Ramaco Resources - Q4 2025
February 26, 2026
Transcript
Operator (participant)
Good day, and welcome to the Ramaco Resources Fourth Quarter 2025 Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Jeremy Sussman, Chief Financial Officer. Please go ahead.
Jeremy Sussman (CFO)
Thank you. On behalf of Ramaco Resources, I'd like to welcome all of you to our fourth quarter 2025 earnings conference call. With me this morning is Randy Atkins, our Chairman and CEO, Chris Blanchard, our EVP for Mine Planning and Development, Jason Fannin, our Chief Commercial Officer, and Michael Woloschuk, our EVP of Critical Mineral Operations. Before we start, I'd like to share our normal cautionary statement. Certain items discussed on today's call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent Ramaco's expectations concerning future events. These statements are subject to risks, uncertainties, and other factors, many of which are outside of Ramaco's control, which could cause actual results to differ materially from the results discussed in the forward-looking statements.
Any forward-looking statement speaks only as of the date on which it is made, and except as required by law, Ramaco does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. I'd also like to remind you that you can find a reconciliation of the non-GAAP financial measures that we plan to discuss today in our press release, which can be viewed on our website, www.ramacoresources.com. Lastly, I'd encourage everyone on this call to go onto our website and download today's investor presentation. With that said, let me introduce our Chairman and CEO, Randy Atkins.
Randall Atkins (Chairman and CEO)
Thank you, Jeremy Sussman. First, I wanna thank everybody for being with us this morning. We had another extremely busy quarter on our critical mineral front out West, and indeed, the best quarter in years on our met coal operations. Given the great job our coal ops team did in maintaining cost control in 25, I'm gonna start on that front. This quarter, we achieved the lowest cost we've seen since the fourth quarter of 21. At our Elk Creek complex, cost averaged just $80 a ton. Quarterly costs and margins were the strongest of all our Central App tiers. We're also proud that in this difficult market environment, we have not cut wages or benefits for our mineworkers. We believe Ramaco is a best-in-class employer, and we continue to attract the top mining talent in our industry.
Reflecting our strong workforce, productivity in the fourth quarter was also the strongest we've had last year. Quarterly cash margins of $24 a ton were tied with our first quarter margins as the strongest of 2025. This is despite a 17% decline in high-vol met coal indices during that period. We look to where we're headed in 2026, we are initiating our annual met coal guidance, which is published in our release. We are now poised to grow total sales for the sixth year in a row, while lowering overall cash costs for the third year in a row. We cannot control pricing, of course, we are proud to compare our cost against any non-longwall peer in our space. If benchmark prices hold at current levels or even improve, we expect strong overall earnings growth in 2026 versus 2025.
On met coal sales, we've now committed to roughly 80% of our 2026 production at the midpoint of guidance. Jason will go into the specifics on our sales metrics, but we achieved both strong domestic and export pricing. On overall met coal markets, we've begun to see some clarity on what we hope is gonna be a meaningful rebound this year in index pricing. The potential triggers are both supply constraints in Australia and some stronger Indian demand after a slow buildup. Australian premium low-vol indexes have increased to roughly $240 per ton and by more than $40 a ton from the fourth quarter. Average low-vol and high-vol indices are also up almost 10% today compared to the fourth quarter.
As a result of all this market clarity, we are now either accelerating or initiating some of our low-vol growth projects at our Berwind and Maben complexes and moving them from 2027 into 2026, which we had previously deferred. These projects are expected to add about 500,000 tons of production in 2027 and between 100,000-200,000 tons of additional production in 2026. They'll also add about $20 million in growth CapEx this year and have very strong paybacks. On high-vol markets, we are currently seeing a crowded field of new projects from several of our peers. They're all fiercely competing for Asian export business and have created lots of pricing pressure, with current high-vol index prices lagging well below historic relativities.
We, however, have been able to secure recent high-vol sales into Asia at meaningful premiums because of our low-vol, pardon me, low sulfur character of our coals. It's our expectation, given market conditions, that published U.S. index pricing will eventually adjust. Now I'd like to move to our rare earth and critical mineral business. We're excited about the new proprietary technology breakthrough from our internal team, who has developed something called carbochlorination for purposes of separation and extraction from coal. Recall that we recently brought on board two of the most senior members of Fluor's Critical Mineral Team that had spearheaded the work on our original preliminary economic assessment, or PEA. We have referred in our earnings release to some of the details of this novel form of flow sheet. This carbochlorination process provides a fundamental de-risking of a previous complicated and costly separation and extraction process.
In a number of respects, it reduces the overall capital and operating costs. It improves overall product recoveries and yields. It will ultimately increase our cash flow. It creates a higher value product slate. It uses a proven technique, which has already been deployed in the titanium industry. From a marketing perspective, it reduces the project's reliance on scandium as the main product driver, although we still feel scandium is an important future use for our rare earths. We are now working with our independent consultant, Hatch, to validate these estimates and expect to publish a revised PEA with third-party economics by the middle of the year. Despite being a coal company, we have a good deal of technology focus in our DNA.
We've been exploring, as many of you know, new uses of carbon in coal and indeed rare earths for over a decade, both on our own and with the Department of Energy's National Labs. We currently have an impressive basket of intellectual property, which includes over 70 patents, pending applications, exclusive license agreements, and trademarks. We have now already filed robust patent and trade secret protections around this novel flow sheet process and related technologies. We believe this will ensure that Ramaco and our Brook Mine will be the only unconventional source of rare earths and critical minerals that will be able to use this novel proprietary process. As I said, our internal analysis shows that this flow sheet results in increased cash flow and a reduction of both capital investment and operating costs.
These preliminary figures compare very favorably to the already strong original economics that were in both Fluor's original PEA last July, as well as the upsized development case from my last shareholder letter in September. The new flow sheet also shows markedly increased separation recoveries and yields and a higher overall value product slate. Specifically, it changes the proportions of individual production levels of the overall basket of products. We now anticipate that the largest percentage of production will come from the combination of high-purity gallium, high-purity alumina, as well as high-purity quartz. These all target the semiconductor industries and are very high-value products. As mentioned, we also anticipate that this approach will reduce the overall percentage of scandium production. We continue to think that scandium use will prove to be a very important developing market.
