Q4 2019 Earnings Call
Ladies and gentlemen, peacetime by your route MCO resources Inc. fourth quarter 2019 earnings conference call.
Well begin moments hobby again, please stand by your conference will begin in two minutes. Thank you.
[music].
Good morning, ladies and gentlemen, and welcome to run the coal resources Inc.
Fourth quarter 2019 earnings conference call.
And this all participants are in listen only mode.
Later, we'll conduct a question and answer session and instructions will follow a that's fine.
If anyone should require assistance during the conference. We spoke Star then zero on your touch drilling telephone.
As a reminder, this conference maybe recorded.
I'll now like to during the call over to your host Jeremy Sussman, Chief Financial Officer.
Thank you.
On behalf of Radmacher resources I'd like to welcome all of you to our fourth quarter 2019 earnings Conference call with me. This morning, as Randy Atkins, Our executive Chairman, Mike Baur staff, our president and CEO, Chris Blanchard, our Chief operating officer.
Before we start I'd like to share our normal cautionary statement certain items discussed on todays call constitute forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
These forward looking statements represent ramcos expectations or beliefs concerning future events.
And it is possible that the results discussed will not be achieved.
These forward looking statements are subject to risks uncertainties and other factors many of which are outside of parameters control, which could cause actual results could differ materially from the results discussed in the forward looking statements any forward looking statements speak only as of the date on what's your dismayed and except.
As required by law Ramco does not undertake any obligation to update or revise any forward looking statements whether as a result of new information future events or otherwise new factors emerge from time to time and then it's not possible parameter cook to protect all such factors when considering these forward looking statements you should.
Keep in mind the risk factors you should keep in mind, the risks factors and other cautionary statements found in the company's filings with the Securities and Exchange Commission included in our annual report and form 10-K.
These risk factors and other factors noted in the company's FCC filings could cause actual results could differ materially from those contained in any forward looking statements.
Lastly, I'd encourage everyone on this call to go onto our website ran MCO resources dotcom download today's investor presentation under the events calendar with that said, let me introduce our executive Chairman Randy Atkins.
Thank you Jeremy.
As always I want to thank everyone for joining us today to discuss our fourth quarter in 2019 year in results.
So it was not to Bury the lead we had a very good year in 2019, Indeed, it was our strongest year since we went public.
We reached over 55 million EBITDA on coal sales of roughly 230 million.
We sold 1.9 million tons were priced at an average of about $109 a ton.
More importantly, we have equally maintained a strong cost discipline at our main operating asset at the accrete complex, which averaged annual mine cost of $67 per ton and indeed over the last few months cost have been at $60 or below.
We manage that performance book ended by physical headwinds in the early part of 2019 created by our 2018 silo failure at Bell Creek.
And ended 2020 in one of the more trying marketing environments. The industry is facing several years.
The sales and marketing landscape as we speak is the best tenuous.
We've seen some bounce back in benchmark pricing over the last few weeks with Australian low vol prices bumping near $160.
Atlantic Seaborne highball prices, however, still hovering in the $130 range.
With most admit domestic business for 2020 already contracted we look at the state of exports steel markets around the world and see some cost for modest medium term optimism, but we think any real market resilience will probably be back ended the second half of 2020.
At this point, we have placed roughly 1.5 million tons for 2020 with about 1.4 million of that sold domestically at around $93 a ton.
About 100000 of export tons price did index.
At the midpoint of our production guidance that would put us about 80% sold for 2020.
Ideally, we would like to place another five to 600000 tons into a strengthening export market and hit full production for the year in two to 2.1 million ton range.
When we look back to the dark days at the state of the markets in September of 2019, we made a decision at that time to dial back selling a larger amount of our quality blends domestically. The idea was that we would have those more valuable blends available to sell into what we hoped would be a strong.
<unk> export market later in 2020.
We will see how this plays out but we feel we are somewhat advantaged to participate in the export markets as we move forward into the next to 10 months of 2020.
Indeed, we are beginning to see more sales activity in Western Europe, and South America, certainly more than we had previously seen over the last several months.
We're also now actively engaging with some Asian markets, we have not approach than years past and are hopeful that we can make some inroads there in 2020.
At the moment, the lower Drybulk rates are actually favoring the Asian markets over some of our traditional European customers.
And speaking of Asia, the situation with the economy.
