Ramaco Resources Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
March 8, 2024

There are 8 speakers on the call.

Operator

Welcome to the Remco Resources 4th Quarter 2023 Results Conference Call. All participants will be in listen only mode. Please note, today's event is being recorded. I would now like to turn the conference over to Jeremy Sussman, Chief Financial Officer of Ramaco Resources. Please go ahead, sir.

Speaker 1

Thank you. On behalf of Ramaco Resources, I'd like to welcome all of you to our Q4 2023 earnings call. With me this morning is Randy Atkins, our Chairman and CEO Chris Blanchard, our Chief Operating Officer and Jason Fanning, our Chief Commercial Officer. Before we start, I'd like to share our normal cautionary statement. Certain items discussed on today's call constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Speaker 1

These forward looking statements represent Ramaco's expectations concerning future events. These statements are subject to risks, uncertainties and other factors, many of which are outside of Ramaco's control, which could cause actual results to differ materially from the results discussed in the forward looking statements. Any forward looking statement speaks only as of the date on which it is made, and except as required by law, Ramaco does not undertake any obligation to update or revise any forward looking statements whether as a result of new information, future events or otherwise. I'd like to remind you that you can find a reconciliation of the non GAAP financial measures that we plan to discuss today in our press release, which can be viewed on our website, ramicoresources.com. Lastly, I'd encourage everyone on this call to go on to our website and download today's investor presentation.

Speaker 1

With that said, let me introduce our Chairman and CEO, Randy Atkins.

Speaker 2

Thanks, Jeremy. Good morning to everyone. As always, thanks both for your interest and for joining the call. We have a lot of positive developments to unpack this morning since we spoke last November. As I discussed then, over the past few years, we have tried to differentiate ourselves by aggressively but prudently growing our production and sales profile.

Speaker 2

In 2021 through last year, we doubled our production. Our goals over the next few years are to again double our current 3,500,000 ton level in met coal and next to hopefully add an intriguing and very valuable new line of business with Rare Earths. Looking back over the last few years, we invested almost $250,000,000 in capital for increased production and acquisition. That strategic investment in growth paid off for us in the second half of twenty twenty three, again letting us be consensus for the last two quarters. I will let Jeremy provide the financial metrics Q4 was the record quarter for us this year and we printed $182,000,000 in annual EBITDA and also had record free cash flow, all despite some muted pricing in the overall markets.

Speaker 2

As we look down the road at our quality slate, we are aiming to essentially double our low volmid vol levels to about 50% of overall production, with another 30% as high vol A. Today, we are about In part, that decision is based on our organic reserve quality mix, but it's also based on what we perceive may be some future crowding in the High Vol A space. Several peers are slated to bring on as much as 6,000,000 tons of new production in that blend over the 'twenty four to 'twenty six period. On the other hand, we see low vol production is essentially flat with a fair amount of anticipated depletion from existing low vol mines. Moving forward, we expect spreads may start widening between premium low vol and lower tier high vol coals and we hope to be able to capture that margin.

Speaker 2

Turning to our Q4 performance, we managed to do well despite seeing not much strength in pricing over the back half of the year. This year's North American domestic settlements for 24 were down year over year about $40 a ton from 23. While U. S. Met indices rose in the 4th quarter, they also ended 23 more than 10% below Q1 levels.

Speaker 2

Our Q4 financially was fundamentally due to a sales increase of shipping at a 4,000,000 ton per annum run rate during the whole second half of twenty twenty three. That was a bump of about 33% compared to our 3,000,000 ton per rate in the first half. We were also helped by the completion of the 1,000,000 ton increase in our processing capacity at our Elk Creek complex. Moving to this year's sales and marketing, we took a balanced approach to our 24 domestic sales exposure and committed only about 1,500,000 tons of coal to North American customers. We thought the offered pricing Despite that, our average mixed fixed domestic sales price of $167 per ton was the highest $24 pricing figure among our publicly traded peers.

Speaker 2

By shaving back the level of our North American business, we pivoted to an increased export book, which will now be over 2 thirds of this year's sales. At the start of December, we had 2,000,000 tons committed sales for 24. In the past 2 months, that number has almost doubled to 3,900,000 tons, which means we are now basically 100% sold out at the low end of our original 'twenty four production guidance. Fortunately, most of those sales have been in the works for some time, so we were able to move those tons without sacrificing pricing. We now hope to accelerate that sales growth as we move further into 2024.

