Ramaco Resources, Inc.

Good day and welcome to the Ramico Resources second quarter 2024 results conference call. All participants will be in a listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference 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 second quarter 2024 earnings conference call. With me this morning is Randy Atkins, our Chairman and CEO, Chris Blanchard, our EVP for Mine Planning and Development, 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. 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, www.ramicoresources.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. Randy Atkins Thanks, Jomi.

Good morning to everyone, and thanks for joining the call. As we had hoped, our second quarter results were much better than our first, both on operations and financially. This improvement came in spite of the continued softness in the global coal pricing. Last quarter, we saw U.S. met coal indices drop by 15%, and they're now down 25% since the start of the year. We also made some solid progress this quarter on our REE project in Wyoming, which I will mention later. Turning first to our met coal operations, importantly, we had record production. This was up about 7% to 900,000 tons in the second quarter. This increase was largely due to a combination of better productivity, geology, and labor availability. As a result of the stronger production and more tons, our cash costs declined 8% or by roughly $10 to $108 per ton in the second quarter. Looking forward, both operational and financial results should continue to improve throughout the year. as our growth projects come online. In a nutshell, we're expecting to ramp to a year-end run rate in excess of 5 million tons on both production and sales, with costs hopefully at or below the $100 per ton cash cost range. Let me take a moment and walk through our four current production growth projects for this year. All of these remain on track and on budget. Two growth initiatives relate to our high vol production at Elk Creek and two relate to our low vol production at Berwyn and Maven. At Elk Creek, we are adding the Ram 3 surface high vol mine and a third section at the Stone Coal Alma mine. Combined, they will increase our overall 24 production by roughly 600,000 high vol tons on an annualized basis. Both of these mines had already begun to ramp up as of this June. At Berwyn's main mine, we are adding a third section starting in the fourth quarter. This should add roughly 300,000 tons of low vol production on an annualized basis. Importantly, costs at all four of these new four mines are anticipated to be roughly $90 to $95 per ton on a combined basis. Finally, we expect the prep plant at our Mabin complex to be fully operational this fall. While this won't add to our overall 24 production, it should meaningfully reduce our current trucking costs at Mabin by approximately $40 per ton. If you step back and look at the impact of these growth projects, again, we see a lot of operating parallels between this year and last. In 2023, our second half was much stronger than the first, where we essentially went from being a three to a four million ton per year production company. In the first half of 24, we remained at this four million ton run rate, but we also invested in the growth initiatives I mentioned. Again, we should exit the year at a five million ton run rate on both production and sales. And turning to the met coal markets, both the U.S. and global met coal indices have continued to fall meaningfully throughout the year. This drop has, of course, negatively impacted our price realizations across the board. The biggest reason was simply muted overall global economic and steel demand. This was coupled with China's slower internal growth and overproduction of steel and a corresponding dumping of this steel in the world markets. It's tough to expect strong met coal pricing when the world is awash in cheap steel. Unfortunately, we've seen the highest level of Chinese steel exports in a number of years. This is continuing to hurt both pricing and demand in our traditional European and U.S. markets. Looking to the second half of the year, we hope these markets will move higher. We have unfortunately recently seen a number of high-profile mine incidents this year. This has impacted global production and should lead to more muted supply in the second half. Also, at this point, both Indian elections and their monsoon season is almost behind us. Next month, we anticipate Indian demand should accelerate. And lastly, we possibly will see the start to see some worldwide tariffs and other restrictions placed on Chinese steel exports. Indeed, Chile became the first this morning to impose a steel tariff on China. These types of tariffs could boost our traditional markets, but given the