ラマコ・リソースズ（METC）2026年第3四半期決算説明会：2027年の石炭成長とブルック鉱山の進捗

要点

• Ramaco Resourcesの2026年第3四半期末の流動性は3億7500万ドル（前年同期比38%増）となり、これには2億3300万ドルの現金が含まれます。
• 同社は2027年の北米向け契約（170万トン）について、1トンあたり約139ドルで価格決定しました。経営陣は、これが原料炭セグメントからの2027年予想調整後EBITDAのうち、6500万ドル超に相当すると述べています。
• 約60万トンの過剰在庫は、現在の価格水準において、今後数四半期にわたり約7500万ドルの運転資本の追い風をもたらす可能性があります。在庫は2027年半ばまでに正常化する見込みです。
• 経営陣は、石炭価格の上昇と在庫の現金化に支えられ、2026年第4四半期の調整後EBITDAが2026年第1〜第3四半期の累計調整後EBITDAを上回ると予想しています。
• Ramacoは主に軽油価格の上昇を理由に、2026年のキャッシュコスト見通しを従来の1トンあたり96〜99ドルから101〜103ドルに引き上げました。軽油価格は1ガロンあたり5.85ドルに達し、1トンあたり3ドル超の逆風となっています。
• ブルック鉱山（Brook Mine）の重要鉱物プロジェクトは、精錬所開発前の段階まで資金が手当てされています。経営陣は、精錬所の最終投資決定前に、2027年に約2500万ドルのプロジェクト設備投資を見込んでいます。

主要財務データ

事業および業績の動向

原料炭

経営陣は原料炭市場が改善しつつあると述べました。オーストラリア産プレミアム強粘結炭（低揮発分）の第3四半期の平均価格は1トンあたり約248ドルで、9月に約285ドルのピークを付け、電話会議時点では約262ドルでした。高揮発分A炭の第3四半期平均価格は約171ドルで190ドルまで上昇し、米国産低揮発分炭は1トンあたり210ドルでした。

Ramacoは2027年の国内交渉をほぼ完了しました。契約済みの170万トンは、前年比で約3分の1の数量増加に相当します。第4四半期終盤に予定されている特殊顧客との契約により数十万トンが加わり、国内契約残高は200万トン弱に達し、平均実現価格がわずかに向上する可能性があります。

同社は高付加価値な低揮発分炭へと生産をシフトさせています。BerwindとMabenの新規能力により、年内までに年換算で約60万トンが追加される見込みです。Laurel Forkの再開を含め、Ramacoは2026年中に対年換算で約100万トンの低揮発分炭を追加することを見込んでいます。

Mabenでの最初の坑内採掘（地下生産）は12月に予定されています。鉄道積み込み設備の稼働開始は2027年第1四半期初めに予定されており、1トンあたり20ドル以上の操業コスト削減が見込まれています。市場環境に応じて、早ければ2027年夏にも第2坑内区画を追加する可能性があります。

Berwindでは換気工事が完了に近づいており、第3生産ユニットは12月にランプアップを開始する予定です。同コンプレックスはLaurel Forkを含め、4つの稼働区画を擁して2027年を迎える見込みです。

Elk Creekでは、供給過剰な市場に適応させるため、高揮発分炭の生産を削減しました。需要と価格が追加生産を裏付ける状況になれば、2つの区画を再開する可能性があります。

重要鉱物

ブルック鉱山プロジェクトでは、第三者機関による炭素塩素化処理テストにおいて、スカンジウム、ガリウム、ゲルマニウムの合計で平均97%、ネオジムとプラセオジムで92%、イットリウムで96%、ジスプロシウムとテルビウムで97%の回収率が達成されました。

経営陣は、スカンジウムおよび特定の重要鉱物の回収率が、従来のプロセス経路（スカンジウム回収率が70%台以下）と比較して約20ポイント改善したと述べました。

パイロットプラントの建屋建設は2027年初頭に完了する予定です。Hatch社は2027年第1四半期に事業化調査（PFS）を開始し、同年後半に完了する見込みです。自社ラボの稼働開始遅延に伴い、パイロットプラントの完成時期は2027年後半になると見込まれています。

Ramacoは8月に法的拘束力のない基本合意書（MOU）を3件締結しました。Indium CorporationおよびBedrock Semiconductorとの合意は潜在的なガリウム需要を想定したものであり、roboLoopはガリウムを多く含む電子ゴミ（e-waste）原料を供給する可能性があります。また、同社はレアアース、スカンジウム、高純度アルミナ、高純度シリカの引取契約交渉も進めています。

