8 million income tax refund.
In June 2023, Ramaco created Class B tracking stock intended to reflect CORE assets’ performance separately from metallurgical coal operations. EPS presentation changed after issuance, limiting direct comparability with prior periods.

Outlook, commentary, risks and unusual items

Management expected to fund near-term liquidity and capital requirements using cash, revolver availability, and operating cash flows. It had no specific plan to raise capital, though a shelf registration allows offerings of up to $400 million.
At September 30, outstanding fixed-price performance obligations were approximately 1.5 million tons at an average $177 per ton, excluding freight; 0.4 million tons had index-based pricing. The company expected to satisfy existing commitments in 2023 and 2024 and later reported additional sales commitments.
Management cited risks including metallurgical coal price and demand volatility, inflation, transportation availability and cost, customer payment timing, mine-development delays and cost overruns, and permitting and operating risks. The filing provides no earnings guidance.
Q3 other income included a $7.8 million gain recognized for compensatory damages in the Elk Creek silo insurance litigation and $3.0 million of Berwind mine ignition insurance proceeds. For the nine months, the company recognized a $4.9 million net gain related to the Berwind insurance claim. Further litigation proceedings remain pending on inconvenience-and-aggravation damages and attorney fees; the compensatory-damages portion was paid after quarter-end.
Outstanding take-or-pay rail and export-terminal commitments were $28.9 million, including $21.1 million remaining on a five-year contract entered into in 2023. The company had $28.2 million of surety bonds outstanding. No environmental liabilities or amounts for pending litigation were accrued.
Class B dividends are discretionary, and CORE is not a separate legal entity. The board may change asset, expense, and fee attribution policies or convert Class B shares into Class A shares. The filing highlights risks of conflicts between classes, dividend variability, and Class B exposure to company-wide liabilities and performance.
CORE’s Wyoming exploration target is not a mineral resource or reserve. The company reported promising core-analysis results but did not provide a quantified resource or reserve estimate.

Important facts for investors to verify

Whether higher shipment volumes can offset lower realized coal prices and continued cost inflation.
Execution of the 2023 capital program, expected spending range, mine-development schedule, and ability to meet contracted deliveries.
Customer concentration and collections: three customers represented approximately 72% of accounts receivable at September 30, 2023.
Revolver borrowing-base availability, scheduled debt payments, covenant compliance, and cash needs for acquisition financing and dividends.
Outcome and timing of the remaining Elk Creek litigation proceedings and collectability of any further awards.
Board decisions, fee calculations, and cash availability underlying Class B dividends and CORE attribution; reported CORE fees are not standalone segment revenue and are primarily intercompany transactions eliminated on consolidation.