Corona virus in China, certainly creates an unusual market dynamic in the months ahead.
For human as well as business reasons, we remain optimistic that the virus can be contained over the next few months.
Yes, so we take the view that there may be some fiscal stimulus certainly within China to make up for the last months of normal economic economic activity.
That's stimulus may have a positive impact on overall steel usage and met coal demand.
We were of course hopeful that the virus were run its course quickly.
We're also providing production guidance for 2020.
A bit wider than normal with the range being between a million eight in 2.1 million tons.
All of this production with the exception of roughly 200000 tons at Berwyn will be our high vol tons Adele Creek.
We were also guiding to a mine cost range of 63 to $67 dealt.
But I hope that we will be able to move toward the lower into that range. This cost structure to ALC is certainly borne out by the performance over the last few months.
Finally, we were also maintaining our long term production guidance to four to four and a half million tons.
Over the last few quarters, we've discussed some production in infrastructure add on such as the addition of plant capacity will creep and the new job own high Vol minded Arnox Creek complex.
All of these projects remain on the table and importantly, we will have the financial capability to move forward with me so choose.
However out of Prudence until we see better market clarity, we are planning to keep our powder girl dry and remain posed to move forward on these projects as conditions dictate.
As always our fundamental long term strategy is to operate conservatively in a volatile business and control what we can by maintaining a low debt low a our liability capital structure and a strong balance sheet and uncertain times in these markets.
We've also recently taken some structural steps to improve our liquidity levels with our revolver lender, which Jeremy will speak about and we also look forward to having more flexibility and equipment financing for some of our new projects.
We think that in 2020, you're going to see some meaningful supply contraction in cap.
Met supply we believe it's already contracted in the four to 5 million ton range and a good gas is that this figure might even double by year end.
We're still seeing new bankruptcies.
Many of our peers are still operating either higher cost mines are overleveraged or both.
We were always actively looking at some of these situations to see if we can accelerate our growth curve either from a reserve logistical or production standpoint, and a low cost an opportunistic manner.
In a moment, Mike and Chris will fill in more detail on our overall mine operations and development activities, but right now I'd like to turn the floor, but a jeremy for some updates on markets and our state of our finances.
Thank you Randy in terms of our fourth quarter financial highlights you hit on a number of a key points, but I wanted to dig into the details a bit more fourth quarter 2019, adjusted EBITDA was $9.0 million, which was a 28% increase from the 7.0 million in the same period of last year.
Fourth quarter 2019, adjusted EBITDA would have been $2.7 million higher were it not for some volume carrying over into the first part of 2020.
Full year 29 team adjusted EBITDA was 55.4 million, which was 35% above that for 2018 and of course, new annual record for the company.
Fourth quarter, 2019 revenue was $46 million, which compared to 44 million in the same prior in the same period in the prior year full year 2019 revenue was $230 million, which compared to 228 million in 2018.
Fourth quarter net income was $2 million versus $3 million in the same period of 2018.
Fourth quarter earnings per share was five cents, which compared to the prior year of eight cents last year Lastly, full year 2019 diluted EPS was 61 cents versus 62 cents in 2018.
In 2019, the company recorded income tax expense of $5 million for an effective annual tax rate of 17%. However, actual cash taxes paid in 2019 were less than $3000.
Hey.
Next to nothing Ramco expects to continue to pay minimal taxes for the foreseeable future, though our effective tax rate is likely to remain in the 13% to 18% range.
As of December 30, Onest 2019, I would remind everyone that we have federal net operating loss carry forwards for income tax purposes totaling about $81 million.
Fourth quarter 2019 price per ton and company produced coal was $104, which compared to the prior period in 2018 of $96.
Full year 2000 Tonight 19 price per tonne on company produced coal was $109, which compared to the 2018 price per ton of $92 per tonne.
Fourth quarter 2019 sales accompany produce tons was 420000, which compared to the fourth quarter 2018 of 315000 for the full year sales of company produce tons was just under 1.9 million versus 1.7 in 2018. This smart.
The third consecutive year of production growth for Ramco.
Now in terms of cash costs fourth quarter 2019 cash cost per ton sold a company produce coal was $74, which compared to 68 per ton in the prior year.
For year 2019 cash cost per ton sold on company produced coal was $73 versus 63 in 2018.
