What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-03-14 compared with 2023-03-14 · 189 added, 141 removed, 199 unchanged (62% of the section changed)

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Our primary source of revenue is the sale of metallurgical coal.

We are a pure play metallurgical coal company with 62 million and 1,156 million measured and indicated tons of high-quality metallurgical coal reserves and resources, respectively.

Our plan is to continue development of our existing properties and grow annual production over the next few years to approximately 6.5 million clean tons of metallurgical coal, subject to market conditions, permitting and additional capital deployment in the medium-term.

We are a pure-play metallurgical coal company with 59 million reserve tons and 1,119 million measured and indicated resource tons of high-quality metallurgical coal.

Our plan is to continue development of our existing properties and grow annual production over the next few years to approximately seven million clean tons of metallurgical coal, subject to market conditions, permitting and additional capital deployment in the medium-term.

We may make acquisitions of reserves or infrastructure that continue our focus on advantaged geology and lower costs.

During 2022, we sold 2.5 million tons of coal.

Of this, 58% was sold in North American markets and 42% was sold in export markets, excluding Canada, principally to Europe, South America, Asia and Africa.

The Company is responsible for rail and loadout costs for coal sold into export markets.

During 2021, we sold 2.3 million tons of coal.

Of this amount, 51% was sold in North American markets and 49% was sold in export markets, excluding Canada.

We purchase coal from third parties for sale for our own account from time to time;

however, sales of higher-margin Company produced coal made up 98% of total sales in both 2022 and 2021.

The overall outlook of the metallurgical coal business is dependent on a variety of factors such as pricing, regulatory uncertainties and global economic conditions.

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dollar’s strength relative to other currencies and accelerating production cuts.

Coal benchmark prices soared in early 2022, but then fell throughout the rest of the year.

Uncertainty related to COVID-19 continues to linger across the world.

The Company actively monitors for developments and may take further actions altering our business operations that we determine are in the best interests of our employees, customers, suppliers, and stakeholders, or as required by federal, state, or local authorities.

Regarding the military conflict involving Russia and Ukraine, resulting sanctions and future market or supply disruptions in the region, are impossible to predict, but could be significant and may have a severe adverse effect on the region.

Globally, various governments have banned imports from Russia including commodities such as oil, natural gas and coal.

These events have contributed to volatility in the commodity markets.

This volatility, including market expectations of potential changes in coal prices and inflationary pressures on steel products, may have a significant effect on market prices and overall demand for our coal and the cost of supplies and equipment.

We are closely monitoring the potential effects on the market.

We have no meaningful direct financial exposure to Russia and Ukraine;

however, the European Union ban on Russian coal has put upward pressure on international thermal coal prices.

In addition, fear of economic contraction may affect future demand for coking coal.

Values of certain indices for high quality thermal coal exceeded values of coking coal indices for part of 2022.

Available coking coal may be directed into thermal markets when such conditions occur.

In addition, blast furnace steelmaking is more prevalent outside the U.S.

compared to domestic steel production, which creates demand for exports of metallurgical coal.

Although conflicts overseas continue and economic growth remains uncertain in some regions of the world, supply constraints continue to support the global metallurgical coal market overall.

Ongoing bans on the import of Russian coal have affected the availability of supply to certain seaborne markets as well as contributed to volatility in prices.

Metallurgical coal benchmark prices increased significantly in early 2022, but then fell throughout the rest of the year.

Market pricing for 2023 was generally down from 2022 levels but remains favorable versus long-term averages.

We expect metallurgical coal prices to remain volatile in the near term.

In addition, we anticipate that inflation may remain high in the near term for steel prices, freight rates, labor, and materials, which would continue to negatively affect our profitability.

During 2023, we sold 3.5 million tons of coal.

North American markets made up 33% of our 2023 revenues and export markets, excluding Canada, accounted for 67% of our 2023 revenues.

The Company is responsible for rail and loadout costs for coal sold into export markets.

During 2022, we sold 2.5 million tons of coal.

North American markets made up 58% of our 2022 revenues and export markets, excluding Canada, accounted for 42% of our 2022 revenues.

We purchase coal from third parties for sale for our own account from time to time;

however, sales of Company-produced coal made up 95% and 98% of total sales in 2023 and 2022, respectively.

The annual contracting season with North American steel producers generally occurs in late-summer through the fall.

As of December 31, 2022, we had entered into forward sales contracts with certain North American customers for 2023 on a fixed price basis for 1.2 million tons of coal at an average realizable price of $198/ton FOB mine.

level of pricing in 2023 is higher than the average price of $187 per ton FOB mine that was obtained during the previous contracting season for North America.

As of December 31, 2023, we had entered into forward sales contracts with certain North American customers on a fixed price basis for 1.4 million tons of coal at an average realizable price of $166 per ton, excluding freight.

This level of pricing in 2023 is lower than the average price of $198 per ton that was obtained during the previous contracting season for North America.

This is due to a combination of factors, including changes in demand, variations in the types of coal qualities being purchased, fluctuations in steel prices, and other macroeconomic trends.

In addition, we anticipate a shift to more export sales in the Company’s mix of revenues during 2023.

Export sales often contain index-based pricing and, therefore, could lead to greater volatility in pricing and revenues compared to 2022.

The Company shifted to

more export sales in the Company’s mix of revenues during 2023, which will likely continue into 2024.

Export sales often contain index-based pricing and, therefore, greater volatility in pricing and revenues.

