管理層發言
Good day, and welcome to the Ramaco Resources Fourth Quarter 2025 Results Conference Call. 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 Ramaco Resources, I'd like to welcome all of you to our Fourth Quarter 2025 Earnings Conference Call. With me this morning is Randy Atkins, our Chairman and CEO; Chris Blanchard, our EVP for Mine Planning and Development; Jason Fannin, our Chief Commercial Officer; and Mike Woloschuk, our EVP of Critical Mineral Operations. Before we start, I'd like to share our normal cautionary statement. Certain items discussed on today's call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent Ramaco's expectations concerning future events. These statements are subject to risks, uncertainties and other factors, many of which are outside of Ramaco's control, which could cause actual results to differ materially from the results discussed in the forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and except as required by law, Ramaco does not undertake any obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. I'd also like to remind you that you can find a reconciliation of the non-GAAP financial measures that we plan to discuss today in our press release, which can be viewed on our website, www.ramacoresources.com. Lastly, I'd encourage everyone on this call to go on to our website and download today's investor presentation. With that said, let me introduce our Chairman and CEO, Randy Atkins.
Thank you, Jeremy. First, I want to thank everybody for being with us this morning. We had another extremely busy quarter on our critical mineral front out West and indeed the best quarter in years on our metallurgical coal operations. Given the great job our coal operations team did in maintaining cost control in 2025, I'm going to start on that front. This quarter, we achieved the lowest cost we've seen since the fourth quarter of 2021. At our Elk Creek complex, cost averaged just $80 a ton. Quarterly costs and margins were the strongest of all our Central Appalachian peers. We're also proud that in this difficult market environment, we have not cut wages or benefits for our mine workers. We believe Ramaco is a best-in-class employer, and we continue to attract the top mining talent in our industry. Reflecting our strong workforce, productivity in the fourth quarter was also the strongest we've had last year. Quarterly cash margins of $24 a ton were tied with our first quarter margins as the strongest of 2025. This is despite a 17% decline in high-vol metallurgical coal indices during that period. As we look to where we're headed in 2026, we are initiating our annual metallurgical coal guidance, which was published in our release. We are now poised to grow total sales for the sixth year in a row while lowering overall cash cost for the third year in a row. We cannot control pricing, of course, but we are proud to compare our cost against any non-long-haul peer in our space. As a result, if benchmark prices hold at current levels or even improve, we expect strong overall earnings growth in 2026 versus 2025. On metallurgical coal sales, we've now committed to roughly 80% of our 2026 production at the midpoint of guidance. Jason will go into the specifics on our sales metrics, but we achieved both strong domestic and export pricing. On overall metallurgical coal markets, we've begun to see some clarity on what we hope is going to be a meaningful rebound this year in index pricing. The potential triggers are both supply constraints in Australia and some stronger Indian demand after a slow buildup. Australian premium low-vol indices have increased to roughly $240 per ton and by more than $40 a ton from the fourth quarter. Average low-vol and high-vol indices are also up almost 10% today compared to the fourth quarter. As a result of all this market clarity, we are now either accelerating or initiating some of our low-vol growth projects at our Berwind and Maben complexes, and moving them from 2027 into 2026, which we had previously deferred. These projects are expected to add about 0.5 million tons of production in 2027 and between 100,000 to 200,000 tons of additional production in 2026. They will also add about $20 million in growth CapEx this year and have very strong paybacks. On high-vol markets, we are currently seeing a crowded field of new projects from several of our peers. They're all fiercely competing for Asian export business and have created lots of pricing pressure with current high-vol index prices lagging well below historic relativities. We, however, have been able to secure recent high-vol sales into Asia at meaningful premiums because of the low-sulfur character of our coals. It's our expectation, given market conditions, that published U.S. index pricing will eventually adjust. Now I'd like to move to our rare earth and critical mineral business. We're excited about the new proprietary technology breakthrough from our internal team who has developed something called carbochlorination for purposes of separation and extraction from coal. Recall that we recently brought on board two of the most senior members of Fluor's critical mineral team that had spearheaded the work on our original preliminary economic assessment, or PEA. We have referred in our earnings release to some of the details of this novel form of flowsheet. This carbochlorination process provides a fundamental derisking of a previously complicated and costly separation and extraction process in a number of respects. It reduces the overall capital and operating costs. It improves overall product recoveries and yields. It will ultimately increase our cash flow. It creates a higher-value product slate. It uses a proven technique, which has already been deployed in the titanium industry. And from a marketing perspective, it reduces the project's reliance on scandium as the main product driver, although we still feel scandium is an important future use for our rare earths. We are now working with our independent consultant