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Jeremy Sussman

Thank you, Randy. As you noted, fourth quarter 2024 operational results were the strongest of the year, despite metallurgical coal indices being the weakest. One testament to all of the hard work of our mine employees is that cash margins have declined only $2 since Q2, while met coal indices have fallen $30 per ton.
To get into specifics, Q4 adjusted EBITDA was $29 million compared to $24 million in Q3. Q4 net income of $4 million compared to breakeven in Q3. Class A EPS showed a $0.06 gain in Q4 versus a $0.03 loss in Q3. The primary reasons for the increase in both Q4 EBITDA and EPS were the $6 per ton sequential decline in our quarterly cash costs and the almost 100,000 ton increase in tons sold.
On the cost front, we exited 2024 in the mid-90s per ton range, which was the best among our publicly traded peers. We've always said that one of the pillars of Ramaco going back to our preproduction days was to operate in the first quartile of the US cost curve. Indeed, that is where we now stand.
On the tons sold front, we exited the year at a 4.5 million ton per annum run rate for the highest level in company history despite challenging market conditions. Looking forward, we're maintaining all of our 2025 guidance other than bumping up our book tax rate to 25% to 30%, that we'd expect to pay minimal cash taxes in the current environment.
In terms of our guidance, we're maintaining a meaningful spread between the low and high ends of production, sales, cash cost and CapEx guidance. This is in large part due to current market uncertainty. To give you a little more color, if weak market conditions were to persist throughout the year, we'd likely come in towards the lower end of all four of these metrics of production, sales, cash costs and CapEx by trimming back on some higher cost production. At the same time, we hope that market conditions improve, especially in the second half of the year, given all of the potential supply curtailments that Randy discussed.
Looking specifically at Q1 of 2025, all of us in Central Appalachia encountered two very challenging weather events. First, we experienced freezing temperatures for two weeks in January and then saw historic flooding in February. As a result, cost per ton sold are anticipated to come in towards the high end of the full year guidance range in Q1.
When coupled with the normal typical inventory build ahead of the Great Lakes opening in the spring, Q1 tons sold are anticipated to be 850,000 to 950,000 with Q2 shipments up by more than one-third sequentially.
Moving to the balance sheet. Our liquidity at year-end of $138 million was up more than 50% year-on-year. This was by far the highest year-end liquidity in company history. We also had nothing drawn on our revolver at year-end. At the same time, our overall credit metrics remain quite strong with net debt to adjusted EBITDA of just 0.5 times on a trailing 12-month basis.
The bottom line is that despite challenging market conditions, our cash margins remained relatively unchanged for the past few quarters despite the meaningful decline in pricing. At the same time, we ended the year with record liquidity and minimal net debt to EBITDA.
I'd now like to turn the call over to our EVP for Mine Planning and Development, Chris Blanchard to discuss operations.

