Ramaco Resources : Rare Earth Element Update Call – March 2024

Corporate Participants

Randall Atkins Ramaco Resources, Inc. - Founder, Chairman, Chief Executive Officer Alex Moyes Ramaco Resources, Inc. - Director of Critical Minerals and Planning Jeremy Sussman Ramaco Resources, Inc. - Chief Financial Officer

Conference Call Participants

Carlos De Alba Morgan Stanley - Analyst

Nathan Martin The Benchmark Company - Analyst

Pavel Molchanov Raymond James - Analyst

Lucas Pipes B. Riley Securities - Analyst

Sam Tisch Millennium Management - Analyst

Presentation

Operator

Hello and welcome to the Ramaco Resources update conference call.

[Operator instructions]

I would now like to turn the conference over to Jeremy Sussman, Chief Financial Officer. Please go ahead.

Jeremy Sussman - Chief Financial Officer

Thank you. On behalf of Ramaco Resources, I'd like to welcome all of you to our first rare earth elements update conference call. With me this morning is Randy Atkins, our Chairman and CEO, and Dr. Alex Moyes, our Director of Critical Minerals. Before we start, I'd like to share a 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 Ramaco's expectations concerning future events. These statements are subject to risks, uncertainties and other factors, many of which are outside of Ramaco'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, Ramaco does not undertake any obligation to update or revise any forward-looking statements, whether it's result of new information, future events or otherwise. I'd also point you to additional REE specific disclosures in our March 21 material, including Randy's shareholder letter which can be viewed on our website www.ramacoresources.com. Lastly, I'd encourage everyone on this call to go on to the homepage of our website and download both the shareholder letter and the full Weir Technical Report. With that said, let me introduce our chairman and CEO Randy Atkins.

Randall Atkins - Founder, Chairman, and Chief Executive Officer

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Thanks, Jeremy, and good morning to everyone. Although the day has the feel of one of our quarterly earnings calls, it's somewhat of a different breed. Today we are going to discuss in more detail our rare earths, which is a new line of business that Ramaco has been working on for some time.

I want to make clear that our potential rare earth business is in development mode. Because of the shareholder interest generated in this project, we felt it was appropriate to now have a public presentation of where we are in the development cycle. I have Jeremy speaking to some of the more business-related aspects and importantly we recently brought on Dr. Alex Moyes to help oversee our rare earth efforts. Alex is got some serious experience in the entire area, including a PhD thesis which focused on rare earth mining in Wyoming and we're delighted to have him guiding us.

The updated Weir report was released last week, as Jeremy said, and had some very positive results. They provide us some confidence that on the basis of that geological testing, we may have the foundation for a commercial rare earth project. But that said, we've gotten a lot of geological, metallurgical, mineralogical and techno-economic work ahead of us to prove all that out. So with that as a preamble, the purpose of today's call is to discuss, first where we are on the critical path for the mining, the processing, and future commercialization opportunity. Second, what near-term steps we will be taking for the rest of the year to advance the project. Third, what are the sort of quote "known unknowns and known knowns," so to speak. And lastly, how we're contemplating structuring the capital investment to move the project forward.

As you all know, this rare earth opportunity was publicly introduced about a year ago. Since 2018, however, we have been involved with the US government in an ongoing geological assessment of our Brook Mine property in Wyoming. In 2019, we received the discovery that the Department of Energy's National Energy Technology Lab, or NETL, had determined that the mine had unusually high primary magnetic concentrations, and that was from testing only a limited number of core samples we had provided. And as far back as 2014, NETL had been tasked by the Defense Department to do a national assessment of where REEs might be found in the US, given both their scarcity and the strategic national importance of these elements. Indeed, we hope that this project will one day contribute to solving that scarcity and become a vital national domestic source of these valuable elements.

Today, after several years of core testing and additional core drilling, the geological aspects of the prospects have matured. Because of that, we can now address some threshold issues. One is whether the REE deposit is

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large enough or concentrated enough to be considered commercially viable. From the results of the Weir report, it's now our conclusion that the geological analysis has reached this critical mass to validate its commercial prospects. Indeed, one important aspect of this project today is that we essentially began this overall development roughly almost 12 years ago. Because of that we're now positioned to now transition from testing and move forward into a commercial development cycle. Our mine is fully permitted - it took us an eight-year slog - and indeed, we've already begun actual mining to develop bulk core samples for additional pre- commercial chemical testing. Our near-term goal is to complete most of that geological and chemical testing this year and produce a full blown techno-economic report by Q4.