political nature of any curtailments, we will have to wait and see. And looking ahead, it's too early to really handicap the 2025 domestic sale negotiations. I would like to point out, however, that we enter this year from somewhat of a unique positive sales position. Before we have even engaged in the 2025 domestic tenders, we have already committed 1.25 million tons for next year from primarily multi-year export index link contracts. Currently, these contracts would have an average net back price of roughly $150 per ton against fixed prices and current curve indexes. That puts us in a nice strategic position as we decide how to move forward. I might add that today we have less than 250,000 tons left to place for calendar 24. Most of this is our higher quality low vol and mid vol blends that we are frankly shepherding to sell in the fourth quarter, hopefully into a healthier pricing environment. Switching gears to our critical minerals front, we continue to make strong progress in terms of the development of the Brook Mine in Wyoming. You'll recall that our project is unique because we are focused on extracting rare earths from unconventional coal and carbon concentrated deposits, not radioactive hard minerals like others. We're currently advancing on the chemical, metallurgical, and mineralogical testing of our cores. And once we get the results this fall, our consultant Weir International will update our previous exploration target report. Importantly, we're also on track to complete our techno-economic analysis of the overall commercial aspects of the opportunity later this year. As we announced yesterday, we will be working with the Fluor Corporation on this, who we've also worked with in the past. As an aside, the development of a rare earth mine requires a tremendous amount of upfront testing in a number of disciplines, far beyond that of a typical coal mine. In our case, this involves a large amount of core drilling and chemical testing to develop a geospatial mapping of where best to locate the highest concentrations of REEs, as well as the best techniques to surgically mine and remove the ores. We're now working with NETL on developing some novel AI assessment techniques to improve on our recoveries. We're also spending a great deal of effort to determine the optimal processing technique for our slate of heavy and medium magnetic rare earths, as well as critical minerals. As I mentioned, we recently brought the Fluor Corporation on board as our senior technical advisor to help coordinate preparing our techno-economic analysis. FLUR will also assist with the design and engineering of our demonstration facility, which we hope to begin construction on by mid-year 2025. We still have an immense amount of testing and planning to complete, but we're optimistic that starting with our demonstration facility, that we'll be in a position to start commercial operation. We'll, of course, continue to provide granular updates on our rare earth activity as the year progresses. Also, one personal highlight for me each year is hosting the Ramico Research Rodeo in Wyoming, which is what we call the R3. We believe this may be one of the leading research conferences focused on coal-to-products research, rare earth element exploration, artificial intelligence, and critical minerals. We hold it out in Sheridan, Wyoming while the real Sheridan Rodeo goes on every night of that week. Last month was our fourth annual R3 conference. We hosted it again in partnership with an affiliate of the International Energy Agency in Paris. It brought together several congressional leaders in the energy space, leadership from the Department of Energy, as well as leading scientists from around the world. We even had the FBI speak on counterintelligence in the carbon research space. Frankly, the R3 gives us an opportunity to keep a leading edge in the newest technologies and development of coal-based products, as well as rare earths. And we hope to be discussing some new developments on all these fronts later this year. So in summary, we had a much stronger second quarter, both operationally and financially, despite dealing with a much lower pricing environment. We know we can't control price, but we try to control our production and cash costs. And if the markets continue to remain generally weak, we'll try and continue to operate with a combination of aggression, agility, and prudence. In the second half, we'll look forward to executing on our twin fronts of growing our met coal production and reducing our mine costs. And we'll also continue to advance the commercial development of our Brook mine. So with that, I'd like to turn the floor over to the rest of our team to discuss finances, operations, and markets. And we'll start with Jeremy to give us a rundown on financial metrics.

