Executive Summary / Key Takeaways

• Strategic Transformation Underway: Ramaco Resources is executing a dual strategy to solidify its position as a low-cost metallurgical coal producer while simultaneously developing a potentially transformative rare earth and critical minerals business, positioning the company for diversified, long-term growth.
• Operational Excellence in Met Coal: Despite challenging market conditions, Ramaco has consistently demonstrated superior cost control, achieving cash costs under $100 per ton and maintaining industry-leading cash margins, driven by strategic mine development and infrastructure investments.
• Pioneering Domestic Critical Minerals: The Brook Mine represents a unique, non-radioactive, carbon-ore-sourced deposit of rare earth elements and critical minerals, including those under Chinese export bans, offering a crucial domestic supply chain solution with significant revenue potential.
• Robust Financial Discipline: The company maintains a strong liquidity position and a conservative balance sheet, enabling it to withstand market volatility in its core business while funding strategic growth initiatives, including the initial phases of the Brook Mine development.
• Growth Optionality and Future Outlook: Ramaco possesses substantial optionality to expand met coal production by an additional 2 million tons when market conditions improve, complementing the phased commercialization of its critical minerals project, which targets oxide production by 2028.

A Dual-Engine Growth Story: From Appalachia's Depths to Wyoming's Future

Ramaco Resources, Inc. (NASDAQ:METC) is forging a compelling narrative, evolving from a focused metallurgical coal producer into a diversified entity with significant potential in the critical minerals sector. Founded in October 2016, Ramaco initially established its footprint in the heart of Central Appalachia, developing high-quality, low-cost metallurgical coal operations across southern West Virginia and southwestern Virginia. This foundational business, supplying essential feedstock to blast furnace steel mills globally, has been characterized by a relentless pursuit of operational efficiency and cost leadership.

The company's strategic journey has been marked by both resilience and foresight. An early test came in 2018 with a partial structural failure at its Elk Creek plant, which was swiftly addressed with temporary and then permanent solutions, demonstrating operational agility. This incident also led to an ongoing insurance dispute, where a court reinstated a $7.70 million contract damages verdict in July 2023, underscoring the company's commitment to protecting its interests. A pivotal moment arrived in the second quarter of 2022 with the acquisition of Ramaco Coal, which included its Carbon Ore-Rare Earth (CORE) assets. This acquisition laid the groundwork for a significant corporate restructuring in June 2023, introducing Class B common stock to allow shareholders direct participation in the financial performance of CORE assets, signaling the company's long-term vision beyond traditional coal.

The metallurgical coal market operates within a volatile global landscape, heavily influenced by macroeconomic conditions and geopolitical dynamics. A persistent challenge has been the Chinese overproduction and subsequent dumping of steel into world markets, which has exerted downward pressure on global steel prices and, consequently, metallurgical coal pricing. For instance, Chinese steel exports averaged 104 million tons annually since early 2022, peaking at an annualized rate of nearly 150 million tons in October 2024. This oversupply has forced steel companies to cut production and reduce their willingness to pay higher prices for met coal.

However, this challenging environment has also spurred significant supply rationalization among higher-cost producers. As much as 16 million domestic tons of met production are expected to exit the U.S. market since its peak in Q2 2024, representing a substantial 20% decline. MSHA data indicates that Q3 2024 U.S. met coal production fell by over 8% sequentially, equating to a 6 million ton annual decline. This contraction, coupled with ongoing mine incidents and bankruptcies among less efficient operators, is creating a tighter supply environment, particularly in Central Appalachian met markets. Ramaco anticipates this supply contraction will continue, potentially leading to upward price movement once demand re-emerges.

Technological Edge and Operational Prowess

Ramaco's competitive advantage in the metallurgical coal sector is deeply rooted in its operational discipline and a differentiated product offering. The company specializes in a broad spectrum of low-ash and low-sulfur coking coals across all grades—low-vol, mid-vol, and high-vol—a quality profile that is somewhat unique in the industry and provides a significant competitive edge, especially in lower price environments. This superior product quality ensures sustained demand, as customers use Ramaco's coal to blend down less favorable characteristics from other suppliers.

The company's commitment to cost leadership is evident in its consistent performance. Ramaco achieved cash costs under $100 per ton in Q4 2024 and Q1 2025, firmly placing it in the first quartile of the U.S. metallurgical coal cash cost curve. This remarkable achievement is a result of strategic investments and operational improvements. For example, the commissioning of the Maben prep plant in October 2024, ahead of schedule and on budget, is expected to reduce trucking costs by approximately $40 per clean ton. Furthermore, the company has strategically transitioned its mining operations into thicker, more favorable geological horizons, which directly translates into higher clean tons per foot and drives down unit costs. This focus on geological advantage and efficient infrastructure has allowed Ramaco to maintain industry-leading cash margins, which were approximately $33-$34 per ton in Q3 and Q4 2024, nearly 50% higher than its next closest public peer.

