Ramaco Resources, Inc. (METC) Q3 2026 Earnings Call Transcript

Good afternoon, and welcome to the Ramico Resources third quarter 2026 results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key, followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then 2. Please note this event is being recorded. I would now like to turn the conference over to Jeremy Sussman, Chief Financial Officer. Please go ahead.

Thank you. On behalf of Ramico Resources, I'd like to welcome all of you to our third quarter 2026 earnings conference call. With me this afternoon are Randy Atkins, our Chairman and CEO, Mike Wolachuk, our EVP of Critical Mineral Operations, Orrin Atkins, our SVP of Critical Mineral Sales, Chris Blanchard, our EVP for Mine Planning and Development, and Jason Fanning, our Chief Commercial Officer of Met Coal. 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 Ramico's expectations concerning future events. These statements are subject to risks, uncertainties, and other factors, many of which are outside of Ramico's control, which could cause actual results to differ materially from the results discussed in the forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and except as required by law, Ramico does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. I'd also like to remind you that you can find a reconciliation of the non-GAAP financial measures that we plan to discuss today in our press release, which can be viewed on our website, www.ramicoresources.com. Lastly, I'd encourage everyone on this call to go on to our website and download today's investor presentation. With that said, let me introduce our Chairman and CEO, Randy Atkins.

Thanks, Jeremy, and thanks to everyone for joining us this afternoon. As we survey the current wreckage in the stock and capital markets over the past several weeks, we are taking some contrarian comfort in where we are headed. Despite a rocky 26 so far, I feel very positive about the direction of both of our business platforms moving forward. Unfortunately, as we are aware, the past year has not been kind to rare earth element and critical mineral stocks. To put this in context, the Van Neck Rare Earth Index is down about 55% from its peak a year ago. Virtually all critical mineral companies are now trading within $1 or $2 of their 52-week lows. In the case of our direct non-long wall U.S. public Metcol peers, average earnings are down about 50% year over year. Most critical mineral stocks, candidly, have no earnings, so there's really no point of comparison. To step back and take some perspective, we feel that the current stock market levels are not reflective of long-term value. With about 17 million shares of our stock shorted, or about 40% of our free float, I suspect that when the market starts to absorb some good news from us, that it will not take long for the stock to reflect that. Indeed, in this environment, Having dual platform operations provides us some stability that many rare earth critical mineral companies do not enjoy. We have one established revenue producing platform in growth mode now, while the other is in development. We also believe that our legacy coal business is nearing some market inflection points. While Jason will discuss this in more detail, simply put... Global coal markets are improving, and so are our 27 sales and pricing. Indeed, we now have about 1.7 million tons of 27 domestic business priced at an average of $139 a ton. That represents more than 65 million of 27 adjusted EBITDA in our Met Coal segment alone. Also, this volume is up more than 30% versus 26. When our new sales are combined with 1.1 million tons of 27 carryover export commitments, these 2.8 million tons of sales for 27 would account for a meaningful portion of our anticipated production. Currently, Australian PLV prices are up about 23 percent since the beginning of 26. The strongest increase in the U.S. has been in high vol pricing, high vol A pricing, which is up about 26 percent. Indeed, fourth quarter spot prices are now up about 9% versus the third quarter average. To try and take advantage of this pricing swing, Ramico's low vol production is set to grow meaningfully next year. In some cases, we've moved CapEx around this year by reducing higher cost high vol production to fund more profitable low vol production. Also, next year's CapEx cash burn is expected to decline both meaningfully and quickly. We will likely have a material working capital tailwind at our backs as we convert coal to cash in 27 from unwinding a large inventory position we held in order to sell into a stronger market. On the financial side, we have managed to maintain good cost control. Despite macro external pressures this quarter, this has all been supported by our strong balance sheet and liquidity. We are also fortunate that pricing has moved up meaningfully more than costs. All this sets the stage for stronger margin expansion in both the fourth quarter of 26 and the full year of 27. Indeed, as we have said, we expect the fourth quarter alone this year to print a higher adjusted EBITDA than the cumulative total of the first three quarters of the year. On our coal production growth, we expect the new third section at Berwyn and the first underground section at Maven to be in production before year end. This will add about 600,000 tons of annualized low vol. When you include the restart of our Laurel Forkbine, we will have added almost a million annualized low-vol tons this year alone. All this has been achieved with low-vol cap spending, capex spending, of roughly $30 million in 2016. The new Maven rail loadout should then reduce trucking costs at that complex by roughly $20 million per ton starting in January. As a result, we expect some significant operating cost reduction to kick in next year. I also want to provide a bit of a roadmap as we transition to a majority of low-ball production over the median term. Assuming market conditions hold, we will complete the third and fourth sections at Berwyn between now and 2028. That complex will then produce almost 1.5 million tons annually of low-ball. Similarly, at Maven, in addition to our current 250,000 tons of surface production, we expect to move into the first two deep mine sections in 27 and complete the remaining third and fourth underground sections in 28 and 29. At that point, Maven will be capable of producing roughly 1.7 million tons of low-ball each. This would then provide us the option to have a medium-term portfolio of almost 6 million tons of total production. You get there by combining 2.5 million tons at Elk Creek with 3.2 million tons of low vol. Additionally, we have the optionality to add 1.5 million tons of high vol A coal from our undeveloped Russell County reserves at the Knox Creek Complex. This would ultimately push up our totals to roughly 8 million tons of production capacity. Lastly, we recently signed 200,000 tons of Q4 business at favorable margins with domestic steel mills in large measure due to our strong balance sheet. The steel buyers have looked to reduce counterparty credit risk from less well-capitalized companies that had struggled to deliver on their previous commitments for the balance of this year. Now, to shift gears to our critical mineral platform, we've continued to move forward on the testing and development of both our upstream geology and our separation and extraction facility, which Mike will discuss. We have also worked on de-risking the carbochlorination processing and have also introduced testing with third-party e-waste samples to enhance our concentrations and ultimate oxide output. As we continue to define the Brook Mine Reserve base, we are positioning ourselves as an upstream and ultimately midstream oxide producer provider with roughly three quarters of our anticipated revenue tied to critical minerals focused on the semiconductor space. When you think about the proposed IPO offerings of AI companies like Anthropic and OpenAI It is interesting to consider that critical minerals such as ours will basically underpin their operations. But candidly, what we in the country currently lack is any domestic midstream capability to refine and separate rare earth feedstock. This is indeed our next step. We are currently fully financed to advance the Brook Mine project through all stages of development up to the construction of the refinery. Our CapEx spend to complete the pilot plant and related steps up to the final investment decision on refinery construction is expected to be roughly $25 million next year. As we move forward, we expect to optimize the size of the refinery to fit the market and capital requirements. As Mike will discuss in more detail, we've also received exceptional recovery results from third-party carbochlorination testing. Average Recoveries were 97% for combined scandium, gallium, and germanium, 92% for neodythium and presidenium, 96% for yttrium, and 97% for dysprosium and terpium. These results continue to validate the process route selected in the Hatch Conceptual Study released last quarter. Construction of the critical mineral pilot plant continues across the street from where I am now speaking. The building structure is expected to be completed in early 27, and Hatch and Zeton are continuing to advance engineering and fabrication of the processing modules. We expect the pre-feasibility study by Hatch to begin in the first quarter of 27 and be completed later next year. As bench-scale metallurgic results become available, including from new waste samples, we anticipate completion of the pilot plant in the second half of 27. We remain in discussions regarding potential domestic and international critical mineral offtake transactions, as well as project financings for the refinery involving both public and private sectors. ORN will provide more color on our marketing here in a moment. And I want to end by noting that after a lengthy eight-year legal battle, we finally received and won a favorable $30 million jury verdict against Chubb Insurance this quarter. This verdict relates to the 2018 Elk Creek coal storage silo failure. Additionally, Ramico expects to recoup attorney's fees from 2018 forward in an amount to be determined by the court. With that, I'll turn the floor over to the rest of our team to discuss finances, operations, and markets. And first, I'd like to turn the floor back to Jeremy.

