Q4 2020 Ramaco Resources Inc Earnings Call
[music].
Ladies and gentlemen, please stand by your of Mako resources incorporated fourth quarter two thousands for any earnings conference call will begin momentarily again, please stand by your conference.
Again shortly thank you.
[music].
Good morning, ladies and gentlemen, and welcome to the different macro resources incorporated fourth quarter 2020 earnings conference call. At this time, all participants are in a listen only.
Later, we will conduct a question and answer session and instructions will follow at the time if anyone should require assistance. During the conference. Please press Star then zero on your Touchtone telephone I would now like the turn the conference over to your House Chief Financial Officer Jeremy.
The demand. Thank you. Please go ahead.
Thank you operator on behalf of for Amoco resources I'd like to welcome all of you to our fourth quarter 2020 earnings Conference call.
With me. This morning is Randy Atkins, our chairman and CEO and Chris Blanchard, our Chief operating officer.
So that's for 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 <unk> of expectations concerning few.
But that's the.
Statements are subject to risks uncertainties and other factors many of which are outside of <unk> 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 for Amoco does not undertake any obligation to update or revise any forward looking statements, whether as a result of new information future events or otherwise.
Lastly, I'd encourage everyone on this call to go onto our website <unk> resources dot com and download.
And today's investor presentation under the events calendar with that let me introduce our chairman and CEO Randy Atkins.
Thank you Jeremy.
As always I want to thank everyone for joining us today to discuss our year end results and our Crystal ball forward look into 2000.
Almost one.
We held our first board of directors meeting of the year of few days ago.
I described of the board the than looking back at 2020. It was kind of like you were transported into an Indiana Jones movie.
Where you were trying to outrun some huge rolling Boulder only the jump out of the way.
20th of snakes.
It was a bad dream type of year, then I'm happy to report it looks like it may finally be in the rearview mirror.
Sadly it left a few battle scars on our reported earnings for the year, which Jeremy will detail for us in a moment.
We basically spent half the year of worrying about.
Whether the world was coming to it and whether we would be able to continue the safely produce and if so would we still have any customers.
That drove us to a mad dash the main as much liquidity and sanity, as we could possibly do through a combination of actions.
Although they were painful at the time.
They did manage to get us about $50 million of new dry powder through the first half of 'twenty, which included both capex and cost cuts.
We were able to deploy funds to keep operations intact in the ship moving forward, even as our customers went into a free fall.
The back half of the year shifted.
And we actually ended up having record sales, but realize that the demand had not quite kicked into gear to allow us to benefit price wise from the coming February.
Indeed, we had two large customers claimed force majeure on over 200000 contracted tons, which cause.
Shifted about $7 million in EBIT.
EBITDA, which would of had US report of solidly positive second half EBITDA.
Indeed, right now we have printed more EBITDA in January of this year alone and then for the entire second half of 2020.
This year is.
Cost of going to be very different.
I told our board that there are several market drivers that are all beginning to position our business for what I believe will be of very strong year.
We had taken our normal conservative posture and since last fall have placed fixed term price domestic and.
Hopefully the index price export contracts for about $1 7 million tonnes, which works out to about 80% of the mid range of our 2021 production target of $2 1 million tonnes.
Any new business that we have placed subsequent to year end has now been substantially better prices.
And flow and indeed has been placed at the premium as opposed to of discount to the benchmark.
We now hope to have five to 600000 additional tons to place into today's rising markets for the balance of the year.
We are now pretty well completely sold out through the second quarter.
This suits us fine.
<unk> see the back half of 'twenty, one is where there may be potentially some very interesting price movement.
And to that end, we announced earlier this week, we have decided to put the.
Quote, adding new production signed back on the front door.
As I told the board it was somewhat like we had lost a year.
Since we at this same time last year, we were also considering whether to approve the continuation of the berwyn slope of mine.
As you might recall February 'twenty was when the first whips for the Pan depth of Inc. We're beginning to appear in the U S.
