Executive Summary / Key Takeaways

• Ramaco Resources is strategically positioning itself as a low-cost metallurgical coal producer while simultaneously developing a potentially transformative rare earth and critical minerals business at its Brook Mine in Wyoming.
• Despite challenging metallurgical coal markets driven by global steel oversupply and price declines, Ramaco has demonstrated operational resilience, achieving first-quartile cash costs below $100 per ton and maintaining relatively strong cash margins compared to peers.
• The Brook Mine project offers significant upside potential, targeting the domestic production of high-value rare earth elements and critical minerals (including those recently banned by China), leveraging unique deposit characteristics and innovative processing techniques.
• Recent financial performance reflects market headwinds, with Q1 2025 revenue and earnings impacted by lower prices, but the company maintains a strong liquidity position and conservative balance sheet to weather volatility and fund strategic initiatives.
• Key catalysts include the expected preliminary economic analysis for the Brook Mine in June 2025, the commencement of large-scale mining and pilot plant construction in 2025, and potential market rebalancing driven by U.S. supply cuts and global demand shifts.

A Foundation in Coal, Eyes on the Future

Ramaco Resources, Inc. (NASDAQ: METC) began its journey in 2016, establishing itself as a focused operator and developer of high-quality, low-cost metallurgical coal in the heart of Central Appalachia. Its core business centers on extracting coal essential for steel production, serving both North American and international markets. The company's early history included overcoming operational challenges, such as the 2018 silo failure at Elk Creek, demonstrating resilience and a commitment to restoring full capacity. Strategic acquisitions, notably Ramaco Coal in 2022, significantly expanded its reserve base and introduced the unique CORE assets, including mineral deposits in Wyoming that would later reveal unexpected potential.

The metallurgical coal industry operates within a volatile global market, heavily influenced by steel production, economic growth, and supply-demand dynamics. Recent periods have seen significant headwinds, primarily driven by China's substantial steel overproduction and subsequent exports, which have pressured global steel prices and, in turn, reduced the price steel producers are willing to pay for metallurgical coal. This environment has led to declining coal price indices and financial strain across the industry, particularly for higher-cost producers.

Within this challenging landscape, Ramaco has strategically focused on controlling its operational costs and optimizing production. The company has consistently emphasized achieving a low-cost position, aiming for the first quartile of the U.S. metallurgical coal cost curve. This focus has been critical in maintaining profitability and financial stability amidst price volatility.

Operational Strength and Cost Discipline

Ramaco's operational performance has been a key differentiator, particularly throughout 2024 and into the first quarter of 2025. The company successfully ramped up production, achieving record quarterly volumes in Q3 and Q4 2024, pushing towards a 5 million ton per annum run rate by year-end 2024. This growth was supported by strategic investments in new production sections and mines, including high-vol additions at Elk Creek and the expansion of low-vol production at Berwind.

A significant achievement has been the consistent reduction in cash costs per ton sold. Costs declined throughout 2024, reaching below $100 per ton by the fourth quarter and remaining at $98 per ton in Q1 2025. This cost performance is attributed to improved operational efficiencies, mining in areas with more favorable geology, better labor availability, and the commissioning of the Maben preparation plant in October 2024. The Maben plant is particularly impactful, eliminating substantial raw coal trucking costs, which previously averaged around $40 per clean ton.

Despite challenging weather in Q1 2025, which impacted production by approximately 150,000 tons and contributed to slightly higher unit costs compared to Q4 2024, the underlying operational momentum remains. This cost discipline has allowed Ramaco to maintain relatively strong cash margins per ton, notably higher than many publicly traded peers, providing a crucial buffer against lower market prices.

Strategic Growth and Future Capacity

Ramaco's strategic plan includes significant optionality for future production growth, aiming to reach approximately 6.5 to 7 million clean tons annually over the next few years. Key projects include the continued expansion at Berwind, with plans for a fourth super section, and the potential underground expansion at the Maben complex, which could add up to 1.5 million clean tons per year. These projects are poised to add high-quality, low-vol tonnage to the portfolio.

The timing of these expansions is contingent on market conditions, reflecting a prudent approach to capital deployment in the current environment. Management retains the flexibility to accelerate these projects when market clarity and pricing improve. The decision to close the Knox Creek Jawbone mine in late 2024, while reducing overall volume slightly, was a strategic move to remove unprofitable production and reallocate resources.