I'd like to put some context to these figures I would note that these numbers are inclusive of our development Berwyn mine, which by nature of its development status is much higher cost. The now creek at the present time, excluding borough and our fourth quarter cash cost per ton at El Creek was $66, which comes.
Paired to the same period of 2018 of $64 per tonne for the full year cash costs at El Creek, where $67 compared to $60. In 2018. The majority of the increases year over year of cost. So they'll creek were due to a combination of higher sales related costs.
Such as royalties as well as lower productivity due to what we view as generally one off events specifically in the first half of 2019 productivity was hampered by the lingering effects of the November 2018 style failure.
For much of the second half of 2019 production was lower than originally anticipated based on a weakening metallurgical coal market.
The good news as Randy noted is that with recent signs of life in the market, we've been able to run the mines at closer to capacity in the past couple of months, which have lowered our El Creek costs closer to 2018 levels during that time.
Now moving to capital expenditures fourth quarter, 2019, Capex was $12 million, which consisted of 4 million of maintenance Capex and 7 million of growth Capex total fourth quarter 2018, Capex was $8 million for the full year capital expenditures were.
$46 million, which consisted of $15 million of maintenance capex with over 30 million of growth Capex full year 2018, Capex this $48 million.
Looking ahead to 2020 I point, you to archive guidance tables in the press release, however, I'd like to highlight a few items first in 2020, we expect total production of 1.8 to 2.1 million tons.
Modestly at the midpoint versus 2019 levels, we expect metallurgical coal will account for more than 96% of total volume.
Second we're guiding to 2020 cash cost adult Creek of 63 for $67 per tonne first 67 in 2019.
Third we anticipate total capex of 25 to 30 million in 2020 versus the 46 million 2019 over half of our anticipated 2020, Capex is directed to growth we show the maintenance versus growth splits in our guidance tables.
Next I'd like to highlight a few areas, which we view as key competitive advantages for Ramco.
First as we stripped show on slide 11, our debt to EBITDA metrics are among the best in the industry.
As of December 30, Onest, our net debt stands just $7 million.
We have an industry, leading total debt to EBITDA because that privileged position of 0.2 times based on 2019 adjusted EBITDA.
Given our lack of meaningful interest expense cash taxes and other below the line cash items I'd remind everyone that stress testing, how ramco may hold up in a downturn.
EBITDA minus maintenance Capex should get you almost all of the way there.
Second it's just $15 million Ramcos legacy liabilities are 98% below our direct peer group average and by far among the lowest of our peers.
I'd now like to turn to some of our current and forward views on the macro environment benchmark middleware benchmark Australian metallurgical coal spot prices, while still below where they were this time last year have risen almost 25% from their second half 2019 lows to $159 per ton as it this morning.
Which we show on slide 13, the forward curve remains above $150 per ton through 2022.
Now as we as we slipped show on slide 16, U.S. steel prices are up more than 20% from their second half 2019 lows and importantly, U.S. steel capacity utilization has averaged 82% for the past month for the first time since early 2019, coupled with that.
Domestic coal supply declines that Randy mentioned, we would not be surprised to see some U.S. steel mills looking for more volume in the second half of 2020.
With all that said there still remains a good deal of uncertainty in the global marketplace, especially with the recent spread the Corona virus in China and beyond However, one thing we do know is that as we show on slide 15, the arbitrage of international coal into China is almost $25 per ton.
If history as a guide we look for that gap to shrink once there is a bit more certainty in the market I'd remind investors at its core ramco as low cost producer, but very little debt legacy liabilities. We have designed our operations to be resilient and turbulent times and of course take advantage of strength in good times I would now like.
Turning the call over to our President and CEO, Mike Our SAP Mike.
Thank you Jeremy.
2019 was truly a benchmark type year for ran a co resources.
This occurred despite some of the headwinds previously mentioned.
Our 2019 performance demonstrates their critical resources has the ability to perform even better when we can run our operations without restrictions.
As we sit here today, we can point to a number of game changing the bids that both happen and some that are close to completion in 2020.
In each case, they have both near term and strategic importance to the company.
The first that I will discuss the execution of a co lease, which we have referred to in public filings as the Mcdonald property.
Ameco resources leased the Mcdonald tracks on January Threerd 2020.
The two newly leased tracks or immediately adjacent to our El Creek mining complex and were included in mine plans of existing and planned mines at the time of the company's public offering.