And we decided to shift into the neutral and defer the berwyn expansion until we.
For more.
More market clarity.
I will get to an assessment of the market dynamics in a moment, but suffice to say we regard today as a moment to begin to place some longer term bets on market direction.
As my grandmother Wisely Council.
We saw Bobby once the blue suit maybe of need to turn on of Blue light.
The Marcus markets are now telling us to turn on that light.
The global steel business is back in a big way Steve.
The steel prices of jumped to 150% since last summer and steel utilization, which it hit.
In the year low last spring has jumped almost 50% since that time.
Steel inventories are now at their lowest levels in over 40 years of.
The demand side of the business looks comfortably like it is coming into focus.
We have correspondingly seen benchmark prices jump.
A team of 40% since the start of the year and the forward curve is comfortably in contango at about $160 per tonne benchmark.
When the $60 per ton Chinese arbitrage, which was created I would remind everyone by political and not market factors eventually lifts.
It will create more pricing policy of dynamics.
The bottom line is we think the market has a way to go yet both in terms of price and as well in demand.
So let's review a few metrics on the macro side.
The world will be waking up gradually over.
Yes, 12 to 18 months as the economies of both the developed and the developing world gradually shake off the after effects of Covid.
As we've said before met coal is a proxy for steel and steel is a proxy for our nation's GDP.
The central banks of.
For the next all developed countries have decided to embark on massive fiscal stimulus packages almost simultaneously.
This stimulus will be focused on increasing sustained infrastructure and consumer spending across the board.
This of course bodes well for both.
Both steel and thus its primary feedstock met coal.
Assuming COVID-19 abates over the next two years, there will be an ongoing global restocking among all developed economies and almost at the same time. We think this will further play in the met coal demand.
But what about supply.
In previous cycles, if the market has told you the demand required one new coal mine almost every producer would always oblige they would each add one new coal mine and there weren't the supply imbalance I have a suspicion that this time.
Things may be different.
Our peers are also coming off of terrible operating and financial performances from last year.
We're probably the only U S more.
U S met coal company that maintained as much or more of liquidity in 2020.
Without raising dilutive equity at fire sale prices are issuing onerous term debt.
Most companies will continue to operate with weakened balance sheets and in a new by the administration. They will also operate with substantial political headwinds on their continuing thermal.
Operations.
This will be despite some gymnastic public relations attempting the brand themselves as born again pure met coal producers.
We must also remember that with the exception of ourselves Coronado and warrior almost every public KOL group essentially produces more thorough.
Thermal and met coal.
Many have punishing legacy thermal reclamation and <unk>.
The liabilities that will weigh on their ongoing concern ability and increasingly more acute fashions as the years progress.
We enjoy the lowest legacy liabilities and the.
Public space and by a huge margin.
Similarly, we have the lowest adjusted net debt and that includes arrow the EBITDA by huge multiples.
We are less than one time for this ratio, while our highest periods almost eight times.
I say all of this to point out that I do not.
Deal. This time, we will have a huge supply rebound in the near term.
Yes, there are some companies that of previously announced the expansion some much larger than ours, but not in an investment dollar per new ton basis. We are vastly ahead.
And indeed, some announced.
Once the expansion is also been deferred and may not occur.
And by the way there is also the small matter of finding new capital for growth.
The capital markets are punishing all KOL groups for ESG reasons, underperformance and certainly any thermal.
<unk> production.
To make any headway you somewhat have to go it alone and indeed that is what we have chosen to do.
On Tuesday, we announced the expansion of our operating profile to add both two new mines and 50% of new capacity to our current.
Current $2 1 million tonne production slate.
Chris is going to go into some specifics on each project in a moment.
The headlights are that we will continue to spend about $12 million to finish the berwyn slope, which adds about 750000 tonnes of low volume production.
We will have mine cost in the low $70 per ton range.