Hatch to validate these estimates and expect to publish a revised PEA with third-party economics by the middle of the year. Despite being a coal company, we have a good deal of technology focus in our DNA. We have been exploring, as many of you know, new uses of carbon in coal and indeed rare earths for over a decade, both on our own and with the Department of Energy's National Labs. We currently have an impressive basket of intellectual property, which includes over 70 patents pending applications, exclusive license agreements and trademarks. Indeed, we have now already filed robust patent and trade secret protections around this novel flowsheet process and related technologies. We believe this will ensure that Ramaco and our Brook Mine will be the only unconventional source of rare earths and critical minerals that will be able to use this novel proprietary process. As I said, our internal analysis shows that this flowsheet results in increased cash flow and a reduction in both capital investment and operating costs. These preliminary figures compare very favorably to the already strong original economics that were in both Fluor's original PEA last July as well as the upsized development case from my last shareholder letter in September. The new flowsheet also shows markedly increased separation recoveries and yields and a higher overall value product slate. Specifically, it changes the proportions of individual production levels of the overall basket of products. We now anticipate that the largest percentage of production will come from the combination of high-purity gallium, high-purity alumina as well as high-purity quartz. These all target the semiconductor industries and are very high-value products. As mentioned, we also anticipate that this approach will reduce the overall percentage of scandium production. We continue to think that scandium use will prove to be a very important developing market. However, the current appetite for high-purity gallium and its related alumina and quartz in the semiconductor industry is both proven and rapidly expanding. We hope the Brook Mine will be an important and meaningful resource for this critical industry. Finally, another important benefit to the new product slate is that the flowsheet route will allow us to forgo the costly solvent extraction process. We now expect to sell our rare earth production as a mixed rare earth carbonate, or MREC, to third-party metals and magnet processors at strong pricing. MREC will now be a smaller percentage of our overall production. And this will also now eliminate the significant CapEx expenditure and the ongoing operating reagent expense associated with the former solvent extraction technique. New flowsheet modifications will modestly increase the timeline for completion of our preliminary feasibility study from Hatch. However, on a project that could well exceed $1 billion in capital investment, we would prefer to get it right before we build. We are continuing construction of our pilot plant testing facility in Wyoming, which should be complete this summer. We will begin moving our internal chemical and metallurgical testing operations into that building when it opens. We will defer construction of the internal processing infrastructure at the pilot until we finalize the flowsheet testing from Hatch. As we've said, the internal equipment is being designed and optimized at the Zeton, Inc. fabrication operations in Ontario. We now expect full pilot operations to start in 2027. On our downstream critical minerals front, the administration recently announced an initiative to establish international price floors for critical minerals. We remain confident that the U.S. government is committed to ensuring the development of a robust domestic supply chain and we will take further steps in this area. We also continue to pursue procurement, funding and development opportunities with both governmental and strategic stakeholders. We expect the new direction and information we've just announced today with this new flowsheet approach will inform a good deal of these discussions as we progress. We were also recently gratified to see the administration's discussion about the creation of a domestic rare earth stockpile program called Project Vault. This program dovetails with our previously announced critical mineral stockpiling terminal at the Brook Mine, which we are pursuing with Goldman Sachs. There should be more information on that in the near future. We are also now exploring some reorganization options for Ramaco's overall corporate structure as we move further into our dual platform operations. We hope to announce more clarity on that in the coming months. We expect to set up separate corporate entities within a holding company structure to better reflect the different forms of assets and operations that we both now have and are developing for the future. We hope this structure will provide more operational and financial flexibility as we develop two different and separate businesses in the metallurgical coal and separately in the rare earth critical minerals space. All of this, of course, will be designed to enhance shareholder value. Again, we will provide more color about that as we roll it out. Lastly, I would note that our balance sheet is now in the strongest position that has been in our history. This is despite some challenging recent years in the metallurgical coal markets. As you know, we raised roughly $1 billion in capital in the second half of 2025. We also ended the fourth quarter with record liquidity above $520 million, up more than 275% year-over-year. We expect this additional funding will allow us to more rapidly move forward with our transition to a dual platform critical minerals company. Now I would first like Mike Woloschuk, who leads our critical mineral business, to share some further thoughts and details on our rare earth progress. I'll then turn the floor back to our team to discuss finances, coal operations and markets. Mike?