Thank you, Randy. I'll start by discussing our strong liquidity and cash position. We ended the third quarter with $375 million of liquidity, which was an increase of 38% year-on-year. Our cash balance was a solid $233 million. And importantly, as I look ahead, given improving coal markets, Our strategy of building inventory on a low cost basis throughout the year looks like a solid decision. As of September 30th, we had excess inventory of roughly 600,000 tons, which could translate into a roughly $75 million working capital tailwind over the coming quarters at current prices. As Chris will detail, we're now selling down this inventory at much more attractive prices than earlier this year and should largely be back to normalized inventory levels before mid-year 2027. In terms of third quarter operational performance, costs remain in the first quartile of the U.S. cost curve despite a rise in mine costs due to inflationary pressures such as higher diesel prices. As a result of this pressure, we're increasing 2026 cash cost guidance from $96 to $99 per ton to $101 to $103 per ton. Current diesel prices are $5.85 per gallon compared with $2.50 per gallon to start the year, which represents more than a $3 per ton headwind. We've also tweaked full year 2026 production and sales guidance. With production guidance lowered by 200,000 tons at the midpoint, and sales guidance lowered by 100,000 tons at the midpoint, reflective of continued discipline in the high-vol market. We are increasing our full-year capital expenditure guidance by roughly $5 million at the midpoint. This is based on the first underground section at MABIN, now expected to come online this year. Rather than our previous expectation of the first quarter of 2027. This will, of course, lower our anticipated MABEN CapEx by a similar amount in 2027. Even with the new guidance, the midpoint reflects a roughly $20 million spend in Q4 compared with an average spend of $27 million in the first three quarters of the year. Looking ahead to 2027, the company is at an important inflection point in its evolution. As Randy noted in his remarks, first, low vol production is anticipated to be up by almost a million tons on an annualized basis compared to the start of this year. Second, we've locked in substantially more domestic EBITDA in 2027 compared to 2026. And lastly, we do not anticipate needing to spend more than $25 million in CapEx at our brook mine in 2027 before reaching a final investment decision on construction of the critical mineral refinery. Randy noted, we are continuing to de-risk the flow sheet and refinery engineering as we move forward on future financing options. In summary, we are financially well positioned to move forward in multiple directions as we see improving met markets while also making strong progress in our emerging critical mineral business. That summary, I would now like to turn the call over to our EVP of Mine Planning and Development, Chris Blanchard.

