Q1 2020 Earnings Call
[music].
Somewhat participants are in listen only mode.
<unk>. After you speaks presentation. The good question answer session.
A question during this session. Please press star one on your telephone.
Be advised of today's conference is being recorded require any further assistance. Please press star zero.
Now I'd like to have the conference over to your speaker today Jeremy.
Financial Officer.
If you. Please go ahead sir.
Thank you.
On behalf of Randgold resources I'd like to welcome all of you to our first quarter 2020 earnings Conference call.
With me this morning, as Randy Atkins, our executive Chairman.
Like doubts that 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 Randy.
Patients 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 ran supposed control, which could cause actual results to differ materially from the results discussed in the forward looking statements.
Any forward looking statements speak only as of the date on which it is made and except as required by law remember does not undertake any obligation to update or revise any forward looking statements, whether as result of new information future events or otherwise.
Lastly, I encourage everyone on this call to go onto our website.
Our resources Dot com and download today's investor presentation under the events calendar.
With that said, let me introduce our executive Chairman Randy options.
Thank you Jeremy.
As always I want to thank everyone for joining us today to discuss our first quarter results.
There was an old Chinese curse that goes eurs she'll be a life lived in interesting times.
We are all indeed operating under such a curse momentum afraid.
Before I turn to our results, let me comment on essentially what does the thesis of our three legs of the stool strategy.
For at least the next six months and probably longer.
First.
We will do all that we can to keep our people say.
This is a rapidly changing landscape that we all attempt to do all that we can the balance health safety and continuing operations.
Secondly.
We already have the cleanest balance sheet and the business on the liability side as well some of the lowest cost structure.
We're going to work to preserve this balance sheet, but at the same time create as much liquidity as we can prudently to enable us to take what we're calling me shield in sort of approach to the market.
We know were amoco and indeed, the whole industry will be tested over the next few months. So we have taken steps to add new liquidity.
This is being done through a combination of operational and payroll crops, new changes in our revolver and some recent borrowings all of which we will speak about later.
He thinks that the market may deteriorate for at least the next one or two quarters by how much and for how long are certainly unclear.
That market deterioration no doubt create that involves some for us, but plenty for others, who are disadvantaged by higher mining cost debt.
We feel that added liquidity plus the fact that we've already sold forward about 80% or 1.55 million tons of our 2020 production.
Sure provide ramco shield to weather the storm.
Which brings me to the third like at the store the so called shored behind the shield.
Notwithstanding taking defensive measures. We've also been active doing future planning on our development front.
Due to the market upheaval, we stopped construction on the Bourbons development slope in March but.
But once that project is we initiated.
Roughly five to six months away from reaching the low vol, Pocahontas land before saying and initiating long term low cost production and that reserve.
We've also added two new low vol, and mid vol mining projects, which we refer to as the triad and the big creep mines.
For a relatively little Capex, we could bring on these two new mines within four months from breaking ground.
When we combine them with berwyn.
Then within six months of a clear market landscape and of course, a green light from our board.
We could add roughly 1.2 million tons of additional low in mid vol coal at peak production.
This would normalize for about 900000 tons of annual production on ongoing basis.
And compares to our current low vol run rate of about 200000 times.
We estimate these new mindful produce with an average mine cost in the low $60.
For ton and require additional development capex of approximately $11 million.
This could poised as to potentially increase our production level to as much as 3 million tons next year.
That is about 66% above 2020 production levels.
And would break down as roughly 2.1 million tons of Highball for Mill Creek, and 900000 tons of low vol from Berwyn and lock screen.
Again, we will not greenlight these projects until we see better market clarity, but we obviously like the relatively low capex low mine cost and short lead time to add some meaningful production.
Now, let me turn into some of the financial results for Q1, which Jeremy is going to fill in more detail in a moment.
At the start of 2020, we face the pricing environment, which of course was markedly lower than last year.
In 2019, we have locked in our domestic met coal sales at an average price for $113 a ton.
Thus far in 2020, our average prices almost 20% lower at about 90 350 for Todd.
In Q1, we realize 8.4 million in EBITDA on coal sales of roughly 42 million or 416000 tons price than average of about $93 into.
This worked out to diluted earnings of five cents a share.