However, the current appetite for high-purity gallium and its related alumina and quartz in the semiconductor industry is both proven and rapidly expanding. We hope the Brook Mine will be an important and meaningful resource for this critical industry. Finally, another important benefit to the new product slate is that the flow sheet route will allow us to forgo the costly solvent extraction process. We now expect to sell our rare earth production as a mixed rare earth carbonate, or what's called MREC, to third-party metals and magnet processors at strong pricing. MREC will now be a smaller percentage of our overall production, and this will also now eliminate the significant CapEx expenditure and the ongoing operating reagent expense associated with the former solvent extraction technique. New flow sheet modifications will modestly increase the timeline for completion of our preliminary feasibility study from Hatch.
On a project that could well exceed $1 billion in capital investment, we would prefer to get it right before we build. We are continuing construction of our pilot plant testing facility in Wyoming, which should be complete this summer. We will begin moving our internal chemical and metallurgic testing operations into that building when it opens. We will defer construction of the internal processing infrastructure at the pilot until we finalize the flow sheet testing from Hatch. As we've said, the internal equipment is being designed and optimized at the Zeton Inc. fabrication operations in Ontario. We now expect full pilot operations to start in 2027. On our downstream critical minerals front, the Trump administration recently announced an initiative to establish international price floors for critical minerals.
We remain confident that the U.S. government is committed to ensuring the development of a robust domestic supply chain and will take further steps in this area. We also continue to pursue procurement, funding, and development opportunities with both governmental and strategic stakeholders. We expect the new direction and information we've just announced today with this new flow sheet approach, will inform a good deal of these discussions as we progress. We were also recently gratified to see the administration's discussion about the creation of a domestic rare earth stockpile program called Project Vault. This program dovetails with our previously announced critical mineral stockpile and terminal at the Brook Mine, which we are pursuing with Goldman Sachs. There should be more information on that in the near future.
We are also now exploring some reorganization options for Ramaco's overall corporate structure as we move further into our dual platform operations. We hope to announce more clarity on that in the coming months. We expect to set up separate corporate entities within a holding company structure to better reflect the different forms of assets and operations that we both now have and are developing for the future. We hope this structure will provide more operational and financial flexibility as we develop two different and separate businesses in the met coal and separately in the rare earth critical mineral space. All of this, of course, will be designed to enhance shareholder value. We will provide more color about that as we roll it out. Lastly, I would note that our balance sheet is now in the strongest position it has been in our history.
This is despite some challenging recent years in the met coal markets. As you know, we raised roughly $1 billion in capital in the H2 of 2025. We also ended the fourth quarter with record liquidity above $520 million, up more than 275% year-over-year. We expect this additional funding will allow us to more rapidly move forward with our transition to a dual platform critical minerals company. I would first like Michael Woloschuk, who leads our critical mineral business, to share some further thoughts and details on our rare earth progress. I'll turn the floor back to our team to discuss finances, coal operations, and markets. Mike?
Michael Woloschuk (EVP of Critical Mineral Operations)
Thank you, Randy. As you highlighted, we have some exciting updates to report on flow sheet development. We completed an expanded suite of testing of Brook Mine composite samples at multiple external metallurgical facilities. These include chemical and mineralogical analysis, ore physical properties, chemical mineral extraction, and purification testing. This expanded test program also included initial testing of the carbochlorination flow sheet. Commercial carbochlorination is a high temperature industrial process using carbon, a carbon source, such as coal and chlorine, to convert metal oxides into volatile metal chlorides and water-soluble chlorides. This is the dominant technology used for nearly all titanium manufacturing today, and from our test work completed to date, including the mineralogical analysis and metallurgical response of the critical minerals, initial testing of carbochlorination indicates the Brook Mine responds favorably to our proprietary process.
In this flow sheet, the valuable volatilized critical minerals from the Brook Mine include gallium, germanium, aluminum, and silica. Initial tests show virtually all of the gallium was volatilized. This is a significant recovery bump from the previous flow sheet. We also achieved high extraction of aluminum chloride, a portion of which can be recovered to produce high purity alumina. Germanium and silica are also volatilized under our intended operating conditions. These volatile vapor phase chlorides will be condensed, separated, and purified from the crude chloride mixture. This flow sheet allows us to produce higher purity gallium, which is sold at a premium. We will also generate additional revenue from the HPA and high purity quartz, both high-value products used for semiconductor, renewable energy, and other advanced applications.
Our carbonaceous clays contain abundant amounts of kaolinite, which is the source for high purity alumina and high purity quartz. Effectively, we are now able to generate revenue from gangue, something no hard rock rare earth project is able to do. Scandium and the suite of the rare earth elements are converted to chlorides in the residue. They remain in the solids after the reaction, and similar to table salt, they will dissolve in water, which is a much better option than leaching in large amounts of caustics and acids. We intend to selectively remove scandium and produce scandium oxide, and simplify the balance of the rare earth portion of the flow sheet to produce mixed rare earth carbonate or the MREC product, as Randy mentioned. Separation of rare earths into oxides is both technically complex and capital intensive.
The production of MREC is a flow sheet simplification that will reduce the capital and operating costs associated with rare earth solvent extraction, separation, and finishing. The two main reagents in carbochlorination are carbon and chlorine, so a coal deposit has all the carbon we need, and it is not a reagent we have to purchase. Most of the chlorine is recycled by decomposition of non-revenue generating mineral chlorides, simplifying the bulk reagent logistics associated with the hydrometallurgical flow sheet option. Our focus going forward is to complete more test work to determine optimum conditions for the carbochlorination reactor and downstream testing on solubilizing the rare earth chloride residues to selectively extract scandium and produce the MREC. We will also conduct separation purification testing on the crude chloride circuits to define the flow sheet necessary to achieve the various gallium purities.
The testing plan for high purity alumina and high purity quartz is analogous to gallium. Ramaco filed provisional patents on the carbochlorination process to recover rare earths and other critical minerals from coal and carbonaceous clay deposits, and we feel this is a significant competitive advantage over other flow sheets being considered for critical mineral-hosted coal deposits. In parallel to the test work program, we have engaged a specialist consultant with experience in alumina carbochlorination to generate a thermodynamic simulation of the carbochlorination circuit and to provide design inputs for the updated preliminary economic analysis. We are engaging Hatch to complete a PEA, and this is anticipated to be completed mid-year, followed by a PFS by year-end. With the flow sheet pivot, we paused the detailed design of the downstream pilot plant modules at Zeton until we generate a new basic engineering package for carbochlorination.