In 2023, our capital expenditures were $82.9 million, excluding capitalized interest of $1.1 million.

In 2022, our capital expenditures were $123.0 million, excluding cash paid for the acquisitions of Ramaco Coal and Maben Coal assets which totaled $23.6 million as well as capitalized interest of $1.1 million.

Our capital expenditures in 2021 were $29.5 million, excluding cash paid for the acquisition of the Amonate assets which totaled $30.1 million.

The increase in capital expenditures was due to continued investments in growth projects at our Elk Creek and Berwind mining complexes.

We expect to complete improvements at the Elk Creek preparation plant in the second quarter of 2023, which should result in an increase in annualized processing and shipping capacity from 2 million tons to 3 million tons per year.

Production is also expected to increase at Elk Creek commensurate with the increase in processing capacity.

The decrease in capital expenditures was due to the Company’s progress related to strategic growth projects at our Elk Creek and Berwind mining complexes.

We completed the expansion of processing capacity at the Elk Creek preparation plant in 2023, which now has an annualized processing and shipping capacity of approximately three million tons per year.

On July 10, 2022, we experienced a methane ignition at the Berwind No.

1 mine, which was one of the active mines at our Berwind mining complex.

The other mines resumed production while the Berwind No.

1 mine was idled until a full investigation could be conducted.

There were no personnel in the mine at the time of the incident and no injuries or fatalities occurred.

The overall impact to pre-tax earnings in 2022 was immaterial except for idle mine costs of $9.5 million recognized during the year.

The Company subsequently recognized other income of $8.1 million in 2023 related to insurance proceeds received for the event.

Production from the Berwind No.

1 mine restarted in the first quarter of 2023.

The Company expects the mine to achieve regular levels of production by the third quarter of 2023.

The increase in capacity at the Elk Creek plant and the re-opening of the Berwind No.

1 mine, as described above, as well as the expected start of production at the Maben mine are expected to increase production and earnings starting in the second quarter of 2023.

We expect to be producing on an annualized four million ton per year run rate by the third quarter of 2023.

As a result of the increase in capacity at the Elk Creek plant, the re-opening of the Berwind No.

1 mine described above, and the start of production at the Maben mine during 2023, the Company was producing just under an annualized four million tons per year run rate at the later part of 2023.

The Company expects to produce between 4.0 million and 4.4 million tons in 2024 depending on market conditions.

On June 21, 2023, the Company distributed Class B common stock, a tracking stock, to provide existing holders of the Company’s common stock an opportunity to participate directly in the financial performance of the Company’s CORE assets on a stand-alone basis, separate from the Company’s metallurgical coal operations.

CORE assets were acquired initially by the Company as part of the Company’s acquisition of Ramaco Coal in the second quarter of 2022.

The financial performance of CORE assets consists of the following non-cost-bearing revenue streams based on the Company’s current expectations:

● Royalty fees derived from the royalties associated with the Ramaco Coal and Amonate reserves, which we believe approximates 3% of Company-produced coal sales revenue excluding coal sales revenue from Knox Creek,

● Infrastructure fees based on $5.00 per ton of coal processed at our preparation plants and $2.50 per ton of loaded coal at the Company’s rail load-out facilities, and

● Future income derived, if and when realized, from advanced carbon products and rare earth elements initiatives.

The Company anticipates paying a quarterly cash dividend equal to 20% of the total fees above;

however, any dividend amounts declared and paid are subject to the sole discretion of the Company’s Board of Directors.

Dividends paid on the tracking stock allow the Company to return to Class B common stockholders a portion of the savings from royalties and infrastructure usage fees resulting from the acquisition of Ramaco Coal.

In addition, the tracking stock provides an opportunity for Class B common stockholders to participate directly in the potential revenue growth associated with the development of carbon products and rare earth elements.

The Company paid cash dividends on Class B common stock during the third and fourth quarter of 2023.

Separate financial statements for CORE have not been included as exhibits to this filing since CORE’s financial performance and dividends will be evaluated based on non-cost-bearing revenue streams, at least initially, and other potential forms of passive income rather than reduced by allocated costs and expenses.

The Company continues to assess its potential REEs deposit in Wyoming.

To date, the results of drilling programs indicate elevated levels of REEs, along with significant concentrations of other critical elements such as Yttrium, Gallium, and Germanium.

The exploration target does not represent, and should not be construed to be, a mineral resource or mineral reserve as such terms are used in subpart 1300 of Regulation S-K.

The Company also continues its work to advance new carbon product technologies with the goal of commercializing products that use coal in both an improved economic and environmental manner.

Results of Operations

Years ended December 31,

(In thousands)

(In thousands, except per share amounts)

Costs and expenses

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Total costs and expenses

Operating income (loss)

Operating income

Other income (expense), net

Interest expense, net

Income (loss) before tax

Income tax expense (benefit)

Net income (loss)

Earnings (loss) per common share

Income before tax

Income tax expense

Earnings per common share

Basic - Single class (through 6/20/2023)

Basic - Class A (6/21/2023 - 12/31/2023)

Basic - Class B (6/21/2023 - 12/31/2023)

Diluted - Single class (through 6/20/23)

Diluted - Class A (6/21/2023 - 12/31/2023)

Diluted - Class B (6/21/2023 - 12/31/2023)

Adjusted EBITDA

Net income and Adjusted EBITDA were significantly higher compared to 2021, which was driven by higher sales pricing in 2022.

