Q3 2023 Ramaco Resources Inc Earnings Call
[music].
Okay.
Welcome to the Remco Resources' third quarter 2023 earnings conference call. At this time, all participants have been placed on a listen only mode and the floor will be opened for your questions. Following the presentation. If you would like to ask a question at that time.
Please press star one on your telephone keypad.
If at any point. Your question has been answered you may remove yourself from the queue by pressing star two.
So others can hear your questions clearly, we ask that you pick up your handset for the best sound quality Leslie if you should require operator assistance. Please press star Zero I would now like to turn the call over to Jeremy Sussman, Chief Financial Officer, Sir. Please go ahead.
Thank you.
On behalf of <unk> resources I'd like to welcome all of you to our third quarter 2023 earnings Conference call.
With me. This morning is Randy Atkins, our chairman and CEO and Chris Blanchard, our Chief operating officer.
Before we start I'd like to share our normal cautionary statement certain items discussed on today's call constitute forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
These forward looking statements represent <unk> expectations concerning future events. These statements are subject to risks uncertainties and other factors many of which are outside of the parameters 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.
And except as required by law <unk> does not undertake any obligation to update or revise any forward looking statements, whether as a result of new information future events or otherwise.
Also like to remind you that you can find a reconciliation of the non-GAAP financial measures that we plan to discuss today in our press release, which can be viewed on our website www dot randgold resources Dot com.
Lastly, I'd encourage everyone on this call to go onto our website and download today's investor presentation with that said, let me introduce our chairman and CEO Randy Atkins.
Thanks, Jeremy.
Good morning to everyone and thanks for joining the call we have a lot of positive developments to unpack. This morning since we spoke in August.
From the time, we started <unk>, we have generally been somewhat idiosyncratic within our industry.
Broker five years before it went public in 2017, we were investing and developing geologically advantaged coal reserves.
During most of that time, a majority of the industry was in bankruptcy and certainly not aggressively buying greenfield coal reserves to develop from scratch.
Since then we've continued to invest heavily in a rapid expansion of our business and in production.
Many of our peers have moved into another direction essentially letting their own reserves to sleep without investing in new replacement tonnage.
To prove the point over the last couple of years, we've invested almost a quarter of a $1 billion in growth capital for production and acquisition.
For a young company in this space that is a meaningful number.
And I wanted to highlight this background because our third quarter essentially reflects the results of this differentiated growth platform.
In simple terms this quarter and almost one fell swoop, we went from being a $3 million to a 4 million ton per annum company and of course, we're not done in terms of production growth.
To step back and frame this a little differently over the past years, we have done or tried to do several things at once we've invested to grow production, we have paid off debt and we still have made substantial shareholder distributions.
This year, we paid down over $50 million or over 50% of our term debt at the same time, we have grown production by 55% from $2 2 million tons in 'twenty, one to $3 4 million tons. This year.
Lastly, we made shareholder equity.
Confucius capital distributions of total of $160 million, which include cash dividends and the value of the tracking stock.
We have been fortunate that our shareholders have seen the positive results of this our stock price rose by 38% this quarter and by 320% over the past three years.
We also had a total shareholder return over that same period of 450%.
We are now hopefully getting started down the right track.
And turning to Q3 as a result of this quarter's sales surge we grew EBITDA by over 50% from the second quarter.
This was in spite of a decline in margins caused by lower index pricing.
Also based on Q3 earnings we expect to reduce our overall term debt down to just $50 million by year end for.
For reference our total debt at this point in 22 was $125 million.
Because of both stronger than anticipated third quarter shipments and increased overseas customer demand. We recently increased guidance on R 23 coal shipments.
We also continue to enjoy a working capital benefit over the next few quarters as we expect to continue to reduce and sell down existing inventory as we get into third quarter.
Switching gears to operations I want to complement the work the operating team has done at developing that too deep mine sections of the Berlin.
In the last couple of months the Berwyn mine produced at an annualized run rate of a half million tons per year.
Cash costs were roughly $80 per ton from both deep mines actions yet.
If this trend continues we expect Berlin to be among the highest margin and lowest low vol met or allergic largest low vol met or allergic mountain complexes in the country.
Moving to sales and marketing.
We took what we thought was a prudent approach to our 2000 and for domestic sales business we.
We have now committed $1 3 million tons of coal to North American customers next year at an average price of $167 per ton and an additional 200000 tons for export price against the index.