Thanks, Jeremy, and good afternoon to everybody joining us today. While Randy hit some of the high points on the operations side already, I'll just add a little color on some of our various projects and our existing coal operations. Starting first at our MABEN complex, the Norfolk Southern Batchway Loadout Project is continuing. We now anticipate commissioning early in the first quarter of 2027. Which, as Randy mentioned, will reduce operating costs by over $20 per ton once it comes on. Concurrently, just last week, we have removed the first development face-up coal from our new underground mine at the Maven Complex. Work is being completed on the mine surface installations, and I expect to have the first underground coal production in December. While this production will not be meaningful for 2026 total volumes, being ahead of schedule on this first section will allow us to be closer to full pace as we enter the new year. We look forward to customer trials of this premium, low ash, low sulfur, low vol coal, and are positioning the mine to add its second section as early as the summer of 2027, subject, of course, to market conditions. Parallel with the underground development at MAVEN, we are designing a preparation plant upgrade to allow the second and third underground coal mines to be started in 2028 and beyond. While the plant upgrade is not expected to be launched during 2027, we'll have all the engineering work done in advance so that this project can be fast-tracked as soon as we are comfortable with the market for the MAVEN coals. At Berlin, also on the Lowell side, all necessary shaft work for our ventilation projects has been completed, and installation of the new mine fan at our Indian Creek portal is currently underway. Underground work to support the fan relocation and the additional shafts has also been completed. In December, following the underground ventilation change, we'll begin to bring on the number three production unit and have four full sections operating as we enter 2027, which includes the sections still operating at our Laurel Fork mine. As Randy mentioned, this will put ultimate annual production from this complex well over a million tons of low-vol coal. Finally, at Elk Creek, we have successfully moderated production to be in better balance with the still oversupplied highball market. In October, our MP1 underground mine completed mining in our controlled reserves. This production has not been replaced. And with this, plus the idling of the section at our stone coal mine earlier in the year, coupled with the improving pricing environment, we have begun to successfully monetize the raw coal inventory built during the beginning of the year, when the high vault pricing was much, much weaker. We expect to be down to normal working inventories of raw coal shortly after the start of the 2027 calendar year. Strategically, though, we have two sections which could be reactivated quickly at Elk Creek if we see the market need and the proper price support for our low-sulfur highball coals. With that operational overview on the MET side of the business, I'd like to hand the call over to our Chief Commercial Officer, Jason Fannin, to discuss the market.

Thanks, Chris. Today, I'll review our Q3 sales results at the 2026 sales position, discuss our 2027 domestic settlements to date, share our views on the Metco market, and highlight our low-ball growth strategy at Bowen and Maven. As we enter the final quarter of 2026, I want to highlight the stronger sales mix that Ramico has built throughout the year. We have added incremental domestic tons in 2026, with significantly more for 2027. We are effectively sold out for 2026. As of the end of Q3, we had secured commitments for 4.2 million tons. Slightly over our sales guidance range of 4 to 4.1 million tons, which anticipates that some committed Q4 sales could slide into January, as often occurs. For 2027, we have largely concluded our domestic settlements, although a few of our specialty customers will finalize later in Q4, as usual. As Randy mentioned, to date we have secured 1.7 million tons of North American business at an average price of approximately $139 per ton. Growing our domestic volume by nearly one-third year-over-year. That outcome reflects firm domestic steel fundamentals with U.S. hot-rolled coil prices above $1,300 per short ton and one major domestic steelmaker deferring a planned 2027 blast furnace-free line into 2028. Another has just returned its largest blast furnace to service after a substantial investment. A larger fixed-price domestic book gives us meaningful revenue visibility for 2027. While keeping our export tons positioned for further market upside. Turning to the market, pricing strengthened in the third quarter. Australian POV averaged about $248 per ton, up roughly $10 from Q2, peaked near $285 in September, and is about $262 today. Highball A averaged about $171 per ton in Q3, up $13 from Q2, and is at $190 today. High-vol B is at $174, a level last seen two years ago, and U.S. lowball is at $210 per ton. The weakness in high-vol prices that we saw through the first half appears to be behind us. Idlings, closures, years of limited investment, and improved price discipline have put a floor under pricing. High-vol A is held above $180 since the start of September and remains at $190 today. And its relativity to PLV has improved to just over 72%. China is sending mixed signals. Shaanxi safety inspections tightened supply, and PLV volumes delivered to China rose about 50% quarter over quarter. But the weak domestic demand continues to push Chinese steel into export markets. Finished steel exports have topped 10 million tons for five consecutive months, capping global steel prices and how far seaborne medical prices can rise.

Looking further out, India remains a primary engine of coking coal demand growth.