Thank you, Randy. As you highlighted, we have some exciting updates to report on flowsheet development. We completed an expanded suite of testing of Brook Mine composite samples at multiple external metallurgical facilities. These include chemical and mineralogical analysis, ore physical properties, chemical mineral extraction and purification testing. This expanded test program also included initial testing of the carbochlorination flowsheet. Commercial carbochlorination is a high-temperature industrial process using a carbon source, such as coal, and chlorine to convert metal oxides into volatile metal chlorides and water-soluble chlorides. This is the dominant technology used for nearly all titanium manufacturing today. From our test work completed to date, including the mineralogical analysis and metallurgical response of the critical minerals, initial testing of carbochlorination indicates the Brook Mine responds favorably to our proprietary process. In this flowsheet, the valuable volatilized critical minerals from the Brook Mine include gallium, germanium, aluminum and silica. Initial tests show virtually all of the gallium was volatilized, and this is a significant recovery bump from the previous flowsheet. We also achieved high extraction of aluminum chloride, a portion of which can be recovered to produce high-purity alumina. Germanium and silica are also volatilized under our intended operating conditions. These volatile vapor-phase chlorides will be condensed, separated and purified from the crude chloride mixture. This flowsheet allows us to produce higher purity gallium, which is sold at a premium. We will also generate additional revenue from the high-purity alumina and high-purity quartz, both high-value products used for semiconductor, renewable energy and other advanced applications. Our carbonaceous plays contain abundant amounts of kaolinite, which is the source for high-purity alumina and high-purity quartz. Effectively, we are now able to generate revenue from GaN, something no hard rock rare earth project is able to do. Scandium and the suite of the rare earth elements are converted to chlorides in the residue. They remain in the solids after the reaction and, similar to table salt, they will dissolve in water, which is a much better option than leaching in large amounts of caustics and acids. We intend to selectively remove scandium and produce scandium oxide and simplify the balance of the rare earth portion of the flowsheet to produce mixed rare earth carbonate, or MREC, as Randy mentioned. Separation of rare earths into oxides is both technically complex and capital intensive. Production of MREC is a flowsheet simplification that will reduce the capital and operating costs associated with rare earth solvent extraction, separation and finishing. The two main reagents in carbochlorination are carbon and chlorine. So a coal deposit has all the carbon we need and it is not a reagent we have to purchase. Most of the chlorine is recycled by decomposition of nonrevenue-generating mineral chlorides, simplifying the bulk reagent logistics associated with the hydrometallurgical flowsheet option. Our focus going forward is to complete more test work to determine optimum conditions for the carbochlorination reactor and downstream testing on solubilizing the rare earth chloride residues to selectively extract scandium and produce the MREC. We will also conduct separation and purification testing on the crude chloride circuits to define the flowsheet necessary to achieve the various gallium purities. The testing plan for high-purity alumina and high-purity quartz is analogous to gallium. Ramaco filed provisional patents on the carbochlorination process to recover rare earths and other critical minerals from coal and carbonaceous clay deposits. We feel this is a significant competitive advantage over other flowsheets being considered for critical mineral-hosted coal deposits. In parallel to the test work program, we have engaged a specialist consultant with experience in alumina carbochlorination to generate a thermodynamic simulation of the carbochlorination circuit and to provide design inputs for the updated preliminary economic analysis. We are engaging Hatch to complete a PEA, and this is anticipated to be completed midyear, followed by a pre-feasibility study by year-end. With the flowsheet pivot, we paused the detailed design of the downstream pilot plant modules at Zeton until we generate a new basic engineering package for carbochlorination. This is anticipated in Q3 2026. However, we anticipate Zeton's continued involvement since they have experience piloting similar unit operations. We also anticipate conducting on-site testing, both at the existing iCAM Research Center as well as the new pilot plant building now under construction. We expect the pilot shell to be complete later this summer. Switching to an update on geology. We completed the fall drill program, which included both infill and step-out drill holes. We are nearing completion of an initial fence drill program, which will inform drill density necessary to increase geological confidence to support selective mining. We have additional fence programs planned and are increasing the number of drill rigs to complete this program this summer. We hope to have sufficient geological data from our drill programs to move to reserve status from inferred up to indicated by year-end, in line with the completion of the Hatch pre-feasibility study. As mentioned, we are building our internal laboratory to conduct internal assay and metallurgical testing to mitigate lengthy external lab turnaround times. We have two ICP-MS machines, and we have equipment at site already that will be used for the carbochlorination reaction. We anticipate hiring technical and analytical staff to ramp up in-house geometallurgical testing. I would now like to turn the call over to our Chief Financial Officer, Jeremy Sussman.