Beyond its core coal business, Ramaco is pioneering a transformative venture in critical minerals at its Brook Mine property in Wyoming. This project represents a significant technological differentiator. Unlike traditional rare earth deposits, the Brook Mine's rare earth elements (REEs) and critical minerals (CMs) are found commingled in coal and adjoining strata, with little to no radioactive character. This unconventional, carbon-ore-sourced deposit is strategically vital, as it is anticipated to be the only primary source mine in the world for germanium, gallium, and scandium—critical minerals that China has recently banned from export to the United States, along with terbium and dysprosium. These seven REEs and CMs (neodymium, praseodymium, dysprosium, gallium, germanium, terbium, and scandium) are projected to constitute over 95% of the Brook Mine's future revenue and cash flow.

The scale and quality of this deposit are substantial, with a high-end estimate of 1.7 million tons of Total Rare Earth Oxide (TREO), including approximately 300,000 tons (17%) of the strategically important scandium, germanium, and gallium. Independent testing has shown primary and secondary recovery levels of rare earths above 80%, demonstrating the viability of extraction. Ramaco is also actively engaged in R&D, collaborating with NETL (National Energy Technology Laboratory) to develop novel AI assessment techniques to improve recoveries and optimize processing for its unique slate of heavy and medium magnetic rare earths and critical minerals. A key innovation is the integrated business model: the remaining 2 million tons of non-mineralized coal mined from the Brook Mine will be sold as conventional Powder River Basin thermal coal, effectively lowering the overall mine cost basis for the critical minerals. This unique approach provides an extremely low mine cost for the REE operation, enhancing its economic viability.

Financial Performance and Strategic Outlook

Ramaco's financial performance in recent periods reflects the dual impact of challenging market conditions in metallurgical coal and its disciplined operational execution. In Q1 2025, the company reported a net loss of $13.97 million and adjusted EBITDA of $10 million. This decline was primarily driven by a $7 per ton sequential drop in realized pricing and a 175,000-ton reduction in sales volume, directly mirroring the continued fall in U.S. and Australian met coal prices. Despite this, Q1 2025 saw a record quarterly production of 1 million tons, annualizing to 4 million tons, underscoring the company's operational strength even amidst adverse weather conditions that impacted production by approximately 150,000 tons.

For the first six months of 2025, revenue stood at $287.62 million, down from $327.99 million in the same period of 2024, largely due to lower pricing. However, cash cost per ton sold FOB mine improved to $101 for H1 2025, compared to $113 in H1 2024, demonstrating the positive impact of efficiency gains and strategic mine closures like the Jawbone mine in Q3 2024. The company's annual revenue for 2024 was $666.29 million, with a net income of $11.19 million, reflecting a challenging but profitable year.

Liquidity remains a core strength. As of June 30, 2025, Ramaco held $28.13 million in cash and cash equivalents, with $59.2 million available under its Revolving Credit Facility. Total current assets of $154.91 million comfortably exceeded current liabilities of $113.79 million. The company's net debt to adjusted EBITDA was less than 0.7x in Q1 2025, highlighting a conservative balance sheet.

This strong liquidity position is viewed by management as both defensive, to weather market downturns, and offensive, to capitalize on opportunistic acquisitions or growth projects. In July 2025, Ramaco further optimized its debt structure by completing a public offering of $57 million (plus an $8 million option) in 8.25% Senior Unsecured Notes due 2030, with proceeds earmarked to redeem existing 2026 notes and for general corporate purposes. This move underscores the company's proactive financial management.

Looking ahead, Ramaco's guidance reflects a disciplined approach to market realities. For full-year 2025, production is anticipated to be between 3.9 million and 4.3 million tons, and sales between 4.1 million and 4.5 million tons, both adjusted downwards from prior expectations. This reduction is a strategic choice to avoid forcing tons into a weak spot market without adequate returns, particularly into Asia. Cash cost per ton sold guidance is lowered to $96 to $102, reflecting continued confidence in operational efficiencies.

Capital expenditures for 2025 are projected at $55 million to $65 million, with approximately $5 million allocated to the rare earth project.

