Ladies and gentlemen, thank you for standing by and welcome to the Ramaco Resources Second Quarter 2020 Earnings Conference Call. At this time all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions]. It is now my pleasure to introduce, Chief Financial Officer, Jeremy Sussman.

Thank you. On behalf of Ramaco Resources, I'd like to welcome all of you to our second quarter 2020 earnings conference call. With me this morning is Randy Atkins, our Executive Chairman; Mike Bauersachs, our President and CEO; and Chris Blanchard, our Chief Operating 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 Ramaco's expectations concerning future events and it is possible that the results discussed will not be achieved. 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. Lastly, I’d encourage everyone on this call to go on to our website, ramacoresources.com and download today's Investor Presentation under the Events Calendar. With that said, let me introduce our Executive Chairman, Randy Atkins.

Thank you, Jeremy. As always, I want to thank everyone for joining us today to discuss our second quarter results. We're trying something a little bit different today given the current situation, by we're calling in from essentially two different parts of the country. Part of our management team is in West Virginia, part of our management is now out in Wyoming. So I started last quarter's call by quoting some Chinese proverbs about operating in interesting times. I'm not sure how to characterize this quarter other than by saying, I'm sure we would all like to never repeat the experience of operating in this kind of an environment again. First, I want to point out that for Ramaco this quarter reflects only two months of economic activity for us, not three. We were essentially closed for much of the month of April. And that in and itself is a condition of course we hope never to repeat. Under the outage, that sometimes it's better to be lucky than smart. It's also true that sometimes you get lucky by working hard. And I think all of our team worked extremely hard and creatively last quarter. Fortunately, despite all the overall macro conditions, we were able to post a financially solid first half and second quarter. As you know, on the numbers we booked EBITDA of roughly 19 million in the first half and almost 11 million for the second quarter, this was up about 30% quarter-over-quarter. Net income also bumped about 35% for the same period, and of course, Jeremy will follow me with some more granular detail on economic and financial statistics. One unusual item that was in April was that we received approximately 8.4 million in PPP or Paycheck Protection financing from the U.S. Treasury. As a result,…

Thank you, Randy. In terms of second quarter 2020 financial highlights, please remember, as Randy pointed out, we only had Elk Creek running for a little over two months. With that caveat EPS of $0.06 was up from Q1 2020 EPS of $0.05 and compared to $0.26 a year ago. Revenue was $36 million, down 13% from Q1 and down 45% from the same period of 2019. Other income totaled $8.5 million as we recognized roughly $7 million of income for the anticipated forgiveness of funding under the Payment Protection Program loan. This was based on our Q2 2020 usage of flow in proceeds, largely for eligible payroll expenses. The accounting for this funding as the grant is based on guidance issued in June from the American Institute of CPAs and blessed by our independent auditors. On the operational side, Q2 sales were 362,000, down 27% from the same period of 2019. Despite a lengthy furlough in April Q2 2020 production of 390,000 tons exceeded our sales, which were weaker than originally projected based on demand contraction from COVID related issues. Second quarter average price per ton came in at $91, which compared to $116 in the same period of 2019. Cash margins came down on the back of lower pricing and higher costs, margins on company produced coal were $17 per ton in the second quarter of 2020, down 35% from Q1 and down 62% from the same period of 2019. Cost of company produced coal came in at $74 per ton in Q2 up 4% from $71 per ton in the same period of last year. It is important to put second quarter costs into some context. First, Elk Creek overall mine costs came in at $72 per ton for the entire quarter. Excluding April mine cash cost…