訴訟による回収・勝訴判決

Ramacoは、2018年に発生したElk Creekの石炭サイロ倒壊事故を巡り、Chubb Insuranceに対し3000万ドルの勝訴判決（陪審評決）を獲得しました。また、同社は2018年以降に発生した弁護士費用等の回収も求める予定であり、金額は裁判所によって決定されます。

業績予想・ガイダンス

• 2026年キャッシュコスト：主に軽油価格の上昇に伴い、1トンあたり96〜99ドルから101〜103ドルへ引き上げ。
• 2026年生産量：高揮発分炭市場における継続的な規律を反映し、中間値を20万トン引き下げ。
• 2026年販売量：四半期末時点の約定残高は420万トンに達しているものの、中間値を10万トン引き下げ。
• 2026年設備投資：Mabenの第1坑内区画の稼働開始が2027年第1四半期から2026年内に前倒しされる見込みとなったため、中間値を約500万ドル引き上げ。この支出により、2027年のMabenにおける必要資本が同程度削減される見通し。
• 2026年第4四半期調整後EBITDA：経営陣は、同四半期の数値が2026年第1〜第3四半期の累計調整後EBITDAを上回ると予想。
• 2027年の出荷ペース：経営陣は出荷が下半期にやや偏る可能性があると示唆。在庫の現金化が上半期の出荷量を支える一方、新たな低揮発分炭の生産は年後半により大きく貢献する見込み。
• ブルック鉱山：精錬所建設の最終投資決定前に、2027年に約2500万ドルの設備投資が見込まれる。精錬所の開発には別途プロジェクトファイナンスが必要となる。

リスクおよび注視事項

軽油価格の上昇は依然として最も差し迫ったコスト圧迫要因です。現在の軽油価格は1ガロンあたり5.85ドルで、2026年初頭の2.50ドルから上昇しており、経営陣はこの上昇により1トンあたり3〜4ドルのコスト増加が生じたと述べています。

中国の鋼材輸出量は5ヶ月連続で1000万トンを超えました。経営陣は、これらの輸出が世界的な鋼材価格および海上輸送原料炭の短期的な上値を抑えていると述べています。

ドラフトフード設置の遅れにより自社ラボの試運転および関連するベンチスケール試験が延期されたため、ブルック鉱山のパイロットプラントのスケジュールは2027年上半期から下半期へ繰り延べられました。

重要鉱物に関する覚書（MOU）は依然として法的拘束力がありません。正式契約の締結は、技術的認定、価格設定、プロジェクト開発の節目（マイルストーン）にかかっています。経営陣はまた、米国には現在十分な中流の分離・精錬能力が欠けているため、Ramaco独自の処理ルートを開発する必要があると指摘しました。

アナリスト質疑応答の要点

経営陣は、2027年の石炭価格環境が横ばいであるという見方を否定しました。プレミアム強粘結炭の先物カーブが1トンあたり約255ドルとなっていることを挙げ、現在の指標は楽観論を裏付けていると述べました。一方で、運賃や燃料コストの影響により、指標価格の改善による恩恵を全面的に享受することはできないとも認めました。

同社は中国へ直接販売することは計画していません。それにもかかわらず、中国による米国産炭の購入可能性については、競合供給を吸収し、他のアジア市場におけるRamacoの機会を改善させる可能性があるため、間接的にプラスと捉えています。

第4四半期の国内および海上輸送の販売構成比は、販売量の約35%が国内、約40%がアジア向けであった第3四半期と類似する見込みです。現在の価格水準が維持されれば、市場指標の上昇がネットバックの改善につながる可能性があります。

経営陣は、2027年のブルック鉱山に関する約2500万ドルの予算は設備投資のみを対象としていることを明らかにしました。営業費用は現在の水準付近にとどまる見込みで、パイロットプラントの追加人員増に伴うコストは2028年に顕著になる可能性が高いとしています。

重要鉱物事業の分社化の可能性は引き続き検討中ですが、経営陣は資本市場での取引を進める前に、精錬所の規模、製品ミックス、引取契約、資金調達に関する確実性をより高めたいと考えています。

決算説明会 全トランスクリプト

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決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Good afternoon, and welcome to the Ramaco Resources Third Quarter 2026 Results Conference Call. [Operator Instructions] 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.

Jeremy Sussman

Thank you. On behalf of Ramaco 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 Woloschuk, our EVP of Critical Mineral Operations; Orin Atkins, our SVP of Critical Mineral Sales; Chris Blanchard, our EVP for Mine Planning and Development; and Jason Fannin, 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 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 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.ramacoresources.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.

Randall 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're 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 VanEck 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-longwall U.S. public met coal 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 the 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% 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%. Indeed, fourth quarter spot prices are now up about 9% versus the third quarter average.