The Transformative Rare Earth Opportunity

Beyond its core metallurgical coal business, Ramaco is pursuing a potentially transformative opportunity at its Brook Mine property in Wyoming. Acquired as part of the Ramaco Coal transaction, this site unexpectedly revealed a significant deposit of rare earth elements (REE) and critical minerals. What sets this deposit apart is its unconventional nature – the minerals are commingled in coal and adjoining strata, and importantly, the deposit has little to no radioactive character.

This unique geological characteristic translates into a significant technological differentiation in extraction and processing. Unlike traditional hard rock REE deposits that often require complex and environmentally challenging processing of radioactive materials, Ramaco's deposit is expected to be amenable to more conventional and potentially novel processing techniques. The company is actively engaged in extensive testing (geological, chemical, hydrometallurgical) with experts like Weir International and Fluor Corporation (FLR), and is exploring innovative approaches, including AI assessment techniques with NETL, to optimize recovery and refinement.

Recent analysis, including the Weir update released in May 2025, estimates the high-end total rare earth oxide (TREO) at the Brook Mine at 1.7 million tons. Crucially, this includes significant concentrations of critical minerals like gallium, germanium, scandium, terbium, and dysprosium – several of which have recently been subject to export bans by China. Management anticipates that a basket of seven key REEs and critical minerals (neodymium, praseodymium, dysprosium, gallium, germanium, terbium, and scandium) could constitute over 95% of the project's expected revenue and cash flow, making up about 40% of the deposit material. The Brook Mine is believed to be the only primary source mine in the world for germanium, gallium, and scandium.

Ramaco's plan is to develop a fully domestic, vertically integrated operation, from mining to refining. The Brook Mine is projected to produce approximately 1,400 metric tons of critical mineral oxides per year from mining about 2.5 million tons of material. A key aspect of the business model is the sale of the non-mineralized coal (~2 million tons/year) as conventional thermal coal, which will help offset mining costs and provide an extremely low cost basis for the critical minerals extraction.

The development timeline includes initiating large-scale mining in June 2025, which will mark the first new rare earth mine in the U.S. in over 70 years and the first new coal mine in Wyoming in over 50 years. Construction of a pilot processing facility is planned for later in the summer of 2025, with initial operation expected by 2026 to inform the design of the full commercial plant. Construction of the commercial facility could commence in late 2026 or early 2027, targeting production by 2028. This initiative is supported by grants, such as the $6.1 million from the Wyoming Energy Authority, and strategic hires like Michael Woloschuk, an experienced critical minerals executive from Fluor.

Competitive Positioning

In the metallurgical coal market, Ramaco competes primarily with other U.S. producers like Arch Resources (ARCH), Peabody Energy (BTU), Alpha Metallurgical Resources (AMR), and CONSOL Energy (CEIX). While smaller in scale than some larger peers, Ramaco differentiates itself through its focus on high-quality, low-sulfur coal across various grades and its consistent achievement of first-quartile cash costs. This cost advantage is a significant competitive moat, allowing Ramaco to maintain positive margins even when market prices pressure higher-cost operations. The company's cash margins have consistently outperformed many peers in Central Appalachia.

Ramaco's strategic positioning is also enhanced by its strong domestic customer base, providing a degree of stability compared to producers heavily reliant on volatile export spot markets. While larger competitors may have advantages in overall scale and logistics, Ramaco's operational efficiency at its key complexes and its focus on favorable geology contribute to a competitive cost structure.

The rare earth and critical minerals venture introduces a new competitive dimension. In this nascent U.S. market, Ramaco's Brook Mine stands out due to the unique nature of its deposit and the potential for domestic vertical integration. While companies like MP Materials (MP) operate the only existing U.S. REE facility, Ramaco's deposit characteristics and focus on specific critical minerals like gallium, germanium, and scandium position it uniquely. The ability to leverage coal sales to subsidize REE mining costs provides a distinct advantage over traditional hard rock REE projects. The competitive landscape in the REE space is heavily influenced by China's dominant position, but Ramaco's domestic focus aligns with national strategic goals to build secure supply chains.

Financial Performance and Liquidity

Ramaco's recent financial performance reflects the impact of the challenging metallurgical coal market. In Q1 2025, the company reported revenue of $134.66 million, a decrease from $172.68 million in Q1 2024, primarily due to lower realized prices despite a slight increase in tons sold. The decline in prices, particularly in export markets influenced by lower index prices, led to a net loss of $9.46 million in Q1 2025, compared to net income of $2.03 million in Q1 2024. Adjusted EBITDA also decreased sequentially and year-over-year, falling to $9.79 million in Q1 2025 from $24.18 million in Q1 2024.