After operating adjacent to these tracks for the past few years and being able to review additional geologic information. The company now projects to mine approximately 10 million Mcdonald turns in conjunction with our most recent long term mine plans.
Our recent FCC complaint reserve study that the Mcdonald tracks added over 21 million proven and probable reserves to our credit reserve base.
These reserves occur in approximately 20.
Different coal seams.
This is a traditional lease and there was no additional consideration paid or liabilities assumed in conjunction with the lease.
The lease property became available in 2019 after the former based lease was terminated.
Prior Lissy, who control the property since 1978 did not produce commercial amounts of coal from the property during their possession of the lease.
In fact, the last commercial money on these tracts was in the 19 sixties.
Configuration and location that attracts lend themselves to be mined and processed far more efficiently from Ramcos L Street property, then from any other access point.
In many cases these reserves are immediately adjacent to existing or planned radical mines, thereby not requiring additional capital to develop the reserves.
I don't want reserves are expected to exhibit and perpetuate the same geologic advantages that we are experiencing from our existing trail Creek minds I personally believe these tracks, especially of compared to other properties on an acreage basis are among the most valuable in Appalachia.
Another of the impactful developments at Elk Creek is the capital deployment on two new plate presses.
Our two existing presses have proven to be valuable as we ultra replacement of waste between or in pound and combined drift use areas.
When the two new additional presses become active in the second quarter, we will have enhanced capabilities that will also support additional production growth at Bell Creek.
Spending this capital alongside acquiring synergistic reserves will help sustain bell creek's advantages for decades to come.
Turning to our Berwyn mine.
It is also noteworthy that we're within days of reaching the slope.
The slope to the low cost Pocahontas, forcing will land in coal that is twice as thick because the development mining that we had been conducting in the Pocahontas threec.
This milestone dramatically lowers the risk profile for this development and ran Mcos now poised to make a large step forward to roughly 500000 tons of global production in 2021.
We've already had a great deal of interest from potential customers in the Pocahontas foreseen quality, we feel confident that the coal will be well received in the marketplace going forward.
Overall, our increasingly large reserve base is a tremendous advantage.
It now stands at around 265 million times, including reserves added fitting into 2019.
We're currently negotiating additional leases, which should push our reserves to near 300 million tones.
Within this reserve base, we have projects that we're working on which could result in new company minds contract mines leases or subleases with third parties as well as packaging properties and permits for potential divestitures.
Our willingness to focus on reserves first is one of the key differentiating strategies Aramco resources.
We are confident that this orientation will result in continued growth non mining income and create long term value for our stakeholders.
While we see others continually focusing on acquiring legacy operations with short reserve lives and assumption of substantial liabilities, we prefer to developed properties, which are focused on geologic advantages.
Even though development can be challenging like or Berlin.
Spending capital on long lived assets that will operate for decades is certainly a key to success.
Another key to success has always been opportunistic.
We recently completed a transaction in early January to acquire multiple permits from various affiliates of Omega Highwall mining.
Consideration for the transactions contained assumption of a limited amount of a aro liability estimated at approximately $800000.
Curing some minor lease defaults in pain advance royalties under two assumed lease instruments.
Total out of pocket consideration was less than 65000.
Most of which is recoupable against future royalty payments.
The permits are in close proximity to Ramcos Knox Creek preparation plant and loadout infrastructure and provide immediate access to two separate mining areas.
One area as a deep mine permit in the job on scene, which contains approximately 2.65 million tones of geologically advantaged mid volatile metallurgical coal.
The second as a metallurgical surface mine in the tiller and Red Ash seems that has stayed ready for production.
It contains approximately 800000 tons of coal that can be mine via the surface and highwall mining methods.
The surface mines expected to have relatively low money ratios translating to a low cost structure likely in the mid sixtys per to.
In annualized run rate would be approximately 150000 tons for the surface mine.
The combination of close proximity to Inox Creek and geology make these two mining permit is likely to become active in the next 24 months. The fully permitted surface mine is one of the areas.
Subject to market conditions.
That could positively impact 2020 production and earnings if activated during 2020, we should be able to produce around 75000 to.
It is likely that the surface mine will be operated utilizing third party contractors, who would be managed by Ramco operations personnel.