It takes us until next year to hit full stride, but we will be able to add some modest production even this year from that mine.
Berman will become our second flagship complex and should produce at these levels for another.
Other 20 years or more.
Adding to Berlin.
A new mid Vol High vol. A surface property called Big Creek, which is near our Knox Creek plant and where we will spend in the neighborhood of $5 million to $7 million.
Big Creek will add up to 200000.
New tons of production starting later this year with mine cost in the mid to upper $50 per ton range.
Both of these new mines currently in jewelry F O B mind margins north of $50 per ton in this market.
We look forward to adding them to our mix.
Indeed, they both also derisked our overall portfolio.
So we're not so reliant only on Elk Creek.
Once they are all online we have almost equal production levels of high vol. A high vol, B and low vol.
And we of dish.
Decided to finance these developments as conservatively as we can.
We will pay for these new mines from a combination of working capital small equipment of credit lines and free cash flow.
Indeed, we recently repaid our revolving credit line in full last month. So we were operating at strong.
Drawing levels of liquidity at the moment.
These new mines of are also cash flow to completely repay any new investment in them in under one five years of today's profit prices. They are both extremely strong projects.
Depending on the markets they will probably not be our last.
As the new projects. We currently have permitted mines to take us to the four to $4 5 million ton production levels, if the markets to continue to perform strongly.
We will probably not look to test the any new ideas for new projects until next year.
We will also look forward to sort of.
Substantial free cash flow generation as the overall portfolio kicks into gear in a strong market.
And we continue to operate with little to no debt.
<unk> exposure.
I would like to point out that unlike many public companies we are all substantial.
And management at <unk>.
We will look to start of policy of prudent return of capital to our shareholders. As soon as we feel we have reached sufficient levels of free cash flow to.
To begin a sustained program of regular dividends, we are not far from that time right now when we will be in a position.
Holders you those options.
And before I turn the balance of our remarks over to Chris and Jeremy I would like to make some brief comments on some recent changes in our management and board of directors.
Last year my partner, Mike <unk> decided to split our areas of responsibility.
Mike is.
Two of the best development minds in the coal industry, while I am a little more comfortable operating under the hood of the car so to speak.
We decided that Mike would step down and focus on acquisition and development projects of our sister private company <unk> resources Pardon me <unk> royalty.
There may be some interesting news on that front.
One of it in the near term.
I will continue to steer <unk> resources now with the assistance of Chris and Jeremy who the board has elevated to executive Vice President for operations and finance respectively.
We are also elevated Jason Fannin to Chief commercial officer, who has done a great job.
And dealing for us and allows the market and hopefully now that we are headed into a stronger market will continue is Iran.
We also added bjs, Georgia to our team last year of General Counsel.
Together all of those mentioned and the rest of our experienced team comprised of what I believe is one of the strongest.
On market groups in the business.
We have also had some recent changes to our board.
Tyler reader of friend and our longtime director from Energy capital has unfortunately stepped down to turn his attention to the back to the power sector.
And we have replaced him with both Jennifer grey and Mahmud for feet from energy.
Energy capital.
We have also recently added David Frisch corn of Houston, and Forest Jones of Charleston, West, Virginia, as new directors.
At this point, we have of board with eight independent directors and three inside directors. We also now fully meet all ESG diversity related matters in all respects.
Management.
I might also add that our overall board is one of the strongest and has some of the greatest experience in the coal industry as well.
So in close with <unk>.
Whether 2020, as well or perhaps better than most but we look forward to growing in 2021.
Perhaps better than most so with that I would like to turn the program back over to Jeremy.
Thank you Randy.
I am going to first go over our fourth quarter 2020 financial highlights and then I will turn to our forward outlook.
To begin with fourth quarter 2020 EPS.
Back to the EBITDA were both down from a year ago. We Unfortunately have lots of good company here, which is the result of operating in the middle of the global pandemic.