Net income and Adjusted EBITDA were lower in 2023 compared to 2022, despite the increase in sales volume, due to lower sales pricing and higher cost per ton sold in 2023.

Net income and Adjusted EBITDA for 2023 benefitted from $15.9 million of pre-tax income for proceeds received from insurance claims related to the 2022 Berwind ignition event and 2018 silo failure.

Refer to Non-GAAP Financial Measures below for an explanation of the Company’s calculation of Adjusted EBITDA.

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We include amounts billed by us for transportation to our customers within revenue and transportation costs incurred within cost of sales.

For the year ended December 31, 2022, we had revenue of $565.7 million from the sale of 2.45 million tons of coal including 0.05 million tons of purchased coal.

During 2021, we sold 2.29 million tons of coal including 0.05 million tons of purchased coal for total revenue of $283.4 million.

Coal sales information is summarized as follows:

For the year ended December 31, 2023, we had revenue of $693.5 million from the sale of 3.5 million tons of coal.

During 2022, we sold 2.5 million tons of coal for total revenue of $565.7 million.

Coal sales information is summarized below:

Year ended December 31,

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Coal sales revenue

Company-produced revenue per ton sold (GAAP)

Purchased from Third Parties

Coal sales revenue

Purchased coal revenue per ton sold (GAAP)

Coal sales revenue

Coal sales revenue for 2022 increased nearly 100% from 2021, which was driven by improved fixed pricing for domestic sales and favorable spot/index pricing for export sales in 2022.

Revenue per ton sold increased 86% from $124/ton in 2021 to $231/ton in 2022.

Revenue per ton sold (FOB mine), which excludes transportation revenues, increased 91% from $109/ton in 2021 to $207/ton in 2022.

In addition, we sold 0.2 million more tons of coal in 2022 compared to 2021 despite rail-related constraints occurring in 2022.

Total revenue per ton sold (GAAP)

Cost of Sales:

Company Produced

Cost of sales

Company-produced cost of sales per ton sold (GAAP)

Purchased from Third Parties

Cost of sales

Purchased coal cost of sales per ton sold (GAAP)

Cost of sales

Total cost of sales per ton sold (GAAP)

Refer to Non-GAAP Financial Measures for supplemental calculations of revenue per ton sold (FOB mine) and cash cost per ton sold (FOB mine)

Coal sales revenue for 2023 increased 23% from 2022, which was driven by the 41% increase in tons sold.

The increase in sales volume was due to greater export sales and was aided by the Company’s increased capacity for production achieved during 2023.

Revenue per ton sold decreased 13% from $231 per ton in 2022 to $201 per ton in 2023.

Revenue per ton sold (FOB mine), a non-GAAP measure which excludes transportation revenues and demurrage, decreased 18% from $207 per ton in 2022 to $170 per ton in 2023 including company-produced coal and purchased coal.

The decrease in both revenue per ton sold measures in 2023 was driven by the variability in index-based pricing for export sales.

Refer to Note 2—Summary of Significant Accounting Policies—Concentrations and Note 11—Revenues in Item 8, Part II for additional information regarding sales to customers.

Cost of sales.

Our cost of sales totaled $333.0 million for 2022 as compared to $195.4 million for 2021.

The 70% increase versus the prior year was driven primarily by inflationary pressures on labor and supplies.

Total cost per ton sold increased 59% from $85/ton in 2021 to $136/ton in 2022.

Total cash cost per ton sold (FOB mine) , which excludes transportation costs and idle mine costs related to the Berwind ignition event, increased 54% from $70/ton in 2021 to $108/ton in 2022.

The cost of sales for coal we purchased from third parties was $9.4 million in 2022 compared to $5.4 million in 2021.

Our cost of sales increased 48% from 2022, which was driven by the increase in tons sold discussed above.

Cost of sales per ton sold increased 5% from $136 per ton in 2022 to $143 per ton in 2023.

Cash cost per ton sold (FOB mine), a non-GAAP measure which excludes transportation costs and idle mine costs, increased 3% from $108 per ton in 2022 to $111 per ton in 2023, including company-produced coal and purchased coal.

The increase in both cost per ton sold measures in 2023 was primarily due to inflationary pressures on labor and supplies.

Asset retirement obligation accretion .

ARO accretion was $1.4 million for 2023 and $1.1 million for 2022.

The higher level of accretion in 2022 was driven primarily by AROs assumed as part of the acquisition of Amonate assets in December 2021.

The higher level of accretion in 2023 was driven primarily by changes in estimates of future cash flows.

Depreciation, depletion, and amortization .

Depreciation of our plant and equipment totaled $24.1 million for the year ended December 31, 2022 as compared with $17.9 million for the previous year.

Higher depreciation expense for 2022 was principally due to the increase in deployment of additional mining equipment.

Amortization and depletion of capitalized mine development costs and mineral rights totaled $12.2 million in 2022 as compared to $7.2 million for the previous year.

Higher amortization and depletion expense for 2022 was driven by higher production volumes.

Amortization of right of use assets related to equipment finance leases totaled $4.8 million in 2022 as compared to $1.1 million in the previous year.

The higher amortization for 2022 was due to new equipment finance leases.

Depreciation, depletion, and amortization expense totaled $54.3 million in 2023 compared to $41.2 million in 2022.

The increase in 2023 occurred across all asset classes consistent with the Company’s initiative to grow production.

Selling, general and administrative expenses .