While it is exciting to discuss the strategically advantaged course that we are on.
We also need to discuss the current marketplace and how things shaped up for us in the fourth quarter.
So we look at our competition due to our heavy domestic book at fixed pricing Ameco had a substantial advantage in the fourth quarter.
That business allowed the company to sell.
Colin approximately $104 per ton.
While we have a robust book of domestic business for 2020, we will need to continue to sell coal throughout the year to operate at optimum levels.
Fortunately as we make decisions going forward, our low cost structure provides us with more flexibility than others.
From a market penetration standpoint radical shift Thats first test shipment to Asia in the first quarter.
We hope to convert that trial into some amount of term business in the back half of the year.
While we believe traditional Atlantic basin markets remain the primary target. It is also important to be a player in the only growth markets for metallurgical coal in the world.
On another positive note relative to overall efficiency, we experienced a good rail service and 20 million team.
And our primary rail provider has been willing to participate and it gauges and rate discussions that acknowledged the realities of the current market.
Working closely with stakeholders is critical to success in a difficult market.
The realities of the current market continued to discourage investment.
They are very few entities, especially those that operate in central Appalachia that actually have future development options capable doubling production.
In summary.
Ramco continues to differentiate itself with an outsized an advantaged reserve base smart infrastructure deployment LOE costs low liabilities.
In an opportunistic orientation.
We look forward to an acting our plans for 2020 and continue to believe that the advantages that we built will sustain us through the current challenges and provide our shareholders with a successful year.
I would now like to turn things over to Chris Blanchard, who will provide some operating highlights relative to our fourth quarter 2019 and prospects for 2020.
Thanks, Mike.
Before delving into some of the operational details and updates I do want to command and recognize the employees of Ramco for their commitment and performance in 2019 on both the human safety and then and environmental fronts.
The fourth quarter of last year was the company's best quarter of what was by far our best year to date in these two arenas.
At the end of each day, providing safe workplace for miners and being good stewards and the communities in which we operate are the foundation upon which our production and cost profile can be built.
It's truly a team effort and it is reflected throughout the organization at all levels.
Shifting to an operations update.
I'll start with our primary 2020 growth project, which is the Berlin development.
As we speak today, we have essentially reached the end of our mainline development at the Berlin mine in the span Pocahontas numbers three same.
Midway through the fourth quarter of 29 team we extended our main line in the lower same by approximately 1500 feet. So that our inter seen slope could be positioned to emerge in some of the most advantaged Pocahontas number foreseen conditions above.
And with a slightly shorter slope development distance.
Advance mining in domains will be completed in early March with slope mobilization to commence immediately thereafter.
Spec slope excavations to bit begin by the end of the month.
Our slope project will be managed by third party company, who specializes in these projects with support from brand MCO mine personnel.
We anticipate eight months of slope development work and we will of course update this performance at our next quarterly call.
While slope operations are underway the below one mine will continue to produce low volatile coal to fill existing commitments and to fill test orders with new customers.
Freed from the requirements of the mainline development.
And mining to a specific location for the purposes. The slope, we expect to be more selective in mining areas be more able to reduce mining heights and ultimately be more productive than we have been historically.
Which naturally will reduce our operating cost from this mine and ultimately of the company as a whole.
We expect fourth quarter 2020 production from the Pocahontas known before seem at Berlin.
Productivity from the same are expected to double based solely on the geology of the upper seem compared to the lower.
Coal heights will be greatly increase.
Last out of seem dilution will result in lower equipment costs, lower transportation costs and lower processing costs.
Once our first section of the established in the upper saying, we will quick quickly work to complete the ventilation worked activate our second Super section and mobilize the equipment to the same.
Well conditions in the current Pocahontas number three same have been challenging we are excited and optimistic about the near and long term for this line as we move to the much more prolific pocahontas number for same.
Shifting to the L. Creek property as Randy briefly mentioned when external restrictions are removed. This complex can truly demonstrate its low cost production potential.
2019 was a year of missed opportunities in this regard.
Due to high inventory levels in the first half of the year, resulting from the late 2018 silo failure, we throttled our minds production back to match the limited capabilities of our preparation plant, while the silos will being bolstered.
While the market was in a much more favorable place early last year, we were not able to participate nearly as much as we would have liked.
In the third and fourth quarters, just as we were able to ramp operations and fully utilized plant the market weekend with deferred shipments and lower steel production, reducing excess volume opportunities.