Australia benchmark met coal pricing fell under $100 per ton for the first time in roughly five years in the fourth quarter in total.
In <unk> Q4, adjusted EBITDA loss was $1 million the for.
Fourth quarter was negatively affected by a number of onetime cost issues described in our press release, which impacted EBITDA by over $5 million Chris.
Chris will describe the larger items in more detail and.
In addition, <unk>.
Overall second.
Half of 2020, EBITDA was negatively affected by well over $6 million, including $4 million in the fourth quarter alone due to more than 200000 tons of coal that was force majeure by our two largest customers and subsequently resold into a weak stock of weak spot market.
The good news is that both of these unusual items are behind us of <unk>.
Of course, it naturally helps when your customers take their previously contracted shipments as they have so far in 2021 with the meaningful pick up in steel pricing and demand that Randy referenced.
Lastly, as it relates to the fourth quarter.
We were pleased that we were able to sell a record amount of company produced coal of 515000 tons as well as record quarterly export volume of over 300000 tonnes.
While index pricing remained weak in the fourth quarter a record sales volume for told a material increase in demand for our.
<unk>.
Which in turn has now translated into a meaningful uptick in pricing.
U S metallurgical coal pricing is up more than 50% from its 2020 COVID-19 induced lows.
Simply put the same customers who caused us disruption in 2020 are now seeking more tons.
Product materially higher pricing than just a few months ago.
In fact, we recently signed a term contract with the domestic steel mill for more than a third higher on a price per ton basis compared to our average 2021 committed volume. This of course is not reflected in our committed volume tables.
As of December 31, 2020 now.
Now turning to our forward outlook, we anticipate overall 2021 company production of $1 9 million to $2 4 million tonnes compared to $1 7 million tons. In 2020, we expect up to 300 for.
<unk> thousand tons of new production from the 2021 combination of triad for wind and Big Creek as well as more tonnes coming from our flagship Elk Creek complex.
At the midpoint of guidance, we anticipate mid <unk> per ton Elk Creek cash cost down from $70 per ton in 2000.
50, <unk> and more in line with historical figures as we anticipate being able to operate without the market related disruptions that we had to endure in 2020.
We expect 2021 capital expenditures to increase to $25 million to $30 million up from $25 million.
In 2020, largely on the back of roughly $12 million of growth capital for Berwyn and Big Creek.
Finally, we continue to anticipate paying minimal cash taxes for the foreseeable future due to over $90 million of net operating losses.
Overall I am pleased that.
<unk> has emerged from the 2020 challenges with what I soundly believe is the strongest balance sheet in the space, including very minimal debt and arrows as well as no legacy liabilities.
Feel that this puts us in a very solid position to be able to resume our previous growth trajectory and increased.
The Ram production capacity by roughly 50% by the time Berwyn is at full capacity in mid 'twenty 2000 by mid 2022, I would now like to turn the call over to our Chief operating Officer, Chris Blanchard Chris.
Thank you Jeremy.
Before turning to a bit of discussion.
<unk> on our new projects I wanted to spend a few minutes, reflecting on the full year results of 2020 and offer some granularity on the challenges that we faced in the fourth quarter.
Navigating 2020 was a challenge for us like it was for everyone in the industry.
Maintaining our.
The Sky license for our employees in is safe and healthy in the environment as possible was our primary objective.
After minimal COVID-19 related impacts in the first three quarters of the year.
We unfortunately did see an uptick in the number of confirmed cases of our employees as well as among there.
Our work maintenance late last year.
The increase in cases track directly with the general increase nationally and more specifically in the southern counties of West, Virginia, where the majority of our work force resides.
Fortunately the direct impact from Covid has trended downward along with the broader national.
They're dependent state and local levels.
Nevertheless during December.
Absent theism due just to test in quarantine and oil recovery from the virus average 10%.
We are thankful that of our employees, who have been directly affected none.
Cash in all serious complications or hospitalizations from the virus to date.