Selling, general and administrative expenses were $40.0 million for the year ended December 31, 2022 compared to $21.6 million for 2021.

This increase reflects the growth of our organization including higher stock compensation expense, incentives, and professional services.

Selling, general and administrative expenses were $48.8 million for 2023 compared to $40.0 million for 2022.

The 22% increase in 2023 was primarily due to greater compensation-related expenses and headcount as well as increased spending for professional services consistent with the Company’s growth efforts.

Other income (expense), net.

Other income, net was $2.6 million in 2022 driven by the gain of $2.1 million recognized on the sale of mineral rights.

For 2021, other income, net was $7.4 million principally due to the recognition of $5.4 million associated with the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) Employee Retention Tax Credit.

Other income, net was $18.3 million in 2023 compared to $2.6 million in 2022.

The activity in 2023 was related mostly to insurance proceeds received in 2023 related to the 2022 Berwind ignition event that occurred in 2022 and the silo failure that occurred in 2018.

The Company received proceeds of $17.0 million during 2023 and had accrued a recovery asset of $1.1 million in the previous period;

thus, a gain of $15.9 million was recognized in 2023.

This activity is not indicative of expected future results.

The activity in 2022 was driven by the gain of $2.1 million recognized on the sale of mineral rights.

Interest expense, net.

Interest expense, net was approximately $8.9 million in 2023 as compared to $6.8 million in 2022.

The increase in net interest expense in 2022 was primarily due to debt incurred to finance acquisitions in 2022 as well as the issuance of Senior Notes in July 2021.

The increase in net interest expense in 2023 was primarily due to increased use of the revolving credit facility during 2023.

Income tax expense.

We recognized income tax expense of $22.4 million and $30.2 million in 2023 and 2022, respectively.

Income tax expense for 2022 includes a $1.5 million benefit for stock-based compensation and a $0.5 million benefit related to state tax rate changes.

Income tax expense for 2021 includes a $2.3 million benefit associated with changes in state income tax regulations for Virginia and West Virginia and a $0.2 million benefit for stock-based compensation.

Excluding these discrete items, our effective tax rate was 22% for 2022 and 16% for 2021.

The primary difference from the statutory rate of 21% is related to permanent differences for state income taxes, non-deductible expenses (including limitations on compensation), and the difference in depletion expense between generally accepted accounting principles in the U.S.(“U.S.

GAAP”) and federal income tax purposes.

The lower amount in 2023 was largely due to the decrease in income before taxes.

Refer to Note 13 to the Consolidated Financial Statements included in Item 8 of Part I in this Annual Report on Form 10-K for an explanation of differences versus the statutory rate of 21%.

Year Ended December 31, 2022 compared to Year Ended December 31, 2021

Please see Part I, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations"

in our 2021 Annual Report on Form 10-K for a discussion of the results of operation for the year ended December 31, 2021 as compared to the year ended December 31, 2020.

Please see Part I, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our 2022 Annual Report on Form 10-K for a discussion of the results of operation for the year ended December 31, 2022 as compared to the year ended December 31, 2021 .

Non-GAAP Financial Measures

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Reconciliation of Net Income to Adjusted EBITDA

Net income (loss)

Depreciation, depletion, and amortization

Interest expense, net

Income tax expense (benefit)

Income tax expense

Stock-based compensation

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Adjusted EBITDA

Non-GAAP revenue per ton.

Non-GAAP revenue per ton (FOB mine) is calculated as coal sales revenue less transportation costs, divided by tons sold.

Non-GAAP revenue per ton sold.

Non-GAAP revenue per ton sold (FOB mine) is calculated as coal sales revenue less transportation revenues and demurrage, divided by tons sold.

We believe revenue per ton (FOB mine) provides useful information to investors as it enables investors to compare revenue per ton we generate against similar measures made by other publicly-traded coal companies and more effectively monitor changes in coal prices from period to period excluding the impact of transportation costs which are beyond our control.

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Adjustments to reconcile to Non-GAAP revenue (FOB mine)

Transportation costs

Transportation

Non-GAAP revenue (FOB mine)

Revenue per ton sold (FOB mine)

Non-GAAP revenue per ton sold (FOB mine)

Refer to coal sales information for revenue per ton sold (GAAP) calculations

Non-GAAP cash cost per ton sold.

Non-GAAP cash cost per ton sold is calculated as cash cost of sales less transportation costs and idle mine costs, divided by tons sold.

Non-GAAP cash cost per ton sold (FOB mine) is calculated as cash cost of sales less transportation costs and idle mine costs, divided by tons sold.

We believe cash cost per ton sold provides useful information to investors as it enables investors to compare our cash cost per ton against similar measures made by other publicly-traded coal companies and more effectively monitor changes in coal cost from period to period excluding the impact of transportation costs which are beyond our control.

The adjustments made to arrive at these measures are significant in understanding and assessing our financial performance.

Cash cost per ton sold is not a measure of financial performance in accordance with U.S.

Cash cost per ton sold (FOB mine) is not a measure of financial performance in accordance with U.S.

GAAP and, therefore, should not be considered as a substitute to cost of sales under U.S.

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Non-GAAP cash cost of sales

Cash cost per ton sold

Non-GAAP cash cost per ton sold (FOB mine)

Refer to coal sales information for cost per ton sold (GAAP) calculations

2024 Sales Commitments

As of December 31, 2022, we had entered into forward sales contracts for approximately 1.5 million tons at an average fixed price of $202/ton as well as roughly 0.7 million additional tons priced against various benchmark indices.