Thank you, Jeremy. The second quarter of 2020 marks one of the most unusual quarters experienced to-date at Ramaco Resources. As the quarter progressed, we dealt with some of the worst uncertainty that we face as a public company, with the primary concern being both our employees, and how our customers will be impacted by the pandemic, and in turn the impact to our contracted sales. Our view today is that things have seemed to stabilize, with demand from the auto sector picking up and some domestic customers restarting blast furnaces idled earlier this year. While we will continue to face challenges during the back half of 2020, from a demand and shipment standpoint, it appears to be manageable, and we hope to see continued steady improvement, especially in the domestic space. From a macro perspective, we continue to see slow recoveries and reduced demand in the traditional Atlantic Basin markets. China, the most influential mover in the marketplace continues to recover nicely from steel production standpoint. Conversely, they appear to be more actively enforcing import quotas, keeping downward pressure on seaborne coking coal pricing. Recovering from COVID disruptions in the increasingly important India marketplace has been challenging, but recent data shows improvement. While there are concrete instances, production cutbacks, most sources point to a continued oversupply of coal production, particularly from the U.S. traditionally a swing supplier in the seaborne market. It appears that the real key to near term recovery will need to be in the form of government stimulus and even more impactful for the metallurgical sector infrastructure spending. Like others we were recently surprised by the European Union's ability to unite, to enter into a stimulus effort for all members through share borrowing. While recent projections show that the EU is expecting their economy to shrink…

Thank you, Mike. Well, there were a few key operational milestones from the second quarter and some of our strategies for the remainder of 2020 that I will briefly discuss this morning. First, our primary operational concern as always remains the health and safety of our workforce. During this period of the COVID-19 global pandemic, our focus has widened to consider how the virus can affect our miners, both at home and at work. We've taken what we believe to be prudent and proactive steps as the pandemic has developed and we continue to adapt our policies and procedures as conditions have changed over the past month. As previously mentioned, one of the most material steps taken was the furlough of operations during the month of April following the March declaration of a global pandemic and the uncertainty that was created throughout both the steel sector, as well as the coal space. Most of our operations were idled three weeks during April to assess the situation and to develop action and prevention plans. We returned focused upon social distancing, personal protective equipment and sanitation of all common areas and equipment. Face coverings were provided to all employees prior to any of the now widespread recommendations or requirements. We continue to require face coverings in all enclosed areas or where social distancing is not possible. We are now also having all offices and buildings deep sanitized on a regular schedule. Also, despite our focus on limiting and minimizing capital spending during the current period, we are deploying additional capital dollars for additional personnel carriers so that our underground miners can travel in multiple machines and have more space from their co-workers during these otherwise congested portions of the workday. As the coronavirus continues to spread and cases increase in the locations…

Great. Thank you, Chris. Thank you, Mike. So at this point, we’d be happy to take some questions from any of the analyst or investor community out there. So moderator, if you could proceed?

[Operator Instructions]. And our first question comes from the line of Lucas Pipes with B. Riley.

Randy I may have missed it in the prepared remarks, but what should be able to fill us in on domestic pricing in 2021 ideally by customer and by product? More seriously, of course, I wondered is there anything that’s been able to clean on 2021 demand based on the amount of timing of domestic tenders to-date?

Sure. Well, I appreciate that remark Lucas, because you've been basically email bombing me for the last two weeks to try and get this pricing information and I'm glad you have come to the realization that we're probably not going to step up again this year on your behalf. But keep trying, Lucas we appreciate it. So, I think as far as the '21 tender season is concerned, as I said, it's -- they came out a little bit early. I think the reality check is that the steel companies are probably, again, trying to sort of feel their way through a fog in terms of assessing their own demand requirements for '21. We felt last year they probably under bought just a little bit, but I suspect in hindsight, that probably proved precedent on their stand -- from their standpoint. I think looking at '21, the size tenders that they've come out with are a little bit better than the '20 numbers. We're not exactly dealing in a market environment where we have a surging benchmark to price against. So, we have to approach this with a certain realism there. And, we've got some producers that are obviously in various forms of continued financial distress. So, that will play a role, I'm sure in how some of our peers that look at and get into the market. So, I think in general, a number of commentators and some of our peers have also taken the posture that they view maybe the second half of next year as being a little brighter than right now. I really can't disagree with that notion. But I again, as I mentioned in my remarks, we've got a lot of humility in terms of trying to view forward markets, when you could have things like resurgence of the virus that might impede or even reverse any powerful steps in economic recovery. By the same token, you might have steps that would develop a vaccine quickly, maybe get everybody back on their feet a little bit quicker and that might have a very positive impact on the market. So, I think, again, for all of us, at least on our side of the table here, we approach the market with a certain realism. We approach the market with a certain optimism. But, as I said, most importantly, we approach our market view with a lot of humility. So, I hope that kind of addressed most of your issues.