The direct impacts of COVID-19 in the fourth quarter financially where over $2 per ton sold.
For the absenteeism subsequent loss of production for vacation and sickness and the direct.
And of head related spending for additional personnel carriers safety and cleaning supplies and personal protective equipment.
Even more impactful was having to operate with shorter cruise than normal and cover with temporary labor when it was available.
In addition to the health constraints in the.
Sales quarter nearly every one of our operating mines at Hail Creek had other geologic or operational challenges.
Starting with our Ram surface mine, we lost our prime overburden removal during the month of December.
While we mobilized with the rental replacement the cost of this repair in the.
Fourth the productivity of the rental unit weighed heavily on operating costs and metrics.
At our stone coal mine, both in November and December mining encountered poor roof conditions with two roof falls and adverse ground conditions.
We supported these roof areas modified our mine plans and moved our section.
Logan.
In reaction to these conditions.
This resulted in a reduction both in the available work days due to the section moves as well as lower productivity and higher roof control costs during both months.
Finally at our number two gas mine, we completed retreat operation.
Sections in early November and began advancing again in a low coal sandstones zone.
Each had been previously identified in mind through on one side.
While we knew and projected that production would be limited.
The sandstones zone persisted longer than our initial projections.
<unk>.
While mining in this area are clean tons per foot was lowered productivity, we're less into the materially and our operating costs were substantially higher.
Of course, none of these items are particularly abnormal for central Appalachia mines to encounter but to have each.
<unk> had the issues concurrently while also dealing with the labor shortage driven by COVID-19 was unusual.
Unfortunately of negative perfect storm for our fourth quarter mine performance.
Happily each of these conditions has been.
Low Kelly worked through during late 2020 with overall Elk production returning the budgeted levels during January.
Now.
To speak briefly about our new growth projects.
As has been reported we are moving forward to add two new mines.
The <unk> low and mid vol.
The portfolio.
The first project will be the restart of construction on the slope from our Berlin Pocahontas number three mine into the targeted thicker higher quality and lower cost Pocahontas, <unk> seam reserves, which lie of directly above.
In response to the uncertain market and economic conditions due to the pandemic. We put this project on hold in March of 2020.
We now project of six to eight months of construction timeline.
Following completion of the excavation of the slopes, we will move quickly to do the development mining.
Mining at the top of the slope.
With much of this completed in the fourth quarter of 'twenty, one, which will add some modest new production.
During the first half of 2022, we plan to ramp production to two full.
Sections to bring the mine into full operation and at its full ratable.
The production level of 700000 to 800000 clean tons annually.
The other new project debt, we will start as a new high vol. A mid volatile coal surface mine located in <unk> County, Virginia, which we call the Big Creek mine.
This mine permit.
<unk> and associated reserves were acquired in early 2020.
These approximately 600000 tons of recoverable reserves contained both high vol, a coal and mid volatile coals.
Which are fully permitted and located in close proximity to our Knox Creek.
The preparation plant.
Much of the development work to reach this mine was done by a previous operator.
We project that once we break ground on road and infrastructure projects.
Can begin moving production overburden in the beginning of the third quarter 'twenty, one with coal production.
To follow within a month.
At full production level, we will mine approximately 150 to 200000 clean tons per year.
With a relatively low mining ratio and layering in inexpensive highwall mining tons. We believe this mine will have projected mine.
<unk> cost in the mid <unk>.
$50 per ton range.
The permits we hold cover enough mining for approximately three years at our projected run rates.
We hope to find ways to expand the mine life onto some of our adjacent coal reserves and potentially perpetuate this.
Mine.
In summary, we are glad to have navigated our way through 2020.
We look forward to progressing through 2021 in markets that seem to have returned to normalcy with the generally improving world market driven by optimism about emerging from the COVID-19.
<unk> Shadow.
We believe the timing is correct two of initiated these projects and restarted our measured growth trajectory, which we have discussed at several several of our previous updates.