These volumes were mostly metallurgical quality coal.

Sales commitments of another 0.4 million tons were obtained subsequent to December 31, 2022.

We anticipate a shift to more export sales during 2023 compared to 2022, which may lead to greater volatility in revenues due to index-based pricing.

As of December 31, 2023, we had entered into forward sales contracts for approximately 1.4 million tons to North American customers at an average fixed price of $166 per ton, excluding freight, as well as roughly 2.1 million additional tons to export customers priced against various benchmark indices.

The Company expects to satisfy approximately 88% of these commitments in 2024 and the remainder in 2025.

Sales commitments of another 0.4 million tons were obtained subsequent to December 31, 2023 for delivery in 2024.

We expect the shift to more export sales in the Company’s mix of revenue that occurred in 2023 to continue during 2024, which may lead to volatility in revenues due to index-based pricing.

Liquidity and Capital Resources

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Net change in cash and cash equivalents and restricted cash

Cash flows provided by operating activities during 2022 increased $134.5 million versus the prior year primarily due to higher cash earnings.

Changes in working capital were also favorable versus the prior year as accounts payable increased in 2022 and accounts receivable decreased slightly in 2022 despite the large increase in revenues.

These changes were offset partially by the increase in inventories in 2022, which was driven by logistical and rail challenges experienced during 2022.

The Company expects a meaningful decline in inventories in 2023 from sales of 2022 carryover tonnage and the increase in processing capacity at the Elk Creek preparation plant discussed earlier.

Net cash used for investing activities increased $86.1 million versus the prior year primarily due to $93.5 million of increased capital expenditures, or $94.6 million including the effect of capitalized interest, driven by growth projects at the Elk Creek and Berwind mining complexes to increase capacity and accommodate higher production levels.

The strategic acquisitions of Ramaco Coal and Maben Coal assets in 2022 are largely being paid for by the Company over time and, therefore, are included in the discussion of Indebtedness below.

Net cash used for financing activities was $28.5 million in 2022, which was driven by $20.0 million of cash dividend payments made by the Company to its shareholders.

Net cash flows provided by financing activities were $22.4 million for 2021, which was primarily due to proceeds received from the issuance of our Senior Notes having a face value of $34.5 million offset partially by payments made on our revolving credit facilities.

Restricted cash balances at December 31, 2022 and December 31, 2021 were $0.9 million and consisted of funds held in escrow for potential future workers’ compensation claims.

Cash flows provided by operating activities during 2023 decreased $26.8 million versus the prior year driven by lower cash earnings.

Changes in operating assets and liabilities were favorable versus the prior year due to a variety of factors, most notably, variations in income tax payments as the Company received an $11.8 million refund in 2023.

Net cash used for investing activities during 2023 decreased $73.5 million versus the prior year primarily due to lower capital expenditures and acquisition-related activity of $40.1 million and $22.2 million, respectively.

The decrease in capital expenditures was due to the Company’s progress related to strategic growth projects at our Elk Creek and Berwind mining complexes.

The strategic acquisitions Maben Coal and Ramaco Coal, as well as the concurrent sale of mineral rights, took place in 2022 and no such transactions occurred in 2023.

In addition, the Company received $11.2 million of insurance proceeds during 2023 related to property, plant, and equipment claims from the 2022 Berwind ignition event and 2018 silo failure.

Net cash used for financing activities was $54.0 million higher in 2023 versus 2022, which was driven by greater repayment of debts and similar financings including $25.0 million and $9.6 million related to the Ramaco Coal and Maben Coal asset acquisitions, respectively.

In addition, the Company also paid $5.8 million more cash dividends during 2023, which was largely due to $3.6 million of cash dividends paid on Class B common stock that was initially distributed in 2023, as part of the Company’s strategy to increase value for its shareholders.

The Company declared an additional quarterly cash dividend for holders of Class B common stock in February 2024, subsequent to the date of the financial statements, in the amount of $0.242 per share of Class B common stock.

All cash dividends declared to date for Class B common stock were based on 20% of CORE royalty and infrastructure fees for the previous quarter as shown below.

Three months ended December 31,

Three months ended September 30,

Three months ended June 30,

(In thousands)

Amonate Assets

Total Royalties

Infrastructure Fees

Preparation Plants (Processing at $5.00/ton)

Rail Load-outs (Loading at $2.50/ton)

Total Infrastructure Fees (at $7.50/ton)

CORE Royalty and Infrastructure Fees

Total Cash Available for Dividend for Class B Common Stock

20% of Cash Available for Dividend for Class B Common Stock

Restricted cash balances at December 31, 2023 and December 31, 2022 were $0.8 million and $0.9 million, respectively, and consisted of funds held in escrow for potential future workers’ compensation claims.

Restricted cash balances were included in other current assets on the consolidated balance sheets.

Please see Part I, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations"

in our 2021 Annual Report on Form 10-K for a discussion of the Company’s cash flows for the year ended December 31, 2021 as compared to the year ended December 31, 2020.

Please see Part I, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our 2022 Annual Report on Form 10-K for a discussion of the Company’s cash flows for the year ended December 31, 2022 as compared to the year ended December 31, 2021.

At December 31, 2023, we had $91.4 million of outstanding debts, or $90.2 million net of unamortized discounts and issuance costs.