Alongside that work, we will be exploring with third parties the optimal processing techniques that will apply to our geology and chemistry. And this could then set the stage for, in 2025, considering either to construct a pilot processing facility on the site, or to have that pilot testing done in a third-party facility. We hope that this would then lead by 2026 to preliminary commercial production. Admittedly, this is a long runway, but if each piece of the puzzle falls in place, it is achievable. We are starting this REE development as an established metallurgic coal producer and not as a startup junior miner. Ramaco's coal operations are growing in size and financial capability, but with a very conservative capital structure. Our team is experienced in successfully starting new projects from scratch. And we also start the Brook Mine project from the position of already enjoying a solid core cash flow pipeline from our met coal operations. That's going to enable us to develop this project for the optionality of what is going to be the highest value proposition as far as the shareholders of Ramaco are concerned.

Now, let me briefly summarize the findings on the geology and chemical testing we released last week. Then I'm going to turn the floor over to Jeremy to discuss some of our options on funding the development, and then I will have Alex explain in more technical detail what the results mean and what we will be doing to move the project forward on a variety of operational fronts.

As I said in my shareholder letter released last week, what we know now is that the Brook Mine is the largest unconventional rare earth discovery thus far the US. Also, NETL has a variety of theories geologically as to why the REE was formed in this spot, and came to be deposited in our mine, which Alex will address. In a nutshell, we have independent testing that's validated we possess about 1.5 million tons of various REEs with an average concentration of almost 600 parts per million. These numbers will likely grow as we do further testing and

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coring. Also, recall that these totals are from less than a third of the property and its shallower depths. The deeper and the broader the physical areas we test and core, the more we expect to add to these totals.

The REEs were found in a variety of different seams and but lithologies, but one important fact is we do not have radioactive tailings which would make the mining and processing much more expensive and complex. The concentration levels are important as a marker for the cost and difficulty of processing the REEs economically. Some of the deposits now show concentrations particularly in coal, which are much higher than the norm, and indeed, the level of almost 10,000 parts per million. And through some physical and chemical techniques, all of these concentrations can be further enhanced for processing.

We're now also starting to do more deeper cores, because NETL has a theory that there may be greater concentrations at deeper levels. We have previously cored to only about 200 feet, and we know that there are seams that go down to more than 1000 feet. Testing on these deep cores also opens the possibility that we might pursue a variety of mining techniques, surface highwall or even in situ mining at different parts of the property, and of course with different cost structures. The REEs we've found to date are extremely valuable. Testing so far indicates that about 40% of the deposit contains primary and secondary rare earths, including two very valuable critical minerals, germanium and gallium. And both of those two minerals were banned from export by China last year, and candidly, may be about more valuable than almost all the other rare earths except for perhaps Terbium.

If we step back and look at this opportunity, one analogy would be to size this up as another major Ramaco mine project. But one with the possibility, however, to process the mine product ultimately to an even higher value end product. It's too early to declare that this might be a mine-to-magnets project. However, both the deposit size and the concentration levels would suggest that this concept is not beyond contemplating. And as far as financing the project, as I said in my shareholder letter, we need further information on project economics and costs before we can begin to determine which direction to proceed there. We are going to preserve a great deal of optionality on our finances. However, given the growing cash flow from our met operations, and the potential high value returns from developing the REEs, we will probably have a bias to self-funding so as not to dilute our existing Ramaco shareholders.

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So with that as background, I'm going to turn the floor over to Jeremy to discuss the project economics and then to Alex to discuss the technical aspects of what we're doing. At that point, we're going to open the floor to some questions. And with that, Jeremy, please give us some background on the business side.

Jeremy Sussman - Chief Financial Officer

Thank you, Randy. I'm excited to talk about the business prospects of our potential new rare earth element business line. Even though we'll be focused today on rare earth, let me first say how proud we are of the growth in our core metallurgical coal business. With that said, we've been given a unique geological opportunity from the discovery of an exceedingly large and concentrated rare earth deposit at the Brook Mine. It's our goal to now de-risk and advance the commercial prospects of that project. Investors would then have the benefit of being able to view Ramco as both a growing metallurgical coal company and an emerging producer in the REE space.