Australia's Office of the Chief Economist forecasts Indian met coal imports rising from about 90 million tons this year to 94 million tons in 2027, as Indian mills continue to add blast furnace capacity. Taken together, we believe the floor under met coal pricing is firmer than it was a quarter ago, although Chinese steel exports may limit near-term upside.

That is why we are focused on growing our low-vol production.

Low-vol supply is structurally tighter than high-vol, and it is that quality that stillmakers in India and other growth markets rely on for stronger cook blends. As Maven ramps up alongside Berwyn, we are building a larger, more consistent low-vol offering that reaches customers our high-vol tons alone cannot. Over time, that shifts more of our portfolio toward the higher value end of the quality spectrum. So to wrap up the Metcold side, our 26th book is essentially complete. Our 2027 domestic book is in place at both higher volumes and attractive fixed pricing. And our growing low-vol platform at Berwyn and Maven broadens our reach into the market's premium segments. Our focus remains on enhancing the value of our sales portfolio, both in product mix and market positioning. With that, I'll turn the call over to our EVP for Critical Minerals Operations, Mike Woloschuk, for updates on the continuing progress of our brook mine project in Wyoming.

Thanks, Jason. Our key focus areas in Q3 on the upstream geology side have been to continue the infill drilling program, and on the midstream side, to advance construction of both the internal laboratory facilities and the pilot plant. Drilling continues in a targeted area within the 4,500-acre permitted zone. Geological modeling, supported by independent third-party experts, showed good continuity of kaolinite. Critical minerals hosted in kaolinite represent about three-quarters of the project revenue, so this finding is favorable for drill spacing requirements as we increase the resource confidence level from inferred to indicated. Last quarter, we anticipated commissioning the internal chemical and metallurgical testing laboratory in Q3. However, we are awaiting installation of two fume hoods, which will now push commissioning into this month. To support the increased on-site activities in geology, analytical lab work, and metallurgical testing, we completed two additional hires in Q3. Last quarter, we onboarded our director of analytical laboratory, and in Q3, we added a vice president of geology and a senior director of metallurgy. In Q3, we obtained the full results from the series of carbochlorination tests conducted at a third-party laboratory. And as Randy stated, the results confirmed exceptional extraction across the board for our key REEs and other critical minerals. The Hatch team has been focused on advancing the pilot plant design. Process definition studies to determine the key pilot plant equipment selections were completed. Zetan commenced process plant module design for the front end of the flow sheet. These skid-mounted modules will be released in stages as we progressively collect bench-scale results to support the designs. We received two e-waste samples that were assayed by independent labs, and we're going to continue to source additional samples for assaying, and these samples will be prioritized for our carbochlorination testing. Over the next six months, we plan to complete the drilling necessary to lift the resource. to indicated and complete significant bench-scale metallurgical testing across the flowsheet. The results will support downstream pilot plant module designs and the pre-feasibility study. These tests are planned to incorporate e-waste into the feed, and we will report the results as those milestones are achieved. We anticipate more visibility into the pilot plant execution schedule as the engineering, procurement, and fabrication schedules are developed by Zetong. I would now like to hand over the call to our Senior Vice President of Critical Mineral Sales, Orrin Atkins. Thanks, Mike.

Good afternoon. Last quarter, we introduced our critical mineral marketing effort and said we expected additional MOUs to follow the release of the Hatch Study. I'm pleased to report that in August, we executed three non-binding MOUs, and that our commercial pipeline continues to grow and mature across every product in the Brook basket. Two of the three MOUs cover gallium, sitting at different points in the same supply chain. First is with Indium Corporation, a long-established global supplier of specialty materials to the semiconductor and electronics industries. As Indium currently serves hundreds of downstream customers, this gives us a channel into a broad base of end users to secure offtake for bulk tonnage of gallium. The second is with Bedrock Semiconductor, a U.S. company developing native gallium nitrate substrates and GAN devices for data centers, telecom, radar and satellite systems, and electric vehicles. Bedrock represents a direct pull from a device maker that wants a domestic source of high-purity gallium. Together, these agreements validate demand at both the refining and the device level. The third MOU is on the supply side with RoboLoop, which uses AI-driven robotics to disassemble e-waste more cost-efficiently. It focuses on isolating gallium-rich streams that were previously uneconomic to recover. This gives us a low-cost option to supplement our brook ore feed over time. These MOUs, along with our re-alloys MOU announced in the second quarter, represent a path to definitive agreements through technical qualification, pricing, and achievement of the project's development milestones. We are in ongoing discussions with these parties and others to solidify these agreements. Beyond the announced agreements, we continue to advance commercial discussions for every material in the brook basket. On rare earths, our MREC contains a valuable mix of both light and heavy rare earths, including the magnetic critical elements. We are working in parallel with our technical team and the lab development program to identify the best separation solution for this product mix and to pair it with the right offtake partner. Alongside our re-alloyed MOU, we continue to engage with separators both domestically and in allied nations, with the goal of capturing value across the full basket of elements. In scandium, we are taking a two-track approach. We continue off-take discussions into the solid oxide fuel cell market, where demand for a stable domestic supply continues to grow. In parallel, We are advancing an alloy development initiative to standardize scandium and new aluminum and titanium alloys for aerospace, space, defense, and transportation applications, which we believe can open significant new demand channels for brook scandium. In high-purity alumina and high-purity silica, the carbo-chlorination flow sheet gives us flexibility, as we have the option to increase or decrease HPA and HPS volumes to suit downstream demand. We are in discussion with various counterparties across the battery, semiconductor, and specialty ceramics markets to place these materials and to grow our supply as those markets continue to expand. Lastly, The HATS study identified the ability to blend e-waste and other secondary feedstocks with our ore, and we view these secondary streams as a sweetener that can improve project economics and production yields of the brook basket. This quarter, we initiated outreach for secondary feedstocks across four general source areas, one from IT asset disposition, or ITAD firms, and other recycling companies. Two, from off-streams of smelting, refining, and other downstream recycling facilities. Three, from semiconductor scrap and wafer manufacturing facilities. And four, from circular arrangements with waste and spent materials with off-take counterparties. We are in various stages of testing and sourcing samples. As samples arrive at our Wyoming laboratory, we'll evaluate each stream for technical compatibility and economic value, in parallel with the lab and pilot plant development Mike spoke to. Looking ahead, our focus over the coming quarters is converting MOUs into definitive agreements, advancing separation validation, alloy development, and offtake solutions for each of the brook basket materials, and evaluating secondary feedstock streams to further enhance project economics. We'll report progress against those milestones each quarter. With that, thank you, and I'll pass it to the operator to open up the line for questions.

Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster. Our first question comes from Brian Lee of Goldman Sachs. Please go ahead.

Hey, guys. Good afternoon. Thanks for taking the questions. Maybe just wanted to start on the medical pricing environment. I know you're not ready to, you know, give us kind of the 27 view quite yet, but just given, you know, the strength in the market of late and your comments around near-term maybe stability, could you at least kind of frame of reference, you know, direction of travel here, you know, puts and takes on pricing for that part of your business into 2027? It sounds like you might be comfortable assuming more of a flattish environment, you know, given some of the comments around somewhat improving markets in the press release, but just, you know, I didn't want to read too much into that. Maybe any sense of where we should be expecting pricing heading into next year?

Yeah, Brian, I don't think we're expecting a flattish environment, but I'm happy to have Jason respond to your question.

Yeah, Brian, this is Jason. Yeah, I mean, certainly we've seen, you know, prices up Q3. You know, I think our export netbacks have tracked those. You know, we've seen them come up further, roughly on average, the U.S. indices up about 9% quarter over quarter from where we sit today versus Q3. You know, so I'd expect, you know, a similar uptick in Q4, you know, taken with the fact that we're still seeing these impacts from diesel pricing and bunkering on the freight market, so we won't pick up that entirety of the game. But, yeah, as Randy mentioned, going into 27, I mean, we feel good about the projection of the market. You know, you look at the forward curve, it's flattening out at a pretty high level. I think I last looked at it yesterday. We're right around $255 for PLV. Fairly healthy number, certainly more healthy than we've seen, you know, up to the back half of this year. So, yeah, certainly we have reasons we think to be optimistic as far as next year's pricing goes.

All right, fair enough. That's helpful. And then, you know, since you mentioned the cost, You know, you've been pretty specific that a lot of it has to do with diesel cost here. Is there any cost mitigation efforts you're able to implement, or is there any kind of, you know, ability to offset some of those cost inflation measures, especially on the freight side, or is this something where, you know, we're just going to consistently be kind of watching the macro and clearly what's happening out in the Middle East to get a sense of when you might get some cost relief?

Yeah, I'll take it on this.

Go ahead, Stacey. Can you talk about the rate? You can talk about the mine.

Exactly. Yeah, Brian, I'll start out just a little on the sales side and then hand off to Chris on the ops side. But yeah, I mean, the sales end, you know, we're seeing most of the impact, you know, back to our bottom line, of course, on the vessel freights, on the freight differentials going to the Pacific. You know, the best way we can mitigate that, of course, is be smart in the deals we're doing. You know, as the year winds down, of course, there's less and less spot availability out there. You know, I'd say for some of the deals we've done most recently, you know, we've taken a view on a fixed, you know, differential or a fixed freight, and that's worked out okay for us. Just being smart about the freight we're booking essentially right now and not booking until we have to. And then working with partners, I have the ability to hedge those as well.

So then on the sort of at the mine level costs, Pretty difficult to deal with the diesel, but we're continuing to work with all our vendors and suppliers to mitigate costs on everything else that we buy, roof bolts, rock dust, supply-type items through longer-term agreements or committing to one vendor for favorable pricing. And that's helped this year to mitigate some of the rise of diesel, but obviously not all of it.

Yep, makes sense. Last one for me, and I'll pass it on. The delay in the pilot plan from first half 27 to second half 27, I know you kind of talked to it a little bit. Can you elaborate a little bit on what's driving that? And also, do you expect that would have any impact on, you know, customer engagement and, you know, the potential to convert more offtakes?