The company retains significant growth optionality in its metallurgical coal business. When market clarity improves, Ramaco is poised to add an additional 2 million tons of new production, primarily from a 1.5 million ton deep mine expansion at its Maben low-vol complex and 0.5 million tons from the Berwind #3 and #4 sections. This would elevate overall production to 6.5-7 million tons annually, requiring approximately $100 million in growth CapEx spread over 24-36 months.

The Brook Mine critical minerals project is on a clear development timeline. Large-scale mining commenced in June 2025, marking the first new rare earth mine in the U.S. in over 70 years. A Preliminary Economic Assessment (PEA) by Fluor Corporation (FLR) in July 2025 affirmed the project's commercial and technological feasibility. Construction of a pilot plant demonstration facility is slated for late summer 2025, with initial operation by 2026. This pilot phase will inform the design of the full commercial facility, planned for construction in late 2026 or early 2027, with commercial-grade mineral oxide production targeted for 2028. The project has already secured a $6.1 million matching grant from the Wyoming Energy Authority for pilot plant development, and Ramaco is actively engaging potential customers, including the U.S. Department of Defense, for future offtake agreements. The recent appointment of Mike Woloschuk, former Global Executive Director of Fluor's Critical Minerals division, as Executive Vice President to oversee this project, further strengthens Ramaco's execution capabilities.

Competitive Landscape and Risks

Ramaco operates in a competitive landscape dominated by larger players like Arch Resources, Inc. (ARCH), Peabody Energy Corporation (BTU), and CONSOL Energy Inc. (CEIX). While these competitors benefit from greater scale and broader global reach, potentially leading to stronger market positioning and cash flow generation, Ramaco distinguishes itself through its acute focus on cost leadership and the unique quality of its metallurgical coal products. Ramaco's cash margins have consistently outperformed peers, demonstrating its ability to extract value even in challenging pricing environments. Its strategic emphasis on low-ash, low-sulfur coals provides a competitive advantage, particularly as other U.S. producers have seen incremental growth in higher-ash or higher-sulfur qualities.

The company's growth strategy is more targeted, focusing on high-quality, low-cost reserves in Appalachia, which allows for efficient operational execution. This project-specific expertise and regional focus enable Ramaco to compete effectively in niche markets and with quality-sensitive customers. The significant supply rationalization occurring in the broader U.S. met coal market, driven by the financial distress of higher-cost producers, creates opportunities for Ramaco to capture market share and expand its long-term customer relationships.

The critical minerals business introduces a new competitive dimension. Here, the primary competitor is China, which holds a near-monopoly on global rare earth production and processing. China's state-backed enterprises and export bans on key critical minerals underscore the strategic importance of domestic alternatives. Ramaco's Brook Mine, with its unique non-radioactive, carbon-ore-sourced deposit of highly sought-after minerals like germanium, gallium, and scandium, directly addresses this national security and supply chain vulnerability. While China's dominance and potential for predatory pricing present a formidable challenge, the U.S. government's increasing focus on establishing a domestic rare earths supply chain, including potential financing and procurement support, provides a significant tailwind for Ramaco.

Despite its strengths, Ramaco faces several risks. The metallurgical coal market remains susceptible to global economic slowdowns and continued Chinese steel overproduction, which could prolong price weakness. Operational challenges, such as severe weather events (as seen in Q1 2025) and persistent labor tightness, can impact production volumes and costs. The rare earth project, while transformative, is a new and complex business. Delays in testing, processing optimization, and construction timelines, as well as the inherent complexities of establishing a new supply chain, pose execution risks. Furthermore, ongoing litigation, including the silo insurance lawsuit and a dispute over a preparation plant purchase, could lead to increased legal expenses, impacting profitability.

Conclusion

Ramaco Resources stands at a pivotal juncture, strategically positioning itself as a resilient, low-cost metallurgical coal producer with a burgeoning, high-potential critical minerals business. The company's consistent operational excellence, reflected in its industry-leading cash margins and sub-$100 per ton cash costs, provides a strong foundation to navigate the volatile metallurgical coal market. This disciplined approach, coupled with a robust liquidity profile and conservative debt management, enables Ramaco to withstand market pressures while retaining significant optionality for future growth in its core business.

The Brook Mine rare earth and critical minerals project represents a truly transformative opportunity, offering a unique, non-radioactive, and domestically sourced supply of strategically vital materials. Ramaco's integrated approach, leveraging coal sales to offset REE mining costs, along with its aggressive development timeline and strong government support, positions it as a key player in addressing a critical national supply shortfall. As the company progresses towards commercial production of rare earth oxides by 2028, its dual-engine strategy promises to unlock substantial long-term value, making Ramaco Resources a compelling investment for those seeking exposure to both a disciplined coal operator and a pioneering force in the domestic critical minerals supply chain.