This is anticipated in Q3 2026. We anticipate Zeton's continued involvement since they have experience piloting similar unit operations. We also anticipate conducting on-site testing, both at the existing iCAM Research Center, as well as the new pilot plant building now under construction. We expect the pilot shell to be complete later this summer. Switching to an update on geology. We completed the fall drill program, which included both infill and step out drill holes. We are nearing completion of an initial fence drill program, which will inform drill density necessary to increase geological confidence to support selective mining. We have additional fence programs planned and are increasing the number of drill rigs to complete this program this summer.
We hope to have sufficient geological data from our drill programs to move to reserve status, from inferred up to indicated, rather, by year-end, in line with the completion of the Hatch pre-feasibility study. As mentioned, we are building our internal laboratory to conduct internal assaying and metallurgical testing to mitigate lengthy external lab turnaround times. We have two ICP-MS machines, and we have equipment on-site already that will be used for the carbochlorination reaction. We anticipate hiring technical and analytical staff to ramp up in-house geometallurgical testing. I would now like to turn the call over to our Chief Financial Officer, Jeremy Sussman.
Jeremy Sussman (CFO)
Thank you, Mike. Starting with the balance sheet, I'm pleased to note that we hit record liquidity of $521 million at the end of the year. This is the strongest level of liquidity that we've ever had. Liquidity was up over 275% compared to the same period of 2024, and we ended the quarter with a net debt position of $11 million. I want to touch upon the extraordinary financial transformation to our balance sheet that we achieved in the H2 of 2025. First, in July and August, we raised $65 million in unsecured notes. Second, in August, we raised $200 million in new equity through an underwriting by Morgan Stanley and Goldman Sachs.
Third, in November, working again with Goldman Sachs, Morgan Stanley, and a larger underwriting syndicate, we raised $345 million in sixth-year unsecured convertible notes with a 0% coupon. In December, we increased our revolving credit facility led by KeyBank to $500 million, inclusive of a $150 million accordion feature. In terms of fourth quarter performance, as Randy noted, operational results were again extremely solid, with cash costs per ton sold of $92. This continues to put Ramaco in the first quartile of the U.S. cash cost curve. Q4 also represented the company's strongest quarter in terms of cash costs per ton sold in four years.
Fourth quarter cash margins of $24 per ton equaled those of the first quarter as the strongest of 2025, despite the U.S. high vol metallurgical coal indices having fallen 17% during that time. Our Q4 production fell modestly from Q3 to 892,000 tons, which was the result of the typical Thanksgiving and Christmas miner vacations, as well as our continued focus on value over volume. We'd rather leave production in the ground versus selling it at a loss into the spot market. Thankfully, our strong balance sheet, including our record liquidity position, allows us this flexibility. Should markets continue to improve, 2026 can provide a very meaningful working capital tailwind on the inventory front, especially in the back half of this year. Metallurgical coal price indices declined throughout Q4, they're now up meaningfully from the bottom.
Unfortunately, however, U.S high vol indices fell another 4% in Q4 versus Q3. Despite the continued fall in index pricing, we managed to print Q4 financial results that exceeded Q3 financial results, as cash costs fell $5 per ton sequentially, compared to the realized pricing that fell just $4 per ton sequentially. To get into specifics, Q4 Adjusted EBITDA was $9 million compared to $8 million in Q3. Class A EPS showed a $0.22 loss in Q4 versus a $0.25 loss in Q3. I would note that these fourth quarter results exclude a one-time, non-recurring expense incurred in connection with the structuring of a strategic critical minerals terminal at our Brook Mine. All of our primary peers have either reported Q4 results or pre-announced results.
I'm proud to note that our cash costs of $92 per ton and cash margins of $24 per ton were easily the best in class among our Central App met coal peers in Q4. Looking forward, we're initiating 2026 guidance. Full year 2026 production is now anticipated to come in at 3.7 million-4.1 million tons, an increase at the midpoint versus 3.8 million tons in 2025. Full year 2026 sales are anticipated to come in at 4.1 million-4.5 million tons, an increase versus 3.8 million tons in 2025. Our guidance tables lay out a number of other 2026 expectations, such as CapEx, SG&A, DD&A, interest income, tax rate, and idle costs. While you can find the specifics in our earnings release, I wanna touch on two areas.
First, we anticipate net interest income in 2026 versus net interest expense in 2025 as a result of our large cash balance. Second, we anticipate CapEx of $85 million-$90 million, up from $64 million in 2025. This includes spending on maintenance capital on our metallurgical coal mines of roughly $10-$11 per ton, approximately $20 million of growth capital at the Berwind and Maben complexes, and roughly $20 million for our rare earth elements and critical minerals business. We anticipate first quarter of 2026 shipments to be 800,000-950,000 tons due to normal seasonality with the Great Lakes, which were, of course, closed for most of the first quarter. We expect cash costs towards the high end of the annual range for Q1 on the back of lower ratable shipments.
As I look ahead, I'm incredibly optimistic about 2026. First, we have by far the best balance sheet and liquidity in our history. Second, our cash costs and margins are among the best in Central Appalachia. Third, coal markets appear to be improving, in large part due to pricing having reached unsustainable levels from a cost curve perspective in the second half of 2025. Lastly, we're making meaningful progress on our rare earth elements and critical minerals path towards commercialization. I would now like to turn the call over to Chris Blanchard, our EVP for Mine Planning and Development.
Chris Blanchard (EVP of Mine Planning and Development)
Thanks, Jeremy, and also to everyone who joined us today. It's always preferable to share our operational results when we have been successful in controlling those things like costs and volumes, which are in our control. Across all of Ramaco Resources' operating complexes, I wanna give recognition to all of our miners and support staff who focused on the fundamentals all year to help us drive down costs across the board and to complete the year with our best quarterly performance since 2021. These successes are continuing as we begin 2026. Productivity levels remain high relative to our internal forecasts, particularly at our flagship Elk Creek complex. However, while the mines continue to operate at budgeted levels or above, logistics bottlenecks with both of our railroad partners as a result of the extreme temperatures and snow in late January, did cause delayed shipments in January and so far in February.