We were pleased that we maintained strong cost discipline with our main operating L Street complex, averaging mine costs of about $61, a ton and capex falling by 25% from the prior quarter to just under 9 billion.
Uh huh.
Turning to the sales and marketing landscape can still what's difficult with best with no meaningful polls right now and the export markets.
The Atlantic seaborne prices have dropped this quarter by over $20 a ton.
And U.S. low vol benchmark is now hovering at about 107.
Although there has been some recent bounce from China is probably prudent to expect more domestic weakness before we see truly encouraging news.
As we lap step last quarter, we do not expect any real market resilience and tell the second half of 2020, and perhaps not beginning until actually in Q4.
As such we're not really providing any further production guidance for the balance of the year.
But even in these challenging times, we continue to maintain our long term production guidance of four to four and a half million tons.
For those of you like to keep track of our production ramp I.
I would encourage you to take a look at slides in our earnings deck, which outlines these projects.
Our fundamental long term strategy remains the same which is to maintain a low debt low a aro liability capital structure.
Because none of us knows what the next several months will unfold like we have recently, taking some structural steps to strengthen the shield by improving liquidity.
In Q1, we added about 11 million of functional new capacity to our revolver.
In Q2, we drew down at new $5 million equipment line, and all sort of received a paycheck protection loan of over 8 million, which enabled us to bring back the almost 200 miles we had furloughed in the early weeks of April.
We idled further development construction at Berwyn and also took some strong DNA cats.
All of these steps combined plus some additional ones we're prepared to initiate in Q2 in Q3, good at as much as 40 million in New York quantity. If there is further market deterioration.
We continue to assume that we're going to see supply reduction in cap in 2020 at some point.
Today, we have seen some contraction, but expect more.
Our sense is that the ability to defy gravity exist in this business for only so long and particularly now with current benchmarks equating to about mid Seventys per tonne at the mine with average mine cost in the mid eighties.
We suspect many of our peers are still operating these higher costs mines.
Potentially overlevered both.
And as the old saying goes the markets can often say irrational longer than you can stay liquid.
So time will tell.
Now with that overview I would like to turn it over to Jeremy to give a more granular discussion on financings.
Thank you Randy.
In terms of first quarter 2020 financial highlights.
Adjusted EBITDA was $8.4 million, which was the 6% decrease from the fourth quarter 2019.
Frankly, given the fact that our sales price declined to $93 per ton in first quarter compared to $104 per ton in the fourth quarter, the 6% quarter over quarter decline was better than we had anticipated.
Chris This operating team had an excellent quarter with cash costs that helped create the $61 per tonne, which compared to $66 per ton in the fourth quarter and $53 per ton in a same period of 2019.
Overall company costs, which include our urban development I came in at $67 per ton in the first quarter, which was also down both year on year in quarter over quarter.
Rounding out first quarter financial metrics revenue was $42 million down 8% from the fourth quarter and down 27% from the same carry into 2019.
First quarter earnings per share five cents was in line with fourth quarter 2019 results and compared to 17 cents a year ago.
As we noted in our press release covert 19th has brought on an unprecedented amount of uncertainty as such but most of our peers. We're suspending our forward sales guidance for 2020.
The exception of given our current annual sales commitments of 1.5 million tons at $93 per ton.
However, I do want the touched upon three areas on the financial front, where I see differentiation between Ramco and many of our peers.
First everyone. On this call is aware that ran myself. It's been in growth mode has a relatively new met coal producer, we're extremely proud and the fact that production has grown over 235% from 2017 to 2019 and that we have added roughly 400, good paying jobs over the past few.
Two years.
As Randy noted when there is more clarity in the market Ramco will continue to add new low cost production as we ramp to a for four to four and a half million ton production plateau.
However, I want to be very clear, but given current market uncertainty we have stopped virtually all of our growth capex.
As you'll see in our press release.
<unk> point 7 billion of the 8.9 million first quarter Capex was related to growth.
Mostly at Parliament.
While there will be some growth capex payments that bleed into the second quarter as well as modest capital lot losses expected at Fairwind to fulfill in existing contract, we expect first quarter to be by far our our high watermark for 2020 Capex.