To complement our sales group this appears to be the highest 2024 sales price figure of our public peers.
And as a backdrop when the domestic steel mills came out in early July we decline to lock in business at what we felt was then a low priced near the bottom of the cycle.
We have basically decided instead to pivot to increasing the size of our 24 export business roughly 70% of anticipated production.
And while we March on the path to increasing our production to roughly 7 million tons over the next few years I would note that we could continue to produce at our current four to four 5 million ton level for the foreseeable future largely only for maintenance capex.
I feel we are advantage to be in this position since the market. At this point is very settled unsettled with a number of worldwide macro factors dominating the headlines and a little clarity in near term economic direction.
On 24 production, we will be providing formal guidance. After our December board meeting next month.
But next year, we plan to preserve some optionality to either increase or maintain production levels, depending on how we see the markets develop.
I'd now like to turn to an update on our western operations in Wyoming.
I am pleased to report that last month overall mine development commenced at the rare Earth Brookline.
We have been working to test from only core samples over the past years.
We began meaningful mine development, a few weeks ago with an initial goal to obtain larger quantities of material for testing.
We will now be moving into a phase of extensive sequential testing of the metallurgy and chemical composition of the multiple areas of material.
This will help us determine the overall nature and extent of the deposit.
We've now established that the mine has an extremely large unconventional rare earth deposit.
The figures of its size will no doubt increase as we do more core testing over both larger areas and a deeper depths.
<unk> our partner has told US that this mind, maybe geologically unique from almost any deposits they have examined.
The challenge for US from here is to perform an overall assessment of the optimal extraction recovery and separation techniques, which can then be used to estimate the minds economics, we will be doing this with our consultants and ISR K and within Etfs.
Yes.
We will also be working on some novel technologies in this area with other National Labs, and we will continually update our progress on this project as it goes forward.
On the carbon products front I want to highlight two exciting areas. We are focused on involving work at our ITM Research center in Wyoming.
As many of you may have seen China recently decided to both regulated and restrict the export of graphite used for EV batteries and a host of other electronic applications.
Opportunistically <unk> multi year development of a revolutionary electrochemical process for conversion of coal to synthetic graphite is now assumed added strategic importance. Our work on this innovative technology has been done pursuant to our greater partnership with Oak Ridge National Labs.
We've also recently filed an application with the DLA to build a continuous pilot plant using this technology for conversion of the two minutes coal from <unk> Berwyn mine.
Into synthetic graphite.
Also we have developed a low cost process with comprehensive intellectual property rights for the production of activated carbon fiber model is to be used for direct air capture and other filtering applications.
This quarter, we established in house melt blowing capability at the ICANN to produce the model S and activate them in larger quantities.
We look forward to updating on the commercialization of these activities going forward.
Now I'd like to finish by reflecting that I believe we were at a flexion inflection point for <unk>.
Over the past couple of years, we have spent seven times more toward production growth in.
And capital acquisitions than we have done compared to paying dividends.
Importantly at this point I would anticipate in 24 that we will be returning substantially more to shareholders in cash dividends alone than we're currently expecting to spend on growth capital for production or M&A.
And with that I'd like to turn the floor over to the rest of our team to discuss finances operations and markets. So Jeremy please start with the rundown of our financial metrics and markets. Thank you Randy as you noted we enjoyed a strong third quarter, especially in light of weaker markets in coal pricing throughout much of the quarter.
Specifically Platts U S East coast indices fell roughly 5% in Q3 versus Q2.
Despite this decline Q3 net income grew more than 150% versus Q2 to $19 5 million and adjusted EBITDA grew by more than 50% to $45 million during the third quarter. Adjusted EBITDA benefited by 3 million received from insurance claim proceeds in connection with the Berwyn mine outage in mid.
2002.
22022, and $8 million received in connection with the Elk Creek silo failure in late 2018. The combined net income impact was $8 million I would note that Elk Creek insurance proceeds are not reflected in our cash balance as of September 30th I would also note that the company received.
A tax refund of $11 $8 million in September which is reflected in our Q3 cash figure.
Turning to our key metrics the largest variance relative to Q2 was on volume the company shipped 1 million tons of coal, which achieved its previous guidance of reaching a ratable annualized sales run rate of roughly 4 million tons. This figure was up 39% from Q2 as we had been previously shipping at a roughly 3 million.