Our indebtedness was comprised of $61.0 million related to the financing of significant acquisitions (of which $40.0 million is related party debt), $34.5 million of Senior Notes ($32.8 million net of unamortized discounts and issuance costs), $25.0 million of outstanding borrowings under the Revolving Credit Facility, and $8.4 million of various equipment loans.

Of these amounts, $75.6 million is expected to be repaid in 2023, including $20.0 million of revolver borrowings that were repaid shortly after the balance sheet date using funds from current operations and $49.6 million of acquisition financing due in 2023 (of which $40.0 million is due to a related party).

Our indebtedness was comprised of $42.5 million of outstanding borrowings under the Revolving Credit Facility, $34.5 million of Senior Notes ($33.3 million net of unamortized discounts and issuance costs), $11.4 million of unpaid financing related to the Maben Coal assets acquisition, and $3.0 of various equipment loans.

Of these amounts, $56.5 million is expected to be repaid in 2024, including $42.5 million of revolver borrowings that were repaid shortly after the balance sheet date using funds from current operations and $11.4 million of acquisition financing that is contractually due in 2024.

The remaining amount of $34.9 million, or $33.7 net of unamortized discounts and issuance costs, is mostly comprised of the Senior Notes due in 2026.

The Company’s outstanding debt increased approximately $83.9 million in 2022 and was due primarily to the financing of the acquisitions of Ramaco Coal and Maben Coal during the year as well as revolver borrowings associated with the management of our normal operating cash position that remained outstanding at the reporting date.

The acquisitions of Ramaco Coal and Maben Coal help reduce royalty expenses associated with the Company’s metallurgical operations in the Appalachian basin and complement our existing low-vol portfolio, both of which help achieve the Company’s objective of remaining among the lowest cost producers of metallurgical coal in the U.S..

The Company’s outstanding debt decreased approximately $37.0 million in 2023 and was due primarily to the repayment of financing associated with the previous acquisitions of Ramaco Coal and Maben Coal in the amount of $40.0 million and $9.6 million, respectively.

The Company’s outstanding borrowings under the Revolving Credit Facility increased $17.5 million compared to 2022.

The acquisition of Ramaco Coal helps to reduce royalty expenses associated with the Company’s metallurgical operations in the Appalachian basin and, along with the acquisition of Maben Coal, complement our existing low-vol portfolio, both of which help achieve the Company’s objective of remaining among the lowest cost producers of metallurgical coal in the U.S.

In addition, the acquisition of Ramaco Coal includes potential concentrations of rare earth elements and is being used to support the Company’s possible expansion into the manufacture and commercialization of advanced carbon products and materials from coal, both of which provide additional growth opportunities in the future.

The Revolving Credit Facility contains usual and customary covenants including limitations on liens, additional indebtedness, investments, restricted payments, asset sales, mergers, affiliate transactions and other customary limitations, as well as financial covenants.

At December 31, 2022, we were in compliance with all debt covenants under the Revolving Credit Facility.

The financing associated with the acquisition of Ramaco Coal, which was provided by a related party, was repaid in full during 2023.

Revolver borrowings are typically used for the management of our normal operating cash position.

Revolver borrowings that were outstanding at December 31, 2023 were repaid in full during January 2024.

In addition to the debts discussed above, the Company finances the payment of premiums associated with various insurance policies.

The Company’s liability at December 31, 2023 was $4.0 million, which must be repaid in 2024.

The Company also has various finance leases for mining equipment, which are generally for terms up to 36 months.

The Company also has various finance leases for mining equipment, which generally include terms from three to five years.

The Company’s total liability for finance leases at December 31, 2023 was $10.4 million, which includes $5.5 million due in 2024 and $4.9 million due thereafter.

Refer to Notes 7 and 8 to the Consolidated Financial Statements included in Item 8 of Part I in this Annual Report on Form 10-K for additional information on indebtedness.

As discussed above, the Company repaid $20.0 million of the $25.0 million of borrowings under the Revolving Credit Facility shortly after the balance sheet date using funds from current operations.

At a later date, on February 15, 2023, the Company entered into a new revolving credit agreement involving KeyBank National Association and multiple other lending parties, as discussed under Liquidity below, that resulted in additional borrowings of $20.0 million.

The Company used $10.0 million of the proceeds from these borrowings to pay down more expensive related-party debt associated with the acquisition of Ramaco Coal.

Revolving loans under the new facility bear interest at either the base rate plus 1.50% or the secured overnight financing rate plus 2.00%.

The base rate equals the highest of the administrative agent’s prime rate, the federal funds effective rate plus 0.5%, or 3%.

Refer to Notes 7 and 8 to the Consolidated Financial Statements included in Item 8 of Part I in this Annual Report on Form 10-K for additional information on indebtedness and leases.

As of December 31, 2023, our available liquidity was $90.6 million, comprised of $42.0 million of cash and cash equivalents and $48.6 million of availability under the Revolving Credit Facility for future borrowings.

Subsequent to the date of the financial statements, on February 15, 2023, the Company entered into the Second Amended and Restated Credit and Security Agreement, which involves multiple lending parties and provides additional borrowing capacity compared to the facility utilized in 2022.

The new facility, which has a maturity date of February 15, 2026, provides an initial aggregate revolving commitment of $125.0 million as well as an accordion feature of $50.0 million subject to certain terms and conditions, including lenders’ consent.

The aggregate revolving commitment had a borrowing base of $66.3 million at the closing date of the new facility after consideration of collateral and reserve requirements.