Consequently, our operating cash costs were higher than we would have liked.
So I would note the cash costs have been running below the low end of 2020 guidance over the past two months as spot prices of vendor.
A gun to recover and steel production has shown signs of improvement.
The acquisition of Mcdonald lease was timely.
While the lease was not require for mine plans one of our operating sections was in close proximity to this lease and we will cross the property lines before the end of this month.
Throughout the next 10 to 15 years of operations. It out we expect to have a minimum of one unit operating in this lease and could have as many as three.
This reserve with its superior geology wall, Iowa free to maintain a competitive an advantage cost profile regionally for years.
As we completed 2019 and enter 2020, our preparation plant is running well.
With some assistance from the two planned mine vacation periods in the fourth quarter. We have worked through a large portion of our inventory and have been able to upgrade our minds at closer to full capacity.
The results have been as expected.
As I previously mentioned cost of move significantly lowered out Creek.
There were always be there will always be some variability to these numbers would but we believe that cash cost are sustainable in the low to mid $60.
As a new preventative maintenance program is rolled out and fully implemented and as we will start the replacement in rebuilds of some of our initial underground equipment. This year. The repair costs that are highest unit cost mine will also be reduced.
As Mike mentioned, we will complete the Oak Creek plants plate press expansion this year.
We should commission the second press buildings housing our third and fourth suppressed by late April 2020, and following a normal troubleshooting and testing period have them fully operational and in service by the middle of May.
In the near term these presses will give us more operational flexibility to determine our course and bond material ratios longer term. This expansion will allow us to handle the full preparation plant expansion, we envision completion.
With some apparent green shoots in the metallurgical coal markets, we remain cautiously optimistic about 2020, particularly the second half of the year.
From an operational standpoint, we plan to remain nimble to be able to adjust to the changing conditions whichever direction the market chooses.
This now concludes managements prepared remarks at this time I'd like to open the line up for any questions you might have on our fourth quarter 2019 results or outlook operator.
Ladies and gentlemen, you do you have a question at this time. Please press Star then the number one on your touched on telephone.
Your question has been answered or which to some of your stuff from the Q. Please press the pound key.
We have your first question comes from the line of Mark 11.
From the benchmark Company Alliance Allison.
Great. Thanks, very much first question has to do with cash costs. I think you referenced at El Creek, you around $60. A last couple of months I was just curious.
What's behind that and how sustainable you think that is.
Mark This is Chris.
Primarily what's behind that as we have been running all are underground mines.
They are fully full schedule of slated production days.
Not to.
Not being restricted by inventory levels that are mindful, we've had to limit production.
Nor production.
Across the same fixed cost, bringing those costs down.
Got it and then.
Just as you kind of think about the the pricing environment.
I realize most of what you guys are selling is under domestic fixed price contracts, but but in terms of what you're actually seeing in the export market can you talk about what kind of discounts you're seeing too.
The U.S. index prices out in the market how competitive it is new Asian prices of ramp, but I'm just curious what kind of discounting if there is in the.
Among amongst the sort of versus the U.S.U.S. indices.
I think mark there clearly customers overseas that are asking for discount their bearing.
By quality grade, obviously different discounts requested for different types of calls.
We have basically been looking at the export markets, but we havent execute anything recently simply because we're not prepared to but really what we have as we think higher quality blends into a market it really hasnt from jet.
Our view on the market in general is obviously, we're trying to get the market's trying to get a sort of back on its needs a little bit.
And we expect that's going to take probably several months, but we think that probably by the second half of the year from a combination of strengthening steel utilization as well as hopefully.
Perhaps some stimulus coming out of Asia from the.
China needs that we look forward to sort about second half, which will have perhaps.
Pricing being closer to to the benchmarks as opposed to discounts.
That makes that makes a lot.
I'm sorry.
Mark I might just add I mean, yes, indeed, I think we've seen double digit type discount asks you can tell by our contracting position, we've we've been a bit resistant to that.
I think it is a wait and see kind of thing because volumes do need to move we have more options and lots of the competition, but.
Hopefully things will improve so.
And then it makes.
Makes sense.
Guide and that makes a lot of so let me ask you a little bit about the quarterly cadence of.
