Ramaco Resources, Inc. (NASDAQ: METC) reported Q3 EPS of ($0.11), $0.07 worse than the analyst estimate of ($0.04). Revenue for the quarter came in at $39.5 million versus the consensus estimate of $37.33 million.

• Net loss was $4.8 million (EPS loss of $0.11), while adjusted EBITDA was $0.6 million in the third quarter of 2020. Adjusted EBITDA was negatively affected by $2.6 million, primarily due to the force majeure of nearly 90,000 tons scheduled to be shipped domestically and subsequently resold into a lower priced spot market. Net loss was $0.2 million for the first nine months of 2020, and adjusted EBITDA for the first nine months of 2020 was $19.9 million.
• Export coal sales (including to Canada) of almost 300,000 tons were a quarterly record for the Company. Based upon contracted tons, we expect another record export sales figure in the fourth quarter.
• Based on a large accounts receivable balance as of September 30, 2020, as well as strong anticipated fourth quarter 2020 shipments, year-end 2020 liquidity is anticipated to be above $30 million, as compared to $21.8 million at year-end 2019.

“While pandemic-related public health restrictions and related changes in physician and patient practices dampened our third quarter commercial results,” said Joseph K. Belanoff, MD, Corcept’s Chief Executive Officer, “we have built a remarkably stable and profitable business. After Covid-19 is brought under control, we expect our growth to resume.

“Meanwhile, the breadth of our clinical development program continues to increase. We are now evaluating our proprietary, selective cortisol modulators in patients with Cushing’s syndrome, four different types of solid tumors, antipsychotic-induced weight gain (APIWG) and – starting this month – nonalcoholic steatohepatitis (NASH). The pandemic’s effect on these trials has varied,” added Dr. Belanoff. “Studies of illnesses which are acutely life-threatening, including advanced ovarian and pancreatic cancer have recruited briskly. Studies of illnesses that are not perceived as immediately dire – such as antipsychotic-induced weight gain – have lagged.”

Outlook and Comment

Randall Atkins, Ramaco Resources' Executive Chairman remarked, "Given the uncertainties of operating in today's unprecedented COVID-19 conditions, I am incredibly proud of what Ramaco has managed to safely accomplish in the first three quarters of 2020. Our overriding concern since the outbreak of the pandemic has been to maintain and build sufficient liquidity to position the Company to ride through these troubled markets. To that end, we now have strong visibility into year-end 2020, and expect to end the year with over $30 million in liquidity. I would note that I believe we are perhaps the only public coal company that is expected to end the year with more liquidity than we began the year with. We managed to accomplish this without either diluting our equity or pledging our mining operations against secured debt. While 2021 continues to hold uncertainty, we are financially positioned to deal with any further market turbulence and hopefully to capitalize on some opportunities which may emerge. We also expect to end 2020 with more cash than we began with, again no small accomplishment in this market."

Atkins commented, "I would also note that we have now completed the 2021 North American sales season. For 2021, we have now placed roughly 1.1 million mostly high-vol tons at an average price of $84 per ton. Our perception of the market is that it is now beginning to trend upward based on a combination of restocking as well as a general economic upswing in the developed economies. We candidly also think the markets are stronger than these prices might suggest given the contango in the forward price curve, and accordingly have reserved over one million tons of additional production to be placed into export markets throughout 2021. We are encouraged in this view by our newly booked sales of almost 800,000 tons for 2020 and 2021 delivery into foreign markets over the past sixty days. In many cases these are to new customers for Ramaco and we anticipate a record fourth quarter of shipping over 500,000 total tons. Indeed, for the first time in 2020 we will have sold over 50% of our tonnage to non-domestic steel customers. As to our macro view of overall markets, we see some hopeful signs for emerging medium-term optimism. First, U.S. steel capacity utilization is currently at 70%, after bottoming at 51% in early May, largely due to several blast furnaces restarting, as automotive plants resume production, and housing markets strengthen as a result of a lower interest rate environment. Second, although we do not like to read Chinese tea leaves, if, as we expect, import restrictions wane in late 2020 or early 2021, we would anticipate a meaningful upward move in index pricing, given the current arbitrage to import Australian coal into China of almost $70/ton. We have hopes that 2021 will be a better year on many fronts, both from a coal market and an overall perspective."

Michael Bauersachs, Ramaco Resources' President and CEO commented, "The aforementioned force majeures negatively impacted our cost structure, especially in July and August, as we had to limit production to control stockpiles. Fortunately, our costs returned to more normalized levels in the low to mid $60s per ton range at Elk Creek in September. This was in large part due to being able to run at capacity. Based on our current book of business for the fourth quarter, we would expect to build on the momentum we saw in September from an overall cost and production standpoint."

Bauersachs continued, "The second item that I want to touch upon is our low-vol strategy. As a reminder, we elected to wind down the majority of our higher cost development production from the Berwind Pocahontas #3 seam in July. We are now positioned so that when market conditions dictate, we can restart development of our Berwind slope project, and within six months be in production from the low-cost Pocahontas #4 low-vol seam. In the interim, the Board has just authorized the mine development of an adjacent, but smaller Pocahontas #4 reserve we call the Triad Mine. This mine should function as a bridge until the main Berwind Pocahontas #4 reserve is fully activated. We expect to be able to mine the roughly 250,000 ton reserve Triad Mine, with a capital cost around $1.5 million, with production starting in the first quarter of 2021, and at a cash mine cost in the mid $70s/ton range. The Triad Mine reserve will provide us a profitable low-vol option as we assess market conditions as they evolve into 2021."

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