Second as Randy noted because we live in a world of uncertainty right now we have plans in place, which could add roughly $40 million and liquidity from the beginning of this year through the third quarter to ensure that we can ride out a protracted downturn, if indeed that turns out to be necessary.
While keeping our workers as always while keeping our workers say as always our number one ball protecting our balance sheet and liquidity as a very close second right now.
Date, the additional liquidity has come in the form of adding new debt modifying our existing revolver, and making DNA operational and Capex cuts.
Typically we have taken on $13 million, the new debt consisting of $4.75 million of new equipment that an $8.4 million from the payment protection program, which we used to recall all previously for furloughed workers.
We have also modified our existing revolver to among other things increased availability.
Specifically, we amended our $30 million revolver in February and extended the maturity date to year end 2023.
We also worked with our partner key back to modify the definitions of both inventory and receivables under the borrowing base.
On average this should increase our true borrowing base availability by $11 million compared to our previous internal estimates over the course of the year lastly, the balance of existing and future increases and liquidity come from DNA operational and Capex cuts.
Third I want to remind everyone of the key competitive advantages for Ramco.
As we show on Slide 12, our net debt to EBITDA metrics are the best in the industry.
I would remind everyone that at March 30, Onest, our net debt stood at just $10 million.
We have an industry, leading net debt to EBITDA physician 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 when stress testing, how remic of may hold up in a protracted downturn EBITDA minus maintenance Capex said get you almost all of the way there.
Furthermore, it just $15 million Ramcos legacy liabilities are 98% below our direct peer group average and by far the lowest among that group.
Remind investors that at its core Renato is a low cost opportunistic producer with very little net debt or legacy liabilities.
Designed our operations to be resilient and turbulent times and of course take advantage of strengthened the markets in good times.
With that I would now like to turn the call over to our president and CEO liked hours that Mike.
Thank you Jeremy.
Operationally all Rand gold mines ran well in Q1.
Cost containment on less than ideal sales volume was exceptional at our rail Creek mine complex.
As we sit today the impacts from coal bed 19 continue to take their toll on what wasn't already weak marketplace.
At all levels Ramco is going to greatly [noise].
[noise] [noise] at all levels ran MCO is going to great links to address health and safety concerns relative to the cobot 19 in our minds and really.
<unk> infrastructure.
Chris Blanchard will provide additional details relative.
To the on the ground efforts that we have implemented.
I would like to focus the first part of my remarks on the current coal markets and how ramcos position to respond.
During much of Q1 coking coal market fundamentals performed relatively well as the effects of cobot 19, we are yet to be felt in the Atlantic basin.
During this period China's early virus related Lockdowns created labor in logistics issues, causing the spike in Pacific Basin demand.
China's first quarter coking coal imports were up nearly 30% year over year.
Seaborne pricing followed suit rising to levels in mid March nearly 20% above end of your 2019 prices only to give back most of these gains as Q1 came to a close.
With the major impacts of the virus seemingly behind them and encouraged by stimulus spending China was able to post year over year crude steel and pig iron production gains of 1.2% and 2.4% respectively for the first quarter, while global steel crude and pig iron production.
Excluding China fell, 4.1% and 5.4% respectively. During the same period year over year.
Different regions and countries around the world are now in various stages of dealing with the continued impacts of the cobot 19 pandemic.
These impacts have materialized in the downstream auto manufacturing and construction sectors and have affected consumer confidence and spending habits.
The pandemics effect on the coking coal market has been swift and severe.
With major integrated steel producers around the world might only blast furnaces and curtailing production.
Which hasn't turned reduced coking coal demand and pricing.
Many you asked and Canadian back coal producers responded by temporarily curbing production.
Although a significant supply response from Australia is yet to occur.
Until we see major steel producing countries implement government backed economic stimulus measures. It is likely that demand destruction will continue to outweigh the overall seaborne supply response.
We expect indices to remain subdued due to lack of demand and uncertainty around the timing of an eventual recovery.
During the first quarter and through April we were able to maintain our originally planned shipment schedules with all existing customers.
Our domestic sales position for 2020 is made ramco less vulnerable to the steep decline in demand and pricing currently seen in seaborne market and is providing stability and shipment schedules and revenues.
As we navigate the remainder of the second quarter, we continue to work closely with our customers to maintain planned shipments and minimize potential delays and offtake.