<unk> tonne per annum run rate the increased to 4 million tonnes per annum is the culmination of a multi year investment and taking the Elk Creek prep plant capacity from two to 3 million tons per year as well as the ramp up at our Berwyn mind that Randy touched upon.
Average realized price in Q3 fell 4% versus Q2 to a $157 per ton in line with the decline in coal indices.
Production was down 18% versus Q2 to 719000 tons and cash cost increased 5% to $114 per ton. This was largely on the back of the two week paid vacation taken in July at Elk Creek due to high inventory levels, which has since come down substantially.
After a disappointing second quarter, we applaud both railroads efforts in the third quarter, which allowed us to ship at a 4 million tonne per annum run rate and meaningfully reduce inventory. We anticipate that this trend will continue looking ahead, we are refining a number of areas related to our 2023 guidance.
First we now expect to produce three one to $3 4 million tonnes with the midpoint unchanged from prior guidance, we expect to sell three to five to $3 5 million tons, which is unchanged from our mid October update where we increased 2023 sales expectations on the back of both strong Q3.
Results in increased overseas demand.
I'd note that we now have $3 3 million tons contracted including $2 9 million tons at an average fixed price of $173 per ton and the balanced price that index.
We have increased cost guidance to 108 to $112 per ton versus the high end of the previous range of 102 to $1 <unk> per ton. The increase is largely due to continued inflationary pressures that the industry is facing as witnessed by the majority of our peers also increasing cost guidance in some cases substantially.
In the past month, or so lastly, we have tightened the range on Capex SG&A in DD&A, which youll see in our guidance tables. The increase in Capex is largely related to the timing of payments. We would anticipate 2020 for capex to be down meaningfully versus 2023, and we'll update you all on this.
Front after the 2020 for budget is approved by the board.
Moving to the balance sheet. The company had liquidity of $98 million as of September 30th double the $49 million level as of year end 2022.
I would remind everyone that liquidity has doubled despite the substantial year to date debt repayments, which Randy went through earlier.
We would also expect to continue to pay down debt in 2024, and if current prices hold we would also anticipate being in a net cash position next year.
While this concludes my financial remarks, I am now going to give a brief sales and marketing update since Randy and I, both touched upon our sales commitments I'm going to focus more on the market itself.
<unk> challenging conditions in July and August the metallurgical coal markets began to substantially improve in September.
Hi, Vale prices prices are $60 per ton higher today compared to the middle of August.
This is despite the fact that European steel demand remained subdued in the U S endured almost a two month long strike at the major automakers.
The good news is that on the supply side. There is muted production globally with major downward production revisions from large players in Australia, the U S and Canada.
These three countries collectively account for roughly 75% of seaborne metallurgical coal supply.
Our opinion the reason for these continual production disappointments as simple.
The majority of coal companies are not reinvesting in a depleting asset base in large part due to financing and ESG pressures.
Global met coal Capex as a fraction of what it has historically been despite very strong and growing Asian demand.
On that front, India has now surpassed China is the largest importing country of seaborne met coal. This is important for two reasons first India has very limited domestic supply of metallurgical coal and that is reliant on imports for substantially all of its high quality met coal.
Steel demand has been extremely strong this year in India, specifically September saw Indian steel production up 18% year over year, bringing the total year to date increase to up 12% year over year.
India is not the only bright spot Indonesia is set to bring online roughly 20 million tonnes of metallurgical coal coke capacity, which began to ramp up earlier this year.
Put this in some context this figure is larger than the entire United States annual Coke production Jason.
Jason and his team have continued to do an excellent job placing tons into both new and existing customers. This is increasingly in Asia, where the majority of near term demand exists and specifically to those two markets I just mentioned.
The bottom line is that in terms of the overall market while demand remains relatively tepid in the U S and Europe. We are increasingly encouraged by both continued supply constraints and increased Asian demand. In addition, we saw a number of high cost operations, either closed or materially cut their workforce when the Australian benchmark.
<unk> fell into the low to mid $200 per ton range earlier this summer <unk>.
This tells us that the cost curve has meaningfully steepened in recent years on the back of high global inflation.
Amid this supply demand backdrop, we see a market, where we expect prices to remain above historical levels for the foreseeable future.
With that said I would now like to turn the call over to our Chief operating Officer, Chris Blanchard.
Thank you Jeremy and good morning, everyone.
Operationally, it's nice to talk about positive steps and milestones. Despite all the challenges that are inherent to the industry.