The remaining availability under the new facility was $41.3 million at the closing date after total outstanding borrowings of $25.0 million.

The terms of the new facility include covenants limiting the ability of the Company to incur additional indebtedness, make investments or loans, incur liens, consummate mergers and similar fundamental changes, make restricted payments, and enter into transactions with affiliates.

The terms of the new facility also contain a financial covenant that requires the Company to maintain a fixed charge coverage ratio of not less than 1.10:1.00 calculated as of the last day of each fiscal quarter starting with the first quarter of 2023.

The new facility also contains certain

compensating balance requirements, which include that the Company maintain an average daily cash balance of $5 million, as determined on a monthly basis, to assure future credit availability.

The new facility provides greater liquidity to the Company and added flexibility to pursue our strategic growth initiatives as well as withstand potential changes in macroeconomic conditions.

We expect to fund our capital and liquidity requirements with cash on hand, borrowings and credit facility discussed above, and projected cash flow from operations.

Total current assets were in excess of total current liabilities, which included $42.5 million of revolver borrowings repaid in January 2024, by $19.7 million.

The Company is party to an arrangement that began in 2023 whereby our cash and cash equivalents are placed at various banks in amounts no greater than the $250,000 FDIC-insured limit to help safeguard against potential losses in the financial sector.

The Revolving Credit facility, which includes multiple lending parties and has a maturity date of February 15, 2026, provides added flexibility to the Company to pursue our strategic growth initiatives and manage our normal operating cash position as well as withstand potential changes in macroeconomic conditions.

The terms of the Revolving Credit facility include covenants limiting the ability of the Company to incur additional indebtedness, make investments or loans, incur liens, consummate mergers and similar fundamental changes, make restricted payments, and enter into transactions with affiliates.

The terms of the facility also require the Company to maintain certain covenants, including fixed charge ratio and compensating balance requirements.

A fixed charge coverage ratio of not less than 1.10:1.00, calculated as of the last day of each fiscal quarter, must be maintained by the Company.

In addition, the Company must maintain an average daily cash balance of $5 million, as determined on a monthly basis, in a dedicated account as well as an additional $1 million in a separate dedicated account to assure future credit availability.

At December 31, 2023, we were in compliance with all debt covenants under the Revolving Credit Facility.

Our primary use of cash includes capital expenditures for mine development, infrastructure, and equipment as well as ongoing operating expenses and repayment of financing associated with previous acquisitions.

As of the date of this Annual Report, we expect to fund our capital and liquidity requirements for the next twelve months and the reasonably foreseeable future with cash on hand, borrowings under the Revolving Credit Facility, and projected cash

flows from operations.

Factors that could adversely impact our future liquidity and ability to carry out our capital expenditure program include the following:

● Timely delivery of our product by rail and other transportation carriers;

● Timely payment of accounts receivable by our customers;

● Late payments of accounts receivable by our customers;

● Cost overruns in our purchases of equipment needed to complete our mine development plans;

● Delays in completion of development of our various mines which would reduce the coal we would have available to sell and our cash flow from operations;

● Delays in completion of development of our various mines, processing plants and refuse disposal facilities, which would reduce the coal we would have available to sell and our cash flow from operations;

● Adverse changes in the metallurgical coal markets that would reduce the expected cash flow from operations.

Capital Requirements

Our primary use of cash includes capital expenditures for mine development, infrastructure, and equipment.

During 2022 we spent $123.0 million, over 75% of which related to ongoing growth projects, including the increase in capacity to accommodate higher production levels at the Elk Creek and Berwind mining complexes.

We also used cash to acquire Ramaco Coal and Maben Coal assets in 2022, which totaled $23.6 million.

The Company also capitalized interest of $1.1 million in 2022.

We anticipate capital expenditures of approximately $60-80 million in 2023, which includes both maintenance capital and growth capital for development projects.

The growth capital will allow the Company to continue to grow production, which encompasses starting new mines, expansion of existing mines, and upgrades to existing preparation, processing, and rail-loading facilities.

As of the date of this Annual Report, management believes that current cash on hand, cash flow from operations and available liquidity under our Revolving Credit Facility will be sufficient to meet its capital expenditure and operating plans.

We expect to fund any new reserve acquisitions from cash on hand, cash from operations and potential future issuances of debt or equity securities.

If future cash flows were to become insufficient to meet our liquidity needs or capital requirements, due to changes in macroeconomic conditions or otherwise, we may reduce our expected level of capital expenditures for new mine production and/or fund a portion of our capital expenditures through the issuance of debt or equity securities, new debt arrangements, or from other sources such as asset sales.

On September 1, 2023, the Company filed a shelf registration statement to sell any combination of Class A common stock, Class B common stock, preferred stock, depositary shares, debt securities, warrants, and rights at an aggregate initial offering price of up to $400.0 million, which was declared effective on September 29, 2023.

However, the Company has no specific plans to raise capital at this time and no securities may be sold until a prospectus supplement describing the method and terms of any future offering is delivered.

In March 2024, Ramaco initiated actions to extend the maturity date and increase the size of its existing Revolver facility.

The Company is targeting a $200 million facility with a $75 million accordion feature and a maturity date of five years from the closing date.

The Company hopes to achieve a successful syndication of the new facility during the second quarter of 2024, which would strengthen our liquidity and provide additional flexibility in support of the Company’s strategic initiatives and operations.