I believe there are five unique aspects to Ramaco that would allow our prospects to stand out favorably, in contrast to pre-revenue junior mining companies, which as Randy noted we of course are not. First, as Randy mentioned, our mine is permitted after an eight-year odyssey. That in and of itself is a rarity. We also own the minerals, which are on private, not federal land.

Second, the deposit's not only uniquely large, it has now tested to show likely commercial concentration. It contains a slate of the most valuable magnetic REEs in almost 30% of the deposits, such as terbium, dysprosium, neodymium and Praseodymium. Two extremely valuable critical minerals, germanium and gallium, also make up another 10%. Importantly, our deposit does not show any radioactive tailings so we can ultimately process this ore in the United States without shipping to China for refinement.

Third, we're well capitalized to be in a position to fund the capital for development. Ramaco Resources generated almost $350 million in net cash from operating activities in 2022 and '23 from its metallurgical coal business. This all gives the company a major leg up financially to be self-sufficient compared to the vast majority of pre-revenue junior miners.

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Fourth, our management team has an excellent track record both growing a business from scratch and attracting the talent to do so. Ramaco has grown from mining its first ton of coal in 2017, to exiting 2023 at a 4 million ton per annum sales run rate with over 800 employees.

Fifth, Brook Mine is located in the true tier one jurisdiction near Sheridan, Wyoming. It's intersected by both Interstate 90 and the main line of the BNSF railroad. By contrast, over two thirds of all critical minerals are found in conflict zone countries around the world.

In terms of the value proposition of this mine, it's noted on page five of Randy's shareholder letter, the estimated size of the deposit is 1.5 million tons of total rare earth oxide or TREO. This is from sampling only a third of the site. The market value of our magnetic REEs and critical minerals are found in Randy's shareholder letter. Our mining extraction plans will focus on maximizing that value by focusing on mining and extracting those valuable elements, and not concentrating on the lesser value REEs. In terms of financing the project, we believe both the necessary investments to commercialize this asset is within both our operational and financial capabilities. Once we understand the capital and operational requirements to develop this new REE business, we can more logically provide a capital structure around how this unique opportunity should be financed. We'll maintain optionality on this, with of course one option being to internally fund the investment from Ramaco's own growing financial resources. Alternatively, there are other financing options and, in any scenario, METCB could maintain a royalty position in the REEs and critical minerals being mined.

As everyone is aware, there's increased focus from the government on securing domestic sources of key critical minerals. In fact, speaking of financing, earlier this month, a single clay lithium deposit received more than a $2 billion conditional loan from the US Department of Energy. The Brook Mine may also be positioned to be of significant strategic and economic benefit to the US.

I want to be clear that regardless of the financial direction we take, Ramaco's management remains committed to maintaining a conservative balance sheet while at the same time striving to return increasing amounts of cash to our shareholders. Lastly, as we look at the somewhat different unconventional opportunity, reality is the coal companies generally trade at fairly low multiples. This is one of the motivations for Ramaco to pursue this unique business line. There's only one active REE mine in the US today owned by MP Materials in California. For some comparative purpose or context, Ramaco generated more adjusted EBITDA net income in the second

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half of 2023 alone than MP generated for all of 2023, yet Ramaco's market cap is currently less than 1/3 of the market cap of MP. In summary, while there's clearly a lot of work that remains as we embark on a path to REE commercialization, we're excited for what lies ahead on this journey.

With that said, I'd now like to turn the call over to Alex Moyes, our Director of Critical Minerals to discuss the geological aspects of the deposit and our next steps in the commercialization timeline.

Alex Moyes - Director of Critical Minerals and Planning

Thank you Jeremy, and good morning everyone. Randy and Jeremy touched more on the business and financial aspects of the Brook deposit. I'm going to focus on the geological and operational aspects of our development.

Our exploration efforts at the Brook Mine deposit have been nothing short of exciting. As Randy mentioned, based on the Weir report released last week, our estimated tonnage has almost doubled since last year. That is because we've identified mineralization spanning multiple rock types, ranging from near surface level down to depths of approximately 400 feet. We now have significantly more drill holes in core compared to last year. Not only did we organically drill new bore holes and cut core, but we also inherited a massive drilling database with significant data from prior work on the property. We now have approximately 600 boreholes informing our geologic model and over 100,000 feet of core and lithologic logs. We have performed almost 30,000 XRS scans and over 1900 ITPMS analyses to date. This does not include the significant testing we are doing on our new deep 850 foot core.