Thank you, Randy. As you noted, second quarter 2024 results were meaningfully better than the first quarter 2024 results, both operationally and financially. This was despite U.S. indices declining roughly 15% sequentially. To get into specifics, Q2 adjusted EBITDA was $29 million compared to $24 million in Q1. Second quarter net income of $5.5 million was more than double first quarter levels, which amounted to Class A diluted EPS of $0.08 for Q2. The primary reason for the increase in both EBITDA and EPS was the $10 per quarter over quarter improvement in cash costs to $108 per ton on the back of stronger production. Second quarter production was a record 901,000 tons, up 7% compared with the first quarter, due to a combination of better productivity, geology, and labor availability. Quarterly sales volume of 915,000 tons was down slightly from 929,000 tons in Q1. The decline was due to modest transportation constraints in June, which have largely since been alleviated. The realized price of $143 per ton during Q2 was down 8% from $155 per ton in the first quarter, reflecting both weaker market conditions and lower index pricing. I'd point out that our decline in realized pricing was less dramatic than a decline in indices, thanks to our strong domestic book of fixed price business. Looking ahead, we anticipate third quarter shipments of 900,000 to 1.05 million tons. We also expect sales will increase in Q4, and it will exit the year above a 5 million ton per annum sales run rate. As Randy noted, we anticipate adding almost a million tons of annualized production compared to the first half of 2024 run rates before year end. Overall mine costs in the third quarter are expected to remain in the same range as compared to the second quarter. Due to the additional tonnage coming online, we will expect to exit the year at or below the $100 per ton cash cost range. We are maintaining all full year 2024 guidance with the exception of production and sales. In the current pricing environment, production and sales guidance is being reduced by 200,000 tons at the midpoint to between 3.8 to 4.2 million tons and 4.0 to 4.4 million tons, respectively. Specifically, we are proactively reducing higher cost production at each of our complexes with the exception of Maven. Importantly, this move should have minimal impact to overall earnings in the current pricing environment. I'll make two other brief comments regarding 2024 guidance. First, you may notice that our committed tonnage level fell off a couple hundred thousand tons compared to our Q1 earnings release. This is due to proactively working with our customers and agreeing to defer some business into early 2025. Second, in the current environment, our book tax rate will likely be towards the high end of the 20 to 25% range, though our cash taxes should be minimal. Moving to the balance sheet, our liquidity on June 30th of $71 million was up 14% year on year. Furthermore, in July, we paid off the remaining $7 million in acquisition debt related to the $30 million purchase of Maven Coal LLC. We've now retired all $75 million of acquisition debt since 2022 related to both our Maven and Ramico Coal acquisitions. I'm proud to say that as of today, the only remaining material term debt is the $35 million, 9% unsecured notes due in 2026, and any amounts drawn on the revolver that are used for working capital purposes. As of Q2, our net debt to trailing 12-month EBITDA was less than 0.4 times, which illustrates our continued commitment to maintaining a conservative balance sheet. In addition, the Board has maintained our quarterly Class A common stock cash dividend of 0.1375 per share for the third quarter of 2024. The Board also declared the quarterly Class B cash dividend of 0.2246 per share, which of course is driven mostly by our sales volume and to a lesser extent our realized price. With that said, I would now like to turn the call over to our EVP for Mine Planning and Development, Chris Blanchard.