These were primarily due to the difficulties in moving and unloading coal to the piers and ports, and the subsequent backlog of loaded trains with insufficient empty cars cycling back to all producers for several weeks. While we built clean inventory due to these events, no production had to be curtailed. However, the impact of the interruption in rail equipment cycling cascaded and continues to be worked through. As Randy mentioned, the high vol markets remain oversupplied and ultra-competitive. Fortunately, our Elk Creek product has some quality advantages over some of the incremental high vol producers, who tend to be of a lower metallurgical rank and have higher sulfur contents. To take further advantage of that, we are transitioning a portion of Elk Creek's production into even lower sulfur areas of our reserve to better meet our customers' needs.
As mentioned earlier, we've also kept our wages and benefit packages for our workforce constant, even in the declining market over the last couple of years, and we are taking opportunities to strengthen our workforce with some of the most talented miners available in Southern West Virginia and Virginia. On the low volatile side of the company, we're seeing meaningful improvement in market dynamics and limited excess supply of high-quality, low volatile coals. Accordingly, our board of directors has approved pulling forward approximately $20 million of planned growth capital from 2027 into 2026 at our Berwind and at our Maben complexes. First, we'll begin to ramp low volatile coal production at Berwind Mine approximately one year ahead of schedule. The timing of the full build-out will be dictated by the completion of two additional air shafts into the coal mine.
Work has been ongoing on these projects since late 2025 and will be completed during this summer. Once the ventilation system is in place, a full section will be added to the mine at an annual expected production rate of 350,000 tons per year. While the Berwind Mine will not be running at this full rate until the third quarter, we will bring on some interim low-vol production during the second quarter at our Laurel Fork Mine, utilizing the same equipment, capital, and workforce. Combined, we project an additional 150,000 approximate clean tons of production during 2026. Secondly, at the Maben Complex, we are now moving forward with the construction of the flood load batch weigh loadout system at our Maben processing plant.
Once operational, this will allow us to ship our premium Maben product to our domestic and international customers without adding approximately $20 per ton of additional logistics trucking costs, which have negatively impacted this operation. We believe that having the fully operational loadout will potentially allow us more opportunities to purchase and ship other high-quality, low-vol coal that would be advantaged by loading at Maben. Work has commenced on the loadout project already, and we are projecting it being operational and loading its first train in the middle of the fourth quarter of 2026. The completion of the loadout will make the development of the underground portion of the Maben property much more advantaged, and we will continue to evaluate the full bowl build-out of the underground mines at Maben at that time, and let the market conditions guide the timing of that investment and expansion.
Finally, to briefly turn to some of the mine and construction updates in Wyoming at the Brook Mine. During the fourth quarter, we expanded the Brook Mine pit to excavate additional thermal coal for an upcoming trial with a regional customer. During this mining, we also segregated several hundred additional tons of rare earth element and critical mineral ore from two different enriched strata zones for continued optimization testing. Construction has also begun on the ore storage facility on the Brook Mine itself, which will function as a staging area for mine products prior to being sent to outside labs and ultimately to our own on-site pilot facility, which Mike mentioned is also starting foundation work and will be under roof later this summer.
Detailed design engineering is also underway for all of the electrical transmission to site and the substation to power our future commercial processing facilities. In closing, with the security and liquidity from all the transformational financial transactions that were consummated during the H2 of 2026, we find ourselves with flexibility to modify our operational portfolio to quickly take advantage of the strengthening low-vol met markets, while also continuing the development of the Brook Mine at full speed as well. To discuss both the coal and the critical minerals markets in detail, I'd like to now turn the call over to our Chief Commercial Officer, Jason Fannin.
Jason Fannin (Chief Commercial Officer)
Thanks, Chris. Good morning, everyone. Today, I'll share our views on the steel and coking coal markets, provide an update on our 2026 met coal sales position, and then discuss the progression of our marketing strategy at Brook following our recent flow sheet breakthrough. We continue to see global steel markets increasingly shaped by policy rather than supply-demand dynamics. China exported a record amount of steel in 2025, even as domestic crude steel production declined. That divergence between export growth and domestic contraction is unlikely to persist. Export licensing measures and rising political pressure suggest that Chinese steel exports could decline meaningfully this year, which would lend considerable support to global steel prices and in turn, provide uplift to coking coal prices.
European steel production appears to be stabilizing, and prices are already reacting to tighter import controls, rising nearly 20% since early Q4 2025. One of the world's largest steelmakers has predicted a year-over-year increase in European steel production of approximately 6 million-8 million tons, reflecting improved mill margins amid a more constructive policy backdrop. North America, trade enforcement continues to support domestic pricing. U.S. steel prices remain among the highest globally, with spot pricing nearing $1,000 per ton for the first time since mid-2023. India remains the primary coking coal demand growth engine. Blast furnace production increased 17% year-over-year in 2025, and blast furnace steelmaking capacity continues to expand aggressively.
Discussions between U.S. and Indian officials regarding increased U.S. met coal imports could lead to a potential removal of the import tax on U.S. met coal into India, which in turn could increase U.S. imports above 2025's 9.5 million tons. Seaborne metallurgical coal markets began 2026 with an already tight Australian premium coking coal supply, further exacerbated by extreme weather events. With Australian premium low-vol pricing sitting just below $240 per ton today, up nearly 20% from Q4. U.S. East Coast indices are approximately $196 per ton for low-vol, $159 for high-vol A, and $149 for high-vol B. This volatility underscores how thin the spark market truly is. Seaborne hard coking coal supply is roughly 180 million tons annually, with less than 5% of that typically available on spot.
That structural thinness magnifies short-term supply disruptions. That said, the development of significant long-wall, high-vol production capacity in the U.S. has intensified competition in both domestic and export markets. As a result, U.S. high vol pricing continues to stubbornly lag historical relativities to Australian PLV. We therefore continue to focus our growth efforts on our low vol portfolio, where the supply-demand balance remains tighter and pricing durability appears stronger. The new rail load out at Maben, once operational, will materially improve logistics economics and provide access to additional customers for this premium Central App low volatile coal. Turning to our 2026 sales position, we have secured commitments for 3.1 million tons. North American customers account for 1.1 million tons at an average fixed price of $142 per ton. In addition, 2 million export tons are committed at index-linked pricing.