Yeah, it's my mic. Let me take that one. It's due to the late start of our internal lab. I mentioned the fume hoods were late to come for the carbochlorination. We need to get those installed. Those bench scale results are to generate design criteria for the pilot plant. That's what's shifted out from middle of the year into the second half. We don't anticipate any delays at this stage of, you know, off-takes, so those discussions are happening. We do feel like we can probably get some samples, at least for partial basket at bench scale, where we have larger quantities that we can start some of those quality analysis with off-takers, even from bench scale data. So we don't see anything that's going to be an issue for us.

Okay. Appreciate all the color, guys. I'll pass it on. Thank you.

Our next question comes from Matthew Key of Texas Capital. Please go ahead.

Good afternoon, and thank you for taking my questions. You mentioned that you're still working on some specialty shipments in the domestic market. Could that have a material impact on increasing domestic volume under contract, or is the 1.7 pretty much what we should expect in regards to the domestic book as we look out to next year? No, Matthew, this is Jake.

I think what you'll see is this is usually an additional couple hundred thousand tons, and it's among our highest-priced business. This will probably take us just short of two million tons, somewhere in that range, and it'll add a few dollars. To our average realizations, and maybe just to follow up to one of the previous questions, I mean, I think when you look at the fact that, you know, high vol A pricing is up about, you know, 26% year to date, as Randy noted in his remarks, coupled with, you know, incremental domestic volumes at higher prices, I think what you'll see for 27, again, we're not giving formal guidance, but a very different environment on realized prices than what you're seeing right now. Got it.

That's super helpful. And I just wanted to, you know, touch on expected shipment cadence in 27, just given the moving parts around the incremental low-ball production that was brought online. Should we expect, you know, a weight in maybe more into the second half of 27 as we model out shipments, or will the incremental low-ball production be pretty much available for sale, like, immediately at the start of the year?

Yeah, it's a good question, Matt. So I'd say it's something we're refining as we speak. So as we said, we've got about an excess of, call it 600,000 tons of inventory above normal. So obviously, as Chris said in his remarks, we've got the ability to ship that pretty early in the year. I think I'd probably spread that out for a few quarters, you know, at least into kind of mid-year. So, yeah, I think you'll see a shift from inventory in the first half, which will certainly help with working capital and cash. And then in the back half of the year, obviously, some of the low-vol production will be fully up and running. And so that'll probably offset any inventory decline. So I think right now I'd probably model a little bit heavier in the second half than the first half, But nothing dramatically different, again, given kind of the inventory situation.

Got it. That's very helpful. Well, I will stop there and jump back in the queue, but thank you for the time, and best of luck. Thank you.

Our next question comes from Nathan Martin of Stonex. Please go ahead.

Thanks, Operator. Good afternoon, everyone. You know, I want to think about 2027 as well. I guess Can you guys talk about the potential for additional exports to China in 27 and even 28 if the country follows through with its plan to import roughly 10 million tons of U.S. coal per year?

We're not Chinese sellers. Sorry. No, we have not sold China directly to China, nor is that on our wavelength for next year. We do sell in Asia, but not into China. And I do think if the planned 10 million ton sort of allocation, if you will, that China has, I guess, agreed to take, that will probably sop up some tons that would otherwise be going from some of our other producers, which we think will actually, on a net basis, help us into some other Asian markets, non-China. So, we view it as positive, but not as positive from us directly shipping into China ourselves.

Perfect. That commentary is what I was after. I appreciate that. The other question I had, maybe for Jason, how should we think about the mix for fourth quarter sales between domestic export? Maybe any commentary on quality as well. Thanks.

Yeah, sure, Nate. Yeah, roughly speaking, I think Q4 is going to look a lot like Q3 in terms of the domestic seaborne split, frankly, and also in terms of the index exposures. I think in Q3, we're roughly, call it 35% domestic, about 40% going to Asia. You know, I'd say the rough numbers, you've got the same exposure to PLV there as well as the tons going to Asia, that percentage. So, you know, on a ton-for-ton basis, I think fairly similar to Q3. Of course, we're seeing the indices today up versus Q3. Should those hold, we should see a like increase as well in those net max.

Appreciate that, Jason. Then maybe just one question on the rare earth side. I guess you guys made the comment that at this point you're expecting to spend a maximum of $25 million or so on the Brook Mine Project in 2027. How do you see that CapEx expanding post-2027? I think you still expect to make the decision to move ahead of the commercial facility before year end next year. Any further comments would be helpful. Thank you.

Yeah, I mean, we view the refinery as a separate project financing, obviously, from the pilot phase, which, you know, once we put together a package for that, which, as we've discussed before on a number of occasions, could come from a mosaic of a bunch of different sourcing, either governmental or non-governmental, including potential for us to sort of drop down our critical minerals into a separate entity and do some capital market transactions around that. So we got at least a year to worry about that particular issue. I think the main takeaway we wanted to give is that in terms of where we are viewing our 27 spend, we're not only, you know, fully capitalized to do so, but it's a relatively modest sum, certainly in comparison to the refinery. And, you know, we're really fully capable of getting everything to the point with the bow around it. To a time position of sometime next year, and we'll certainly keep the market well-informed as we move forward in our financing plans.