Thank you, Jeremy, and to everyone who joined us this morning. As Randy summarized, we had a significant turnaround in the operations during the second quarter. The bulk of the improvement was at our underground operations, which frankly had lagged our expectations the last several months. Overall, we saw improvements of slightly over 5% in clean tons per foot quarter over quarter underground as our Eagle mine and one of our stone coal sections managed to mine through some lower coal conditions and return to more normalized mining conditions. We've also seen modest improvements in the labor market in the southern West Virginia area. This allowed us to start the third section of our stone coal mine late in the quarter and also helped to fill a number of vacancies at all of the other mines. This hiring and stabilization of the workforce directly led to achieving 80 more production shifts during the second quarter compared to the first. The combination of all of these positive factors culminated in overall June cash costs below the $100 per ton threshold for the first time in 2024. Regarding the labor market, it remains very tight. There are insufficient experienced coal miners available in southern West Virginia and southwest Virginia to fill all the open positions of both our mines and those of our competitors. Although the turnover rates have moderated throughout the year, they are above the levels we want and higher than our historical averages. Hiring, training, and retaining highly skilled miners remains challenging and is a daily focus of the operations. Moving into the third quarter, following the traditional vacation period around the 4th of July, the June momentum has continued. While there are obviously less available shifts to work in July due to the idle periods, we have seen continued modest improvements in average coal heights and feet per shift and the other operational metrics for the legacy mines and plants to start the third quarter. We're guiding the flattish costs in quarter three versus quarter two due to the vacation period and the ramp-up period at our stone coal three surface mine. I'm sorry, our ram three surface mine and the third section at our stone coal mine. Three of our four discussed growth and optimization projects made strides in the second quarter and are now ahead of schedule. At Elk Creek, the third section at Stone Coal started in May ahead of projections and is ramping according to our expectations. We expect this section to be fully staffed by the end of the summer and due to its projected geology to have advantage cash costs compared to the other operating sections at Elk Creek. This section should add an additional 300,000 annual clean tons at what we expect will be cost below $100 a ton. Similarly, our Ram 3 surface mine started in June. More importantly, though, we have been able to start the Ram 3 highwall miner spread almost two months earlier than we projected with the first coal cut in the last week. We're particularly excited about Ram 3 as it projects to have better geology and lower ratio than our Ram number one surface mine. Once the hollow miner spread is fully operational, the production rate from the combined surface mine will be approximately 350,000 clean tons per year, with produced coal costs at or near $90 per ton. Finally, the labor market for highly qualified surface miners has not been as challenging as on the underground side, so the ramp-up period for this mine will be much shorter and the cash costs will be normalized before the end of the third quarter. On the lowball side, the construction of the new Maven plant is well underway. All geotechnical work and foundations were completed during the second quarter. The first few pieces of steel were set in the last days of June as well. Plant re-erection is in full swing. We are now projecting completion of the plant early in the fourth quarter of the year rather than in the last days of the year with the attendant cost savings that I'll further discuss. In the intermediate term at Maven, having the plant on site will open up the possibilities of additional underground low-vol production in our high-quality Sewell, Beckley, Fire Creek, and Pocahontas reserves at Maven. more immediate fundamental benefit is the raw coal transportation cost production reduction our maven surface mine and the highwall miner is currently amongst rameka's lowest cash costs of production before the burden of hauling this coal to our berlin facilities for washing and shipment dependent on the actual recoveries that we see for the mine The raw coal transport costs can make up 30 to 40% of their total cash costs and up to or exceeding $40 per clean ton of their final produced costs. As the startup date of the Maven plant has become closer and becomes more certain, we will start stockpiling coal on the Maven property and not transporting it to Berlin so that we can claw some of these trucking savings back even on tons produced prior to the plant's completion. Our final expansion project is at the Burland P4 mine. Ventilation and infrastructure work is underway underground and on the surface in advance of starting the third operating supersection. This work will continue throughout the third quarter with an anticipated start-up and ramp period for this section in the fourth quarter. Our projections have this section providing approximately 300,000 clean tons per year of low-cost, low-vol coal. The startup of this section and the incremental raw coal to be processed will coincide with the completion of the Maven plant and elimination of a similar volume of coal being trucked into the Berlin complex. Additionally, during 2025, we expect to further ramp the Berlin mine to its ultimate capacity of four operating supersections. Finally, while our overall cash costs have declined significantly, We are extremely focused on a couple of mines and a couple of sections where the cash costs remain elevated and are not currently compatible with market conditions. All options at these sections are on the table, including redeploying equipment and manpower to other mines which have better geology if we do not see continued improvement. As always, we will be aggressively agile at the operations level to respond to the financial and market conditions as they exist. For some additional discussion and detail on the markets and sales position, I'd now like to turn the call over to our Chief Commercial Officer, Jason Fannin.