Volume this year in terms of how to think about modeling the quarters, maybe Jeremy can can provide some color in terms of how to think about waiting each quarter as the year as the year progresses.
Sure Mark So what I would say is is 2019 is probably not a good guide because if you recall, we had the silo issue in the first half of the year.
And we.
In the second half of the year.
Things picked up nicely in Q3, and then of course the market fell so we've been up in Q4 that affected our production.
I'd say the only real variability at this point that we see is we do have a bit more Lee lakes business than normal, which you would act as you would expect would mean, our Q1 volume will be that lighter than.
Then the rest of the year, so I'd say right now other than sodium normal minor vacations typical seasonality that's really the only.
Thats really the only thing that we could.
We would highlight as you know as as modeling point for you and the only thing I would add is.
We do.
We do like some of the the the permits that we've acquired Nox Creek and I think you could see us do something in the second half there that would add another 75000 or so tons to our production just because of mid vol quality is.
Is something that if we if we had we could move that it could numbers today. So.
That makes us and then you reference I think rail rates.
That your primary rail providers bin bin.
Been accommodative to some degree can you maybe talk about just directionally like what type of rate rates, you were getting and 19, and then what's kind of a reasonable expectation for 20.
Yes rates have been rapes have been volatile.
With what's been a pleasant surprise is that we do have yes, we do have.
We've been having good discussions I mean, I think you can see.
Thank you could see rate fluctuations as you look at export business that could be 10 to $15 deferred in a in a bad market versus a good market and that's that's a lot of variability, but when you look at the at the in pricing.
Participating together in that and trying to continue to build market is important both to both of the railroads and to us and.
So thats kind of range that you're seeing depending on what type of business is so for example, new business might have a better pricing than than some of the existing business, but that's that's kind of the range of stuff that we've seen Jeremy.
On average what would you kind of built into your model like if you're trying to arrive at a netback price for 20, what do you think is a reasonable.
25 is at 30.
Yes, it's been so.
In all of our discussions have been different for example on Asia on Europe on on on Brazil up pretty hard to pick one I think if we look at year and look at a recovery.
I think you pick something in the cause them in the mid to high Twentys as a target and we go from we sort of go from there. So okay. That's very very helpful. And then last question for Jeremy and then I'll get out let other people ask questions.
Minimum liquidity like what's the what's the the bottom sort of liquidity number you are willing you guys are willing to runway.
I mean, mark I don't know if we have necessarily.
A number in mind, what I will say is we're very comfortable with our we're very comfortable with our liquidity.
Yes, especially with a heavier mix of domestic as opposed to export business.
And our customers with check within our customers excuse me then our than our peer group, which generally as more favorable payment terms.
I would just say we feel confident in where we are and I don't want to necessarily put a number on it but hopefully.
You can kind of see where we are with with our guidance, where we are with with capex and kind of back into a level that.
But that that you. Thanks, I'll leave it at that and Mark All I had I think I alluded to it and in in.
In my remarks that we've we've recently tweaked our revolver with our main lender, which is going to provide us a great deal more liquidity.
Through our revolver mechanism by changing around some some definitions and obviously some seasoning from our relationship with them. So.
To Echo Jeremy we're in a good spot.
Great Super Thanks, guys.
Thanks Mark.
Next question comes from the line of thing Scott from Clarkson lines now open.
Hi, Thanks, guys Marcus almost every conceivable question, but.
Maybe you could comment on your comment on your committed tonnage in pricing you went from a 1.3 million tons at 91 to 1.4 million tons at 93 that implies a pretty good uptick in pricing is am I reading too much into that was it was a pretty nice add to the contract to book this quarter.
Uh huh.
It was I think we would have probably rather rather added some more tons, maybe even the some of the higher higher numbers, but it it exhibits kind of what Randy alluded to it also higher quality coals that are available and US that's worked out to thats worked out well to change the book.
That being said.
We'll continually focused on additional volumes and we allowed ourselves to.
Two.
Remain opportunistic there.
Yes that being said, we still have older move and a lot of our competitors still have a big chunk of coal move if you look at the looked at the numbers. So.
But I like our cost structure compared with the other guys.
Yes, and I think Dan to Echo again, what we've said before we got a pretty good situation because we've got a strong balance sheet, we got a lot of liquidity.
We're not going to try and chase deals down.
When we think that there is a reasonable prospect to market will improve.
