Ramaco Resources, Inc. 8.375% Senior Notes due 2029 2026 Q2 Earnings Call

On behalf of Ramaco Resources, I'd like to welcome all of you to our second quarter 2026 earnings conference call. With me this morning is Randy Atkins, our Chairman and CEO, Mike Woloschuk, our EVP of Critical Mineral Operations, Orin Atkins, our SVP of Critical Mineral Sales, Chris Blanchard, our EVP for Mine Planning and Development, and Jason Fannin, our Chief Commercial Officer of Met Coal. 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. 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, 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 also 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, www.ramacoresources.com. Lastly, I'd encourage everyone on this call to go onto our website and download today's investor presentation. With that said, let me introduce our Chairman and CEO, Randy Atkins.

Thanks, Jeremy, and thanks for everyone joining us this morning. We have a lot to discuss. First, turning to our critical mineral front, as you know, we released last week the long-awaited Hatch conceptual study, along with the shareholder letter, both of which are on our website. The overall Brook Mine project is transformative, both for Ramaco and for the country. It also represents the reality of developing, building, and financing a major supply chain response to the chokehold on critical minerals that the Chinese have over the West. At Ramaco, we have been at this now for about six years. We believe we are more than halfway there before commercial production. The reality is that it will take several years for the U.S. to balance the playing field with the Chinese, who have been at it for more than three decades.

As you know, we changed direction last fall to test the carbochlorination method to apply to our coal-based feedstock. We've now arrived at a method to processing our ore. This moves us from being just an upstream feedstock provider to also a potential large-scale midstream refiner. Refinery is clearly the most expensive and largest project we have considered, but it also represents a unique long-term potential profit center and at a transformative scale. We are conservative in our fundamental approach to our commodity businesses, be they critical minerals or met coal. We will approach this project in the same way. In brief, now that we know both the, quote, "how to process" and also, quote, "what oxides, metals, and MRICs we can potentially produce," going forward, we will work to improve the refining techniques to make them financially stronger.

We'll also focus to optimize both the refinery construction cost and the construction timing. On financing, we want to make sure that the subject is properly framed. The major capital disbursements for the refinery are still more than two years away. We are approaching that runway deliberately to finance the project in as an attractive as possible manner for our shareholders. As we've said before, we have been in discussions with the government. Government financing support has been pending the completion of the independent third party diligence. Procurement offtake counterparties, including relevant federal agencies, were also perfectly reasonably awaiting the Hatch study before advancing. With that Hatch report now in hand, we are positioned to move these discussions forward with both offtake and commercial financing counterparties. Basically, the door opened last week for us to now concretely pursue these discussion to some point of conclusion.

I'm not going to repeat all of the metrics which we discussed in last week's letter, other than to highlight just a few of the milestones. We had Hatch look at the Brook Project at two different levels of plant feed. One was at a 1.8 million, separately, we had it at an elevated 3.5 million tons of feedstock. The higher case was in part motivated by supplying a larger level of feedstock production for domestic government supply chain needs. The project is, and always has been, very scalable in both directions. Our mine out here was originally permitted at 8 million tons of coal production, which we later scaled back to 2 million tons before it became a rare earth project. As I will touch on, we have generations of available feedstock in our deposit. We can always increase production.

If economics or timing so dictate, we can always also lower the tons mined and oxide produced to get started. Then add more production later. Depending upon future demand and financing availability, we could increase or decrease production accordingly. The initial size of the facility will be dictated on Ramaco's efforts to de-risk the project, including offtake agreements and, of course, financing. If there is one hallmark about this company, it is that we call an audible at the line almost every day. Internal modeling for the Brook Mine, using the capital and operating cost information from Hatch on the two alternative feedstocks, showed a potential NPV of between roughly $3.4 billion-$8 billion, an average adjusted EBITDA of between $600 million-$1.3 billion. Both these figures are up substantially compared to Fluor's 2025 studies.