Christopher Blanchard

Thanks. Jeremy. Thank you to everyone who joined us this morning. As we've discussed, it's nice to be able to talk about positive performance at the operations even if the underlying market wasn't as strong as we would all prefer. The fourth quarter operational performance and the improvement seen throughout the full year was the result of both the diligent efforts of the entire team and commitment to the development and growth plans we put in place late in the preceding year.
2024 was always projected to be a transitional year as we completed development mining in some of our older and thinner reserves at our legacy mines and transitioned into new areas with favorable geology throughout the year.
Among the most significant milestone was the completion of the construction of our Maben plant, which ended the need to transport raw coal to our Berwind Complex and reduced net trucking costs by over $20 per clean ton. Work continues at Maben, completing final construction and optimization projects at the plant itself, but we are now processing on a regular schedule and working through the raw coal inventories we had stockpiled at the complex.
Company-wide, while individual mines production levels fluctuate normally as their conditions ebb and flow, we saw month-over-month increases in overall productivities throughout the fourth quarter. Some of this was attributable to easing employee turnover rates as the overall coal markets have cooled from what was an extremely tight labor market in the Central Appalachian region.
Continuing into 2025, the labor market is still tighter than its historical average and the reductions in the industry and the belt tightening has not yet translated into an abundance of skilled coal miners available.
Pricing continues to languish in its current range. However, on our growth plan, we are still continuing to advance several development projects so that we're positioned to execute when there's a rebalancing of market dynamics. The biggest group of projects relate to the Maben Complex. This will involve the development of the underground reserves, which will ultimately ramp the complex up to 1.5 million clean tons per year.
At Maben, the permits are being advanced and work related to opening the underground mine continues. We believe that these mines can be brought online and ramped within 12 to 15 months when they are green lighted. Much of the lead time then will be the procurement of the underground mining equipment.
Also, at our Berwind Complex, several capital projects continue related to new ventilation shafts and a new portal area in the heart of Ramaco's fee coal position at this mine. These safety-related and cost savings projects will continue. This will allow the Berwind mine to have the proper ventilation, safety and logistical infrastructure to operate at its full planned capacity of four super sections when market conditions allow.
We expect the first of the three new air shafts to be online late in the second quarter of 2025 after receiving the final federal permits needed for the approval of this work. Indeed, across all of our operations, we have started to see some of the permit backlog unwind and our minor permit revisions and additions to again be approved in a timelier manner.
Turning briefly to 2025. As Jeremy mentioned, in Q1, the extreme winter snow and freeze events followed by historic flooding did impact operations and shipping. In West Virginia, the impacts to McDowell, Logan and Wyoming counties where we operate were devastating. Beside the impact on actual mining operations, the damage to homes of the families of our employees was heartbreaking.
We continue to work with some of the most stricken for relocation and recovery of their homes. Also throughout the region, we continue to work with charitable organizations and local groups supporting the recovery however we can. More directly at the mining complexes, the biggest impact of this weather was hundreds of collective employee shifts missed during January and February.
We also had some additional downtime and costs associated with the flooding in February, primarily from unusual accumulations of water in the sealed or inactive areas of our underground coal mines, as well as some slowing of surface and plant operations. Fortunately, as we enter March, all of these conditions have abated and subsided, and we have resumed our normal operational cadence.
We continue to watch the markets and hope for price improvement. In the meantime, we remain disciplined in operational performance and costs to focus on those areas we do have some level of control over. We're positioned to be nimble to adjust as necessary to the economics of the market.
To discuss all these factors driving the market right now, I would like to turn the call over to our Chief Commercial Officer, Jason Fannin.