We're also working closely with our key transportation partners.
They are experiencing the downturn as well and are reacting by implementing cost cutting measures.
While likely necessary, we need to ensure that their cuts the not hurt our ability to ship our committed volumes.
Radical is prepared to produce and ship all of its committed tonnage. However, we can confirm or see force majeure notices from the majority of our customers.
Lack of market clarity continues to reduce certainty around forward shipping schedules. The remaining 2020 committed at times. This lack of clarity has cost us to cancel providing forward looking volume guidance.
First quarter advanced that already weak global economy did not present material sales opportunities for us to add international turn business to our sale portfolio to bridge the gap between committed and uncommitted production.
In many cases existing export term business was simply rolled over with current suppliers at prices that were likely much lower year over year in order for those incumbent suppliers to maintain market share for of any new entrance from game business.
Ramco is now focused on international spot tenders to bridge the gap between our highly efficient production sources, and our coal sales as well as making trial shipments to new customers.
With that said, our uncommitted volumes position is smaller than most of our competitors and allows us to be more discriminating with regard to current opportunities and pricing levels. While at the same time seen ready for a potential market rebound.
We also remain focused on placing unsold volumes into those markets, which provide the best return for our high quality products and make the most long term strategic sense.
Despite the current market downturn during the first quarter and April Ramco has renewed relationships with a couple of customers in Europe. We also shipped our first tons to Asia and we have made significant inroads in South America, having our products now approved for use by all major integrated mills.
We're extremely pleased to welcome Jason fan and our new Chief marketing officer to our team.
Jason brings a wealth of experience to our senior management levels and alongside Kevin peers, you will provide a two pronged approach to growing our international book of business as well as maintaining and growing our domestic relationships.
All of the Ramco mines that were previously idle due to cold that 19 related furloughed are currently operating.
The decision to restart the mines was substantially impacted by the receipt of 8.44 million in PPP loan funds from the SBK through our primary bank Keybanc.
Ramcos profile and the obvious uncertainty in the Colin discrete prompted us to apply for the long.
We also believe DSP, a properly granted alone and that we met all appropriate guidance issues.
By the U.S. Treasury.
We have received substantial independent advice on the subject and are confident we have met all Ella.
All eligibility criteria to both receive and retain the law.
Market uncertainty as cost distillate to delay is substantial amount of capital projects.
With capital markets for coal at a virtual standstill, the best way to retain liquidity as to control spending and match production with sales while also controlling our stockpiles.
From a guidance standpoint on capital it is difficult, but this time to provide clarity.
Well, we can do is provide feedback that we remain firmly committed to driving the slope come to poke honest received for the focus forcing that our Bourbon mine.
We reached the slowed bottom in our Berlin mine in the first quarter and began working on the slow.
We subsequently idled this work until we could get comfortable with our sales prospects and build a comfortable level of liquidity.
Most of the competing growth projects that we're seeing domestically or high quality coal projects. We believed that our berwyn mine expansion is the only substantial high quality low volatile project currently being pursued.
Other competing developments from a quality standpoint will likely be forced to compete primarily in international markets versus seeking what should be more attractive markets domestically.
Management of switching that's near term development focus to being able to react quickly with new production to a recovery market.
We're advancing the ball several quick to implement high impact projects that require relatively modest amounts of capital.
I will let Chris Blanchard discuss some of these opportunities in more detail and their potential impact.
I might add that these types of projects are result of our relentless focus on geology, and our willingness to both take projects from scratch to production as well as opportunistically and decisively acquire assets that are synergistic with existing assets.
While the challenges of uncertainty that we face reportable, we believe that they are manageable.
We've continued to regularly ploy maintenance capex in our coal mines, while many competitors.
We've avoided tying up large amounts of cash by not stranding large amounts of inventory docs fears railcars.
While the furlough at Elk Creek in April allowed us to prepare for an address cobot 19 related issues. It also allowed us to better align our stockpiles with our coal sales.
We continue to focus our available liquidity and cash generation on stability and continuity versus elevated debt debt retirements and maintenance of non value creating liabilities.
The realities of the current market continued to discourage investment and it looks more and more likely there will be failures and potentially more bankruptcies. Among our competitors. Many have already implemented production cutbacks reduce shifts and reduced wages and benefits.