I would now like to of return the call to the operator for the Q&A portion of the call operator.
Ladies and gentlemen, if you have a question at this time. Please press the star and then the number one key on your Touchtone telephone. If your question has been answered or you Mr. The move yourself from the queue. Please press the pound key.
Alright. The your first question comes from the line of Lucas pipes.
Hi.
B Riley Securities you May now ask your question.
Hey, good morning, everyone.
Good morning Lucas.
I first wanted to kind of turn to the marketing side.
Many.
Yeah.
The improving market globally, and then specifically the ARP into China to what extent are you able to tap into that market or would you say, it's really more about taking advantage of the rising high vol. A high vol. B price. Thank you Robert Thank you Lucas well first the congratulations on your.
You mentioned production addition yourself for.
For 'twenty one.
But as far as your comment about China, it's really a twofer for us. So if you remember last year, we mentioned that we had initiated a.
Our relationship with the group out of Brisbane, and Singapore called the square recently.
Your news.
The handle our marketing in the far east So we have already been in contact and indeed.
The.
Decided that we will probably be making some offers on Chinese related bids that have come to us recently.
So we will be playing the uptick in the Chinese market.
Resource play indirectly of course because of the Aussie Chinese.
Political issues as.
As we are all aware China is embargoed.
The new Australian coals coming in and as the results you've got an arb.
<unk> gone from.
Direct you to 100 Bucks I guess, it's about 80 Bucks today.
And when that lifts, we believe that there will be not only of course of rise in the Australian benchmark, but that will find its way also into a rise on the Atlantic benchmark when that happens of course is anybody's guess.
No one's intelligence.
Particularly perfect when it comes to Chinese political policy. So we will look forward to that happening at some point because the economic reality to lift it is of course well in place. So we look forward to enjoying sort of two benefits from exposure to the far east here of this year.
That's very good.
To hear I appreciate that additional insight. Thank you Randy and then.
I wanted to also again this is more marketing related but touch on the domestic market.
Last year, obviously was very tough.
For the domestic steel industry, specifically Q2, Q3, but that's been.
And coming going back and you noted that in your presentation as well.
Are you getting inquiries for additional domestic tons and I assume if so they they'd have to compete with some of these higher international prices. So I'd be curious kind of hear your thoughts on all of those dynamics.
So so last.
It was tough for us because we could see that the market was starting to wake up probably by let's call. It late summer, but the demand equation was not quite there and as a result, when we came out for the domestic bids early in the fall we were bidding into still.
What was a still somewhat weakened market on the domestic side, which we knew was going to improve and indeed it has I mean, the demand has come pretty well roaring back on the metrics that I described earlier and to your point, yes. We are indeed seeing some of those same domestic customers.
Come back to us.
To try to get more tons that they had.
Need to top off some of their demand.
We're looking at right now and.
Where we're having to quote them prices that are well in excess of what.
Of what they were able to buy their coal for in the fall.
And I think depending upon how the the cards play out for the balance of the year. It should be an interesting domestic sales season coming next fall because that's somewhat when we estimate the demand.
We will start to be kicking in even perhaps even more so than it is today and in which case.
We expect that the pricing dynamics for the 2022 business will be much different than this year.
Interesting interesting thank you Randy.
Then one last question for me.
There's been a lot of.
News headlines around.
Case, the more difficult share these markets, mostly on the thermal coal side I haven't been hearing much on the on the metallurgical coal side.
Around the co of course is well positioned with it.
The extremely low legacy liability balance and strong balance sheet.
But can you comment on NAV.
Maybe Jeremy what what the impact is for it for you.
If any would appreciate your insights thank you.
Yes, Lucas I'll start and then I'll, let Randy kind of finish up so I mean.
The short answer is if if we didn't read the trade rags or look at some of our thermal coal competitor for.
Frankly, we are seeing.