Randy and Jeremy both mentioned, the Berwyn mine ramp up and I'll touch on that in more detail, but first I wanted to start with a comment on <unk> safety performance.
We are extremely proud of our team at the Elk Creek preparation plant for having earned a sentinels of safety award for the second consecutive year further performance in 2022.
Annually only six coal operations and of those only two preparation plants are recognized across the entire nation.
When is the best large preparation plant and the nation two years in a row is not a fluke.
As a company we salute the daily effort that goes towards safety and compliance from all of our employees.
Turning to the production and sales step change.
During the third quarter, we completed the final pieces of the Elk Creek plant throughput upgrade.
We had previously updated the plant reached higher feed rates late in the second quarter, but additional froth flotation cells in clean coal clean coal storage options.
Come online until September.
At this time all contemplated upgrades have been completed and we are operating at our higher feed rates of roughly $3 million annual clean tons much more consistently.
This throughput ramp coupled with an extended vacation period in July.
Loud us to dramatically lower the raw coal stockpile levels at Elk Creek, which had been built due to the delays on the project.
We anticipate that run of mine coal inventories will be brought to normal levels. During the first quarter of 2024.
At the same time, we expect additional production increases at Elk Creek to coincide with the exhaustion of the raw coal surplus.
In 'twenty four.
As Jeremy and Randy have both mentioned we will discuss.
More concrete guidance on the 24 metrics later this year.
At our Maven operation, we have settled into a comfortable production cadence of roughly 250000 annual tons that is somewhat above our initial expectations.
Now that the initial surface mining spread and the highwall miner have reached their steady state we're turning to additional areas to permit in mind by these low cost methods.
We will also explore more detailed.
Mine planning regarding the future underground operations and potential preparation facilities.
Most of the coal from me then is now being processed and sold through our Berlin plant.
As the mines at Berlin continue to grow we may look to expand that maidens operations and reduce our logistics costs there accordingly.
Finally.
Turning to the Berlin complex, we're now running two super sections at the Berwyn mine in the Pocahontas <unk> seam.
During these first few months, we've been able to meet our budget targets for production for the mine.
We believe that current production levels are not only sustainable but there is some room for continued improvement and produce tons and additional cost reductions as the mine progresses from a leased coal position onto our owned coal.
And then in the near future.
We plan to construct additional aircrafts that berland next year, which will enhance ventilation in the mine and allow the startup of the third section if the low vol market dictates that we should do this.
Also as the Berwyn mine continues to grow the wind down of the smaller mines, which we started during 2022 continues.
The Triple S surface mine is now idle and our triad number to mind is completing its last few months of its reserves.
Ultimately the equipment and infrastructure from the Triad mine will be used to minimize growth capital associated with the third section at Berlin.
We continue to evaluate the rest of the small theater mines into the Berlin complex and we'll work to quickly pivot production as conditions in markets drive us.
This now concludes management's prepared remarks, and I would like to return the call to the operator for the question and answer portion of the call.
Operator, please open the lineup for questions.
Thank you.
Floor is now open for questions. At this time, if you have a question or comment. Please press star one on your telephone keypad. If at any point. Your question is answered you may remove yourself from the queue by pressing the star two.
Again, we ask that you pick up your handset when posing your question to provide optimal sound quality.
<unk>.
We will pause for a moment to take our first question.
And our first question comes from the line of Lucas pipes with B Riley Securities. Please go ahead.
You very much operator, and good morning, everyone I will keep my comments to a minimum.
And that is that good job on the 2024 contract.
And I'll go over to the questions but.
On those on those 2024.
Domestic contract.
Would be really great to get some perspective on the quality mix there.
Is it kind of Europe.
Your standard quality, where is it maybe a little bit more on the higher higher end spectrum would appreciate your thoughts.
Thank you.
Yeah. Thanks, Thanks Lucas.
I'll take that so it's pretty similar to our overall mix and frankly.
I would say about 30% of what we've committed is kind of a low vol and mid vol.
And about.
70%.
Is high vol.
As Randy noted, we're kind of working on refining the 'twenty for budget.
As we speak but certainly in terms of the overall high high vol mix it will.
It will come in probably a little less than kind of kind of two thirds. So overall I mean, certainly kudos to Jason and his team for a job well done.
Great Yeah, good good good job Jason.