Cost structure elevated and it's clear that many are selling cold below their cost to generate cash from elevated inventory levels.
All of this being done with the backdrop of capital markets for coal basically being close.
And our experienced bankruptcies in this type of setting look more like chapter seven liquidations that chapter 11 reorganizations.
In summary, granite co is not immune to the difficulties that it faces as we migrate through what is looking like a difficult recovery.
We're doing everything possible imprudent to weather the storm that we're in.
We remain confident that the way our company is structured.
Proved to be one of the winning strategies that ultimately benefits from this downturn.
I would now like to turn things over to Chris Blanchard.
Thank you Mike.
I think Randy said it best at the beginning we are living through interesting times as Ramco continues to navigate through all the uncertainty our primary focus is on protecting the health and safety over our entire workforce with a particular emphasis on safeguarding our central coal miners, who continue to work can produce.
Coal that will fuel and supply the eventual economic recovery.
In this time of Cobiz 19, Ramco continues to be proactive and quickly responses to adapt to the virus to best protect our employees.
Early in March we began workplace modifications to adapt to the Corona bars, we staggered shift times to eliminate or minimize congregations of our troops of miners, we implemented extensive cleaning and sanitation bulk common areas and mining equipment.
And we enhanced our sick and I'll leave policies to provide more flexibility for our employees and their families.
As guidelines changed over the past two months.
Policies have evolved to incorporate all the best practices at the federal state and local levels.
We have adopted best practices in the industry and solicited suggestions from our front line employees.
As we recall miners from the April Furloughed period, we have also implemented temperature checks for all employees visitors and vendors on appreciate basis every day.
We've issued reasonable face masks to all of our employees for their use both at home and at work.
We're continuing to monitor events and gardens, and we'll continue to take off steps necessary to protect our miners.
Looking back at operational results of the first quarter of 20, Twond, We had one of our best quarters to date in most operational metrics.
Our feet per shifted our underground mines was at its highest level for combined company since the Berlin development now mine began production in 2017.
Both elk regained borough and exceeded budget with productivity levels.
As a result or cost per tone on a produce space. This drop well below our previous year guidance levels and showed improvement quarter over quarter and year over year.
From a geologic standpoint, all of our Oak Creek operations remain in favorable operating conditions and production has resumed at Q1 levels as we return from the fertilizer.
Turning to the for where we now have recalled Oliver monitors and each of our operating mines and sections is back at full operation at both Bell Creek in Berlin.
The furloughed period was contained within April with most underground operations that have creek titled for the majority of month.
Because we continue to operate DLT Creek preparation plant throughout the furlough to continue to service our existing orders.
We were able to reduce our raw coal inventories to more manageable levels.
On stockpiles were reduced by over 160000 tons.
However.
Dukson curtailment also caused slightly more than 100000 tons of.
Clean coal not to be produced during the month.
As mentioned previously we will continue to engage with our customers and plan to adjust and modifier operations as needed during the downturn, while remaining poised to take advantage of any recovery in the market for any additional customer needs.
And our Berlin development mine during the first quarter mining progressed underground and reach the slope bottom area for the future access to the thicker Pocahontas number for same above.
We did mobilize on slip construction in the quarter and we started initial excavation.
Unfortunately, as we began to see the impacts to steal coke and coal markets from a global Cove at 19 response, we suspended construction and excavation on the slope in April.
Our construction subcontractor has the most was from site, but as left some their equipment in place to allow for a rapid restart once we see some stabilization in the industry.
As we sit today, we have slightly less than 90 vertical feet separating our slope excavation and the Pocahontas number for same.
Once we restart construction we project.
Six months or west of excavation to reach the upper coal horizon.
Geology in the Pocahontas number for reserve, if or when will allow this mine to produce at mine cash costs, which will rival for be superior to even our ELP Creek have all mines.
Nevertheless, our focus on liquidity in the near term during these extraordinary times makes this delay absolutely the correct decision.
Turning to some of our other near term possibilities that Randy and Mike mentioned.
We have continued to permit mines and our controlled reserves and have made some strategic acquisition with shovel ready projects.
That would just typically fit into our portfolio existing properties.