Jason. Thanks, Chris, and good morning, everyone. I will share what we are seeing in the markets and our current and forward sales outlook. Although global cooking coal markets have weakened from a pricing standpoint, volumes are still well supported. Let me start with an overall global macro recap of the various markets where we sell. We are continuing to see the usual robust inquiries from the Pacific Basin for U.S. coking coals. Atlantic demand remains muted, though we are now starting to see positive momentum for spot deliveries in the region. Integrated mills and coke batteries in the U.S. continue to run strong, despite a decline in finished steel prices. We think this is due to their continued positive profit margins, as well as cost advantages for blast furnaces relative to electric arc furnaces. These cost advantages are likely to grow over time as increased power demand and higher electricity prices heat into EAF profitability. We therefore believe demand for U.S. coke and cold is likely to remain strong for the foreseeable future. We also continue to expect a moderate rebound in Europe in the back half of 2024 and more so in 2025. Western Europe is clearly a mature market contending with carbon pricing and the relentless pursuit of decarbonization. Despite this, we are intrigued by the situation in Eastern Europe with a potential post-war rebuild scenario and resulting increase in raw materials demand. The situation in Brazil also looks promising as steel import tariffs will provide the impetus for higher steel production and follow on increases in coking coal demand in the coming months. In the Pacific, we are likely to see a seasonal rebound in demand from India and China in the back half of the year. The outlook for Indian steel production growth continues to look very favorable and we anticipate long-term seaborne coking coal demand to increase materially as a result. From a supply standpoint, we were reminded how fragile supply chains really are with the recent fires at Grosvenor and Longview. There tend to be no upside surprises when it comes to supply and we view the long-term supply versus demand backdrop as bullish. As Randy mentioned, we have a small open position remaining for 2024, amounting to around only 250,000 tons. Given the near-term weak pricing environment, we will opportunistically time and place these unsold volumes in the market to align with the expected seasonal price correction. Looking ahead to 2025, as we begin the 2025 domestic sales negotiations, our already committed volume of 1.25 million tons puts us in a unique sales position compared to previous years when we were fully uncommitted for the next year at this point in time. Ramico's sales book is now well positioned with specific long-term partners who place incremental premium on Ramico's position as one of the largest producers of low ash, low sulfur coking coals in the U.S. across all grades, low vol, mid vol, and high vol. As production in the U.S. coking coal industry has increased in recent years, a lot of the incremental and new volumes have been on the higher end in terms of ash content, and perhaps more importantly, sulfur content. Turning to the current pricing environment, metallurgical index values have continued to soften as seasonal influences impact markets at this time of year. There's also been a deterioration in steelmaker profit margins as global steel prices have fallen, mostly due to increased exports of Chinese steel. Meanwhile, metallurgical coal demand remains robust from an annual global seaborne volume standpoint. Import demand from India and China continue to grow on an annual basis. Indian first half imports increased 17% year-over-year, while China's seaborne imports increased 22% year-over-year. Prices have fallen, however, due to Asian end-users' inability to profitably pay higher prices for raw material feedstocks like coke and coal. As of August 6th, the U.S. East Coast index values were $208 per ton for low vol, $203 per ton for high vol A, and $181 per ton for high vol B, while Australian premium low vol sits at about $215 per ton. As prices in Asia have declined, U.S. relativities compared to Australian premium low vol have rebounded back to historical averages. This suggests we are nearing a near-term price floor for U.S. coking coals. We also believe current U.S. index pricing netbacks are below fully loaded costs for many marginal U.S. coking coal operations today. Clearly, that situation cannot continue. The U.S. low vol market is currently much tighter than index pricing is suggesting. We see demand continuing to outpace supply in the U.S. low vol and mid vol segments where Ramico is positioned for continued growth as we continue to ramp production at Berwind and at Mabin. In the high vol segment, as mentioned earlier, most of the incremental growth from our peers in the U.S. has been either higher ash or higher sulfur or both. Production growth in these less desirable quality buckets ensures sustained future demand for Ramico's higher quality low ash and low sulfur highball from Elk Creek. Looking ahead, we are very comfortable with our current order book and forward production expectations. We will be very selective where we place our few remaining 2024 volumes in order to achieve the highest netbacks possible. We look forward to the coming domestic contract negotiations, as well as the opportunities in 2025 to be selective in placing incremental volumes for those customers who see value in our low ash and low sulfur supply. I'd now like to return the call to the operator for the Q&A portion of the call. Operator?