No change to how the surety providers are treating us are looking at us of course that when you have $15 million of arrows, which is 98% below the group average.
And no term debt I think.
Obviously.
<unk> only metallurgical coal mostly underground production.
A vastly different profile than than many competitors who have been.
Producing open large open pits for many years or have water issues and whatnot. So.
Certainly interesting to read.
To read in the rags and go through other earnings reports, but.
The short answer Lucas is no change to how we're looking at it yes.
Lucas This is Randy so I have been saying for some time that I'm afraid.
Those are sort of the achilles' heel of.
<unk> of our business in general, but certainly.
For the thermal space and I've seen it as you know we have a private company some production operations out in Wyoming and Wyoming over the last few years has done away with self bonding and then in terms of the the surety requirements has dramatically increased.
Their requirements for operators in that state.
And the same thing is playing off across the country and as a result, a lot of us when we look at coal company balance sheets, we really overlooked the aro and the legacy cost and we just go straight to the the actual financial debt, but the arrow.
<unk> and the legacy liabilities are indeed real liabilities and.
As the recent.
Issues relating to restructuring around Peabody has made clear.
The the <unk> are coming back and they are no longer simply rely on upon the overall balance sheet of the company to secure those surety obligations.
<unk> that are indeed are asking for for hard liquid collateral and as as we all know liquid collateral on the liquid liquidity in general is not something that the coal industry has and.
In great abundance at the moment. So this is something that I think is going to start to play out a little bit more and I am hopeful that there arent any.
Regulatory tweak.
Tweaks the by the administration may make in this regard, but I will be not surprised if the.
The by the administration does not take some steps to probably make the general operation of our.
Our coal industry, a little harder than it was before.
Interesting very helpful perspective, the Randy Jeremy Thank you very much and the everyone continued best of luck.
Thank you Lucas.
Yeah.
Alright. Your next question comes from the line of Nathan Martin with a benchmark you may now ask your question.
Okay.
Hey, Thanks, Good morning, guys and thanks for taking my questions.
Thank you.
First just a quick clarification I think to make sure I heard the comment correctly.
Randy you mentioned on the domestic side you guys recently signed.
The contract.
For the figure it was more than one third higher of a price.
<unk> of your current 2020 committed volume so just want to make sure I heard of that correctly.
Hey, Naved, yeah, it's Jeremy here.
I mentioned that and yes, Indeed, you did hear that correctly.
Okay got it great and then just the kind of goes along with the some of the domestic.
<unk> for Randy just made.
Thanks for that clarification and then the congrats again on the announcement to move forward with Burlington Creek.
It didn't notice the berwyn costs are now expected to be in the low to mid seventies kind of thing.
In the past you guys had always mentioned the cost.
The <unk> handled somewhere.
The minutes of 80, so what Scott you more comfortable now, believing those costs should be even lower than originally planned. Thanks sure I'm going to let Chris answer that.
Specifically, but the simple answer is that once we hit the berwyn for slow it has a substantially higher.
Sure.
Amount of coal.
The amount of the amount of footprint inside of the mine. It goes almost of 78 feet of of carbon So Chris why don't you why don't you provide a little bit more granularity on cost.
Yeah, Thanks, Randy and Nate to your to your question specifically.
The information.
Somewhere in that you have now.
Was afforded to us by the startup of our Triad mine, which is in the same theme that our Berlin mine will ultimately be and once we complete the slope and so.
We have some real live.
Operating data and the the most specific one is the the.
Of the mine recoveries that we are.
<unk>.
At the coal mine coming out of Tri Ed in the Pocahontas <unk> seam are substantially higher than our initial projections for the for the same.
Transportation the.
Trucking in the Washington costs of one of our biggest cost components at the coal mines of the improved recovery.
As of.
See over on the cash costs.
Got it thanks for that information Chris I appreciate it best of luck to you guys.
Nate.
Your next question comes from the line of David Gagliano with BMO Capital you May now ask your question.