At our Berlin complex, we have received apartment for an incremental Pocahontas number four seem reserves, which has out crop access and we'll be able to utilize the surface infrastructure of our existing Berwyn mine.
This model have similar favorable geology to the future berland.
Mine Pocahontas for reserve.
And is located in a small area between two legacy people where margins.
Unfortunately, this reserve is not contiguous with our own Berlin number for reserves, but we'll give us an opportunity to mine low cost little bolt ons either at the bridge for our main Berwyn mind for as an increase to our overall production profile.
Okay.
Our second potential quickly project is a permit is mid vol. Coal mine located in near proximity to our Knox Creek plant.
This permit and reserve Sublease was acquired in first quarter of 2020.
This mine will be in the job and seam of coal, which are low volatile customers have purchased from us in previous years has a part of our former purchase coal program.
This mine will require electric power another mine infrastructure to be installed prior to production site access had already been constructed by previous owners.
This mine also has outcrop out crop access so development time is minimal.
But both of these mines can be brought online in less than six months after greenlighting projects.
Obviously this time neither of these growth projects has been started and our current focus remains on employee safety inventory management and liquidity until we see some stability and visibility in the coal markets.
While back before clarity, both near and medium terms frustrating Amoco does continue to position its operations and asset to survive. This downturn with its low cost profile and be ready to expand our portfolio as the market recovers.
This now concludes managements prepared remarks at this time I'd like to open the lineup for any questions you might have on her first quarter 2020 results or outlook.
Operator.
Thank you.
And as a reminder to ask a question when you press Star one of your telephone. It's withdraw your question. Please press the pound key please standby we've compiled accuen a roster.
And our first question comes from the line to Mark Levin, the with the benchmark Company. Your line is now open.
Great. Thanks, very much and congratulations on the good cash cost quarter.
They get to that point.
Should we think of cash cost at El Creek in the first quarter is kind of being that.
The high watermark were the best of the year, but how how should cash cost trend there I guess.
In a demand looks like it's pretty too.
They are pretty uncertain.
But I'm just trying to get an idea I know you aren't giving guidance, but just kind of how to think about Q2, I guess from midway through that that onward. If this demand environment persist for cash cost of Belpre. Thanks.
Mark This is Chris I think.
The cash costs that we sought out freak in the first quarter are indicative of what that complex can run.
When we are running at full capacity so.
It's all volume related if we're able to run.
Near full utilization, we should see those those rates and if the volume.
Tapers off than we'd expect those to rise slightly.
In markets that Jeremy I I'd remind everyone. If you look at Fort first quarter production, we annualize to about 2.1 million tons for our company wide, which.
Was at the high end of the previous guidance that we had given so he knows as Chris noted clearly minds ran well both volume and cost wise in Q1.
No. That's that's very helpful. And then you you'd referenced maybe getting from two to 3 million tons, but obviously the longer term goal is 4 million tons. I think you are annualizing around 2 million in the first quarter.
Maybe provide some update in terms of like the capital to get from two to 3 million or the incremental capital at from this point onward to get from let's say that 2 million ton annualized rate of 3 billion tons and then what's the total amount of capital. If we take for you to double your production by your estimates to get to two to 4 million.
Tons.
So let me take the first part of your question Mark This is Randy so.
As I said in the remarks and.
Basically.
We're pleased that we can basically take it from two to three for the $11 million I mentioned.
Got it got.
Just a little bit more to spend obviously on the Berlin slope as I said were about five five or six months away from that.
And then the capital requirements for these two other mines that Chris mentioned, the Tri Ed and the Big Creek are pretty modest.
So $11 million all in.
Gets us another roughly million tons, which we think it's pretty attractive proposition, but we're not ready to pull that trigger yet.
But to do.
Development project, Intel, obviously, we're going to get a sense of where the markets.
And then ready to get to the incremental 4 million said it doubled your production you on touched it sounded to get from two to three is 11, then to get from three to four.
Chris you want to pick up on that yet.
The last million tons of service.
And Chris before you go after those that are on the call.
We added a new slot like eight which kind of goes through.
Local economy, calling these three phases of growth so Randy talked about phase, one and Mark basically what's you're asking is sort of.
The last incremental million tons, which is phase two and three jobs on in our Elk Creek expansion, which Chris you want to give a little color on that right. So we've talked about both the job done at our Knox Creek operation and the expanding the Oak Creek preparation plant and each would provide about half a million tons of annual production.