Very, very helpful. Just a quick follow-up kind of immediately on the domestic market now. You are in the enviable position of not having substantial leverage, like some of your peers. So, is there kind of a school of thought where you say, look, this is right now we would try this contract in the middle of a pandemic. But let's hold off, let's maybe just keep more powder dry and plan on selling more in the international market that may recover by 2021. Is that kind of -- to what extent is that -- could that be a part of the strategy? And then, secondly, then that is for me, really intrigued by the new partnership in the Asia Pacific market and wondered if you could kind of give us a sense of what percent of sales may go to Asia over the coming year. So, I would really appreciate there your perspective on these? Thank you

Sure. Thanks again. So, I think, maybe part one, we're not going to get too granular with you, but I think, obviously, our leverage position certainly gives us some wind in our sale, but candidly, I think our cost position equally provides us a little bit of differentiation with our peers as we approach pricing decisions. But as Mike certainly alluded to, we've got some pretty good quality coals and we're not sort of a dual thermal producer. So, I think that gives us a little bit of, as I said, additional wind in our sales because we're dealing with pure met products that are of high quality and low cost. So I think that that gives us a pretty good seat at the table to take some realistic approaches. And, you kind of know what our general percentages of markets, let's call it percentage penetration had been in years gone by on domestic, part of that's by design, part of that’s sort of opportunistic. I think we kind of approach with the general same philosophy we have in years past. So we'll see. The arrangement with Square which we are viewing as a very positive development came around from your colleague, Mr. Sussman here, who in the past life as an analyst had done some work in Australia and had met this group who had reached out frankly to him, trying to find frankly, what they regarded as an ideal U.S. domestic partner in which to grow a relationship and expanding into some Asian markets that they handled. They are pretty decent sized both trading and sales group. I think they handled a little bit under 10 million tons a year of met, which is a pretty healthy number. And they are in a vast array of markets over there throughout the Asian basin. Sitting here in Kentucky, West Virginia or Wyoming it's pretty tough to keep your finger on the daily pulse of any markets that are very, very far away. And they have offices frankly, throughout the Far East. And we will look forward to building that relationship over time. We think they're very good people and very experienced knowledgeable group. And we look forward to that relationship.

Thank you. And our next question comes from the line of Mark Levin with Benchmark.

Lucas, asked a lot of domestic related questions. I know you guys have sent a high proportion or sold a high proportion of your volume into the domestic market. I recall, and I can't remember when it was. It might've been a conference call or two ago. [My bowers] actually was talking about trying to kind of keep a foothold there. I mean, is it reasonable to assume in ‘21 that you would at least sell half or more than half of your volume into the domestic market or have things changed so monumentally that that shouldn't necessarily be the case?

I think I’m going to let Mike follow up on this and give a perhaps more expansive answer, but I think just in general, Mark, you got to be kind of opportunistic when you're talking about the spot sales, you're never quite sure when that market is going to develop and what volume and certainly what pricing characteristics. So, our approach, as I said, let's cover the downside and upside kind of take care of itself. We always start with pretty healthy load of domestic business. And then, once we’ve kind of feel we got that covered we’re going to kind of treat some dry powder for the export business. So, what that number looks like percentage wise? It's probably going to bounce around. But Mike, why don't you pick up on that remark and talk about maybe some of the new export opportunities, we're looking at and also the ones we've kind of started an execution on?

Yes, like, first of all, Mark, we continue to make our domestic or North American sales real key priority for us and to have contract sales that have kind of a 12 month kind of look ahead is really important. It helps us think about what capital we can deploy and have some certainty and I think you'll see us continue to have an outsized amount of our coal sales that are domestic and I mentioned some of the quality differential things that we're looking at this year. I mean, we really think that there are a number of our customers that are really going to like some of this stuff that we put in front of them because it's important for many of our customers, and especially with the low sulfur products we've got at Elk Creek, internationally, and we continue and we've got internal call sales guys that are very experienced internationally. And while the Atlantic Basin continues a slow recovery, I think it's going continue to be difficult to do large amounts in the Atlantic Basin, which is one of the reasons why we continue to focus on Asia. And, of course, it's a successful test shipment to Korea. And one of the challenges of course, with Asia is just the distance from the Eastern ports. And while we think that growth mode is good in that part of the world, and that's where the growth is going to be, you just have to -- you have to build a presence. But I think that probably the market we're maybe the most optimistic about really is Brazil and South America. We think our coals are a great fit for those -- many of those customers down there, and I think you'll see us really focused on trying to grow the market share that we have down there with basically being set up to participate in virtually all of the tenders in that part of the world now. So, hopefully that that helps a little bit.