A lot of my questions have been asked and answered, but I just wanted to ask one on the operating side obviously.
The Elk Creek complex as the huge engine of the volumes in the.
Ground conditions are.
Roof falls in Sandson intrusions are not ever really.
Of the draw.
Our typical I guess I would say in general in Central App, but I did want to ask about the guidance for 'twenty 'twenty, one of the $1 $92 4 million tonnes.
What you are factoring in to that guidance in terms of any potential additional.
Production disruptions and also if you could just comment a little more detail on.
What youre doing to.
Is there anything you can do to address some of the some of the issues that came up in the fourth quarter.
Chris why don't you handle that one lease to start with.
Well I mean, as you said Dave.
Roof falls and ground conditions and sandstone.
Particularly in central App arent unusual and we've definitely had the minute our mines.
Since 2017, when we are ramping the property up.
Had multiple occurrences of of all of the above in the fourth quarter. So the.
Normally with.
For operating mines at Elk Creek, if we have any one that struggling the others are operating normally and we've got enough.
Built into our budgeting that the.
The other three or four carry of the one that's struggling we just happened to hit where everyone struggled particularly.
The last half of November.
Part of December.
So.
We arent expanding our coal mines anymore as far as getting deeper into the coal mine. We generally speaking no. The conditions that we will have throughout 2021 and 2022 of these coal mines.
And while the sandstone persisted longer at number two gas.
Yes.
It wasn't it was by a matter of weeks not months or a large part of the year just had an outsized impact in fourth quarter with two vacation periods already.
That said, if we were to run into.
The prolonged condition.
The first ones that caused the downturn at one of the minds of Elk Creek, we have the ability to go to a second operating section that are number two gas mine or do some other operational things to cover the GAAP and production.
Currently as we're running the minds of we have in place can.
The outperform our Elk Creek preparation plant that can produce more raw coal in a week than the plant can process at full capacity. So we do have some slack built in there already.
And Dave This is Randy couple of other points just to make on Elk. So when we prepared our guidance we kind.
Talked about this a little bit so we've got about a 300000 ton delta there and are in our guidance for Elk, but you got to remember that.
We've got a number of mines on that complex. So as Chris said, we do have some optionality to move around I really think the the main constraint. We've got on Elk of course is our process.
<unk> capability and to that 0.1 of the things that we've got on our to do list at some point over the next few years, probably expand our prep plant capacity, there at <unk>, which youll probably in at least in our current plans probably bump that production up by about another half million tonnes, so youre points absolutely.
<unk> taken on the geologic issues that the central lab has a tendency to define more often than not but I think particularly at <unk>. We've got a.
Number of workarounds for that.
Okay great.
Very helpful. Thanks, So just the difference.
Seeing the low end and the high end of the range of the $1 92 points or is that more operating based or more kind of marketing based.
In terms of that debt.
What would it take to get to the high end versus the.
What's kind of baked into the low end, yes, so Dave Mike My strong ammunition to the board.
<unk> was the gap.
We need more tons to sell this as a rising market, we feel its a strong market thats got some legs and.
And we want to get as much production into that market as soon as we can so the the constraint on the range is really more of a production related issue not a market one.
We feel pretty good debt.
We had $2 4 million tons that we would be able to sell them. This year.
We had frankly, we'd love to have more.
But we're pretty comfortable on the marketing side of that.
Okay perfect. Thanks.
You bet Thanks, Dave.
Dave.
That concludes the question and answer session of today's call I would now like to turn the conference back to Randall Atkins Chairman and CEO.
Okay. Thank you operator, and thanks again for everyone participating on this.
Of that all of us have.
Healthy safe and prosperous new.
<unk> new year, and we at <unk> are looking forward to having this be perhaps one of if not our best year. Thanks very much again.
Ladies and gentlemen. This concludes today's conference. Thank you for your participation and have a wonderful day you may all disconnect.
[music].