I appreciate that. Randy, thanks for the time. I'll pass it on.

Yeah, thanks.

Our next question comes from Nick Giles of B. Riley. Please go ahead.

Yeah, thanks, Operator. Good evening, guys. You started to hit on some of it there, but I just wanted to ask about total spending in the rare-earth business. It's helpful to see you break it out between segments. CapEx is below $10 million year-to-date, but SG&A has been creeping higher. You mentioned some new hires. So should we continue to expect that to increase, or is there any ability to reduce that spend ahead of FID? Just any more comments on how investors should think about total spending for this business would be great.

I think the way to think about it, Nick, is pretty much what we've telegraphed here, that we've got a $25 million bogey, which takes us pretty much to the end of the point where we would make a decision as to proceeding and, obviously, what the financing parameters of that would look like. And that will include, of course, any personnel that we'll be adding between now and then. And candidly, Mike can certainly correct me, but I think most of the personnel is going to be around lab technicians and folks of that nature, which are not high-spend ticket groups of hires. But Mike, please give some more color if you'd like.

Yeah, I think, you know, I highlighted some of the leadership that we needed across the disciplines to run these programs, but as Randy said, we'll be adding some bodies, technicians in the analytical lab and the metallurgical lab, and that's once the pilot plant gets up and running towards the latter part of next year, obviously some operators and that spend will probably be recognized mostly in 2028.

Yeah, I think the one takeaway that I'd like to make sure everybody understands, you know, we're kind of in a bit of a unique position because from an upstream standpoint, we are all dressed up and ready to go. I mean, we've opened the pit. If we had a refinery down the street, which would be in a position to take our feedstock, we would be selling and mining that today. You know, instead, we've opened the pit and we've mined enough for our pilot operations. As we continue to use that up, we'll mine more. But, you know, the real problem that, you know, the U.S. faces is there's no midstream capability here. And so, therefore, you know, we are perhaps like others having to, you know. Design and build our own capacity for midstream operations, which, you know, will put us in a rather unique spot once we're there. But, you know, until we get there, you know, we are pretty much self-contained and fully financed.

God, I know that's helpful. I guess just trying to better understand that $25 million, is that just the CapEx? I'm looking at SG&A year-to-date, and that's run rating near $25 million. So, I assume that would repeat in 2027, and then if you add on the additional CapEx, that implies something higher. So, can you just help me better understand what that $25 million refers to?

Yeah, so the $25 million is just the CapEx next year, Nick. We'll, again, kind of... Go through the detail, but that's obviously the pilot plant, the PFS, and some further drilling. Those are kind of the main three items. And, yes, the OB-X, I would say, will probably continue at similar rates. And then that basically gets us to a point on, you know, final investment decision. You know, I think the other point I would sort of make on the chart that you pointed out, and, yes, we did kind of break out in our earnings release for the first time, kind of the key spend between the Metcol business and the rare earth business. You know, if you look, even in a really depressed pricing environment, I mean, the Metcol business has generated about $25 million of EBITDA year to date. That's almost exactly in line with maintenance CapEx. So, you know, in an environment where highball is trading into the second quartile of the cost curve for a good portion of the year, we're still, you know, basically breaking even on the core business. And I think that's important to remember because obviously that means anything we spend above and beyond that is fully within our control.

Got it. No, Jeremy, that's super helpful. I really appreciate the clarification. Then, you know, Randy, I think you alluded to a separation just earlier. I just wanted to ask about that. You know, can you just talk about your appetite to separate the rare earths business, what the logical timing is? I mean, as you mentioned, the equity has been pulled down with the critical minerals group, which has made isolating the Metcol business more difficult. So I'm just wondering if this volatility increases your desire to do that sooner or later. Appreciate the comments.

Yeah, I think, you know, as you view a drop down of a separate operation, we certainly wouldn't orphan it from the mothership, so to speak. And I think in terms of any, you know, capital market transactions, you obviously want to time that to coincide with, you know, a fairly robust book of business, you know, whether or not you're producing actual revenue, because we obviously we use the capital market raise for purposes. of building a refinery, so we're still several years out from, you know, revenue. Uh, recognition from the critical mineral side. But, you know, I think in terms of separating the businesses now, you know, we will be guided by, you know, some further steps as we refine actually what the sizing and sort of portfolio basket will look like as we get a little bit further down the road from our testing and pilot work. Because we've got some optionality. You know, we designed this thing in the hatch report, as you saw, with sort of two different metrics in terms of size. We were kind of nudged into the higher sizing with some potential interest from certain quarters. And we certainly don't have to go to that route. We can go to a lower size and production. We're going to have a new slate to get started and then bolt on as we go. So I think all of those kind of questions will answer themselves, you know, as we get a little bit further out on the diving board. And I think in terms of a cap to market transactions, we want to have as many, many of these items nailed down before we go and start any type of a float of a separate entity.

Understood. Okay. Well, appreciate the perspective, guys. Very helpful. And continue. Best of luck.

Our next question comes from Jeff Gramp of Northland Capital Markets. Please go ahead.