Turning to our Brook Mine progress, our carbochlorination-based flow sheet should substantially strengthen and de-risk our product mix and revenue basket. We are now placing greater weight on high purity gallium, high purity alumina, and high purity quartz, with a modestly reduced emphasis on scandium applications, although scandium does remain an important part of the Brook Mine portfolio. High purity gallium metal, if achieved at scale, positions Ramaco directly within the strategic semiconductor material supply chain. In parallel, we now intend to market our magnetic rare earths, which represent a smaller portion of our overall revenue basket, primarily as a mixed rare earth carbonate or MREC. These flow sheet enhancements, combined with our elevated gallium focus, materially expand our addressable market. We are in active dialogue with several companies and a wide variety of potential customers regarding potential offtake and partnership structures.
We continue coordinating engagement with defense primes and governmental stakeholders. The broader policy backdrop, including potential domestic stockpile initiatives and price support mechanisms, reinforces the strategic relevance of the Brook Mine, as well as the strategic critical minerals terminal, which we announced last year. For the terminal, our location with a dry climate and a site adjacent to both a Class 1 railroad mainline and a major interstate highway, puts Ramaco in a unique position to serve the U.S.'s stockpiling needs. To conclude, these are exciting times for the company. On met coal, we enter 2026 with a strong and largely committed sales book, improving low vol pricing dynamics and a disciplined growth strategy focused squarely on higher return segments.
We believe our cost position, product quality, and logistics flexibility leave us well positioned as markets rebalance. On critical minerals, our flow sheet direction represents a meaningful step forward. It should enhance product quality, lower capital intensity, and sharpen our commercial focus toward high purity gallium and strategic MREC partnerships. With that, I'll turn it back to the operator for the Q&A portion of the call. Operator?
Operator (participant)
We will now begin the question-and-answer session. To ask a question, you may press star, then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw the question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Ben Kallo with Baird. Please go ahead.
Ben Kallo (Senior Research Analyst)
Hey, good morning, guys. Thanks for taking my question, and thanks for all the detailed information. A lot to go through. Maybe first, so there, the you had a lot of changes, you know, at Brook Mine, and the process and technology. I'm just, I guess my question is, you know, how did you guys, you know, decide to go this route? I know that you guys have been working at this for a long time, and so, from the outside, it looks a little abrupt, but, I'm sure that, you know, this is a thoughtful process. Just if you could explain that.
Then, the second question, just sort of following up on that, is: as you make these changes, I know you've been in, you know, in discussions with, you know, for offtake agreements and with the government, and does that change the timing of any of that? Thank you. Thank you, guys.
Jason Fannin (Chief Commercial Officer)
Let Mike take the first part of that question.
Michael Woloschuk (EVP of Critical Mineral Operations)
Yeah, sure. We had anticipated that this might be a flow sheet option, some time ago, but hadn't completed the necessary test work to understand the magnitude. You know, granted, there's some delays in completion of a PFS with this flow sheet change, the expected impacts on the economics are significant. You know, we were, I guess, delighted to see that almost all of the gallium went to gallium chloride, which is, you know, the ability to produce a higher purity gallium product comes at a significant premium. You know, we feel like for a long mine life project, such as the Brook Mine, with potentially a 100-year mine life, that this is a material improvement to the economics.
Yeah, the last flow sheet, you know, no issues with it, but again, the step change in improvements justified the change in our view.
Jason Fannin (Chief Commercial Officer)
Yeah, I think, Ben, to the second part of your question, you know, we have kept our discussions in relative real time in terms of different procurement and finance options. Honestly, the pivot to probably a more gallium-centric product slate is an improvement and enhances our discussions candidly, because in a number of respects, first of all, we sort of de-risk the process.
The carbochlorination is, of course, a proven technique that's been used with titanium, so it's not as if this is a novel first-time approach given the fact that we've got a novel feedstock to start with. Secondly, of course, you know, as it's been noted before, you know, we think scandium is gonna be a very important part of the whole kaleidoscope of different types of rare earth usage moving forward. It's mainly gonna be used for light weighting and obviously for some electronic storage, but it's a market that, you know, is a bit more in the future that's evolving. The gallium market for semiconductors is not only apparent today, but it's growing rapidly given sort of the electrification of the entire economy and, of course, the AI business.
We are finding, you know, a high level of receptivity, both with strategics as well as with the government, in terms of a pivot toward more gallium, and perhaps a lesser emphasis on scandium. I hope that kind of generally addresses your question.
Ben Kallo (Senior Research Analyst)
Thank you.
Operator (participant)
Our next question comes from Douglas Orman with Discovery Capital. Please go ahead.
Douglas Orman (Portfolio Manager)
Good morning. Thank you. I'm just making sure I caught that in the initial comments. It sounds like the engineering enhancements would lead to materially increased value relative to the September shareholder letter, which had the $5 billion NPV, and not just the floor PEA, when we think about a launching off point for what the new flow sheet will provide. Are we thinking about that correctly? Thanks.
Randall Atkins (Chairman and CEO)
Mike?
Michael Woloschuk (EVP of Critical Mineral Operations)
Yeah, I think, you know, we're looking at the increased production, obviously, from the new product suite. The potential higher purity and what that translates into in terms of throughput, that's a conversation we're gonna have. The basket price, if you will, is materially increased because of these products. We've been, our internal estimates, we've been, I would say, conservative in terms of what we're looking at for purity, for both high purity alumina and high purity quartz. We've taken, you know, 4N type purities in our projections, but if you look at gallium at 6N, you know, it comes at three times the price of 4N.
Similarly with high purity quartz, you know, if you produce a 5N versus a 4N, it's three times the price. These are the things that we wanna test going forward. The ability to produce those products, understand what the recoveries are, there's a whole lot of upside here, and we already see a significant increase on basket price.
Douglas Orman (Portfolio Manager)
Thanks.
Operator (participant)
Our next question comes from Carlos de Alba from Morgan Stanley. Please go ahead.
Carlos de Alba (Equity Research Analyst)
Yeah, thank you. Good morning, everyone. I wanted to maybe get a clarification on the new flow sheet. I think I just heard that this is not a novel approach, it has been used in titanium. If that is the case, then, would you mind please explain, just for our benefit, what is the fundamental technology breakthrough then that you have achieved with this processing? What is the level of confidence on the new approach? Can you maybe talk about the independent laboratories that have done initial testing on this new flow sheet method?