No, that was very helpful. Two quick questions...

Mark, before we go to your next question let me just add one sort of quote to that. So, as we talked about, frankly, I think the last quarter's call and I alluded to in my earlier remarks today, we've got a couple of pretty interesting development projects, they're all lowball, that could potentially add a little bit under 1 million tons for us, which is a very meaningful percentage of new production, particularly against the sort of where we are coming out this year, which is somewhere where I think we give a bandwidth of about a somewhere in south of 2 million tons this year. So, if we were able to add, that kind of tonnage for next year, that gives us a pretty good delta in terms of exploring some other export opportunities, which we might want to not lock in necessarily today. And since we could bring those things on somewhere, a 6 to 12 month timeframe depending upon course, which specific project it is, I think that gives us a lot more runway as we sit here in August of ‘20, as to where we think we could perhaps end up by even August ‘21, much less the full year. So that doesn't really, I think help you too much on modeling. But from a general perspective the market does start to look stronger, and we think it's got some real the legs under it. We're probably going to be in the position to take some serious looks at starting up one or more new projects. I guess the Berwind really wouldn't call it that new project. But we're certainly ready to pull the trigger on a couple of things that could certainly change the perspective for ‘21 again we're looking at a good market.

That's very helpful, two quick ones and then I'm going to get off and let someone else ask a question. The first is the reference to 12% of the sales potentially being at risk due to force majeure letters, maybe Jeremy or you Randy can give me some ideas and thoughts about how your model the back half of the year with that kind of out there. I mean, what's the best way for us to approach modeling your shipments in the back half given that kind of footnote that you have in your release?

Well, I'm going to let Jeremy take that, but I mean, that's a perfect example of why sitting here as a producer talking to you all, who’re trying to constructively create models for with as much accuracy as you can, and you're dealing with matters that are pretty much certainly beyond the control of the producer and frankly, in some respects, perhaps beyond the control of even the customer. So Jeremy take a stab at that from a numbers standpoint?

Yes, I mean, that’s one of the reasons why we've elected to still not give any official guidance Mark. So, the reality is we've given you the committed tons as the contracts were signed and certainly we're going to work with our customers given I think both sides value the long-term relationships and, hopefully preserve as much if not all of that as we can, whether it's calendar 2020, into ‘21, we'll just have to say.

And my follow one was, in a previous time you guys were going through, we talked about -- I think Chris was talking about doubling production or be in position to double production over the next, I can't remember it was 18 or 24 months. What is the total incremental capital that would be required to double your production from this point onward, if you had to approximate it?

Well, I think, I certainly let Chris, sort of target the general part of your question, but I think, we're moving numbers around. We would certainly define that with high specificity at such point as we were going to pull the trigger, but I think in our previous calls, we've said that that number, depending upon which number of mines, and of course, which mines we would bring on, that could look somewhere in the $10 million to $15 million capital, new capital rather, expenditure. And that probably, as I said, gets us to certainly the tonnage at Berwind that Chris alluded to, which is kind of a max out of 750,000 plus tons. And then, we've got a couple other smaller properties we could develop. So maybe Chris just roll back the time machine on our last call to just give a couple of high level comments on these production opportunities.

Yes. Thanks, Randy. So those numbers are roughly in line and obviously it depends which projects we would tackle. But on the low vol side, somewhere between 10, 15 gets you all the way there for all of the projects. And then looking at the high vol side, there's a number of expansion mines we could do at Elk Creek that are a little bit lower, and then we have a little bit larger capital expenditure if we choose to do the plant upgrade. But depending on how quickly and how many of those we put in place all within that 24 month period, probably 15 on the low side up to 20 to slightly over 20, if we were to do everything all at once, if that answers your question, generally.