Evening, guys. I was curious to dive into the topic of the recovery results you provided on the critical minerals business, pretty strong across the board. I'm curious, just for some additional context there, can you give us a sense of how those recoveries compare to any prior tests or what you've kind of assumed in any economic or technical reports?

Yeah, you know, I think if you look at flow sheet options in just about any rare earths or critical minerals flow sheet, the rare earths themselves, you know, you can get high extractions generally with almost all the flow sheets. Getting high extractions of scandium, gallium, germanium, that's a bigger challenge. Those critical minerals are being hosted with the kaolinites. And this flow sheet achieves significantly higher extractions of those than we had in previous flow sheets. So we were in the 70 range, if you will, for scandium, slightly below that. And so this is, you know, a 20% increase in recovery in some of these elements. And I think the other thing to note, we're confident that this also gives us an opportunity to produce some higher purity final products because of the volatile chlorides versus trying to get higher purity from the old flow sheet. So that's going to be proven by test work, but we're quite excited by the results that we've obtained through a suite of tests so far.

Great. I appreciate those details. For my follow-up on the cost side of things on the net coal business, the guide looks like it's kind of implying Q4 cast costs to maybe be similar-ish to Q3. How are you guys seeing that trending into 27, given both the mix in production shifting as well as the rail loadout facility? I understand you can't predict diesel prices, so maybe if we throw that variable out and just kind of focus on things you guys can control, just trying to get a sense of where we should think about 27 trending.

Yeah, I'll start, and Chris can add any callers. So, yeah, I mean, I'll throw diesel out in a second, but unfortunately, it's tough to ignore. So, I mean, obviously, diesel is just under $6 right now. It averaged a little under $5 in Q3. So, you know, we're certainly factoring that into your Q4 numbers, which I, you know, agree with at the midpoint of your numbers. Remember, you also have two weeks of vacation in Q4 where obviously the workers get paid, so that's almost always one of your higher-cost quarters as a result of that. But look, as you head into next year, I mean, I think, again, diesels cost us $3 to $4 a ton this year compared to where it was to begin the year, so that is a big variable, and I would certainly factor that in. At the same time, I think it is slide 19 in our deck. I would point you to where you can see our mix. Thank you. In terms of actual margin expansion, so long-winded way of kind of giving you some of the puts and takes, Jeff, and obviously, you know, as Randy noted in his remarks, we'll come out with formal guidance for 27 in about a month after our board meeting.

Great. I appreciate the details, Jeremy. Thank you, guys.

Our next question comes from Alex Furman of Lucid Capital Markets. Please go ahead.

Hey, thanks, guys, for taking my question, and congratulations on some of the progress you guys have made on the critical mineral side and starting to identify customers and MOUs. Help me understand the timeline here. At what point in the process, as you get closer to completing your PFS, at what point will some of these conversations with customers start to focus on price, And how much of the ultimate investment decision is going to depend on some of the prices that you realize, especially for some of the more obscure minerals like scandium and germanium?

So I'm going to let Oren give a little bit more complete answer, but let me talk a little bit about the capital market issues that you've raised. I think clearly having... Customer acceptance of our product at the various levels and pricing will be a significant input to how both we and the market view the modeling of the refinery project. So I think that's a pretty obvious statement. I think, you know, in terms of defining the individual variables which would go into a contract, that will vary. Some of that may even be involved, particularly if it involves any government discussion, some of that is tied to also procurement issues. So there may be some tying, if you will, of those type of situations. But I think in terms of third-party independent commercial offtake, you know, we are actively in discussion with some of our potential larger users, particularly on some of our name minerals. And I would say at this point, you know, when you're pricing a product that won't be put in somebody's hands for a couple of years, you're not going to go into a fixed price arrangement for obvious reasons. Particularly given the volatility in the critical mineral and rare earth space, but I do think that, you know, as sort of the general market indexes begin to get some greater degree of transparency and, frankly, institutional acceptance, that, you know, we'll be more comfortable in probably pricing off various types of index situations as we view the future. And Orrin, please pick up on that. Elaborate any way you want.

Yeah, sure. I would guess just on the contractual front, I mean, we're in various stages of those conversations now of shifting from a non-binding MOU to a more binding agreement and reviewing language and what that needs to look like and can provide guidance to move forward. And then on the pricing side, I mean, as Randy alluded to, it kind of depends on the material. Some materials in our basket have more visibility into a Western index, or some of them have a price floor that's already associated with them. Others maybe have a more limited transparency, but that is starting to evolve, and you're starting to see more index shops such as S&P and others step into it to provide more transparency into these minerals that are evolving. So we're keeping our options open and getting into those details now.

Okay, I really appreciate that. Thank you very much.

This concludes the question and answer session. I would like to turn the conference back over to Mr. Randall Atkins, Chairman and CEO, for any closing remarks.

Well, again, I thank everyone for joining us today. As Jeremy indicated, we'll probably be providing some further information. It'll be early next month after our board meeting in December, and then, of course, our next time with you will be after the new year when we report our year-end results. So, thanks again, everybody, for joining the call.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.