Speaker 2

As a result of that material increase in committed sales, as you know, we recently raised our 24 sales and production guidance. Depending upon continued market conditions, we hope to end the year with a sales jump of as much as 40% from 23 levels. To profile our sales to date, interestingly, we have now begun to move significant tons into Asian markets. 2 years ago, we didn't really have any Asian business. Now we will end up the year with north of 30% of our sales going to Asian customers.

Speaker 2

When all is said and done, about 30% of our overall 2024 book will be priced off Australian indexes, about 40% off Atlantic indexes and about 30% will be fixed priced domestic. Jason will speak on the relativities of our pricing and also give most of our color on markets, but I'll add a few observations. We now see European markets as somewhat spring loaded. It has been pushed down so hard over the past year and a half that we feel when it rebounds and many of the mills reopen, we may see somewhat of a pop and perhaps some supply dislocations in the Atlantic markets. We have historically done well in Europe and indeed were decent sized sellers even into Ukraine.

Speaker 2

When that whole situation eventually resolves itself, there could be an interesting turn. In Asia, as I said, we were nowhere in this market 2 years ago. We are now a major supplier to Indonesia and other non China markets. Despite the gloom around China, we see the other Asian markets as relatively healthy. We look forward to making further inroads in the region, particularly with our ability to leverage our increasing low vol production slate.

Speaker 2

Switching to operations, I want to complement our operating team first for a great safety record last year. I also want to note the great work on developing the 2 deep mine sections at our low vol Berwind mine. Since September, Berwind has produced at an annualized run rate of 600,000 tons. We are now planning to begin the 3rd section in the next few months and hope to be at a 1,000,000 ton run rate by year end. Cash mine cost at Berwind have currently been under $90 per ton from both deep sections.

Speaker 2

If this trend continues and as we ultimately take the mine to 4 sections, we expect Berwind to be among the highest margin and lowest and largest production low vol mine complexes in the country. Moving on to another low vol project. Last month, we purchased a very reasonably priced $3,000,000 existing coal prep plant, which will be relocated to our Maven complex. We will spend another $8,000,000 this year to move, relocate and upgrade this plant. For cost comparison, had we built a new plant of comparable capacity, the price was estimated at roughly $40,000,000 This plant should be operational by the Q4 of 'twenty four.

Speaker 2

It will meaningfully reduce both the current overall $40 per ton trucking cost as well as our cash mine costs. The plant will have an ultimate annualized clean coal capacity of 1,300,000 tons, far more than our 350,000 ton current surface and high wall production. We will have the opportunity to add a good deal more deep tons to that complex in the years ahead as the market may dictate. Chris will also make some comments on Maven in his remarks. Looking at our balance sheet, last year we were able to half the amount of debt on our books and we started 2024 with about $50,000,000 of term and equipment debt.

Speaker 2

Assuming current conditions continue, we look to retire all of that debt this year. And as I said earlier, we are also rapidly growing. Looking ahead, we are planning today for the notional increase in the amount of both sales and inventory we envision over the coming years. Accordingly, we just executed a mandate with KeyBanc on behalf of our banking syndicate to both increase and extend the size and term of our existing revolver. This facility will then have a base borrowing amount of $200,000,000 with an additional $75,000,000 according in feature expansion, as well as a new 5 year term.

Speaker 2

This is an increase from our existing $125,000,000 facility and we look to finalize all this in Q2. Finally, with respect to our Brook Mine rare earth project, we are aggressively working to advance the commercialization. We expect to receive the updated independent target exploration report from Weir International within 2 weeks. When we do, we will publish the report and I will provide an accompanying shareholder letter to explain its findings as well as the project's critical path and direction. We will also expect to host a separate analyst call to discuss its conclusion and respond to any investor questions.

Speaker 2

Also, I would be remiss not to note that on the back of our solid met coal execution this year and the announcement of our RE discovery, we were delighted that our shareholders enjoyed some very impressive results over the past year. In 2023, our market cap increased by over $500,000,000 Today, including the value of our Metc B shares, we have a combined market cap of roughly $1,000,000,000 This compares to our market value of just over $100,000,000 a few short years ago. Indeed, to start the year, we enjoyed the highest total shareholder return, which includes share price and dividends of any company in the coal and mining space. We had a 1 year return of roughly 200% and over a 1000% return for the 3 year period dating back to 2020. We are deeply appreciative of our investor support from both long time as well as new shareholders and we are working hard to continue to reward that support.

Speaker 2

In summary, this year promises some very positive results for Ramaco. And with that, I will turn the floor over to the rest of our team to discuss finances, operations and markets. So Jeremy, please start us off with a rundown on financial metrics.

Speaker 1

Thank you, Randy. As you noted, financially we enjoyed a strong Q4 in 2023, which was easily our strongest quarter of the year. While U. S. Metallurgical coal indices did rise in the 4th quarter compared to the prior two quarters, the indices were still more than 10% below Q1 levels.

Speaker 1

Our strong Q4 was frankly due to both solid execution of our growth strategy and tight cost control. Specifically, in each of Q3 and Q4, we shipped at a 4,000,000 ton per annum run rate compared to a 3,000,000 ton per annum run rate in the first half. In Q4, our margins expanded more than 50% versus Q3. Realized pricing was up 10% to $173 per ton on stronger indices. More importantly, cash cost per ton fell $7 sequentially on both a stronger absolute and relative contribution from our Maine Berwind mine as Randy noted.

Speaker 1

In terms of financial metrics, adjusted EBITDA was $58,000,000 in Q4, up almost 30% from Q3. 4th quarter net income of $30,000,000 was up more than 50% sequentially. Now I want to make one point on net income and earnings per share. First, for comparative purposes, had we calculated EPS as we had in the past, I would note that Q4 fully diluted EPS would have been $0.68 That said, since we issued the tracking stock in mid-twenty 23, GAAP accounting rules have frankly complicated our EPS calculations. 2024 will be our 1st full year with having a dual share class structure.

Speaker 1

I would note that the Class B dividend amount each quarter will affect the Class A EPS calculation alone. Adjusted EBITDA, net income and all other key items will not be affected. Based on our current outlook, I would expect quarterly 2024 Class A EPS to come in anywhere from 70% to 90% of how EPS would be calculated on a normal single share class estimate. For some guidance, the higher net income is, the greater the percentage of EPS assigned to the Class A shares will likely be. As a reminder, the Class A stock has just under 44,000,000 shares outstanding.

Speaker 1

We are expecting 1st quarter shipments of 800,000 to 950,000 tons, which is well below the run rate we anticipate for the full year. However, we anticipate building inventory in Q1 ahead of some larger term deals into Asia, which begin in Q2 and also ahead of the Great Lakes, which opened in late March. With that said, we anticipate both production and shipments to increase throughout the year with a meaningful uptick in the second half. Specifically, this second half increase will come from the addition of the more than 400,000 ton per annum RAM 3 surface and high wall mine at Elk Creek and the 300,000 ton per annum third section at the Berwind Mine. Mine costs are also projected to decline each quarter throughout the year as volumes increase sequentially.

Speaker 1

For the full year, we are reiterating all key prior 20 24 operational guidance, which you can find in our tables. I'll note that at the midpoint of guidance, we anticipate both production and sales up roughly 30% versus 2020 3, a slight decline in cash costs and a roughly 30% decline in CapEx.

Operator

Moving to

Speaker 1

the balance sheet. In Q4, we repaid the final $10,000,000 of debt related to the 2022 Ramaco Coal acquisition. We ended 2023 with $48,000,000 of term debt outstanding excluding the revolver and $42,000,000 of cash. Lastly, we finished 2023 with record year end liquidity of $91,000,000 compared to $49,000,000 at year end 2020 2. As Randy both said and provided specifics, we have just this week reached a preliminary agreement with KeyBanc to increase and extend the terms of our revolver.

Speaker 1

We expect this to be finalized in Q2. I would now like to turn the call over to our Chief Operating

Speaker 3

want to first start by reiterating how pleased and proud we are at the safety performance and environmental stewardship that we achieved in the field in 2023. We had overhaul our lowest incident rate in our history last year we are focused on improving and enhancing that performance as we move forward. Looking back on 2023 operationally, it was a tale of 2 halves. The first half was constrained at both of our big complexes. We had delays in the preparation plant upgrade at Elk Creek and Berwind was completing its development mining to reach the thick Pocahontas 4 teams following the ignition event of 2022.

Speaker 3

The second half, however, saw us increased preparation capacity at Elk Creek and begin the monetization of our inventory which had built up. We also reached the long talked about main reserve at the Berwind mine and staffed the mine and quickly reached and exceeded projected production levels. We also started our surface mine at Maven, which has run better than expected. The sales and marketing team has done an incredible job selling our inventory. Now as we turn into 2024, our operations will ramp up to meet these new elevated sales levels and work to double the size of our production over the next several years as Randy has described.

Speaker 3

That work is underway at all three of our main complexes now. At Elk Creek, after a couple of years with flat production, we've moved forward with the Ram Number 3 project. This will bring on 300,000 to 4 100,000 annualized additional production from a second surface mine and its accompanying highwall miner operation. This mine had been previously planned in both 20222023, but due to market conditions, the plant capacities and availabilities, it was postponed. Already in 'twenty four, we have broken ground and now expect our first surface tons in July with the Ram No.

Speaker 3

3 Howell Miner following with production beginning in October. The RAM III cost structure should match or beat the existing surface mine at Elk Creek, both increasing our overall volumes and lowering the average Elk Creek cash costs. At Berwind, as we discussed, both super sections are now in normal operation and since Q3 have been hitting targeted production. Our number one section has reached the area where a series of air shafts and a new portal and elevator will be built. Once completed, this ventilation increase will allow the start up of our number 3 section.

Speaker 3

With 3 sections operating later this year, we expect to be producing at nearly 1,000,000 clean ton per year rate from the Berwind mine itself. With the investments Aramco has made over the past several years at Berwind in the preparation plant, in belt lines from the mine to the plant, and of course, in the purchase of the coal reserves, Berwind is finally poised to be among the lowest cost and largest premium low vol complexes in the United States for many years. Finally, at Maven, we are taking steps to grow that operation into a full standalone complex

Speaker 4

with

Speaker 3

the purchase and the relocation of the preparation plant to the Maven site. Work has begun on demolition of the existing plant and the first deliveries of components have begun this week. We anticipate the rebuild of the plant to begin in the summer and the plant to be commissioned late this year. The size of the plant as purchased will allow us to wash all current surface and hollow miner coal at Maven as well as any initial underground sections that are contemplated in the future. As Maven grows, the modular plant design will allow us to quickly add upgrade circuits to the plant.

Speaker 3

Depending on market conditions, we believe that the Maven complex, if totally green lighted, could eventually produce between 1,200,000 to 1,500,000 annual clean tons. However, in the near term, getting the initial preparation plan in operation will drive down our transportation costs and save us nearly $40 per clean ton on the raw coal haul bill that we currently bear. Having the clean coal at Maven also opens this premium coal for shipment on both of the railroads as well as to river served customers. It is an exciting time for Ramaco operations. 24 and the next couple of years will be eventful as we grow out our existing complexes and continue to look for other opportunistic ways to enhance shareholder value.

Speaker 3

As we grow, however, our primary focus will remain on safety performance, environmental stewardship and maintaining strict cost control at all of our existing and new operations. Now for a more detailed discussion of the markets and the sales book, I would like to

Speaker 5

turn the call over

Speaker 3

to our Chief Commercial Officer, Jason Fannon.

Speaker 5

Thanks, Chris, and good morning, everyone. I will share what we are seeing in the markets and our current and forward sales outlook. Global coking coal markets remain well supported, mainly due to lower supply because of continued underinvestment in the coal space. Economic conditions, steel market fundamentals and demand outlook continue to vary widely around the globe. Integrated mills and coke batteries in the U.

Speaker 5

S. Continue to run strong on the back of sustained steel demand and pricing levels. Brazil continues to struggle with low cost steel imports and weak coke production, while economic conditions in Europe, along with high carbon taxes are keeping demand from rebounding there, although many blast furnaces have returned to production to start the year, but at low utilization rates. One bright spot for U. S.

Speaker 5

Producers during much of 2023 and continuing into 2024 has been the Pacific market ex China, where Ramaco is now becoming a player. We saw tremendous year over year demand growth in India, new coke batteries continuing to ramp up in Indonesia and traditional customers in South Korea and Japan expanding their intakes of U. S. Coking coal as they diversify and de risk their supply portfolio. Since our last call, we have effectively doubled our committed and sold position for 2024.

Speaker 5

Since December, as Randy said, we added 1,800,000 tons of new sales, essentially all to seaborne markets at index linked pricing. This now brings our overall sold position to about 3,900,000 tons, basically 100% of our original lower end sales guidance. As Randy also mentioned, during much of 2023, Ramaco focused its marketing efforts on the growing Asian markets, placing multiple test cargoes of all grades of resulted in a number of long term offtake agreements across all ranks of our product portfolio, with shipments beginning in earnest during Q2. At the same time, we have maintained and grown our business in North America and the Atlantic basin with specific long term partners who place incremental premium pricing value in Ramco's broad spectrum of low ash, low sulfur coking coals. Turning to the current pricing environment, index values have softened since the start of the year.

Speaker 5

China is treading water even though coal production has been cut back. India has a temporarily subdued market as elections there have slowed additional new infrastructure project announcements. As of March 7, the U. S. East Coast index values were $2.57 per ton for low vol, dollars 2.49 per ton for High Vol A and $208 per ton for High Vol B, while Australian premium low vol sat at $304 per ton.

Speaker 5

This dislocation between U. S. And Australian pricing has persisted since late September, with U. S. Coking coals continuing to be fundamentally undervalued.

Speaker 5

During 2022, U. S. Low vol averaged a 96% relativity to Australian POV and U. S. High Vol A averaged a 99% relativity.

Speaker 5

Those relativities have dropped substantially and as of yesterday stood at 85% 82% respectively. Currently much tighter than the indices suggest. As Randy commented, we see demand continuing to outpace supply in the U. S. Lowball and midball segment, where Ramaco is placing its bets and continues to focus on growing production.

Speaker 5

We see much of the near term growth in U. S. Coking coal supply in the high vol space. Fortunately, we already placed much of our high vol production into long term offtake agreements prior to a lot of this additional new high vol production coming to market. Regarding our sold pricing performance versus the markets, our low and mid vol coals sold into traditional markets have been sold at near parity to the U.

Speaker 5

S. Low vol index. Our high vol sales to traditional markets are at a modest discount to U. S. Indices.

Speaker 5

Our sales into Asian markets are priced against a basket of Australian indices along with typical freight differentials. Looking ahead, we hope to place a substantial amount of additional tonnage for the year in line with or perhaps exceeding our guidance. With that said, I would now like to return the call to the operator for the Q and A portion of the call. Operator?

Speaker 1

Thank you. We will

Operator

now begin the question and answer session. Today's first question comes from Lucas Pipes with B. Riley Securities. Please go ahead.

Speaker 6

Thank you, operator. Good morning, everyone. This is Nick Giles asking a question on behalf of Lucas. Congrats on the solid results here. My first question was around volume cadence.

Speaker 6

First quarter guidance was 800,000 to 950,000 tons. And I was wondering what would take you to the high or low end of that range? And then you mentioned the 5,000,000 ton run rate over the second half. And should we think about that as an even splitter or more weighted to 4Q? Thank you very much.

Speaker 1

Hey, Nick. It's Jeremy here. Good to hear from you. So I mean sitting here at the beginning of March, there's always a lot of variability with rails. And as we export more, you're going to end up on larger and larger vessels.

Speaker 1

So I mean, frankly, the difference between the low end and the high end this quarter is mostly on the logistics side, I would say. So obviously we hope to be at the high end, but I think history has told us that while the rails have certainly improved at the end of the day there's still some variability in there, hence the range. In terms of the cadence, I mean, I'd say volume will ramp up kind of each quarter. So if you're kind of thinking about a sales cadence, 2nd quarter will be around 1,000,000 tons. I'd say Q3 and Q4 is really where you're going to see the big step up and frankly Q4 a little bit higher than the Q3 call it $1,250,000 $1,300,000 in Q4.

Speaker 1

And really I'll let Chris kind of touch a little bit upon this, but the big delta is just as he talked about in his prepared remarks, when you bring the 3rd section on at Berwind and the Ram III Mine at Elk Creek, I mean that's almost 3 quarters of a 1000000 tons on an annualized basis. Chris, you want to touch on a little bit?

Speaker 3

Yes. So the cadence is obviously RAM surface mine, which is the smaller part of that complex will come in very end of Q2, beginning of Q3 and then we'll layer in the highwall miner at Elk Creek in the Q4 and that will be the bulk of the production and so that's why you get the step change on the Elk Creek side. And then at Berwind on the low vol, it's all based around the timing of our 3rd section, which is ventilation dependent. So we'd love to start that earlier, but the reality is it really won't start up until Q3 and then as we build the workforce and get it to normalize production, you'll see that step change in the 4th quarter, which has us exiting the year at the 5,000,000 ton run rate.

Speaker 6

Super helpful. Thanks, Jeremy and Chris. My next question was just on quality mix. You provided a nice outlook on a full year basis. And I think you mentioned the Great Lakes picking up here in March.

Speaker 6

So how should we think about quality mix here in 1Q and maybe how things would progress into the Q2 as well?

Speaker 5

Yes. Nick, this is Jason. As far as Q1 goes, I think our quality mix will look quite a bit like it did in Q4 certainly. As Chris mentioned, a lot of the production ramp coming in the back half of this year, which we'll see certainly more low volume. As you mentioned, Ram 3 was a smaller part of that uptick in the back half.

Speaker 5

Our Q1 production mix and quality mix essentially mirrored Q4 there.

Speaker 1

Nick, one thing I'd point to the slide 7 where we kind of give the breakdown. Randy touched upon it in his prepared remarks. But I think the thing to note there is that the big change is on the low vol side. So I mean right now we're at sort of a 40% low volmid vol kind of a mix. As we move forward, ultimately that will take us above kind of 50%.

Speaker 1

So I mean our mix I'd say in Q1 will look a little bit different obviously as than it will kind of when we exit the year as Berwind ramps and ultimately you get a full year Maven and bring on more tons there as well.

Speaker 6

Got it. Thanks very much. If I could maybe just sneak one more in on the market. I think you touched on the European market and cited lower utilizations. I was wondering if you'd

Speaker 5

Yes. Sure. Nick, this is Jason again. Yes, I mean as Randy mentioned, it seems like that market is kind of spring loaded for a rebound. I think there are several triggers that are going to be necessary to cause that.

Speaker 5

They've been so depressed now for the last couple of 3 years. Certainly really since COVID and then the energy impacts after the Ukraine war began. We have grown business with certain customers there for the premium products. Those customers have a very, let's say, strong outlook for this year as it goes forward. So those customers have indeed restarted blast furnaces.

Speaker 5

I think some of the capacity holdbacks on those furnaces are going to attempt to keep the steel pricing at a reasonable level for them. Think one of the big triggers for a rebound there would be some resolution in Ukraine. If you recall, prior to the war, they were taking upwards of 4,000,000 a year from the U. S. That could be a big jump in demand out of the states if and when that happens.

Speaker 5

But certainly there are shoots there and there are positive aspects there. It's just a matter of timing.

Speaker 2

I'd also say, Nick, that on a macro, of course, Europe has been sort of behind the U. S. In terms of its perception of when interest rates may start to decline. But I do think if you see the U. S.

Speaker 2

Decline at some point this year, you'll see Europe probably follow in its footsteps not too much further after that, and I think that would be another catalyst towards seeing a little bit more economic activity over there.

Speaker 6

Got it. Got it. Well, I really appreciate all the color. Congrats again on the quarter and continue best of luck.

Speaker 1

Thanks, Nick.

Operator

Thank you. Our next question today comes from Nathan Martin with The Benchmark Company. Please go ahead.

Speaker 4

Thanks, operator. Good morning, guys. Maybe sticking with the slide deck real quick, I think it's Slide 6, you guys talk about medium term production of possibly 7,000,000 plus tons. Could you provide a little more color around that target? Maybe how much CapEx that could possibly take or at least how many years you guys foresee it taking to kind of get to that level, which I think Randy you said is basically double what you guys did in 2023?

Speaker 7

Yes. I think in terms of the cadence, we kind of look at that as probably a 3 year ramp. We bumped Elk Creek up to about 3,500,000 tons. We'd have Berwind probably at a 1,500,000 to 2,000,000 ton level. We haven't green lighted Maven yet, but that would bump probably to about 1,500,000 tons give or take.

Speaker 7

And then we'd also have Knox Creek in there,

Speaker 2

with frankly as much as just a little bit under 1,000,000 tons. So actually that adds up to a little more than 7,000,000 but we've got room for a little wiggle room in there. I think in terms of the CapEx, we've got to work through it. But I would say our main CapEx for this would probably be 25, 26. To get to where we are right now in 2024 moving even up to sort of a $4,500,000 plus threshold.

Speaker 2

We're really bumping CapEx only about $13,000,000 from what we'd originally come in at to maybe in the sort of the low 60s, high $50,000,000 range. And as we look further out, we will give you plenty of heads up as to what the numbers will be. But I would say our cadence would probably ramp for probably 2 years at about a doubling of that rate. And of course that also includes maintenance CapEx too. So our growth CapEx is going to be much less than that.

Speaker 2

But when we get to the point of laying all that out with any new guidance on specific projects to take that up, we will be happy to provide all the CapEx numbers around it, growth CapEx.

Speaker 4

Got it. Appreciate it, Randy. Maybe shifting over to the Brook mine and the potential rare earth element side of the house. And you mentioned the expectation to get the rear report, I think, over the next 2 weeks or so. What kind of information do you expect from that?

Speaker 4

And then separately, do you guys still anticipate receiving the report from SRK, I think you said previously, by the end of the first half? And correct me if I'm wrong, but I believe that should give us the first glimpse in the possible economics of the project as well.

Speaker 2

Yes. So, great question. So basically to break it down, in the Weir report, we are going to we have essentially been putting up a tremendous amount like thousands of additional samples that have been tested since our first report. So that's what's given the time lag. We've also gone back as we will explain and done some interesting new testing metrics that will be focused not only on tonnage, but more importantly on concentrations.

Speaker 2

So I don't want to front load that because it's going to be up soon enough. And in terms of SRK, basically what they were brought in to do was of course to help us determine the economics. And the way that that cadence will roll is first you have to determine essentially what the chemical and metallurgic and mineralargic character of the deposit is before you can really determine how the best processing techniques will be developed. And so that's frankly the process that we're in now. And again, once we come out with the report, we will have a full disclosure of everything we're looking at.

Speaker 2

We just brought on board someone who is kind of now going to functionally run our rare earth effort, who's got a great deal of experience and background in this area. So look forward to having sort of an analyst call here probably sometime within the next month to be

Speaker 1

able to

Speaker 2

explain all the findings from the Weir report and also to give you sort of a critical path of how we're proceeding forward with the commercialization efforts.

Speaker 4

Got it. Very helpful. Maybe just one more on CapEx and as it relates to what we're just talking about. I mean, if these reports come out, let's say, with positive results, is there a possibility that CapEx moves up in 2024 or are we still a little bit ways off before we look to start spending more material amounts on that project?

Speaker 2

You're talking about on REEs or on met coal?

Speaker 4

Yes, on REEs at the Brook Mine, exactly.

Speaker 2

Yes. We have spent exceedingly modest amounts sort of in the $3,000,000 to $4,000,000 range on our entire rare earth project to date. So you can do the math on what kind of return that's generated for us at least from a market value standpoint. So our CapEx relating to the mine out there really won't begin to kick in until 2025. And that is premised on the fact that we will come up with what is the appropriate processing technique that we will try to pursue.

Speaker 2

We've got a lot of testing to do before we come up with that conclusion. And once we get to that point, again, just like we always do with any of our CapEx, we will give you plenty of guidance on what that looks like. But I'm thinking not much CapEx even in 25 percent, I would look to more CapEx probably be in the outer years.

Speaker 4

Got it. Thanks, Randy. I'll leave it there. Very helpful, guys. Best of luck in 'twenty four.

Speaker 1

Thanks, Nate. Thank you.

Operator

And ladies and gentlemen, this concludes our question and answer session. I'd like to turn the conference back over to Mr. Atkins and the management team for any closing remarks.

Speaker 2

Great. Well, as always, we appreciate everybody being on the line this morning. We look forward to catching up here in a few months and thanks for your interest. Thanks very much.

Operator

Thank you, sir. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.

Powered by Quartr
Earnings Conference Call
Ramaco Resources Q4 2023
00:00 / 00:00