My My second question, Randy You mentioned in your prepared remarks, and I don't have your exact wording down here, but you said something along the lines. If this is kind of a pivotal moment as you transition more towards capital returns I think that was the essence and I Wonder if you can.
Speak to that.
I think there are also targets for further debt reduction in 2004, so kind of trying to put it all together.
How much of free cash flow should should investors anticipate going towards kind of the balance sheet for.
Additional flexibility how much would go go back in the form of dividends or buybacks would appreciate if you could maybe.
But put some.
Some additional details around that thank you very much.
Thanks, Lucas So I think when I tried to highlight is we've been trying to do a couple of things at the same time I mean, we've been trying to grow obviously spending a great deal of capex quarter by quarter of a $1 billion over the last few years.
We've been trying to pay down debt, which we've done and we've gotten it down to about $50 million in term debt that remains and then we've also of course been trying to do distributions, which inclusive of both the.
Cash dividends as well as the value of the tracking stock, which we get to the summer.
Been a pretty nice return I think it's about 160 million Bucks so moving forward.
<unk>.
The bulk of our growth Capex from current projects is in the rearview. So as we look to 'twenty four.
Al.
Unless and until we started another.
Large scale.
Development project, we are going to have growth capex that will be below the level that we anticipate paying out in dividends cash dividends.
And as far as further types of capital distributions in terms of <unk>.
Stock buybacks or anything of that nature, we will we will have to see.
We've always left the door open to that.
We also indicated that we wanted to get a certain level of cash on the balance sheet before we started considering that.
We are certainly going to be in a cash build position here over.
The next few years. So that's certainly something that we hope will be able to get to here.
But I find ourselves frankly in a pretty good position, where we're starting to somewhat reap the benefits of what we've sowed.
Where we don't really have to spend too much more on growth Capex and indeed as I indicated we could pretty much maintain the same level of production just from maintenance capex going forward, which four to $4 5 million tonnes.
It's not a it's a fairly tiny amount of production. So I hope that addressed most of whats your question was asking.
That's that's helpful. Thank you Randy for that.
One more operational one in.
A few moving pieces on the cost side during the third quarter and then I think also into year end, but but as you look into 2024.
What's a good way to think about it kind of on a normalized level. Thanks. Thank you for it for any color you can provide.
When you say think about it which cost or use specific.
Production cost per ton.
On the Medicare but.
Yeah, I'll take that Lucas so, yes, I mean, just taking a step back for a second in Q3, obviously overall cash costs were $114 a ton.
It really I would say that the bulk of the increase frankly all of the increase was driven by the.
We took an extra weeks vacation paid vacation at Elk Creek in July to reduce inventory, which we certainly have done. So if I think about sort of August and September costs, which are normal kind of non holiday months.
Those cash cost averaged about $103 per ton to put that into some context. Obviously in Q4, you've got two two months that have a week's holiday in that so that it's.
<unk> got to take that into account as I kind of think about next year. Obviously, we are going through the kind of the budget sort of as we.
As we speak on that on the negative side. There is certainly continued labor inflationary pressure I think given the comments of our peers and just the overall economy, that's not a surprise, but that should be offset by stronger production from a full year of the berwyn mind, producing at two sections and a full year at <unk>.
Prep plant.
3 million tonnes per annum. So.
We'll give some more refined guidance certainly after.
After the budget is baked, but hopefully that gives you a little bit of kind of context kind of where we're coming from and where we hope to go.
Okay. Thank you so so.
Okay.
With low 100 <unk>.
<unk> seem reasonable with these puts and takes.
I mean, that's certainly where we were in August and September.
So I.
I would hope that that.
Repeatable, especially with the positive variances that we talked about but again, you've got some inflationary pressures. So we'll come out and kind of get you get you guys. Some more refined numbers.
Over the next month or so yes, I think I think Lucas we have got a pretty good handle on what we can control ourselves what we have allude.
Alluded to it.
Fairly murky economic environment, we're operating in today.
So we're not quite sure where a few pivots may go.
Externally drive cost.
Hopefully, we'll be able to get some general thoughts on that that will be able to articulate to the market here within the next month or two.
Gentlemen, I really appreciate all the color and continued best of luck.
Thank you Lucas.
Once again, if you do you have a question you May press star one on your telephone keypad at this time.
And we'll take our next question from the line of Nathan Martin with the Benchmark Company. Please go ahead.
Thanks, operator, good morning, guys. Thanks for taking my questions.