Jason Fannin

Thanks, Chris, and good morning, everyone. Today, I'll share our views on coking coal and steel markets, as well as our sales outlook. Global coking coal markets have continued to weaken from a pricing standpoint with average coking coal index prices down approximately 6% since the start of Q1. If current index levels remain flat through the end of March, Q1 index averages will also be down 6% versus Q4.
As of March 10, the US East Coast index values were 182.50 per ton for low-vol, 79.50 per ton for High-Vol A and 166.50 per ton for High-Vol B. Published US East Coast price indices have drifted lower over the last two weeks. We believe these levels are not at all reflective of the supply side tightness in Central and Northern App due to recent bankruptcies, mine idling, operational cutbacks and the extreme weather experienced in much of the Central Appalachian coal fields during January and February.
The Australian premium low-vol index currently sits at $181 per ton, a level last seen briefly in September and before that, not since mid-2021 during the China ban on Australian coal imports. The second-tier low-vol coking coal index is priced at 142.50 per ton and has significantly underperformed relative to premium grades.
As a result, many Australian producers in Queensland and the broader region are experiencing severe margin compression. We believe the majority of mines in Queensland are operating at breakeven cash costs or worse.
We are also witnessing profitability issues in the US. Producers with an inability to control higher costs are struggling. We have already seen a fair deal of idlings, bankruptcies, layoffs and associated supply rationalization because of the continued poor pricing environment. Over the next few quarters, the dominant theme for smaller and less well-capitalized producers will likely be weak profitability and continued supply cuts.
Investors will have an increased focus on liquidity management across the industry. This will be especially impactful for those smaller and or private producers who are more heavily exposed to seaborne markets, and perhaps are overlooked by public markets and industry reporting agencies.
If these weak market conditions continue, we believe the next phase will be more significant supply cuts, which may lead to a rebalancing of market dynamics. This will present many opportunities for Ramaco to capture market share, establish additional long-term customer relationships and continue to grow our sales book.
The weakness in coking coal prices is primarily a reflection of poor profitability at steel mills worldwide rather than an oversupply of met coal. Queensland, for instance, has seen its lowest shipment volumes in over a decade to start the year, yet prices continue to decline. According to MSHA data, quarterly production of coking coal in the US has declined successively since Q2 of 2024.
This underscores the broader struggles of the global steel industry, which remains in a prolonged downturn. The key factor in this dynamic is the surge in Chinese steel exports, which continues to pressure global steel mill profits.
Since early 2022, annual Chinese steel exports have been 104 million tons on average, peaking at an annualized rate of nearly 150 million tons in October last year, a huge increase, which has impacted steel pricing on a global scale.
So far this year, Chinese domestic demand has failed to rise enough to push down steel exports from these astronomically high levels. We, therefore, continue to look for green shoots in the Chinese economy as it relates to potential steel consumption growth in their domestic market. Fortunately, many leading indicators have rebounded. This suggests the cycle is turning up again, although it will likely take some time for excess steel exports to decline meaningfully.
In the Atlantic Basin, Ramaco's term volumes and demand from our usual specialty customers remain solid, while at the same time, the US steel market is staging a prolific rebound in response to the Trump tariffs. With integrated blast furnace production currently holding a cost advantage over electric arc furnace operations, we may see domestic producers ramp up blast furnace output in response to rising steel prices. This would likely result in higher domestic coking coal consumption, which provides a natural hedge against weak pricing in the seaborne market.
The potential for increased domestic demand later in the year aligns well with our sales strategy for 2025. So far, we have committed 3.5 million tons for sale during 2025. We have booked 1.6 million tons to North American customers at an average fixed price of $152 per ton and 1.9 million tons to the seaborne market at mostly index-linked pricing.
Most of our uncommitted volumes are associated with production in the back half of the year as we are largely sold out in the first half. This leaves us with the flexibility to take advantage of evolving market dynamics and layer in additional sales opportunities with pricing arrangements we view as favorable from a risk versus reward standpoint.
Turning to an overview of Ramaco's various seaborne markets. Recent mine outages in the US and in Europe have caused a tightening in US supply markets as buyers seek supplemental met volumes. This trend began before the various major mine outages in the US and Europe, as well as prior to the extreme weather in Central Appalachia in January and February and continues today.
The broader European steel market began 2025 on an upbeat tone with rising steel prices as potential safeguard measures threaten to cut off cheap competition from imports. While the European steel industry remains fragile due to slowing economic growth, we see indications that policymakers may shift away from long-standing fiscal conservatism toward expansionary pro-growth strategies. This would create a much needed tailwind for investment and spur downstream steel consumption.
South American markets continue to be stable with modest demand growth expected as steel safeguard measures provide support for increased pig iron production in 2025. Ramaco's term contract order book in South America continues to perform well, and we have seen increased spot tenders from a few buyers, particularly on the low volatile side.
Looking ahead, we expect Indian coking coal demand to strengthen later in 2025, supported by the addition of 11.5 million tons of new blast furnace capacity. Over the past two years, coking coal demand has lagged behind India's overall steel consumption, largely due to increased seaborne met coke imports. However, with the implementation of met coke import quotas late last year, we anticipate coking coal consumption will better align with blast furnace iron production trends going forward.
Additionally, we are closely monitoring potential Indian steel import safeguard measures, which, if implemented, could enhance domestic steel mill profitability and support higher coking coal prices. In terms of our market strategy in the Pacific Basin, we continue to engage and supply a core group of customers in Asia. This is a group with whom we fostered long-term relationships even as the price environment in the Pacific has become challenging for many US suppliers.
As market headwinds persist, we are adopting a cautious systematic approach to our remaining uncommitted volumes. We plan to allocate these volumes to the highest return sales opportunities, while continuing to supply our long-term customer base, all with a focus strategically on future growth.
With that said, I would now like to return the call to the operator for the Q&A portion of the call. Operator

Question and Answer Session

Operator

Thank you, sir. We will now be conducting the question-and-answer session. (Operator Instructions)
Nick Giles, B. Riley Securities.