Despite the impact on earnings, Ramaco maintains a robust financial position. As of March 31, 2025, the company had $43.47 million in cash and cash equivalents and $74.9 million in remaining availability under its Revolving Credit Facility, totaling $118.37 million in liquidity.

The company has successfully paid down all acquisition-related debt and maintains a conservative balance sheet with a low net debt to trailing 12-month EBITDA ratio. This financial strength provides the flexibility to manage through market downturns, fund ongoing operations and strategic growth projects, and continue its dividend program, which includes both Class A cash dividends and Class B dividends tied to CORE asset performance.

Capital expenditures in Q1 2025 totaled $20.3 million, primarily focused on growth projects initiated in 2024, including the Maben complex expansion. The majority of the planned 2025 CapEx is expected in the first half of the year.

Outlook and Guidance

Ramaco has adjusted its 2025 guidance to reflect the current market environment and strategic optimization. Full-year 2025 production is now anticipated between 3.9 million and 4.3 million tons, and sales between 4.1 million and 4.5 million tons, a reduction from prior expectations. This adjustment is a deliberate decision to avoid selling into a weak spot market without adequate returns, while retaining the optionality to increase production if conditions improve.

Cash cost per ton sold guidance for 2025 is lowered to $96 to $102, reflecting continued confidence in operational efficiencies. Capital expenditures guidance is also slightly reduced to $55 million to $65 million, with the majority weighted towards the first half of the year and including initial spend on the Brook Mine development. Cash SG&A guidance is increased slightly due to higher legal expenses, while DD&A guidance is adjusted down in line with production and CapEx changes.

Management anticipates Q2 2025 tons sold to be similar to Q1 levels, with cash mining costs towards the higher end of the annual range due to lower tonnage. However, they express hope for market improvement in the second half of the year, citing potential supply cuts from higher-cost producers and possible demand shifts. The long-term outlook for metallurgical coal is viewed positively, supported by limited global investment in new capacity and industrialization trends.

The outlook for the Brook Mine project is focused on achieving key development milestones. The preliminary economic analysis from Fluor is expected by the end of June 2025, which will provide crucial details on project economics and capital requirements. The planned commencement of large-scale mining and pilot plant construction in 2025 are critical steps towards realizing the commercial potential of the rare earth and critical minerals business.

Risks and Challenges

Investing in Ramaco Resources involves exposure to several key risks. The metallurgical coal market remains highly volatile, with prices susceptible to global macroeconomic conditions, steel demand fluctuations, and supply disruptions. The continued impact of Chinese steel exports on global pricing is a significant headwind. Operational risks, including adverse weather conditions, geological challenges, labor availability, and transportation constraints, can impact production volumes and costs.

The Brook Mine project, while promising, is in its early stages of commercial development. There are inherent risks associated with developing a new mine and processing facility, including potential cost overruns, construction delays, and challenges in optimizing recovery rates and refinement techniques for unconventional deposits. Market acceptance and pricing for the specific rare earth elements and critical minerals produced will also be crucial. Litigation risks, such as the ongoing insurance dispute and the preparation plant purchase lawsuit, could result in unexpected costs or liabilities.

Conclusion

Ramaco Resources presents a compelling investment thesis centered on its established position as a low-cost metallurgical coal producer and the significant upside potential of its emerging rare earth and critical minerals business. While the metallurgical coal segment faces near-term headwinds from weak market pricing, the company's operational efficiency, cost discipline, and strategic production flexibility provide resilience. Ramaco's ability to consistently achieve first-quartile costs and maintain stronger margins than peers is a testament to its operational execution.

The Brook Mine project represents a potential transformation, offering diversification into strategically vital critical minerals with unique deposit characteristics and a favorable cost structure supported by coal sales. The upcoming PEA and planned development milestones in 2025 are critical factors to watch. Ramaco's strong balance sheet and liquidity position enable it to navigate current market challenges while investing in future growth. For investors seeking exposure to a resilient coal producer with a differentiated, high-potential venture in the critical minerals space, Ramaco Resources warrants close consideration, balancing the near-term market volatility against the long-term strategic vision and execution potential.