METC Q1 Performance Falls Short of Expectations, but Q2 Improvement Expected with Full-Year Guidance Maintained

Overview

This report presents Goldman Sachs' initial review of Ramaco Resources' (METC) 1Q26 results. Key conclusion: Q1 performance missed expectations due to weak pricing and high costs, but the company reaffirmed full-year production/sales guidance and expects Q2 sales volume improvement. GS maintains Neutral rating with 12-month target price of $15, essentially in line with current $15.17 share price.

Core views

Performance shortfall: METC reported 1Q26 revenue of $122M, slightly below GS estimate of $124M and FactSet consensus of $130M. The company sold 892kt of coking coal, in line with expectations. However, non-GAAP revenue per ton of $114 was below GS estimate of $120, while non-GAAP cost per ton of $98 exceeded $95 estimate, resulting in adjusted EBITDA loss of $2M and diluted EPS loss of $0.30, both below GS and consensus expectations. Q2 and full-year outlook: The company guides Q2 sales volume of 0.9-1.0Mt (vs. GS estimate of 1.026Mt), indicating sequential improvement. However, cash costs are expected to remain at high end of guidance range ($95-100/ton) due to higher fuel costs from Iran conflict. 2026 production guidance maintained at 3.7-4.1Mt (+2% YoY) and sales guidance at 4.1-4.5Mt (+12% YoY), broadly in line with GS estimates. The company has secured 3.5Mt sales commitments (~90% of mid-point guidance), comprising 1.1Mt North America fixed-price sales ($138/ton), 1.0Mt seaborne fixed-price sales ($107/ton), and 1.4Mt index-linked sales. Rare earth business progress: Revised carbon chlorination process conceptual study expected by late June, with technical report summary to follow. Pilot plant structure expected to complete this summer, with internal equipment and facility design/construction starting in fall. Pilot plant expected to commence operations in 2027.

Analysis framework

GS employs sum-of-the-parts (SOTP) valuation for METC. Coal business: Valued at $10/share based on 5.5x EV/EBITDA multiple applied to Q5-Q8 EBITDA. Rare earth business: Valued at $5/share based on 6.0x EV/EBITDA multiple applied to 2031 EBITDA, discounted at 15%. Net debt projection of ~$0/share as of Q3 2027 (incorporating incremental capital for Brook Mine development) deducted to arrive at 12-month target price of $15/share. This methodology separately evaluates traditional coal business and emerging rare earth business, reflecting the company's dual-driver profile.

Methodology notes

• Valuation MethodSOTP Valuation

  Sum-of-the-Parts Valuation

  Valuing different business segments separately before summing, suitable for diversified companies. Here, coal and rare earth businesses are valued using different multiples and discount rates before aggregation.

• Valuation MethodEV/EBITDA valuation

  EV/EBITDA Multiple Valuation

  Enterprise value to EBITDA ratio, commonly used for cyclical and capital-intensive industries. Applied 5.5x for coal business and 6.0x for rare earth business here.

• Company Fundamentals & Financial FrameworkVolume-Price Breakdown

  Volume-Price Analysis

  Decomposing revenue changes into volume and price components to identify performance drivers. Here, per-ton revenue/cost analysis shows the miss was primarily due to weak pricing and high costs.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Ramaco Resources Inc. (METC)

  Research coverage subject, direct analysis target

  Strengths

  Secured 90% full-year sales commitments reducing uncertainty; rare earth business as second growth driver progressing

  Weaknesses

  Q1 performance missed due to weak pricing and high costs; fuel cost pressures persist from Iran conflict

  Risks

  Brook Mine progress faster/slower than expected; coking coal price volatility; uncertainty around government investment/offtake agreements; China geopolitical risks

Key data

• 1Q26 Revenue$122MBelow FactSet consensus of $130M, slightly below GS estimate of $124M
• 1Q26 Non-GAAP Revenue/ton$114/tonBelow GS estimate of $120/ton
• 1Q26 Non-GAAP Cost/ton$98/tonAbove GS estimate of $95/ton
• 1Q26 Adjusted EBITDA-$2MBelow GS estimate/consensus of $11M/$8M
• 1Q26 Diluted EPS-$0.30Below GS estimate/consensus of -$0.19/-$0.21
• 1Q26 Coking Coal Sales Volume892ktIn line with GS estimate of 896kt and guidance of 800-950kt
• 2Q26 Sales Volume Guidance900-1000ktBelow GS estimate of 1026kt
• 2026 Production Guidance3.7-4.1Mt+2% YoY, broadly in line with GS estimate of 3.9Mt
• 2026 Sales Guidance4.1-4.5Mt+12% YoY, broadly in line with GS estimate of 4.3Mt
• Secured Sales Commitments3.5Mt~90% of mid-point 2026 production guidance
• Cash Cost Guidance$95-100/tonExpected at high end of range due to higher fuel costs from Iran conflict
• 2026 Capex Guidance$85-90MUnchanged
• 12-Month Target Price$15Based on SOTP valuation methodology

Impact & implications

For METC, the Q1 miss reflects short-term pricing and cost pressures, but maintained full-year guidance shows management confidence. Secured 90% sales commitments reduce uncertainty, but cost risks persist from geopolitical factors (Iran conflict). The rare earth business as second growth driver remains on track for 2027 pilot plant operations, but commercialization needs further validation. For the coking coal sector, METC's cost pressures may reflect industry-wide fuel cost increases, warranting monitoring of peers' cost guidance.

Risks

• Brook Mine project de-risking and progress faster/slower than expected
• Coking coal prices higher/lower than expected
• Uncertainty around securing government investment or meaningful offtake agreements
• Escalation/improvement of China-related geopolitical issues

What to watch

• Company conference call discussions on rare earth business progress
• Coking coal price outlook
• Q2 sales volume sequential improvement
• Whether cash costs remain at high end of guidance range