Thank you, Mike. Starting with the balance sheet. I'm pleased to note that we had record liquidity of $521 million at the end of the year. This is the strongest level of liquidity that we've ever had. Liquidity was up over 275% compared to the same period of 2024, and we ended the quarter with a net debt position of $11 million. I want to touch upon the extraordinary financial transformation to our balance sheet that we achieved in the second half of 2025. First, in July and August, we raised $65 million in unsecured notes. Second, in August, we raised $200 million in new equity through an underwriting by Morgan Stanley and Goldman Sachs. Third, in November, working again with Goldman Sachs, Morgan Stanley and a larger underwriting syndicate, we raised $345 million in 6-year unsecured convertible notes with a 0% coupon. Then in December, we increased our revolving credit facility led by KeyBanc to $500 million, inclusive of a $150 million accordion feature. In terms of fourth quarter performance, as Randy noted, operational results were again extremely solid with cash cost per ton sold of $92. This continues to put Ramaco in the first quartile of the U.S. cash cost curve. Q4 also represented the company's strongest quarter in terms of cash cost per ton sold in four years. Fourth quarter cash margins of $24 per ton equaled those of the first quarter as the strongest of 2025 despite the U.S. high-vol metallurgical coal indices having fallen 17% during that time. Our Q4 production fell modestly from Q3 to 892,000 tons, which was the result of the typical Thanksgiving and Christmas miner vacations, as well as our continued focus on value over volume. We'd rather leave production in the ground versus selling it at a loss into the spot market. Thankfully, our strong balance sheet, including our record liquidity position, allows us this flexibility. Should markets continue to improve, 2026 can provide a very meaningful working capital tailwind on the inventory front, especially in the back half of this year. While metallurgical coal price indices declined throughout Q4, they're now up meaningfully from the bottom. Unfortunately, however, U.S. high-vol indices fell another 4% in Q4 versus Q3. But despite the continued fall in index pricing, we managed to print Q4 financial results that exceeded Q3 financial results as cash costs fell $5 per ton sequentially, compared to realized pricing that fell just $4 per ton sequentially. To get into specifics, Q4 adjusted EBITDA was $9 million compared to $8 million in Q3. Class A EPS showed a $0.22 loss in Q4 versus a $0.25 loss in Q3. I would note that these fourth quarter results exclude a one-time nonrecurring expense incurred in connection with the structuring of a strategic critical minerals terminal at our Brook Mine. All of our primary peers have either reported Q4 results or preannounced results. I'm proud to note that our cash costs of $92 per ton and cash margins of $24 per ton were easily best-in-class among our Central Appalachian metallurgical coal peers in Q4. Looking forward, we're initiating 2026 guidance. Full year 2026 production is now anticipated to come in at 3.7 million to 4.1 million tons, an increase at the midpoint versus 3.8 million tons in 2025. Full year 2026 sales are anticipated to come in at 4.1 million to 4.5 million tons, an increase versus 3.8 million tons in 2025. Our guidance tables lay out a number of other 2026 expectations such as CapEx, SG&A, DD&A, interest income, tax rate and idle costs. While you can find the specifics in our earnings release, I want to touch on two areas. First, we anticipate net interest income in 2026 versus net interest expense in 2025 as a result of our large cash balance. Second, we anticipate CapEx of $85 million to $90 million, up from $64 million in 2025. This includes spending on maintenance capital on our metallurgical coal mines of roughly $10 to $11 per ton, approximately $20 million of growth capital at the Berwind and Maben complexes, and roughly $20 million for our rare earth elements and critical minerals business. We anticipate first quarter of 2026 shipments to be 800,000 to 950,000 tons due to normal seasonality with the Great Lakes, which were, of course, closed for most of the first quarter. We expect cash costs towards the high end of the annual range for Q1 on the back of lower ratable shipments. As I look ahead, I'm incredibly optimistic about 2026. First, we have by far the best balance sheet and liquidity in our history. Second, our cash costs and margins are among the best in Central Appalachia. Third, coal markets appear to be improving in large part due to pricing having reached unsustainable levels from a cost curve perspective in the second half of 2025. Lastly, we're making meaningful progress on our rare earth elements and critical minerals path towards commercialization. I would now like to turn the call over to Chris Blanchard, our EVP for Mine Planning and Development.
Thanks, Jeremy, and also to everyone who joined us today. It's always preferable to share our operational results when we have been successful in controlling those things like costs and volumes, which are in our control. Across all of Ramaco's operating complexes, I want to give recognition to all of our miners and support staff who focused on the fundamentals all year to help us drive down costs across the board and to complete the year with our best quarterly performance since 2021. These successes are continuing as we begin 2026. Productivity levels remain high relative to our internal forecasts, particularly at our flagship Elk Creek complex. However, while the mines continue to operate at budgeted levels or above, logistics bottlenecks with both of our railroad partners as a result of the extreme temperatures and snow in late January did cause delayed shipments in January and so far in February. These were primarily due to the difficulties in moving and unloading coal to the peers and ports, and the subsequent backlog of loaded trains with insufficient empty cars cycling back to all producers for several weeks. While we built clean inventory due to these events, no production had to be curtailed. However, the impact of the interruption in rail equipment cycling cascaded and continues to be worked through. As Randy mentioned, the high-vol markets remain oversupplied and ultra-competitive. Fortunately, our Elk Creek product has some quality advantages over some of the incremental high-vol producers who tend to be of a lower metallurgical rank and have higher sulfur contents. To take further advantage of that, we are transitioning a portion of Elk Creek's production into even lower sulfur areas of our reserve to better meet our customers' needs. As mentioned earlier, we've also kept our wages and benefit