Thank you, operator. Good morning everyone. Guys, congratulations on the lower cash costs and the successful additions of production at Elk Creek in 2024. My first question, if I saw correctly, you have some seaborne volumes fixed at $111 per ton. And so I was hoping you could add some color around where you see netbacks today for your various qualities. I think you mentioned that current Atlantic indices aren't fully reflective. So where do you see the highest return opportunities in the current market?

Christopher Blanchard

Nick, on the $111 there that those are index-linked prices that have settled out for January and February. A large portion of that were from a couple of our Asian high-vol contracts that have since rolled off. That's the impact you're seeing there in that fixed price number.
To your question on where we see the highest returns in the current seaborne market, certainly, in the Atlantic, you know, we factor out the freight differential to the Pacific and then frankly, the near parity now with the Pacific indices versus the Atlantic indices, there's a differential there. In terms of current netbacks, just broadly speaking, where indices are at today, I think our high vol, you're in the 125 per net ton range back at the mine with low vol, you know, up, I'd say, $3 to $5 above that.

Jeremy Sussman

It's Jeremy here. If I could just add a couple of things to that. So just on the $111 number, I'd say about 40% to 45% of what was shipped in January and February on the export market was to Asia. That's about double sort of our normal Asian cadence. So I'd say it's a little bit wonky from that perspective.
But regardless of sort of the netbacks and whatnot, I mean, I think the key is our cash margins are, call it, $33 a ton. That's down $2 a ton since the second quarter and certainly about 50% or more than 50% higher than, I think, the next highest in Central Appalachia when you kind of average Q3 and Q4 and frankly, competing with the Alabama longwall margins. So all in all, again, kudos to Jason and Chris and their teams for keeping our margins very strong on a relative basis.

Jeremy, Chris, I appreciate all that additional detail and for the clarification. Maybe just on the growth side, in your guidance, you've noted that you could respond to higher prices with some of the growth projects you have at your disposal.
And so could you remind us of the capital intensity of each of those? And what would you ultimately need to see to move forward? And then is any of this potential growth CapEx included in your current guidance of $60 million to $70 million?

Jeremy Sussman

Sure. A few questions there, Nick. So I guess, first, from the standpoint of our total capital, our guidance is about $60 million to $70 million. I'd say our normal sort of maintenance CapEx is around $9 to $10 a ton. So sort of embedded in that is about $20 million of growth capital. I'd say it's split pretty evenly between Elk Creek and Berwind. I mean there's a few million in addition.
But at Elk, really, it's basically increasing the infrastructure for the most part to make sure that we can get to 3 million tons on a sustainable basis. And at Berwind, Chris discussed a number of the projects that basically allow us to mine full out ultimately in the third and fourth section.
So I guess what I would say is if market conditions remain weak, there's probably some room in our CapEx to come down. At the same time, as Randy sort of detailed in his remarks, there's a lot of carnage out there. And certainly, we do think that the market is poised to move higher in the second half of the year.

Randall Atkins

Yeah. I'll make one other comment. So I mean, basically, in this kind of a sideways market, in terms of committing new capital to growth, we basically, as I said, want to see some clarity, whether that's one or two quarters of stabilized pricing or hopefully even increased pricing remains to be seen.
But the nice thing about where we're teed up at Maben, of course, we already have a prep plant in place. We've got probably for the deep portion, about a $30 million spend, which will be graduated over a period of time. That's not a one-year spend. That's probably more like a two-year spend. And at Berwind, we're essentially just continuing through an existing mine to add more sections.
So that's a relatively modest spend, I would say, again, about the $10 million range. And that's, once again, not a one-year spend, that's probably a two-year spend. So our cap requirements for these additions are in relative terms, pretty darn modest. I can't think of too many people who can add 2 million tons for essentially $40 million in CapEx. So that's how I'd look at it.