Maybe just one quick one for clarification on the cash cost per ton guidance, the 108 to $1 12 for the full year.
Is that still the way you guys expect to frame your expectation for the fourth quarter as well.
Yes, I mean so.
Obviously Nate.
At the midpoint I think the answer is yes, obviously with the range.
Can get kind of lower than that in the fourth quarter, and even a little bit higher.
Remind you that fourth quarter always is kind of the.
The one with the most variability with the two weeks' worth of take vacations of course and for Thanksgiving and Christmas So.
Hopefully that answers the question.
Yes, perfect Jeremy I appreciate that and then maybe just sticking with full year 'twenty three guidance for a second on the sales side. As you guys mentioned that seems to imply shipments around 800000 tons at below and $9 million at the high end or maybe even a 1 billion plus.
So kind of what gets you to the higher low end of the range is it the ability to move more inventory you guys seem to anticipate just would be great to get your thoughts there too.
Yes, I think we've got a nominal amount of open tonnage that's left for the year, which.
We're going to try and obviously pushed out before the year end.
There's the normal variables.
Making sure we can get the sales across the line with the rails et cetera.
But I think thats the primary variability.
Yeah.
Perfect. Thanks, Brandon and then.
Maybe sticking with the stockpile just real quickly I think Chris mentioned, hopefully getting to normalized levels, maybe the first quarter of next year, I think youre down to maybe 900000 tonnes plus or minus what's what's kind of normal there for you guys for Elk Creek.
Chris go ahead.
Yeah. So.
You know that the inventory levels that we've put out our.
Combined clean and raw, but just from a run of mine raw standpoint.
Besides that Elk Creek is we'd like to be running.
Somewhere around 200000 tonnes. So we have some flexibility for the ebbs and flows of production without impacting the preparation plant but.
Never in a position, where we're having to re handle coal or.
Have any concerns about it sitting so if that answers your question.
Got it yeah I was just trying to figure out how much more there was to go and I think you guys mentioned as well hopefully it kind of a working cap tailwind for the next two quarters because of that okay.
Nate to add on a little bit to Chris I mean, we've had kind of a funny year because of the fact that we had sort of built up inventory in anticipation of sort of flipping the switch in our prep plant to knock the production of 5 million tons from two to 3 million tons. So we had a little bit of delay getting that plant.
<unk> opened and then ramped up to full processing capacity. So thats whats caused the inventory and I think in general.
We'll certainly refine it but at the moment our expectation is we'll have that inventory back down to normal levels, probably just after the first quarter next year.
Great I appreciate the thoughts there guys and then and then maybe just thinking about you know.
Little bit intermediate term Randy you made the comments you guys are very comfortable where you are now maybe a 4 million tonne plus kind of run rate.
Next year looking at next year, we don't know what.
The macro economy is going to bring with some of the some of the issues. We're all keeping a close eye on but.
Let's say the market cooperates and you see more demand for your product just curious what's kind of the next stage of growth.
<unk> on the coal side, what projects are you looking at maybe what kind of growth Capex would that entail.
Yes, I think I think basically Nate.
As I indicated.
Baked some optionality into next year dependent upon how we see the market.
We can kind of continue generally in about the same call. It 4 million ton level, we can ramp that up without really bringing on much new growth capex at all to a higher level.
I will give you the exact tonnage right now, which will probably try to provide a little bit more clarity on after our budget, but we could ramp that up reasonably substantially next year. If we saw the demand there.
And I think going forward, we were kind of.
Company that hits, mostly singles and doubles as opposed to trying to go for Grand slams in terms of production increases.
We've got.
A number of projects out there on the horizon, one of which we've talked about before is taking our maven.
Complex, which we're now operating as sort of a surface high vol High vol proposition and looking at the possibility of.
Taking that into a deep.
Mine production, which attendant.
Yep facilities et cetera.
That's down the road, we're not there yet.
But we have a we have a ramp that I think.
Jeremy has put in our presentation, which gets us to about six five to 7 million tons over the next couple of years and we're very comfortable comfortable that that can be accomplished with nominal growth capex.
Got it that's helpful and it was used.
It used to be nice to see that chart in there as well it kind of broke out the capex.
What I was trying to cut it to kind of get too. So I appreciate that and then maybe just one final one if I could just shifting directions, a little bit Randy I appreciate your prepared remarks.
On both the Ria and carbon product initiatives.