packages for our workforce constant even in the declining market over the last couple of years, and we are taking opportunities to strengthen our workforce with some of the most talented miners available in Southern West Virginia and Virginia. On the low-vol side of the company, we're seeing meaningful improvement in market dynamics and limited excess supply of high-quality, low-volatile coals. Accordingly, our Board of Directors has approved pulling forward approximately $20 million of planned growth capital from 2027 into 2026 at our Berwind and at our Maben complexes. First, we will begin to ramp low-volatile coal production at Berwind mine approximately one year ahead of schedule. The timing of the full build-out will be dictated by the completion of two additional air shafts into the coal mine. Work has been ongoing on these projects since late 2025 and will be completed during this summer. Once the ventilation system is in place, a full section will be added to the mine at an annual expected production rate of 350,000 tons per year. While the Berwind mine will not be running at this full rate until the third quarter, we will bring on some interim low-vol production during the second quarter at our Laurel Fork mine, utilizing the same equipment capital and workforce. Combined, we project an additional approximately 150,000 clean tons of production during 2026. Secondly, at the Maben complex, we are now moving forward with the construction of the flood load batch weigh loadout system at our Maben processing plant. Once operational, this will allow us to ship our premium Maben product to our domestic and international customers without adding approximately $20 per ton of additional logistics trucking cost, which have negatively impacted this operation. We believe that having the fully operational loadout will potentially allow us more opportunities to purchase and ship other high-quality low-vol coal that would be advantaged by loading at Maben. Work has commenced on the loadout project already, and we are projecting it being operational and loading its first train in the middle of the fourth quarter of 2026. The completion of the loadout will make the development of the underground portion of the Maben property much more advantaged, and we will continue to evaluate the full build-out of the underground mines at Maben at that time and let the market conditions guide the timing of that investment and expansion. Finally, to briefly turn to some of the mine and construction updates in Wyoming at the Brook Mine. During the fourth quarter, we expanded the Brook Mine pit to excavate additional thermal coal for an upcoming trial with a regional customer. During this mining, we also segregated several hundred additional tons of rare earth element and critical mineral ore from two different enriched strata zones for continued optimization testing. Construction has also begun on the ore storage facility on the Brook Mine itself, which will function as a staging area for mine products prior to being sent to outside labs and ultimately to our own on-site pilot facility, which Mike mentioned is also starting foundation work and will be under roof later this summer. Detailed design engineering is also underway for all of the electrical transmission to site and the substation to power our future commercial processing facilities. In closing, with the security and liquidity from all the transformational financial transactions that were consummated during the second half of 2025, we find ourselves with the flexibility to modify our operational portfolio to quickly take advantage of the strengthening low-vol markets, while also continuing the development of the Brook Mine at full speed as well. To discuss both the coal and the critical mineral markets in detail, I'd like to now turn the call over to our Chief Commercial Officer, Jason Fannin.
Thanks, Chris, and good morning, everyone. Today, I'll share our views on the steel and coking coal markets, provide an update on our 2026 metallurgical coal sales position and then discuss the progression of our marketing strategy at Brook following our recent flowsheet breakthrough. We continue to see global steel markets increasingly shaped by policy rather than supply-demand dynamics. China exported a record amount of steel in 2025, even as domestic crude steel production declined. That divergence between export growth and domestic contraction is unlikely to persist. Export licensing measures and rising political pressure suggests that Chinese steel exports could decline meaningfully this year, which would lend considerable support to global steel prices and in turn, provide uplift to coking coal prices. European steel production appears to be stabilizing and prices are already reacting to tighter import controls, rising nearly 20% since early Q4 2025. One of the world's largest steelmakers has predicted a year-over-year increase in European steel production of approximately 6 million to 8 million tons, reflecting improved mill margins amid a more constructive policy backdrop. North America trade enforcement continues to support domestic pricing. U.S. steel prices remain among the highest globally with spot pricing nearing $1,000 per ton for the first time since mid-2023. India remains the primary coking coal demand growth engine. Blast furnace production increased 17% year-over-year in 2025 and blast furnace steelmaking capacity continues to expand aggressively. Discussions between U.S. and Indian officials regarding increased U.S. metallurgical coal imports could lead to a potential removal of the import tax on U.S. metallurgical coal into India, which in turn could increase U.S. imports above 2025's 9.5 million tons. Seaborne metallurgical coal markets began 2026 with an already tight Australian premium coking coal supply, further exacerbated by extreme weather events, with Australian premium low-vol pricing sitting just below $240 per ton today, up nearly 20% from Q4. U.S. East Coast indices are approximately $196 per ton for low-vol, $159 for high-vol A and $149 for high-vol B. This volatility underscores how thin the spot market truly is. Seaborne hard coking coal supply is roughly 180 million tons annually, with less than 5% of that typically available on spot. That structural thinness magnifies short-term supply disruptions. That said, the development of significant long-wall high-vol production capacity in the U.S. has intensified competition in both domestic and export markets. As a result, U.S. high-vol pricing continues to stubbornly lag historical relativities to Australian premium low-vol. We, therefore, continue to focus our growth efforts on our low-vol portfolio, where the supply-demand balance remains tighter and pricing durability appears stronger. The new