Working Capital

Accounts receivable were $96.9 million at December 31, 2023, which increased $55.7 million versus December 31, 2022 driven by the $67.5 million increase in fourth quarter revenues.

Inventories were $37.2 million at December 31, 2023, which decreased $7.8 million versus December 31, 2022 driven by the logistical and rail challenges we experienced in 2022.

Accounts payable were $51.6 million at December 31, 2023, up from December 31, 2022 due to increased spending.

Capital Requirements

During 2022 we spent $123.0 million for capital additions, over 75% of which related to ongoing growth projects, including the increase in capacity to accommodate higher production levels at the Elk Creek and Berwind mining complexes.

During 2023 the Company spent $82.9 million on capital additions, a significantly lower amount versus 2022, as the Company has made substantial progress in achieving its growth initiatives.

We anticipate capital expenditures of approximately $53-63 million in 2024, which will likely be weighted more toward maintenance capital than growth capital and development projects.

The shift toward maintenance capital is due to the Company’s substantial investments in growth projects in previous periods and its progress to date regarding these initiatives.

Despite this shift, it should be noted that the Company entered into an agreement during February 2024 to purchase preparation plant assets for the Maben Complex at a price of $3 million.

The Company anticipates spending an additional $8 million in capital expenditures related to the plant in 2024.

These assets will be relocated to the Maben Complex and reassembled there for future use with the purpose of reducing the cost of transporting current raw coal production.

These assets will also provide the Company with a preparation facility to handle additional future production from a deep mine complex at Maben should the Company decide in the future to pursue such development.

Contractual Obligations

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Take-or-pay obligations represent those liquidated damage obligations as determined by contract volume minimums for transportation of coal at the representative rates of transportation or a portion thereof.

Additional take or pay commitments totaling $15.1 million were entered into after the balance sheet date and have been excluded from the table above.

Additional take-or-pay commitments for the next annual period were renewed after the balance sheet date and have been excluded from the table above.

These commitments are estimated at approximately $14 million based on last year’s average rate.

Asset retirement obligations have been excluded from the table above.

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Coal Reserves .

Our coal reserves and resources are updated on an annual basis.

Our coal reserves and resources are generally updated on an annual basis.

There are numerous uncertainties inherent in estimating quantities and values of coal reserves and resources, including many factors beyond our control.

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To the extent future revisions are made to the ARO liability, a corresponding adjustment is made to the related asset.

The $6.3 million increase in total ARO liabilities during 2022 was driven mostly by revisions to our estimate of inflation.

The inflation per year assumption of 3.75% used in 2022 was higher than the assumption used in 2021 of 2.3% based on macroeconomic trends.

Our ARO liabilities at December 31, 2023 were nearly flat versus December 31, 2022 as the accretion of the liability during the year and the downward revision to estimates were mostly offsetting.

We lowered our inflation per year assumption from 3.75% used in 2022 to 3% in 2023 based on macroeconomic trends.

If our assumptions differ from actual experience, or if changes in the regulatory environment occur, our actual cash expenditures and costs that we incur could be materially different than currently estimated.

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The occupational illness benefit obligation represents the present value of the actuarially computed liabilities for such benefits over the employees’ applicable years of service.

Estimating the future occupational disease (pneumoconiosis) benefits requires management to make estimates and judgments regarding timing and existence of a liability utilizing third-party actuaries assist in preparing what constitutes adequate liability amounts.

Inherent in the calculation are numerous assumptions and judgments including the ultimate costs, inflation factors, credit adjusted discount rates, timing of settlement awards in the legal and regulatory environments.

These estimates are subject to uncertainty due to a variety of factors, including extended lag times in the reporting and resolution of claims, changes in claim settlement patterns, and future cost trends.

As a result, actual costs could differ significantly from the estimated amounts.

Estimating the future occupational disease (pneumoconiosis) benefits requires management to make estimates and judgments regarding timing and existence of a liability utilizing third-party actuaries to assist in preparing what constitutes adequate liability amounts.

Inherent in the calculation are numerous assumptions and judgments including the ultimate costs, mortality factors, credit-adjusted discount rates, and timing of settlement.

These estimates are subject to uncertainty due to a variety of factors, including limited Ramaco-specific claim volume and future cost trends.

As a result, volatility in future estimates may occur and actual costs could differ significantly from the estimated amounts.

Impairment of Long-lived Assets.

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In addition, a temporary idling of operations at a particular mine or complex may or may not be viewed as a triggering event depending on the remaining life of the mine, the length of time the mine is expected to be idle, and the amount of incremental costs expected to resume operations.

When events or changes in circumstances occur that trigger a recoverability test, the test is performed comparing projected undiscounted cash flows from the use and eventual disposition of an asset or asset group to its carrying amount.

When events or changes in circumstances occur that trigger a recoverability test, the test is performed by comparing projected undiscounted cash flows from the use and eventual disposition of an asset or asset group to its carrying amount.

If the projected undiscounted cash flows are less than the carrying amount, an impairment loss is recorded for the excess of the carrying amount over the estimated fair value of the asset or asset group, if any.

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If actual outcomes differ from our expectations, we may record an additional valuation allowance through income tax expense in the period such determination is made.

The Company had no valuation allowance at December 31, 2023.

Actual income taxes could vary from the estimates and judgments above due to future changes in income tax law, significant changes in the jurisdictions in which we operate, our ability to generate sufficient future taxable income, or unpredicted results from the final determination of each year’s liability by taxing authorities.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis