Ramaco Resources, Inc.

Welcome to the Ramico Resources Inc. Fourth Quarter 2021 Earnings Conference Call. My name is John. I'll be your operator for today's call. At this time, all participants are on listen-only mode. Later, we will conduct a question-and-answer session. During the question-and-answer session, if you do have a question, please press star then 1 on your touch-tone phone. And I'm going to turn the call over to Jeremy Sussman, Chief Financial Officer. Please go ahead.

Thank you. On behalf of Ramico Resources, I'd like to welcome all of you to our fourth quarter 2021 earnings conference 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. These forward-looking statements represent Ramico's expectations concerning future events. These statements are subject to risks, uncertainties, and other factors, many of which are outside of Ramico'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, Ramico does not undertake any obligation to update or revise any forward-looking statements. whether as a result of new information, future events, or otherwise. Lastly, I'd encourage everyone on this call to go onto our website, ramicoresources.com, and download today's investor presentation under the events calendar. With that said, let me introduce our chairman and CEO, Randy Atkins.

Thank you, Jeremy. We always look forward to discussing results with everyone interested in following Ramico. As you know now from our earnings release, we have been quite busy during the past month or so. To start, we had our strongest quarter on record in Q4 21. So far in 2022, we have committed sales on about 70% of this year's production. Through these sales, we have already basically printed year to date roughly $270 million of EBITDA, $195 million of net income, which translates to about $4.40 of earnings per share. So after less than two months into the new year, we have greater than three times more EBITDA and four times more net income than we did for the entire year of 2021. We still have the balance of roughly a million tons of dry powder left to sell for the balance of the year. This will go into export markets with currently record index pricing. We have now essentially de-risked 2022 and are now on track to basically produce our highest annual earnings and sales metrics by several multiples. On our last call, we telegraphed that we are on the verge of a very special transition. This is now happening perhaps much sooner and much stronger than we envisioned. I can think of no other public coal group which is currently doubling production, paying for it from internal funds, and simultaneously making meaningful shareholder returns of capital. It is a nice place to find ourselves. First, looking down the road, we hope to move our production up by about 50% this year to roughly 3.3 million tons. We are on track to essentially double last year's 2.2 million ton production level to roughly 4 to 4.5 million tons by 2024. To reemphasize for anyone concerned about our capital spending to get there, we intend to pay for all capex for new mine production from internally generated funds. From this level of production, we are on track to generate a great deal of both free cash flow and cash buildup over the coming years. This is net of our budgeted capital expenditures for mine expansion. As a result, last week we announced a doubling of our base regular dividend. Before, I might add, we had even made the first payment. We intend to revisit dividend levels later this year, and our hope is to not only increase this base level by 8% to 10% annually, but also to consider further shareholder return in the form of share buybacks. Now let me look back on some of the overall metrics. 2021 marked our most successful year financially, operationally, and safety-wise since inception. Earlier this month marked our five-year anniversary as a public company. For the record books, Ramico mined its first ton of coal in April 17. As we sit, we have now mined about 8 million tons in total and will hit our 10 million ton production mark later this year. When we think about our 2021 results, I note that in the fall of 2020, we sold roughly two-thirds of our 21 production to domestic steel groups, at what were, in hindsight, pretty low prices. Despite that headwind, we managed to record our best financial year in 2021. We massively exceeded every metric we had set for ourselves. A quick list, EBITDA was up over 325% year-over-year to $79 million. Net income increased to $40 million, up over 900%. Earnings per share were 90 cents. up about 880%. Free cash flow jumped by about 890% to $50 million. Our stock price rose year-over-year by over 370% from $2.88 per share to $13.60 at year-end. Our market capitalization rose about 390% from $123 million to $600 million. As I said earlier, Today, we have more forward visibility on this year's performance than we've ever had before this early in the year. Some of our 2022 highlights to date are that we've committed to sell roughly 2.3 million tons or 70% of this year's production, which we estimate will total 3.3 million tons. In the fall of 2021, as we've stated before, we locked in 2022 domestic sales of about 1.7 million tons or half of our production to North American steel customers at an average fixed price of about 196 FOB mine. We viewed this as a good hedge against any possible future downward price adjustments. Since the end of the year we have sold roughly another half million tons mostly into export markets. Prices have averaged $270 per ton FOB mine at today's spot prices. Roughly 50 percent of these new tons ship before the end of the first quarter. Based on our expected cost for the year, we estimate that these committed domestic and export sales currently translate, as I said, into net income of $195 million and roughly $270 million of EBITDA. We still have 30 percent of production left to sell. Most of these recent international sales have been index priced. Recently, that price has exceeded over $400 per ton on the vessel and remains at $380 per ton for high vol A, giving us a net back margin currently at about $200 FOB per ton. We think that the overall market still has legs. It is currently stretched tighter than a snare drum. I will let Jason share some more granular thoughts on the subject, but we still see a distinct imbalance in supply or lack thereof and demand. Ex-China steel production is still recovering to pre-COVID levels, and candidly, at the moment, there is not enough met coal to go around. Anecdotally, even this week, a substantial steel group told us that if they did not get prompt delivery on a new requested shipment, they would be out of coal. It is that tight at the moment. This year, we project about 6 to 6.5 million new tons coming online in the U.S. In 21, MET production was still down 9 million tons from pre-COVID levels. We are still not caught up to pre-2019 levels. MET coal mining capex has fallen by 75% since its peak in 2012. Given the industry's inability to access capital and increasing ESG concerns, It is unlikely to come back. However, even as supply languishes, the market is in the middle of a robust demand rebound post-COVID. We are also experiencing some challenging market disruptions, issues of being overseas. Geopolitics is back in the energy markets, and energy is back in the geopolitics. So we should buckle up. Turning to production, our 2021 year-end mine costs were roughly $70 per ton, likely some of the lowest in the industry. This level will no doubt rise this year based on selling costs alone, but is a nice place to start from. We've also taken steps to help rein in a good portion of those sales costs. We just announced an agreement to purchase our affiliated private company, Ramico Coal. We will be discussing that transaction in much greater detail once we close, but this deal has dual interests to us. One is meaningful cost containment by managing our royalty expense. About 25% of our overall costs are sales and marketing related, and about 66% of those costs directly are royalties. In a market with strong prices and rising royalty related expense, We feel anything we can reasonably do to control long-term cost is important. Secondly, we think the deal positions us to be one of the only coal producers thinking about a meaningful new form of transition in the emerging energy and sustainability narrative, which I will get to in a moment. As we have grown, one thing we have focused on more is how we are postured from a stock market standpoint. I'm afraid, candidly, the U.S. coal industry does not enjoy much respect for the markets. As this analyst group knows well, overall, the industry trades at an EV multiple of about 2.5 times of expected 2022 EBITDA. Oil and gas, other energy groups, and industrial companies all trade at substantial higher multiples ranging from 5 to 15 times. I think one reason for this underperformance is is that irrespective of whether a coal company produces thermal or metallurgic coal, the market does not perceive a credible endgame for any form of sustainable energy transition for the industry. One goal we have set is to explore possible forms of a transition which could be both profitable as well as have some possible long-term environmental benefit. The Ramico coal acquisition, in addition to saving us royalty expense, will also support the company's expansion into exploring additional alternative uses of coal. Over the past several years, working with two of the Department of Energy's national laboratories, we have developed, patented, and have exclusive licensing rights to a rather substantial portfolio of intellectual property. This IP is focused on coal's use as both a higher tech and higher value feedstock for the manufacture and commercialization of advanced carbon products and materials. For anyone interested in the subject, I would refer you to the white paper I chaired to then Secretary of Energy Perry in 2019 from the National Coal Council entitled Coal in a New Carbon Age. We think in the future there will be other markets which will develop where we and others might sell some of our coal for higher prices as feedstock for non-greenhouse gas emitting uses. This is not an entirely new concept. Today, we already sell coals to specially industrial customers at higher prices than we do to steel companies. But make no mistake, for a long time to come, this would be an addition to Ramico selling to conventional steel customers. We are perhaps the first coal group that has developed some extensive background in this area, and we intend to explore how these new markets might be commercially developed. We will discuss that more in the months ahead. Rest assured, whatever form this transition might take, we are committed to selling coal to steel customers and to maintain the fiscal discipline we have always shown. We will look forward to seeing where that might lead us in the years ahead. So in summary, where does this now put Ramico? You should expect we will continue to meaningfully grow our size and production profile from internal funding. This will provide us increasing levels of free cash flow and cash generation, which we then intend to prioritize to in turn return capital to our shareholders. For 2022, we were off to a terrific start and have now committed sales which will generate a substantial multiple of last year's net income and EBITDA. We still have an additional third of our production left to sell in the currently strong markets. We expect to grow using little to no debt, little to no ARO or any other liabilities, and end up bluntly with a lot of cash. This year and in the years ahead, we expect to have formidable cash generation and increasingly larger amounts of free cash flow from adding new low-cost production. We also hope to continue to be somewhat insulated from market pressures because of that low cost of production as well as our strong financial conditions. And lastly, we expect to share that good fortune with our shareholders by returning increasing amounts of cash back to them. Today, that is in the form of a reliable, increasing dividend, and perhaps in the future, some share buybacks. Now with that, I'd like to turn the floor over to the rest of the team to dive into more detail on finances, operations, and the market. So Jeremy, please run down our financial metrics.