railroad out at Maben, once operational, will materially improve logistics economics and provide access to additional customers for this premium Central Appalachian low-volatile coal. Turning to our 2026 sales position. We have secured commitments for 3.1 million tons. North American customers account for 1.1 million tons at an average fixed price of $142 per ton. In addition, 2 million export tons are committed at index-linked pricing. Turning to our Brook Mine progress. Our carbochlorination-based flowsheet should substantially strengthen and derisk our product mix and revenue basket. We are now placing greater weight on high-purity gallium, high-purity alumina and high-purity quartz, with a modestly reduced emphasis on scandium applications, although scandium does remain an important part of the Brook Mine portfolio. High-purity gallium metal, if achieved at scale, positions Ramaco directly within the strategic semiconductor material supply chain. In parallel, we now intend to market our magnetic rare earths, which represent a smaller portion of our overall revenue basket, primarily as a mixed rare earth carbonate or MREC. These flowsheet enhancements, combined with our elevated gallium focus, materially expand our addressable market. We are in active dialogue with several companies and a wide variety of potential customers regarding potential offtake and partnership structures. As we advance pilot operations and generate lab scale and pilot scale material, we expect these discussions to evolve into formal commercial frameworks. Finally, we continue coordinated engagement with defense primes and governmental stakeholders. The broader policy backdrop, including potential domestic stockpile initiatives and price support mechanisms, reinforces the strategic relevance of the Brook Mine, as well as the strategic critical minerals terminal, which we announced last year. For the terminal, our location with a dry climate and a site adjacent to both the Class 1 railroad mainline and the major interstate highway puts Ramaco in a unique position to serve the U.S. stockpiling needs. To conclude, these are exciting times for the company. On metallurgical coal, we entered 2026 with a strong and largely committed sales book, improving low-vol pricing dynamics and a disciplined growth strategy focused squarely on higher-return segments. We believe our cost position, product quality and logistics flexibility leave us well positioned as markets rebalance. On critical minerals, our flowsheet direction represents a meaningful step forward. It should enhance product quality, lower capital intensity and sharpen our commercial focus toward high-purity gallium and strategic MREC partnerships. With that, I'll turn it back to the operator for the Q&A portion of the call. Operator?
分析師問答
Our first question comes from Ben Kallo with Baird. Growth strategy focused squarely on higher-return segments. We believe our cost position, product quality and logistics flexibility leave us well positioned as markets rebalance. On critical minerals, our flowsheet direction represents a meaningful step forward. It should enhance product quality, lower capital intensity and sharpen our commercial focus toward high-purity gallium and strategic MREC partnerships. With that, I'll turn it back to the operator for the Q&A portion of the call. Operator?
Thanks for all the detailed information. A lot to go through. Maybe first, you had a lot of changes at Brook Mine in the process and technology. How did you decide to go this route? I know that you guys have been working at this for a long time. From the outside, it looks a little abrupt, but I'm sure that this is a thoughtful process. Could you explain that? And then second, as you make these changes, I know you've been in discussions for offtake agreements and with the government. Does that change the timing of any of that?
I'll let Mike take the first part of that question.
Yes, sure. We had anticipated that this might be a flowsheet option some time ago, but hadn't completed the necessary test work to understand the magnitude. Granted there's some delays in completion of a PFS with this flowsheet change, the expected impacts on the economics are significant. We were delighted to see that almost all of the gallium went to gallium chloride, which provides the ability to produce a higher purity gallium product, and that comes at a significant premium. For a long mine-life project such as the Brook Mine with potentially a 100-year mine life, this is a material improvement to the economics. The last flowsheet had no issues, but the step change in improvements justified the change in our view.
Yes. And I think, Ben, to the second part of your question, we have kept our discussions in relative real-time in terms of different procurement and finance options. The pivot to a more gallium-centric product slate is an improvement and enhances our discussions because, in a number of respects, it derisks the process. The carbochlorination is a proven technique used in titanium manufacturing. We have a novel feedstock, but the base technology is not unproven. We think scandium is going to be a very important part of the future market for lightweighting and electronic applications, but that market is more nascent. The gallium market for semiconductors is apparent today and is growing rapidly given electrification and demand from AI. We are finding strong receptivity both with strategic partners and the government to pivot toward more gallium and a somewhat lesser emphasis on scandium. I hope that addresses your question.
Our next question comes from Douglas Ormond with Discovery Capital.
I'm just making sure I caught that in the initial comments. It sounds like the engineering enhancements would lead to materially increased value relative to the September shareholder letter, which had the $5 billion NPV and not just the prior PEA, when we think about a launching off point for what the new flowsheet will provide. Are we thinking about that correctly?
Mike?
Yes. We're looking at increased production from the new product suite and potential higher purity, which translates into higher throughput and higher basket prices. Our internal estimates have been conservative regarding purity assumptions for high-purity alumina and high-purity quartz — we used 4N type purities in our projections. But if we can achieve higher purities, the pricing steps up materially. For example, gallium at 6N can be roughly three times the price of 4N. Similarly with high-purity quartz, 5N versus 4N can be three times the price. These are the things we need to test going forward. The ability to produce those products and understand the recoveries presents significant upside, and we already see a meaningful increase in basket price internally.