You can share the names and if there is any documentation that you will share with the market.
Michael Woloschuk (EVP of Critical Mineral Operations)
Sure. I think, you know, it comes back to geology and, you know, because this, the deposit has gallium, germanium, also the mineralogy. You know, we've published that the clays are aluminosilicate clays. This carbochlorination process basically breaks those clays and allows us the ability to produce those products, so high purity quartz, high purity alumina. I think, you know, obviously, the rare earths stay in the residue. You'll find that there's been publications about carbochlorination in rare earths. You know, you'd mentioned the titanium industry. This hasn't been done before in the way that we are viewing the flow sheet. We have some IP around it. We talked about patent pending applications.
Exactly how we're doing it, the operating conditions, the temperatures, the residence times, how we separate these products is proprietary. I would say that it's, you know, we were even surprised by the results. We've been public in our disclosure about the labs that we've been using, Element USA. We've engaged a consultant, Kingston Process Metallurgy, who has carbochlorination experience in the alumina industry, so we're working with them on the simulations. I'm very confident about this. The other benefit is, you know, we've significantly de-risked the bulk reagent requirements for hydromet. You know, we aren't importing large train loads of reagents in this process. The fact that we're a coal deposit, the reagent is right there for us to take.
Chlorine is simply regenerated in this flow sheet, as they do in the titanium industry. Most of the chlorine that we require will be recycled. We'll be, you know, more, I suppose, our operating costs, which were 70% of the processing cost for reagents previously, we'll now be, you know, we'll see electricity consumption go up. That's certainly more favorable, having a, you know, operating costs tied to electricity in a place like Wyoming.
Carlos de Alba (Equity Research Analyst)
Thank you, Mike. May I just follow up on the gallium aspect of the new flowsheet? I understand that, do you have any information that you can share on the economics and the cost advantage that maybe this new approach will have relative, for example, of extracting gallium from red mud refining operations? You know, our understanding from other companies, more on the aluminum supply chain, is that it's not very profitable for them to extract the gallium. Yeah, I wonder if you have any color that you can share with us.
Michael Woloschuk (EVP of Critical Mineral Operations)
Yeah, you nailed it. I think that's been one of the challenges of extracting gallium from other sources, red muds, you know, residues from zinc projects. Gallium is volatile as a chloride, that's why this process works. You know, we, as I mentioned, we saw almost all of the gallium go into the off gas, which will then be condensed as a crude product and separated from the other chlorides. You know, what that translates into is a double-digit increase in gallium recovery, and then compounded by the ability to produce higher purity products. This flowsheet is probably the only one that's gonna be a, you know, primary producer of gallium, that can really compete with the purities required for semiconductor industry. You know, we're excited by that.
Carlos de Alba (Equity Research Analyst)
Thank you.
Operator (participant)
Our next question comes from Brian Lee with Goldman Sachs. Please go ahead.
Brian Lee (Equity Research Analyst)
Hey, guys. Good morning. Thanks for taking the questions. I guess maybe following up on the prior line of questioning. you know, the RE basket, I think it's the price you're outlining on slide 12, went up to $500 and change from your prior view of $300 and change. I know you maybe it's too premature to give us all the nitty gritty specifics, but can you give us a sense of, you know, what's embedded in there? I think previously you had been talking about scandium, roughly 60% of the value of Brook Mine deposit, assuming $3,750 you know, per kg pricing. You're saying there's a modest decline in that.
Can you kind of give us a sense of what's changing, in terms of mix of scandium on the value of the deposit, and then price, if any, change there, and then where kind of gallium sits in the context of the new flowsheet versus the prior views? Thank you.
Michael Woloschuk (EVP of Critical Mineral Operations)
Yeah, I'm glad you noticed that. I, that basket value, if you will, had some assumptions that we would be able to capture 5% of the high purity alumina market at a 4N purity, and that didn't include any high purity quartz in that analysis. We think there's even upside with those numbers, when we start putting high purity quartz in the equation and higher purity products. I think truly that number could get better from what we've published. We, you know, we wanna finish the PEA in order to get confirmation on the numbers, and particularly on the costs, which we've mentioned is gonna be mid-year.
To give you an idea of the basket, we anticipate that gallium, depending on, and we're working with our internal marketing team, could challenge scandium in terms of, you know, equivalent production. We anticipate scandium is gonna be somewhere, perhaps less than 40. We did see a double-digit increase in scandium recovery as well, right? So it still maintains, you know, a significant portion of the revenue. You know, gallium is gonna grow probably, in, you know, into the 30s, and the HPA and HPQ is something that's gonna be a significant contributor to this project as well. And the final point on that, of course, HPA and HPQ don't translate into the TREO grades at all.
You know, that's why we wanna be talking about basket price.
Jeremy Sussman (CFO)
Brian, to your point, you know, that the dollar per ton figure is up more than 50% previous to what we had, you know, previously disclosed. Kind of going back to, I think an earlier question, I mean, the bottom line is our internal projections certainly, you know, show material increases in incremental revenue and free cash flow versus what we've previously disclosed, and obviously now that's what we're working with a third party to validate.
Brian Lee (Equity Research Analyst)
Okay. No, that's helpful color. I appreciate that, guys. Then maybe just a question on timing. You know, I appreciate that, the change in the flowsheet pushes out a little bit of the timing in terms of the pilot and the demonstration facilities. Seems like it's about a year delayed. How should we think about that in the context of, you know, how you're budgeting for timing of Brook Mine, you know, ultimately coming online? I think most people had, including ourselves, sort of a 2028 startup timeframe for that deposit coming online. Is that still valid, or should we be thinking it's, you know, a year behind schedule, like the pilot? Thank you.
Michael Woloschuk (EVP of Critical Mineral Operations)
Yeah, look, I mean, that's obviously, you know, we're projecting a few quarters of delay because of this change. You know, that does push out the overall project schedule similarly. That's kind of what we're anticipating is the overall schedule will push out as well. Yeah.
Brian Lee (Equity Research Analyst)
Thanks, guys. I'll pass it on.
Operator (participant)
Our next question comes from Alex Fuhrman with Lucid Capital Markets. Please go ahead.