Can you give us an update on the timetable there you know kind of what stage are you at in each of those and how long do you think it could take before you do have a commercially available viable product for either.
Yeah, I think Nate the way I'd like to answer that.
[laughter] peculiarly.
The rare Earth business is an entirely different type of mining exercise and coal mine.
Coal mining youre dealing with bulk.
You can find see and touch.
A lump of coal when youre dealing with rare earth youre dealing with microscopic metal deposits that are measured in parts per million. So the real challenge is once you've found.
A sufficient level of rare earth.
Defined it in areas of concentration, which you could eat.
Economically extract from and then to figure out what would be the appropriate sort of processing.
Refinement techniques that would be able to get those minerals out we've got some very interesting things going on we're doing some deep coring now because we think that there is a possibility that there may be some deposits, which we've missed since we've pretty much only used cores have been originally developed.
Our coal mining.
Exploration, which was generally fairly shallow and the cup.
Couple of hundred feet, one to 200 feet levels, and we're going to go down to a lower level.
To really test how much might be down there was slower so I think.
That's a roundabout way of saying, what we're going to be involved in is more testing not only on the dimension of the deposit, but more importantly on sort of the chemical and metallurgical characteristics, which really define the ultimate economics.
So I don't want to put a timeframe on it that button holds us in but im hopeful by next year.
Probably sometime in the first half that we'll be able to have some some pretty solid preliminary.
<unk>.
Thoughts on where we are in terms of defining that deposit and of course, we're getting a lot of help from the national labs.
Not only our friends at <unk>, but we've got a host of other national labs working with.
As well.
Not only just see the deposit aspect, but also on some of the aspects of.
Processing, and frankly magnetic production down the road because as the deposited bears out to be the size.
Conformity that we hope we could be a very important deposit from a national standpoint.
So thats kind of where we are on rare earth on the carbon products. What we're trying to do is we've identified two areas.
That we think have a lot of promise and could potentially use a lot of coal and we've got some very interesting.
Pretty novel intellectual property that we've been able to develop around these with the National Labs again, one is sort of taking coal and using it to to make really a carbon fiber type.
Activated carbon where we could use that as.
A form of direct air capture which is kind of interesting.
We are essentially using coal to capture Cotwo.
And.
The other one is the idea that we would be able to.
Basically do some other forms of development on graphite, where the Chinese just put the kebab on export of graphite, while we've been working for several years with a bridge on developing synthetic graphite.
Essentially from culture, and so that has taken on a little bit more importance and urgency and we were actually thinking about trying to get a prep plant built our Permian pilot plant built in west Virginia to be able to exploit that so in terms of the sort of near term commercialization of those two again I would probably say.
Give us about six months or so.
To sort of see where we are on the sort of commercial.
Critical path and we will be able to give you a lot more definition as to when we were able to turn this sort of technology into actual some form of sales of further development.
Perfect, Yes, it will be waiting for more info on that for sure and then I guess, just curious real quickly though.
The feedstock and the carbon products initiatives would you plan to use your own production there are earn out.
In terms of the coal that would go into the carbon product feedstock correct Yep correct, yes, yes.
Yes. So great question. So the answer is we would use our own production.
We've been doing our testing answer than a synthetic graphite from our low vol coals in Berlin.
And indeed, that's where we are currently contemplating we'd build a pilot plant and in terms of the.
So as the melt blown activated carbon.
That we would use for direct air capture we've been using our Wyoming coal.
And we've got plenty of that so.
Our general thesis is as time goes by.
Bandwagon has been the use of coal for higher value products under the theory that coal is too valuable to burn and if you can use it to make something else with it it might be more valuable to to those of us in the industry.
Go in that direction so.
That's kind of where we are on that.
Got it so just wanted to confirm that could possibly be yet another avenue for your products to move into okay. Perfect guys. I really appreciate the time and information and best of luck in the fourth quarter.
Okay. Thanks Nathan.
This concludes the Q&A portion of today's call I would now like to turn the floor over to Randall Atkins for additional or closing remarks.
I'd just like to as always thank everybody for being on the line with US today, hopefully we've been able to enlighten you we've had a pretty good quarter and.
We will look forward to catching up with everybody again after the first of the year.
For our year end results.
Everybody have a good day.
Thank you. This concludes today's remco resources third quarter 2020 earnings Conference call. Please disconnect. Your lines at this time and have a wonderful day.
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