The additional sampling has increased our average deposit concentration to 550 parts per million on an ash basis, a near doubling since last year. This number includes gallium and germanium, which are incredibly valuable elements, and as Randy mentioned, found in unusually significant quantities at the Brook deposit. We are currently estimating approximately 140,000 tons of gallium and germanium and at high concentration.

We are currently evaluating both the best way to process and separate these two elements as well as where we have the most overlap from our high-grade rare earths. This will have implications on the design of our process flow sheet and subsequent pilot operations. Also keep in mind that our efforts around gallium and germanium are relatively new. We had not previously focused on these two elements and therefore have significantly less

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data compared to our rare earths. We are however, now systematically resampling all our core and are dramatically increasing the number of tests we have on these two elements. So tonnage and concentration may actually increase as we further define these two elements.

I mentioned a moment ago, the concentration on an ash basis. Let me describe ash basis in more detail, because it's a really important point. The Weir report indicates our highest-grade zones are associated with rock types that have high organic carbon content. That is to say, it is not mineral matter, but an easy to remove constituent of the rock mass. Removing this carbonaceous material allows us to assess the concentration of the rare earth and the actual mineral matter. This is just like any conventional rare earth mining operation would report, given that their ore is 100% mineral matter.

Furthermore, it has been documented in academic literature and confirmed by us and SGS that dissolving the carbon in solution when performing concentration testing leads to an underestimation of the rare earths. This is due to the carbon matrix interfering with the machine's measurements. Early retesting suggests that, due to not removing the carbon from our original samples, we were likely underreporting our rare earths concentration by 10%. We are currently in the process of retesting a majority of our samples, and we will rereport our revised concentrations and a later TRS.

Now back to the geology. We have determined that the mineralization encompasses coal seams and associated rock types including sandstones, siltstones, and shells. Importantly, our mineralization is essentially free of radioactive materials, which many domestic and international deposits are having to contend with. Removing radioactive waste can create a significant cost increase when compared to a deposit free of them. As a result, many producers find the only place they can refine their radioactive ore is in China.

Also what's particularly intriguing, geologically, is the emergence of what we've come to term "fairways," which exhibit significantly higher grades of rare earths. These zones demonstrate lateral continuity, suggesting geological controls that concentrate the rare earth elements within specific areas of the Brook. We will now focus on these high-grade regions to gather additional data and optimize our exploration efforts. As we better define and understand these high concentration zones, such as depth and ore thickness, we can make determinations of initial mining methods and do mine sequence planning.

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Interestingly, we've now found the highest concentration zones to be associated with the coal seams. This finding holds immense significance in how we think about our mining and processing of this highest-grade ore. Because of enhanced testing techniques recommended by our consultants, we are able to more precisely sample our coal. Now as we resample these zones from both recovered core and new drilling, we anticipate a combined increase in average concentration within the deposit as a whole, as well as tonnage associated with the coal. Rare earth element oxide tonnage associated with the coal currently stands at 5% or 70,000 tons of the deposit.

It is also worth noting that while we have not definitively established the trend, it appears based on limited tests from deeper zones, that concentrations are increasing the deeper we go. We have a handful of cores down to 400 feet, and those deeper zones do show an increase in concentration. We now have a new deep core that went down to 850 feet and has intersected some large coal zones that we are awaiting testing data on. Having even higher concentrations at depth opens up possibilities for alternative and probably less expensive mining methods such as in situ recovery mining.

This trend is so far consistent with the hypothesis proposed by our colleagues at NETL. That theory suggests that concentrated rare earths within our coals may be due to the infiltration and upward migration of fluids through permeable and porous coal aones and sandstone. These zones have high flow ability which could be due to extensive fracture. The fluid could have been acidic enough to then dissolve the rare earth into solution in situ and then redeposit them in these high concentration zones. The fact that the location of the Brook deposit is on the steep structural edge of the Powder River Basin and likely in an area with increased fracture intensity could partly explain why this deposit is so enriched compared to other parts of the basin. These fractured zones have been identified in core, but not mapped related to the highest concentration areas at this point. That work is ongoing.

Looking forward towards our critical path, let's delve into our ongoing initiative and what lies ahead. Mineralogical analysis of both ore and non-ore zones is now underway. Understanding which minerals our rare earths are associated with, as well as the gains or the non-portion, the non-ore portion of the rock mass, is pivotal for cost efficient concentrating techniques. Understanding mineral distribution, sizes, associations and other properties will be used to inform which physical concentrating tests we should focus on.

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