Alex Fuhrman (Managing Director of Equity Research)
Hey, guys. Thanks very much for taking my question. Congratulations on all of the progress you made last year. Wanted to ask about, you know, the revised flowsheet and the decision to sell rare earths as a mixed product now. Curious kind of where you see that product going. Heavy rare earth separation capacity today is virtually non-existent in North America. Do you anticipate that there will be some separation capacity in the future by the time that you have your MREC product to sell? Actually, are there maybe applications for mixed rare earth products?
Jason Fannin (Chief Commercial Officer)
Hey, Alex, this is Jason. I'll speak to that. Yeah, I'd say, taking one step back, you know, a lot will depend on what the TREO is on that MREC, and of course, that'll depend somewhat as this flow sheet, you know, further develops, any other separation processes that Mike and his team are working on. Yeah, I mean, as you mentioned in the States, you know, most of the separators are, you know, pilot scale or developing. You know, there are obviously some at, you know, I'd say in allied countries overseas. We're in contact with nearly all these folks now. You know, certainly in the last several weeks, we've seen a big emphasis from the government here in the U.S. on that part of the supply chain.
They recognize, you know, the same as we do and you do, that it's, that it's a, you know, a potential bottleneck today. You know, I think given the timeline that Mike just described and how quickly we see this developing, and as well as the conversations we've had with some of those parties, I think we feel confident that the capacity will be there when we're gonna need it.
Alex Fuhrman (Managing Director of Equity Research)
That's really helpful. I appreciate that. Thank you.
Jason Fannin (Chief Commercial Officer)
Sure.
Operator (participant)
Our next question comes from Matthew Key with Texas Capital. Please go ahead.
Matthew Key (VP of Equity Research)
Good morning, and thanks for taking my questions. Staying on Brook, I was wondering if you wanted to do the rare earth separation down the road, could you eventually pursue that there? Like, or are the economics just not there to kind of justify the incremental process, you know, versus just doing a mixed rare earth carbonate?
Michael Woloschuk (EVP of Critical Mineral Operations)
Sure. I think you're onto that. I mean, with the additional revenue generators for this project, the rare earth side of it becomes less. You know, we're looking at 15% of the overall project revenue basket with rare earths. It doesn't make sense to, you know, pursue a complicated, and it's technically challenging, to separate all of these rare earths into products, and build the solvent extraction plant to do so. We're better off selling the product to someone else, and the change in flow sheet is really what's driving that strategy.
We're trying to simplify the back end, where it's a smaller portion of our overall revenue, reducing the CapEx and potentially the schedule and operating costs associated with it, so.
Matthew Key (VP of Equity Research)
Got it. That's helpful. I guess I'll ask one on the met side, too. You mentioned that the rail loadout could facilitate the eventual development of deep mining at Maben. How soon could a projects come online once you make that go-forward decision? You know, in terms of capital investment of a project like that, could you maybe provide a ballpark, you know, in terms of just getting that across the finish line once you make that go ahead?
Jason Fannin (Chief Commercial Officer)
The deep mines are largely permitted already at the Maben complex. Once we decide to move forward, it's mostly relatively small construction lead time and acquiring equipment. You know, somewhere between six and eight months lead time from deciding to move forward on the underground to actually having first production. It certainly could be a 2027 event if the market supported that. I think the way I would frame it for you is, you know, each underground section of equipment plus the development is, you know, between, you know, the face ups and facilities and equipment, is probably about $12 million-$15 million. You know, in our long-term, medium-term plans, we project Maben as being about 1.5 million tons per year.
To add an extra 1 million tons is probably in, you know, $60 million-$70 million of total CapEx development to get there.
Michael Woloschuk (EVP of Critical Mineral Operations)
That's rolled out over a year.
Jason Fannin (Chief Commercial Officer)
Over a, you know, extended period of the build out. Yeah.
Matthew Key (VP of Equity Research)
Got it. That's super helpful. Thanks for taking my questions. Best of luck.
Jason Fannin (Chief Commercial Officer)
Thank you.
Operator (participant)
Our next question comes from Jeff Grampp with Northland Capital Markets. Please go ahead.
Jeff Grampp (Managing Director and Senior Research Analyst)
Morning, guys. Was curious with this, with the change in the flow sheet and some of the timing, being pushed back a bit, can you touch on your ability to qualify product for customers in the near term here? Is that something that would really ramp up more significantly, once the pilot plant's online?
Michael Woloschuk (EVP of Critical Mineral Operations)
Sure. I think the objective of the pilot plant was exactly that, to produce a sufficient quantity for product testing. You know, we are looking at ways to produce sufficient volumes, particularly for HPA and HPQ at bench scale, because, you know, we may be able to do that. That's something that we're anticipating, that we might be able to do some product testing on two of those before even piloting.
Jeff Grampp (Managing Director and Senior Research Analyst)
Got it. Okay, great. Thank you. For my follow-up on the met coal side, seems like there's potentially some upside to coal sales this year. I know you guys aren't guiding to that yet, but given the positive commentary you guys had on the macro, what might you guys need to see to feel good about pushing some more product out into the market? Thanks.
Michael Woloschuk (EVP of Critical Mineral Operations)
I'll let Jason provide the granular detail, but the reality is we've got some unpriced index tons out there right now. If we see upward market movement, we're gonna be able to ride that wave. Jason, go ahead and pick up.
Jason Fannin (Chief Commercial Officer)
Sure.
Michael Woloschuk (EVP of Critical Mineral Operations)
On the other.
Jason Fannin (Chief Commercial Officer)
Okay. Yeah, you know, on the low ball side, you know, here in the States, obviously we're seeing that already. That's why we're advancing, you know, bringing these tons forward both at Berwind, you know, bringing the load out forward there at Maben. Obviously, it's still lagging, you know, the PLV, the U.S. low ball is by more than the freight differential. I think you'll see that gap close as the year goes forward here. Obviously, high ball is tough, Q4 was tough, you know. One Southern App producer came up to full production on a new project, and one Northern App producer brought a project back online fully in Q4. A lot of competition we saw in Q4. You know, here in the States, we're already seeing supply side changes.