We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Nathan Martin with Benchmark Company. Please go ahead.

Thanks, operator. Good morning, guys. Congrats on the progress during the quarter, especially on the cost side.

Thank you, Meg.

I mean, first, maybe just... Something I noticed in the presentation, slide nine, where you guys break out your kind of production outlook. On the medium-term production outlook, it looks like maybe an improvement regarding your expectation for low-vault production versus last quarter. Can we get maybe a few more details on that update?

Yeah, Nate, it's Jeremy. I'll start and then maybe turn it to Chris. So, you know, I think as, you know, Jason said, As Jason noted, obviously, you know, in the current environment, you know, we think low vol is extremely tight. So what we've done is we've effectively put the Maven underground expansion into our kind of official medium-term outlook. So, you know, at the end of the day, in addition to what we're producing now, you know, that's over a million tons of underground production, which effectively takes us to, you know, more than 50-50 in terms of low vol, mid vol versus high vol.

And also that includes the fourth section of Berwyn, correct, that we would be putting on, yes.

When would that, remind me, guys, that David Underground expansion likely get moving forward, I guess?

Yeah, we've got the optionality to frankly start that next year. I mean, the main gating issue for that was the prep plant. And, of course, we moved forward sort of opportunistically there. last summer, or this summer, with the purchase of a sort of idled prep plant that we moved up to Maven and have installed it. And frankly, as I mentioned, it'll hopefully start operation sometime late fall. So that's really what gated us. And then, of course, we'll look at our budgeting for next year and

move accordingly but we can certainly start putting in sort of section by section it'll ultimately probably be a four section mine so ultimately maybe as much as a million and a half tons but obviously market conditions will dictate that okay thanks guys and maybe just sticking with the maven prep plant for a second just something else i noticed um

You just broke out in your cash flow statement kind of a separate line item for that prep plant expense. And then I also saw a footnote in your CapEx guidance that said it excludes $3 million for the purchase of that prep plant. So I just want to make sure how we should think about an all-in CapEx number for the four years of 24.

Yeah. Hey, Nate. It's Jeremy. So very good question. So we did break that out so that you all could kind of, for transparency, see what we're spending on Maven. $3 million within the cash flow statement is for the purchase price. So when you look at our full year guidance of $53 to $63 million, it effectively excludes that $3 million for the purchase price, but it includes the rest of the spend on MABIN, a little bit more than half of which has already taken place. So if you kind of think about our full year CapEx outlook, You know, call it at the $60 million range, excluding the $3 million or so for the purchase price. About $40 million of that is maintenance. About sort of $20 million of that is growth. So obviously, you know, when you look at the first half spend of call it $40 less the $3 million, so $37 million, you know, frankly that implies a lot lower spend in the second half. And the reality is that's because when you look at our three or four major growth projects this year, the vast majority of that spend has already taken place. So I do think that's something, you know, you guys can look forward to in the second half of the year, especially in the fourth quarter.

Yeah. Okay. Perfect, Jeremy. That helps. And I saw that mentioned in your release too, that hopefully things come back down a little bit in the fourth quarter. I guess sticking with CapEx, but shifting over to the BrookMine, you know, obviously saw the release, I guess, two days ago, bringing on a couple of new partners. What kind of capex do you guys expect to be involved in the design and build of that refining and processing plant that you're going to be doing on the floor? Will all that spending be your responsibility? I think you mentioned the target start is the middle of next year. How long could that possibly take to build as well?

Yeah, I mean, our spend, frankly, out at the Brook Mine has been really very modest. I think we've spent since inception just a couple million bucks out there to really get everything moved into position. And as far as the design build, you know, as I said, we're going through testing and, you know, essentially trying to get the various variables nailed down, which will inform essentially how we would design the processing facility to deal with the specific minerals involved in their chemistry. I think in terms of a spend for the planning for the design of that, I would think of it in terms of several hundred thousand dollars. That's about where we're going to be. And in terms of what the cost for the overall demonstration facility will be, I really don't want to get over our skis now. In terms of giving you a number, we'll certainly provide it as soon as we've got you know, the design metrics around it so we can give you really an informed concept. But remember, the demonstration facility is kind of like an advanced pilot. You know, it's not a pure pilot plant in the sense that we intend to frankly start selling product from the demonstration facility. So this will be a revenue-producing plant as soon as we open it. And we'll expect to probably start Doing construction, certainly site work on that sometime around the middle part of next year once the weather permits out in Wyoming. And in terms of the timing, I'd probably earmark nine months to a year of normal construction, assuming no weather-related issues out there. And that's kind of the time frame. So it's probably a 25 start and a 26 completion.