These figures, I would note, also do not reflect any potential uplift from inclusion of e-waste in the feedstock. As Hatch noted, the timeline and capital cost have been pushed out and increased compared to last year's Fluor report. So has the profitability. We will, of course, work to tighten and reduce timing and cost as we progress on the testing, optimization, and engineering fronts. One pushback from last year's Fluor report was that we were over-reliant on scandium production. Both Hatch's and our own analysis now show that roughly 75% of our potential revenue will be tied to key critical minerals, whose main demand driver is the semiconductor industry. Our growth trajectory would then also be tied to several key markets, be they from data centers to AI.

Indeed, at the projected levels of expected production, the Brook Mine could provide a multiple on all of the nation's demand for the strategic critical element gallium and its related products used in these industries. In terms of independent report milestones, we expect to publish a report on e-waste this fall and its use, followed by a new S-K 1300 compliant technical report summary by the end of the year. This will reflect the Hatch flow sheet and the benchmark scale test work now underway. That year-end filing will be followed by a full pre-feasibility study in the spring of 2027, which marks the next formal step in the de-risking of the project. As we always remind ourselves, fundamentally, the Brook Mine project starts as a unique upstream geological opportunity. As we've said before, it's been called the nation's largest unconventional rare earth and critical mineral deposit.

Even at the current permit levels, on roughly only one-third of the mine's total acreage, we should be able to operate the mine for generations. We are also working with independent testing labs to identify commercial levels of other critical minerals and rare earth elements within the deposit that we have not disclosed to date. If independent assays and tests confirm commercial size of deposits, we will include that in our future product mix. To date, we have internally discovered more than 50 such minerals and REEs in our deposit. As Mike Woloschuk will discuss, construction on our pilot plant building remains on schedule for completion later this year, with full-scale operations expected to commence in 2027. We will start moving various lab operations into the new facility this fall to accelerate our testing capability and timing. Now, I'd like to turn to our legacy metallurgic coal business.

As you've already heard from some of our other public coal peers, we have continued to see market weakness across most U.S. coal qualities, but especially in the high vol coals. Too much domestic production is chasing a limited export market at the moment. By contrast, the low vol coals have shown continued relative strength. Reflecting this market reality, in June, our board approved capital for the $25 million development for the first two underground sections at our Maben Complex. Capital will be deployed over the next 12 months, split evenly between this year and 2027. We anticipate by the end of 2027, this two-section deep expansion at Maben is gonna add about 600,000 tons of production at full capacity. These will be tons which can achieve cash margins roughly double the company's overall second quarter margins.

Combined with our existing surface production at Maben, this will also translate into 1 million tons of annualized production by 2027. We have the future potential to add two additional deep sections at Maben. This would increase our low vol capacity by another 600,000 tons, for a total of roughly 1.5 million tons of low vol production from the Maben Complex. To complete our overall low-vol growth plans, we would combine Maben with our previously announced growth at Berwind. This includes adding 300,000 tons in 2027 at the Berwind number 3 section. This would then take the three Berwind sections to 900,000 tons of annual production, with the optionality to add a fourth section for another 300,000 tons. When these four sections are added to Berwind's Laurel Fork Mine, this creates another complex with a 1.5 million ton production slate.

Berwind would then mirror the same future level of production as Maben. We would have a combined 3 million tons of annual low-vol production from both complexes. When added to the more than 3 million tons at Elk Creek and Knox Creek, this provides a balanced medium-term portfolio of over 6 million tons of total production, up from our current level of roughly 4 million tons. Our investor slide shows this strategic objective of increasing low vol to 50%, up from about 25% today. I would also like to commend our metallurgic operations team. Second quarter mine cost at $99 a ton represented the fourth consecutive quarter of sub 100 cash costs. This was achieved despite diesel prices increasing quarterly by roughly 33% in the second quarter. Our costs remain in the first quartile of U.S. met coal cost curves.