You know, we've got a neighbor there at Elk Creek, that come April, will fully wind down. Some of that's due to the export market they face, some of that's due to, you know, we've all faced, lower domestic pricing this year versus last year. You know, we've seen some smaller neighbors there in Central App as well, that have either wound down or are winding down now, too. I think you'll see the, you know, those relativities on the high ball start to creep back up closer to historical relativities, which will To Randy's comment, you know, obviously the biggest part of our met portfolio is Elk Creek, is high ball. Those, those moves up, you know, have a big impact on us as we go forward here.
Michael Woloschuk (EVP of Critical Mineral Operations)
Jeff, I'd just add, you know, we mentioned in the release the ability to sell, you know, almost 5 million tons. Just to be clear, that's without any incremental CapEx. We've built up a fair amount of inventory on the back of our kind of disciplined approach to sales last year. You know, just to be clear, that's, I wanna make sure that everyone is aware that's not with any incremental CapEx.
Jeff Grampp (Managing Director and Senior Research Analyst)
Got it. That's all really helpful commentary. Thank you guys for your time.
Operator (participant)
Our next question comes from Nick Giles with B. Riley Securities. Please go ahead.
Speaker 14
Hi, team. This is Saundarya on behalf of Nick Giles from B. Riley. I just wanted to check on the, like, with the solvent extraction coming out of the flow sheet, directionally, how CapEx might trend related to that prior $1.1 billion estimate? Even if it's just an order of magnitude, like, how much reduction can we see?
Michael Woloschuk (EVP of Critical Mineral Operations)
Look, I think we wanna get the numbers from the PEA to look at what the CapEx is. It's hard to compare exactly these two flow sheets. For sure, we pull out some CapEx on the back end. We also shrink, you know, some of the purification, because the crude product separation is a small part of the circuit. Carbochlorination is really where the CapEx is gonna be. I would say that, you know, we still wanna do those numbers and crunch those numbers, and Hatch is gonna give us what that looks like at the completion of the PEA.
Speaker 14
Got it. Just one more follow-up. Now that the policy environment around critical minerals is quite favorable, how are you guys thinking about, you know, going behind DPA Title III or DOE loan programs as a part of financing? Has there been any conversation around it?
Jason Fannin (Chief Commercial Officer)
I think as we've said before, we are in conversation with various government groups. I'm not gonna get into the specifics about which programs that we're pursuing, but, you know, again, the fact that we're now somewhat pivoting to a slate of products, which I think the government is acutely interested in, which is the gallium for semiconductors, I think will provide a little bit of wind in our sail in terms of those conversations.
Speaker 14
Thank you, and all the best, guys. I'll turn it back.
Operator (participant)
Our next question comes from Nathan Martin with The Benchmark Company. Please go ahead.
Nathan Martin (Equity Research Analyst)
Thanks, operator. Good morning, guys. I'll be sticking with the coal side now. Gave some 1Q guidance there. Does that incorporate the impacts from the Arctic weather Chris mentioned earlier? How should we think about the cadence of shipments in 2Q through 4Q as the weather warms up and you guys catch up there?
Jason Fannin (Chief Commercial Officer)
Hey, Nick, this is Jason. I'll take that one. The Q1 numbers that Jeremy gave earlier do in fact take into account the slowdown we saw there in shipments in late January, early February. You know, we've seen that improve, you know, greatly here over the last few weeks, but, you know, we're still working through the backlog there on the shipment side. You know, as far as cadence goes, obviously with the lake starting back up, you know, getting out of the winter season, you know, Q2, we're looking at about 1 million tons, Q3, Q4, about 1.2 each.
Nathan Martin (Equity Research Analyst)
Great, Jason. Appreciate that color. Maybe also, while I have you know, talk about the relativities between, you know, between low vol and high vol. Should we expect, I guess, the first quarter coke and coal realization to be pressured, given that wide discount we've seen most of the quarter so far? Maybe any thoughts on what the % versus benchmark could ultimately look like for the year?
Jason Fannin (Chief Commercial Officer)
Yeah, I'd say on the second one, your second question there, that's a tough one. I've been doing this almost 30 years, and I'm always wrong, so I'd hate to even wager a guess. I do think it will improve from where we're at, you know, Q4. I'm seeing, you know, some supply side discipline in this quarter on spot that's out there. I think we'll see that improve. Again, there are, you know, our neighbor I mentioned earlier, that's 2 million tons a year coming offline. We've seen some other smaller ones come offline around us in Appalachia.
I think the higher cost guys that just can't compete are gonna go away, and I think the lower cost guys that are left, you know, will have that discipline, and it'll start to shrink that relativity. I think it'll take some time for the markets to rebalance around, you know, the incremental high vol that's coming out of the U.S. now.
Nathan Martin (Equity Research Analyst)
Okay, got it. That's fair. Maybe just one more, if I could. The domestic tonnage of 1.1 million tons, obviously priced above the public guidance of the peers you guys mentioned. Can we maybe get some color on the quality mix of those tons? You know, a little bit lower, both on an absolute and percentage basis, compared to what you guys have done the last few years. Maybe, a little information around that ship, if there is some.
Jason Fannin (Chief Commercial Officer)
Yeah. One thing I'd point out around the last couple of years is there were some carryover volumes, I'd say 2023 to 2024 to 2025, that was in that tonnage number. On a deal-to-deal basis, you know, I'd say we're less than 10% down on contracted tons from year-to-year in that number, given that carryover in previous years. You know, on the mix, obviously, as Chris and Randy both mentioned, you know, our lower sulfur side, you know, there's a limited amount of, you know, in the domestic, obviously, foundry business. We support both those plants pretty heavily. With that lower overall number, you know, there's a bit more of an impact from those sales.
Jeremy Sussman (CFO)
Yeah, Nate, mix will be similar. It's, you know, about call it 15 plus % low vol and the rest high vol domestically. One of the reasons we're moving forward with the rail load out at Maben is that, you know, that's a very good domestic potential, but it's logistically challenged right now, so we think that'll play nicely into the mix next year.
Nathan Martin (Equity Research Analyst)
Great. Very helpful, guys. Appreciate the time, and best of luck.
Jason Fannin (Chief Commercial Officer)
Thank you.
Operator (participant)
This concludes our question and answer session. I would like to turn the call back over to Randall Atkins, Chairman and CEO, for any closing remarks.
Jason Fannin (Chief Commercial Officer)
Great. Well, I just wanna thank everyone for being on the line today, and we'll look forward to catching up here in the next quarter. Thank you.