Jeremy, Randy, thanks again for all the additional detail. Good to hear you have that optionality. Maybe just one last one on the rare earth side. I mean this is seemingly a project of tremendous scale. So what kind of order of magnitude should we be anticipating as far as development CapEx? And is there a CapEx level you'd be able to point us to that's required for the construction of the pilot plant later this year?

Randall Atkins

Sure. So the way that I teed it up, I think, both in our earnings release, as well as in my remarks, we will have a pretty granular description of not only the technical aspects of the deposit, the grades, the recovery rates, but also, of course, the economics and the CapEx, which are inclusive in the Fluor techno-economic report. That's been hung up bluntly because there's such an overwhelming demand for people doing testing of various rare earth projects that they labs that do the chemistry and metallurgic analysis for those are quite backed up, and we've been having delays in getting the test results back.
We've got those results back and Fluor is telling us by the middle to latter part of next month, they will have completed the report. And so instead of front-running that report by kind of drip and drabbing out CapEx numbers and pilot plant numbers, we'll let the report speak for itself.
And as I said, once we put that out there, we'll be even happy to have a sort of a separate rare earth call, which we've done before to go into far more detail than we would on this call, certainly today or certainly even on a normal earnings call where we're talking about our met operations as well.

Operator

Chris LaFemina, Jefferies.

Thanks for taking my questions. I just want to ask first around the reduction in unit costs. I mean that's been an impressive performance there. And obviously it's helped to offset some of the weakness in prices. But I'm wondering to what extent - let's assume that met coal prices begin to really recover in the next year. Does some of the cost reductions that you've realized so far begin to reverse? That's my first question.

Christopher Blanchard

So largely - that's Chris. I'm sorry, this is Chris. But largely, the cost reduction has been driven by the move from more challenging geology in some of our older mines into thicker horizons where the clean tons per foot is higher and it drives down the unit cost.
Obviously, we've seen a little bit of benefit, I guess, by the lower sales price in our royalty costs and other sales related. So that would reverse as the prices go back up. But absent a spike in pricing, we wouldn't expect to see major labor increases, which is what sort of drove a lot of it in 2022, 2023. So I think structurally, the lower cost should be in place with just the normal moves around sales related.

Randall Atkins

And Chris, this is Randy. I'd add, as you heard from our remarks, we are seeing a lot of supply reductions out there. So in the space, not only vis-a-vis labor, but some of the other types of equipment, steel related and other, we're seeing a softening somewhat in the market.
So we would not expect that trend to reverse given the amount of supply coming out of the market unless there's really, as Chris said, a real spike because if we're going to see somewhere around 15 million to 20 million tons come out of the Central App and Northern App markets, that's going to create a large hole for not only suppliers, but also the labor markets.

Christopher Blanchard

And does that capacity come back online in a better market? Or is some of this capacity, you think, permanently gone?

Randall Atkins

I think, Chris, a lot of that capacity may be gone on a permanent basis. The one thing, of course, a lot of people don't appreciate as much is really the depletion that's in the Central Appalachian Basin. It's a mature basin and a lot of these mines, particularly for a lot of the larger legacy producers are in mines that are very mature. And they are coming, if not to the end of their useful life, they're certainly coming to a point where the geology is declining. That's why we've got relatively new mines, sort of fresh geology and thicker seams, which is obviously an advantage to us from a cost perspective.

Operator

Nathan Martin, The Benchmark Company.

Congrats on the fourth quarter results and the continued cost per ton progress. And maybe just kind of starting there and more of a clarification question. You mentioned the commissioning of the major prep plant in the fourth quarter, reduced those trucking costs by roughly $20 a ton at that complex. However, I know you guys had previously talked about a number around $40 a ton. Is there more savings potentially there? Or is that just maybe a clean versus raw ton comparison? Just wanted to get clarification.

Christopher Blanchard

Yeah. So -- good question. This is Chris again. The trucking cost on a raw basis was converted back to clean was about $40 a ton. So we're avoiding that. However, until we build the rail load out directly on site, we're now trucking our clean coal, which has approximately the same unit cost of $20 per ton. So when we build our load out and load the railcars directly at Maben, then that additional $20 will come out as well.

And Chris, when do you expect that to be complete?