Once we started those projects.
Just.
Rough numbers.
Somewhere between.
10, and 12 million for the up Creek plant expansion and.
Little bit more than that primarily related to mining equipment for the job done expansion when we greenlight those projects.
Got it fit very helpful. And then my last question just gets back to liquidity for second inherent be some of the comments that you you'd you'd made.
So where is liquidity I guess, you guys gave us a cash availability at the end of bump.
At the end of the first quarter, we or is it maybe today and then ultimately I think you referenced a 40 something number could can you just provide a little bit of clarity as to.
How you could tell how you would get there when you when you might get there.
Yes, great question Mark so.
As of March 30, Onest, we at $15.3 million cash on hand, and another sort of 13 and a half million of of availability under our under our revolver subsequent to that in April we've taken on about little over $13 million of new debt. So four point.
Seven five of that is equipment debt.
With Keybanc and about $8.4 million that is from the payment protection program. So that that subsequent to the number that we of course habits as of March 31st.
We referenced a 40 million dollar number in our prepared remarks so.
Clearly 13 of that is coming from the additional debt that we're taking on.
I also referenced and Randy as well about $10 million to $11 million of additional availability under the revolver. So what we did in February was we amended and extended our revolver, which functionally gates. It it was a $30 million revolver beforehand, and it's a $30 million revolver today, but functionally gave us the full 30.
<unk> million dollars of capacity so call it an additional.
10 million Bucks then the next case is the growth capex cuts, which lets call it about $6 million to $7 million and then the remaining 10 million is.
A couple of US reference the combination of DNA cuts and also some cost cuts like click the furlough. So hopefully that gives you a bit of a flavor of perfect. How we come up with that.
That's great. Thanks, very much really appreciate it.
Sure.
Thank you.
Your next question comes from the line of Scotch here with Clarksons. Your line is open.
Good morning, everyone. Thanks for taking my questions I appreciate all the commentary around the new growth projects I was hoping you can kind of walk us through what market conditions you'd be looking forward before giving the green light to these investments.
Sure I don't think that Theres, a magic number obviously, we're looking for the the general benchmark to get.
Reasonably significantly above where we are right now.
I would love to say that as soon as we start to see a 150 benchmark and above that.
Like begins to look a little bit rosier, but I think we're also going to have to take a look at not only the price, but also the demand equation because.
As you see right now there is there's a little bit of strengthened pricing seems to be coming out of Asia.
Anecdotally Theres, maybe some demand in China, we obviously don't do too much business in China.
So it's really.
But business is going to be coming from not only our traditional domestic customers, but the Atlantic seaborne markets both of which are weak at the moment. So we're going to have to see some underlying strength in our own markets before I think we felt comfortable moving ahead I guess, probably also likely that that we will have seen.
Domestic business for a for 2021, probably.
Finished up before we would would pull the trigger on some of the stuff just to provide.
Provides more certainty and what's what's kind of Madison the next year.
I will say, though.
Got it.
One thing we'd like is because these are pretty near term projects I mean.
Spread it within a six months time span.
We could essentially ramp up north of a million tons production.
Which gives us the optionality when we start looking at our book for 21.
Talk to some of our customers about.
Significantly larger lowball component to the extent that we can be comfortable on pricing and demand.
That's very helpful. I appreciate that.
Switching gears to I guess mortgage writer market question, I think you had about half million tons committed and priced into the export market and it looks like you committed a little bit more over the quarter can you give us a little bit of color around where these trends are going and.
The demand picture that you're seeing from a seaborne market as well as any kind of push backs for many customers.
You are getting on some of the shipments.
Yes sure.
Hi, I spoke about some of the some of the positive things that have occurred is.
Reconnecting with some different types of Kohl's with some customers that we've had in the past and and sending some high vol coals to Europe.
Has been was positive thing that happened.
In the last four months or so.
Shipping a test shipment actually for what could be a potentially large customer in the in South Korea was a very good.
Very good thing for us.
It's it's also I think positive that we've gotten qualified into Brazil, which.
And then the other mills that are in South America. So.
We've got.