So we're we're obviously going to do everything we can to move tons as we feel appropriate, but we're not going to just chase sense for the sake moving.
Hi, good I Wouldnt expect to too.
Then when I think about your cost guidance you know it continues to be just for L. Creek as Berlin ramps up to full capacity I guess by the end of year will you transition that guidance into being something that's more of a the whole portfolio.
As we as we get the mine into full production in out of development mode. We will certainly transition the guidance that way as well.
And can you give us any feel on out on what that magnitude or would that branch might look like or is it too early to tell.
Dan I don't think youre going to get enough production from the from the Pocahontas number four steam where it's going to really meaningfully affect 2020, I think as Randy alluded to in his comments it's really.
When you know really more.
Transition from 2020 into 2021, so that's really when you'll you'll see that the bigger change and and guidance and will be reflected more in our 2021 numbers than anything we really could do in 2020.
From an overall just perspective, we will begin to see clean ton per foot, which is the largest impactful thing and the focus or looking more like areal creep coal mines. The conditions in the mine will probably be a little bit more adverse from a methane standpoint in phase one of.
One of the other cores impactful things is we do truck this coal.
On the road and so if you sort of look at the beef costs and add a little bit too.
Ed.
Ed maybe $15 personally let it float $15 a defense on recoveries of course, but it's still going to be a very competitive call on from a cost perspective yeah.
Sort of a fob.
Underground mine.
Produced price.
Good match or possibly even be outbreak before the logistics.
You know.
The extra logistics that we have it at Berlin compared to upgrade.
So we are really optimistic about it and looking forward to it and frankly wish we would have more meaningful volume this year as opposed to 21, but we're well on what.
Alright, thanks for the color guys appreciate it.
Thanks.
Next question comes from the line of David Gagliano from BMO capital markets. Your line is dolphin.
Hi, Thanks for taking my questions I'll try and keep the tight.
Is it just want to ask a question on slide seven obviously, we've got.
The 2020 numbers and the 20 to 23 numbers.
And I've asked this question previously, but if you can just give us a senses to how you build that gap between 2020 and 2023.
What should we be assuming for 2021 and 2022 volumes. Thanks.
So David I think without going in through mine by mine and year by year, which is going to be more granular detail than we can roll here out on a call basically by 23, just to kind of get comfortable with it with the in numbers here, we've got about two and a half million tons from from.
Elk, we've got about 750000 tons out of Erwin.
Our job own mine, which we anticipate putting in somewhere in that time.
Period would be about half million tons, we've got our Ram mine up in Pennsylvania about another half million tons and Mike has it.
As referenced that we've now brought on.
Potential, but probably add tons around near Knox for about another 300000 tons and frankly.
Between now and 23, which is for years. The way. We operate is we tend to hit a lot of singles and doubles, we don't try to hit as many grand slams on homers and so therefore count on probably incrementally being able to add around those numbers several hundred thousand more tons that.
We will pick up given the normal sort of development approach, we take two to building over our portfolio.
Okay. That's helpful. Thank you I think for 2021 for example, and you say you gave me the to an ethylene and create by 2023.
We know in 2021, Berlin's going to be 500, I think that wasn't over here on the call 500000 roughly.
We think for 2021, so 500000 from Berlin.
It was 2 million tons reasonable L. Creek and is or is there is it reasonable expect.
Some production out of the Ram mine in 2021 as well.
I think probably missing from your equation is we're waiting on a permit from Ram So I'm not going to count that write downs and we've got in hand, but the job and mine. It's certainly something that we've already done work on.
In 19 pretty significant work, we practically right to the face.
So I think we would probably look at probably at least quarter million tons of more coming out of jail bound by 21, I think the numbers and they'll probably be closer to two numbers of Berliner probably be a little bit north of 500 may be six.
As we ramp up to about 750, as a sort of normalized well production and berwyn.
So that gets you probably about two way give or take for 21 part.
All right perfect. Thank you very much very helpful. Thanks.
There are no further questions I'll turn the call back over to the management.
All right will once again, we appreciate everybody being on the call. This at this time and I look forward to were catching up in another few months and hopefully we'll have a much stronger market, we'll be talking about that.
Take care and thanks very much.
Ladies and gentlemen. This concludes today's conference. Thank you for your participation and have a wonderful day you may now disconnect.
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