Christopher Blanchard

Well, that -- we are -- the project is, I guess, I would say, under consideration. We're going ahead with engineering work and some of the design work on that, but probably not this calendar year.

Okay. But is it right to assume then that would potentially improve those costs even more?

Christopher Blanchard

Yes, absolutely. As soon as that project is put in place, we'd expect just on the top side, the $20 cost savings.

Okay. Perfect. Thanks for clarifying that. And then maybe just sticking with the cost per ton. You guys just talked about some of the variable costs associated with price. What price range are you assuming in your full year cost per ton guidance range?

Jeremy Sussman

We're just - Nate, it's Jeremy. We're just generally using the forward curve for planning purposes.

Okay. Thanks, Jeremy. And then maybe finally, you guys have touched on this a bit, but I wanted to ask, how would you rank or prioritize your capital spending today? Obviously, liquidity position is strong. You've got the dividend policy in place, but we continue to see this prolonged weakness in the market.
You mentioned there could be some opportunities for M&A because of that. You're also continuing down the path of the rare earth process at the Brook Mine. So how do you see balancing growth, whether it's internal or external shareholder returns and then protecting your business during this downturn?

Randall Atkins

Sure. This is Randy. I think to your question about M&A, as I've said before, we're not too fond of the M, but we're happy to look at the A. So in this kind of a down or distressed market, we will try to be opportunistic if we see situations where particularly reserve plays or perhaps infrastructure plays that might become available at opportunistic prices, we'll take a look at that. That's something you can't really plan. You kind of hope for, but you certainly don't expect.
As far as our normal cadence for growth CapEx, I think we've explained that. We've got a very modest growth CapEx laid out for '25, obviously, reflecting the market. We're not ready to push the start button on some of these projects at Maben and Berwind until we see a little bit more clarity.
As far as what's going on in Wyoming, we have been, frankly, surprised at how modest our spend has been to take this project to where it is for about $10 million, I think, has been a very well used amount of our capital to advance a project that has transformative potential. But as we move forward right now, we've gotten a recommendation from the Wyoming Energy Authority for $6 million, which is certainly appreciated. That will be focused on the prep plant or the pilot plant rather.
We don't have too much additional drilling that we have to do. We'll probably continue to drill throughout the years because this is such a prolifically large site that to really prove it up is going to take a good deal of time. Somebody remarked to me, it's almost like you've got a Permian Basin of rare earth. So you've got a lot of work to do to geologically scope it out.
As far as the pilot plant and the future commercial plant, those will be dictated in some instance by the nature of the process we will ultimately use chemically and metallurgically to actually refine the rare earths and the critical minerals. We're going through that testing now. Obviously, the pilot plant is designed to refine that testing and come up with a solution that will be optimized as we move forward. So we don't have too much capital that we've allocated to that for '25.
And on the mining, the same thing. We've already started doing some of the mine mobilization there now. We'll start really moving some dirt around probably in June and July time frame. And then we'll start construction on site for the pilot plant sometime, I would say, late summer, early fall. We're going to basically bifurcate the pilot process because we're going to have some of it designed and tested off-site in a test facility at one of our chemical testing third-party laboratories. And then we'll take that process and essentially move it to the Wyoming site, and that's what will start to occur this fall.

Very helpful, Randy. I guess just one thought there, too. Is that pilot plant CapEx included in the current $60 million to $70 million CapEx range for this year?

Randall Atkins

Yes. Yes, it is.

Okay. Perfect. All right, guys. Very, very helpful. Appreciate the time.

Randall Atkins

And honestly, we did not include originally the $6 million that we've now been recommended to receive an award from Wyoming. So that's an extra bit of wind in our sail, so to speak.

Operator

Thank you. Ladies and gentlemen, this concludes our question-and-answer session. I would now like to turn the conference back over to the Chairman and CEO, Randall Atkins for closing remarks.

Randall Atkins

Well, I'd like to thank everyone for being on the call today. We will certainly look forward to our next earnings call and then also hopefully to, in the interim, have a call with you all related to our rare earth project. So once again, thanks very much.

Operator

Thank you. The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect your lines.