We got a number of different things that I think could result in some term business and longer term relationships, but what I can tell you is that demand right now spend has been.
Fairly weak when we look at spot type deals that have been out there. It's been reduced volumes from what were normally in the past and and it makes sense with the shape that the the economies are in.
And the Atlantic Basin, which is our which is our primary focus but we remain very optimistic that Asia can be a big component of what we do going forward and I might add our sales guys or both.
Very familiar with that marketplace and have had great successes there in the past so.
Pretty tough right now those is really the.
Bottom line ticketing volume anywhere, but I will say Scott one thing that we did within the last few months as Mike pointed out in his remarks, we've added another very senior guy on our marketing and sales team. So we far size, it's got to pretty senior sales guys because as we told the board.
Look we're going to go from.
2 million to four or 5 million tons over the next few years. So we want to make sure we've got as broad based.
Marketing effort as we can we can put in place. So I'm I'm comfortable that were sort of positioning ourselves for the next phase of our our growth.
Which again market permitting.
We're in the position to execute on on a reasonably short period of time.
Great I appreciate all that color congratulations again on this only cost control over the quarter and good luck airport.
Thanks I appreciate it.
Thank you and last question comes from a lot of gate, David Gagliano with BMO capital markets. Your line is now.
Oh, great. Thanks for taking my questions I.
I just wanted to drill down a little bit further on the the commentary regarding force Ms Yours.
So obviously, you've got I think 1.5 million tons committed for the rest of 2020.
But how much of that is actually you know kind of really from and how much of the volume is been exposed to be forced matures and the customers pushing back on deferrals and I kind of.
Well.
What we can say Dave is that.
To date were ratable in that business.
We.
You know in this sort of setting we can look sort of 30 days forward really is about all the sort of the guidance, even we get from our customers, which is why we.
Which is why we basically taken guidance down then and.
It's.
It's difficult for customers, it's difficult for us, it's all really contingent on what sort of recovery and and what happens in the key segments that the our customer service. So it's you know it's difficult to tell what's going to happen, but I can say I can say looking 30 days out we also appeared.
The ratable.
We think our Kohl's go to some some customers and their plants that seem to be each sort of keep plants. So we'll we'll see how everything how everything develops.
Force Majeure layers of course don't mean that people are canceling business. It means that the business is likely to be shuffled around and.
We expect to see some of that.
That being said.
Again, we think.
The places where Kohl's go will be somewhat Brazil. So.
Okay and so so.
Now I mean, just for on near term basis here.
I understand guidance not you know not not for the year, but.
We're we're pretty much halfway through the second quarter and.
What our volumes shipment volumes.
So far through the through the second quarter.
Dave Jeremy I I think we're just we there's a lot of uncertainty obviously, we wish we could give guidance what like others. We full guidance I think we'll just leave it with Mike's comments on that front.
Okay, and then in terms of the Capex cuts.
In terms of you know as we as we look into 2021 excuse me it sounds like.
Again, I know there's the visibility.
Zero here, but the for the cuts that happened in 2020, as we everything about the 2021 volumes.
You know roughly how much of an impact would that have on on if things.
You know kind of get back to normal and let's say in the fourth quarter.
What's sort of the delay if one if that's you know capex ramps up again, a book on us and how much volume comes out of 2021, even in that situation.
Yes, I think Dave if I understood. Your question correctly, it relates mostly to our Berlin slope and we've probably got another five or 6 million bucks to spend that berwyn could get to our Pocahontas number four seem so we've stopped that spend.
And when we turn it on we've got about another five to six months worth of work to get to that same so.
You know rounded up call it a million Bucks a month.
Round numbers.
Once we once we've sat degrading like that.
As I said, we're not.
Were pretty good shape, there should question that we decided lets lets keep.
Our liquidity options at the front of the Q here as opposed to our spend options and.
So we can turn that switch back on when we need to.
Okay, all right I'll just leave it that them. Thank you very much appreciate it.
Sure Okay.
Thank you.
This concludes today's question and answer session I would now let's turn the call back to render Atkins executive chairman for further remarks.
Okay. Once again, we appreciate everybody being on the call on these.
Unusual times, everybody, please stay safe and well look forward to catching up with that of grow. These again I guess in August.
Take care thanks again.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation and you may now disconnect.
[music].