very helpful randy thanks for those thoughts then maybe just one more um i appreciate you guys don't really want to talk specifics on the domestic contracting season for 25 as we're still early on there but any initial thoughts at least directionally on what you think maybe demand for met coal could look like from domestic steel producers next year versus this year and i also noticed that jeremy maybe this is what you referenced in your prepared remarks that their domestic tonnage committed in price for 24 has crept down again to, I think, 1.3 million tons now. With some of that, what was getting deferred into 25? Yeah.

Nate, this is Randy. I'm going to just tee up one brief comment and then turn it over to Jason. But the demand side, we haven't really seen a real fall off on the demand. The U.S. steel producers are still enjoying pretty good margins despite the fact that, you know, the prices are down. So the demand side has not really been the problem. The problem has been, as I mentioned in my remarks, that we've really seen this sort of flood of Chinese steel hitting virtually every market. And, you know, that has impacted, you know, steel companies' ability to frankly raise their prices. And when you've got, you know, low steel prices, you're going to have, unfortunately, low coke and coal prices. So that's, it's really more of a It's really more of a peculiar supply-derived situation based on the Chinese peculiarities, if you call it that. But, Jason, pick it up and refine on that comment.

Sure. Thanks, Randy. And, Nate, yeah, obviously we're in ongoing discussions with some customers now, so we won't get into specifics. But, yeah, I mean, as Randy mentioned, certainly, you know, hot-rolled spot prices are down globally. Still in the U.S., they're still the highest in the world. The margins here are still outsized compared to our seaborne customers. Service centers, obviously, at low inventory points, at a low point in the market, which would seem odd. As they come back in, those spot steel prices are going to move back up. Frankly, Randy referenced this flood of Chinese steel exports, which we probably haven't seen this level in almost 10 years. But protectionism is working. It's working here. It's working in other areas. And they could probably see more of that. But I think one key aspect in terms of you asked about cooking coal demand here in North America next year versus this year, you're not seeing anybody slow down, even given where Hot Roll is at. And I think that says a lot. And then in terms of the tonnage you mentioned there that Jeremy had commented on earlier, We had one North American customer that has an extended force majeure status, and rather than lose those volumes, we worked with them and deferred some into 2025, which worked out for the best for both of us and our customer, which is that committed change you see there.

Very helpful, guys. I appreciate all the comments and the time, and best of luck in the second round.

Thanks, Nate.

The next question is from Lucas Pipes with B Reilly Securities. Please go ahead.

Thank you very much, operator. Good morning, everyone. Good job on the cost side, and I wanted to ask on the cadence for the second half if you could maybe provide a little bit of color for Q3 and Q4. Q3, I always remember, kind of minor vacations can have an impact. So I wondered if you could maybe speak to that. And Chris, you mentioned in your prepared remarks that some mines have an unacceptable level on the cost side today. What sort of tonnage are we talking about? Is that Another 200,000 tons, is it more? And how quickly could you redeploy manpower, equipment, et cetera, if you decided to move things around? Thank you very much.

All right. I'll tackle the first one first a little bit on the cadence of the cost. And right now, in the second half, we're sort of expecting cash costs to be roughly the same in Q3 versus Q4 as we still have Ram 3 and Stone Coal 3 in the ramp process. So low 100s perhaps, but then Q4 pushing to 100 or a little bit below as those mines are fully operational and we also get the Maven cost savings. So at the low end of the guidance, we could see it move down significantly on the cost side, but that's sort of where we're guiding to on the costs. And then as far as the number of tons that are sort of unacceptable, it's probably in the 200,000 to 300,000 annual ton range. And those could be redeployed relatively quickly, within the third quarter, I would say. So, I mean, we'll continue to monitor. We have had some improvement, and that's what we saw in June costs and continuing into July. But coal mining can change day to day, so we are monitoring them extremely closely, and we have a couple of, you know, places that we can move to to get our costs continuing to move lower as they need to.