Our next question comes from Carlos de Alba from Morgan Stanley.
I wanted a clarification on the new flowsheet, because I think I heard this is not a novel approach, that it has been used in titanium. If that is the case, can you explain what the fundamental technology breakthrough is that you have achieved with this processing? And what is the level of confidence on the new approach? Can you talk about the independent laboratories that have done initial testing on this new flowsheet method and share the names and whether there is any documentation that you will share with the market?
I think it comes back to geology and mineralogy. The deposit has gallium, germanium, and the clays are aluminosilicate clays. The carbochlorination process breaks those clays and allows us to produce high-purity quartz and high-purity alumina. The rare earths remain in the residue. There have been publications about carbochlorination and rare earths and the titanium industry uses the process, but it hasn't been done before in the way we're viewing the flowsheet for a coal-hosted deposit. We have IP around exactly how we're doing it — operating conditions, temperatures, residence times, and how we separate these products is proprietary. We have been surprised by the results. We've been public about the labs we've used, including Element USA. We've engaged a consultant, Kingston Process Metallurgy, who has carbochlorination experience in the alumina industry. We're also working with a specialist consultant for thermodynamic simulation. I'm confident about this approach. Another benefit is we significantly derisk the bulk reagent requirements compared to hydrometallurgical routes. Being a coal deposit, the carbon is on site, and chlorine is largely recycled in the process as in the titanium industry, so reagent logistics and costs are greatly simplified. Operating costs will shift more toward electricity, which is favorable in Wyoming.
May I follow up on the gallium aspect of the new flowsheet. Do you have any information on the economics and cost advantage relative to extracting gallium from red mud or from other refining residues? Our understanding is that it is not very profitable for some to extract gallium from those sources, so any color you can share would be helpful.
Yes, that's a key point. Extracting gallium from red mud and other residues has been challenging. Gallium is volatile as a chloride, so this process is effective because almost all the gallium went into the off-gas in our tests. That translates into a double-digit increase in gallium recovery and the possibility to produce higher purity products. This flowsheet may position us as a primary producer of gallium at the purities required for the semiconductor industry, which is exciting.
Our next question comes from Brian Lee with Goldman Sachs.
Following up on the prior line of questioning. The REE basket on Slide 12 increased to roughly $500 from your prior view of about $300. I know it's premature for all specifics, but can you give us a sense of what's embedded in that? Previously, you had been talking about scandium being roughly 60% of the value of Brook Mine deposit at an assumed $37.50 per kg. You're saying there's a modest decline in that. Can you give a sense of what's changing in terms of the mix of scandium versus other products and whether there are price changes? And where does gallium sit in the context of the new flowsheet versus prior views?
Yes, I'm glad you noticed that. The basket value increase reflects assumptions including capturing 5% of the high-purity alumina market at a 4N purity in our internal modeling and did not include high-purity quartz previously. We see upside when we include high-purity quartz and the potential for higher purities. For gallium, depending on achieved purities and recoveries, it could challenge scandium in terms of equivalent production value. We anticipate scandium pricing perhaps less than $40 per kg in the near-term, but we also saw a double-digit increase in scandium recovery with this process, so scandium will remain significant. Gallium and HPA and HPQ will be meaningful contributors. That said, we want to finish the PEA to confirm the numbers and particularly costs, which we will publish midyear.
Brian, to your point, the dollar-per-ton figure in our internal analysis is up more than 50% compared to what we previously disclosed. Our internal projections show material increases in incremental revenue and free cash flow versus prior disclosures. We're working with a third party to validate those numbers.
That's helpful. One more on timing: the change in the flowsheet pushes out pilot and demonstration timing by some quarters. How should we think about the timing of the Brook Mine coming online? Many modeled a 2028 start-up. Is that still valid or should we assume a similar delay?
That's a good question. We are projecting a few quarters of delay because of this change, which pushes out the overall project schedule similarly. So yes, plan for some schedule pushout relative to prior expectations.
Our next question comes from Alex Fuhrman with Lucid Capital Markets.
Congratulations on the progress you made last year. Regarding the revised flowsheet and selling rare earth as a mixed product, where do you see that MREC product going? Heavy rare earth separation capacity in North America is virtually nonexistent. Do you anticipate separation capacity being available by the time you have MREC to sell? Or are there end uses for mixed rare earth products?
Alex, taking a step back, it will depend on TREO content and how the flowsheet develops. Separation capacity in the U.S. is largely pilot-scale or developing, but there are allied-country suppliers and pilot programs overseas. We've been in contact with nearly all potential partners and have seen a recent increase in emphasis from the U.S. government on that part of the supply chain. Given the timeline for our development and these conversations, we feel confident that separation capacity or partners will be available when needed.
Our next question comes from Matthew Key with Texas Capital.
Staying on Brook, if you wanted to pursue rare earth separation down the road, could you eventually do that at Brook? Or are the economics better to sell MREC and not build out separation infrastructure?