Yes, so essentially, it's -- for me to get to 4 million, only other 20 million of capital -- incremental capital on the high side?

I was just going to say, a lot of the reason the capital spend is a little bit lower than you'd expect is we transition a lot of our mobile equipment fleet from our development mining at Berwind into our thicker Pocahontas floor, so you get a lot of a lot of bang for your capital buck at that expansion project.

Mark. Also, this is Randy, as we look at the market in general, we've had periods we still sort of remember with a certain sense of fun nostalgia, the 2016 market where the benchmark ran from about $60 to $80 in early part of the year to touching $300 toward the end of the year. And I can assure you, if we find ourselves in another uplift like that, perhaps not even as dramatic a proportion, but you would find that we would be in a position to kind of move with pretty real dispatch to ramp-up some more permanent production, which I think would get us to the 4 to 4.5, less incrementally than we would if we were kind of getting a couple singles and doubles as we go along in just kind of sort of a flatter market like we are experiencing today.

Thank you. And our next question comes from the line of Scott Schier with Clarksons.

On the restart of development activities once we start to see market recovery, how quickly and flexible will you be in this restart, will it be more immediate once you see demand starting to return or will there be a little bit of a lag effect for getting workers back and kind of just to make sure the price of recovery holds?

Thanks, Scott. I think again I'm going to sort of maybe make a sort of a brief remark and then turn it back over to Chris. So, I think, from an ability to react, one of our hallmarks is we think we're pretty nimble and opportunistic. We have, of course, discussed with our Board, pretty much all of these development projects in reasonable detail. So, they're very familiar with them. We've got, dry powder, in the sense of our liquidity that we could spend some money pretty quickly, needless to say, because we haven't borrowed much money or our banks are pretty comfortable with where we are. And aside from our own liquidity, we probably have additional resources we could draw upon if necessary to expand the spend. But with that, Chris, why don't you again, kind of reiterate some of the more operational detail as it would relate to some of these production increases?

So I think once we have a little bit of clarity both on market direction and the demand and the needs of our customers, it would be -- we could deploy capital and deploy dollars for the development projects as fast or as slowly as we needed. From the workforce standpoint, we're doing everything we can at this point to protect the workforce in place. And, unfortunately we've had to make the reductions we did at Berwind. However, at least as it stands right now, we believe that we could grow the workforce as needed to staff the mines that are part of the expansion in large part because of the development time on the Berwind slope and some of the other developments running between six months and 12 months.

Okay, great. That's helpful. And then moving on to costs, without the impact of some of the higher costs from Berwind using the third quarter, do you think it's reasonable to assume the cash costs to get lower into the mid 60s? Now that they're really just kind of being driven by Elk Creek, obviously as soon as it's relatively stable, and then there aren't any additional COVID-19 impacts?

Thanks, Scott. I'm going to let the both Mike and Chris comment on that. So Mike, why don't you start on costs?

Yes. Sure. I mean, not having that impact with that development mining does absolutely impact our entire sort of cost structure when you look at the average number. And when we look at the -- when we look at our coal mines at Elk Creek, we continue to be in really good conditions. And I'll let Chris kind of kind of add on top of that. But yes, I mean, I think we feel it's very helpful to have a cost structure like that when you're in this kind of environment, but Chris?

No, I think we would see -- we would expect our cost to return to that range. I would remind everybody on the call that the fourth quarter historically is one of the weaker quarters because of the two holiday periods that are in that quarter already, but excepting that normal shutdown period we expect we can run Elk Creek and with the sort of minimal impact from the Berwind development project that they should be in that range, absent external coronavirus COVID type impacts.

Thank you. I will now turn the conference back over to Executive Chairman, Randy Atkins for closing remarks.

Thank you moderator. Well, again, as always, we appreciate everybody participating in this call for Q2. As I said these are pretty strange times. And like all of us, we're doing our best to cope with kind of sailing through some pretty unchartered waters. We knock on wood, I hope we're being pretty good stewards for our investors. We hope to be able to certainly improve on that as the market conditions we all hope improve. And most importantly, I would say to everybody on the call, please stay safe, stay well. And we'll look forward to speaking with you here in a few months. Thank you very much.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.