That's very helpful. Chris, if you kind of expand this, across the industry, how many tons would you say are in that bucket in the U.S., and maybe you have a global view as well?

I would guess in the U.S., if you exclude the big longwall operators, it's probably 25% of the remaining production is in that bucket. you know, questionable and unsustainable range at these prices. Globally, that's probably a little – I'm out of my ski tips to opine on that, but maybe Jeremy or Jason has an opinion.

Yeah, I mean, my quick comment on the global side, Lucas, as Jason, is, yeah, I mean, you can always kind of look at the, you know, the forward cost curve and see where that starts to trail off at, and I think that tends to suggest where most folks think the, you know, that marginal ton lays – I don't know where it's actually 26, 27 at this point since we're kind of focused on 25 right now. But I think that's always a good indicator. And, you know, obviously folks that are above that are on the edge there.

And I think, you know, the good and the bad news, you know, is we see some of these producers have to contract. Needless to say, that opens up some opportunities for us on the labor side because, you know, where we operate down in the southern Appalachian area is always a tight labor market. And to the extent that we see sort of breaks in the action from some of our peers, we are delighted to pick up new people and deploy them because we've got situations where, frankly, our production has been impacted and hindered by inability to obtain full labor. So it's kind of a double-edged sword.

That's very helpful. Thank you for all that perspective. Randy, in terms of the demonstration processing facility, what product are you currently targeting out of that facility? Would appreciate your thoughts on that. Thank you.

Sure. So as you probably recall from our earlier disclosures on sort of the overall product blend of our various REEs and critical minerals, we've got, you know, call it eight rare earths, which are the sort of heavy and medium rare earths, magnetic rare earths. And then we've got two very valuable critical minerals, which aren't really categorized as rare earths, germanium and gallium. And so those would be the end products that we would ultimately be aiming to, frankly, create oxides for, which would be able to be separated and sold on an individual basis. You know, as we start a demonstration facility, we'll probably deal with a concentrate, which will have probably most, if not all, of those kind of combined in one concentrate. And then as we, you know, go further up the food chain, if you will, in terms of processing, then we'll, you know, separate those out, which obviously the farther you go up the food chain, the higher the value you receive for being able to sell separated refined elements.

That's helpful. So kind of first step here would be to demonstrate a concentrate, and then what's a – where's the market for that concentrate today, either in terms of location or price for a bucket? Is there a benchmark?

Yeah, I would say the prices, of course, in the rare earth business in general are a sort of opaque – basket because there's such dominance by China in the pricing and production process. And frankly, China engineers both in a manner to try to mute and or eliminate any other production outside of China. So you can't necessarily always believe, you know, the prices that you perhaps would get off of normal benchmarks. But, you know, the The easy way, if you want to start thinking about it as an analyst, would be to simply take the breakout prices of each individual element and apply that into sort of a basket concentrate, which we, I think, provided you some slides on in some of our earlier presentations on the rare earths, which give you a notion of sort of what percentage of each one of these we have in our overall mix, at least as far as our last exploration target is concerned. Yeah, you can see that on slide 13. Okay. And I might add that, you know, those numbers will probably change around when we do our further update this fall because we've got pretty significant amounts of additional data that will be going into this new revision. So, you know, kind of expect for those numbers to move around. And, of course, we hope they'll move in a positive direction, but we won't comment on that until we actually get all the data collected.

Thank you, Randy. Thank you, everyone, for your comments and best of luck. Thanks, Lucas.

This concludes our question and answer session. I would like to turn the conference back over to Randall Atkins, Chairman and CEO.

Again, I'd just like to thank everybody for being on the call today and we'll look forward to catching up with everybody in several months. Take care and have a great day.

The conference has now concluded. Thank you for attending today's presentation.