With the additional revenue generators from gallium, HPA and HPQ, the relative contribution from rare earths becomes smaller. We're looking at rare earths representing roughly 15% of the overall project revenue basket in our current view. Building a full solvent extraction and separation plant is technically challenging and capital intensive. Given the smaller relative revenue contribution, it's more efficient to simplify the back end by producing MREC and selling that to downstream processors who specialize in separation.
On the metallurgical coal side, you mentioned the rail loadout at Maben could facilitate eventual deep mining development. How soon could a project come online once you decide to proceed, and what's the ballpark capital needed to get it across the finish line?
The deep mines are largely permitted already at Maben. Once we decide to move forward, lead time is primarily construction and equipment acquisition. You're looking at roughly 6 to 8 months from decision to first production, so it could be a 2027 event if the market supports it. Each underground section, including development and equipment, is approximately $12 million to $15 million. To add an extra 1 million tons of capacity, we estimate roughly $60 million to $70 million total CapEx, rolled out over an extended period.
Our next question comes from Jeff Grampp with Northland Capital Markets.
With the change in the flowsheet and some timing being pushed back, can you touch on your ability to qualify product for customers in the near term? Or will that ramp up more significantly once the pilot plant is online?
The pilot plant objective is to produce sufficient quantity for product testing. We are also evaluating bench-scale routes to produce enough volumes for high-purity alumina and high-purity quartz product testing before pilot operations begin. So it's possible we can do some customer qualification work prior to full pilot operations.
Got it. For my follow-up on metallurgical coal, it seems like there's potential upside to coal sales this year. Given the positive macro commentary, what would you need to see to push more product into the market?
I'll let Jason provide the granular detail, Jeff, but the reality is we have some unpriced index tons. If we see upward market movement, we'll be able to take advantage of that.
On the low-vol side we're already seeing improvement, which is why we're advancing tons at Berwind and the Maben loadout. The gap between U.S. low-vol and Australian PLV is meaningful but should compress if spot tightness continues. High-vol remains tough — Q4 was challenging, with some producers coming up to full production and adding supply. We're seeing some supply-side changes already: a neighbor at Elk Creek will fully wind down in April, and some smaller operators in Central Appalachia are winding down. Those moves should tighten supply and help relativities recover over time. Also, we have built a fair amount of inventory through disciplined sales last year, so we can sell more if pricing justifies it.
To add, when we talk about selling more, I want to be clear that our ability to sell up to almost 5 million tons does not require incremental capital expenditures. We've built inventory and internal flexibility to respond to market improvements.
Our next question comes from Nick Giles with B. Riley. Speaking on behalf of Nick is Soundarya Iyer.
With the solvent extraction removed from the flowsheet, directionally how might CapEx trend relative to the prior $1.1 billion estimate? Even an order of magnitude reduction would be helpful.
We want to get the PEA numbers before providing definitive CapEx guidance. It's hard to compare flowsheets exactly. We will reduce some CapEx on the back end by eliminating solvent extraction and some purification steps, but carbochlorination itself will carry significant CapEx. We'll have quantified numbers in the PEA.
Given the favorable policy environment, how are you thinking about pursuing government financing programs like DPA Title III or DOE loan programs? Have you had conversations?
We are in conversations with various government groups. I won't get into specifics about which programs, but pivoting to a slate of products the government is very interested in — such as gallium for semiconductors — certainly helps our discussions.
Our next question comes from Nathan Martin with The Benchmark Company.
You gave some Q1 guidance. Does that incorporate the impacts from the Arctic weather Chris mentioned? And how should we think about cadence of shipments in Q2 through Q4 as weather warms up and you catch up?
Yes, the Q1 numbers Jeremy gave earlier do take into account the shipment slowdown in late January and early February. We've seen shipment performance improve greatly over the last few weeks, but we're still working through backlog. For cadence, with the lakes starting back up and leaving winter season, Q2 we're looking at about 1 million tons, Q3 about 1.2 million to 1.3 million, and Q4 similarly around 1.2 million to 1.3 million, broadly speaking.
Regarding relativities between premium low-vol and high-vol, should we expect first-quarter coking coal realizations to be pressured given wide discounts so far? And any thoughts on where percentage-of-benchmark could look for the year?
It's difficult to predict precise relativities — I've been in the business a long time and it's hard to be exact. I do think relativities will improve from Q4 as supply-side discipline continues. Some higher-cost producers will likely curtail and the lower-cost, disciplined operators will remain, which should help relink high-vol relativities closer to historical levels over time. But it will take time to rebalance given incremental U.S. high-vol production coming online.
Nate, mix should be similar year-over-year: about 15-plus percent low-vol with the rest high-vol domestically. The Maben loadout will be an advantage for domestic sales, and we expect that to play into the mix next year.
This concludes our question-and-answer session. I would like to turn the call back over to Randall Atkins, Chairman and CEO, for any closing remarks.
Great. Well, I just want to thank everyone for being on the line today, and we look forward to catching up here in the next quarter. Thank you.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.