To try and take advantage of this pricing swing, Ramaco'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 3 quarters of the year.

On our coal production growth, we expect the new third section at Berwind and the first underground section at Maben 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 Fork Mine, we will have added almost 1 million annualized low-vol tons this year alone. All this has been achieved with low-vol caps spending -- CapEx spending of roughly $30 million in '26. The new Maben 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 wanted to provide a bit of a road map as we transition to a majority of low-vol production over the medium-term. Assuming market conditions hold, we will complete the third and fourth sections at Berwind between now and 2028. That complex will then produce almost 1.5 million tons annually of low-vol.

Similarly, at Maben, in addition to our current 250,000 tons of surface production, we expect to move into the first 2 deep mine sections in '27 and complete the remaining third and fourth underground sections in '28 and '29. At that point, Maben will be capable of producing roughly 1.7 million tons of low-vol each year. 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 continue 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 derisking 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 3 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 neodymium and praseodymium, 96% for yttrium, and 97% for dysprosium and terbium. 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 prefeasibility 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 e-waste samples, we anticipate completion of the pilot plant in the second half of 2027.

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. Orin will provide more color on our marketing here in a moment.

And I want to end by noting that after a lengthy 8 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, Ramaco 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. First, I'd like to turn the floor back to Jeremy.

Jeremy Sussman

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.

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 30, 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 Maben 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 3 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 1 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 more than 20 -- 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 derisk 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.

With that summary, I would now like to turn the call over to our EVP of Mine Planning and Development, Chris Blanchard.

Christopher 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 batch-weigh load-out 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 Maben 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 Maben, 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 will 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 Maben coals.

At Berwind, also on the low-vol 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 will begin to bring on the #3 production unit and have 4 full sections operating as we enter 2027, which includes the section still operating at our Laurel Fork Mine. As Randy mentioned, this will put ultimate annual production from this complex well over 1 million tons of low-vol coal.

Finally, at Elk Creek, we have successfully moderated production to be in better balance with a still oversupplied high-vol market. In October, our MP #1 underground mine completed mining in our controlled reserves. This production has not been replaced, and with this, plus the idling of a section at our Stonecoal 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-vol 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 2 sections which could be reactivated quickly at Elk Creek if we see the market need and the proper price support for our low sulfur high-vol 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 markets.

Jason Fannin

Thanks, Chris. Today, I will review our Q3 sales results and 2026 sales position, discuss our 2027 domestic settlements to date, share our views on the met coal market, and highlight our low-vol growth strategy at Berwind and Maben.

As we enter the final quarter of 2026, I want to highlight the stronger sales mix that Ramaco has built throughout the year. We have added incremental domestic tons in 2026, with significantly more for 2027, and increased our volumes linked to the U.S. low-vol and PLV indices. Together, these changes reduce our exposure to the U.S. high-vol indices at a time when Australian pricing continues to outpace them.

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 million 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 1/3 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 steel maker deferring a planned 2027 blast furnace reline 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 PLV averaged about $248 per ton, up roughly $10 from Q2, peaked near $285 in September, and is about $262 today. High-vol 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 2 years ago, and U.S. low-vol 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 has 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. Shanxi safety inspections tightened supply, and PLV volumes delivered into China rose about 15% 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 5 consecutive months, capping global steel prices and how far seaborne met coal 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 steel makers in India and other growth markets rely on for stronger coke blends.

As Maben ramps up alongside Berwind, 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 Met Coal side, our '26 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 Berwind and Maben 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 Mineral Operations, Mike Woloschuk, for updates on the continuing progress of our Brook Mine project in Wyoming.

Michael Woloschuk

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 3 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 2 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 2 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.

As 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. Zeton 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 2 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 6 months, we plan to complete the drilling necessary to lift the resource to indicated and complete significant bench-scale metallurgical testing across the flow sheet. The results will support downstream pilot plant module designs and the prefeasibility 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 Zeton.

I would now like to hand over the call to our Senior Vice President of Critical Mineral Sales, Orin Atkins.

Orin 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 3 nonbinding MoUs and that our commercial pipeline continues to grow and mature across every product in the Brook basket. Two of the 3 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 nitride 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 REalloys 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 REalloys 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 2-track approach. We continue offtake 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 in 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 carbochlorination 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 Hatch 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 4 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 offtake counterparties.

We are in various stages of testing and sourcing samples. As samples arrive at our Wyoming laboratory, we will 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 will 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.

Operator

[Operator Instructions] Our first question comes from Brian Lee of Goldman Sachs.

質疑応答

Brian Lee

Maybe just wanted to start on the met coal pricing environment. I know you're not ready to give us kind of the '27 view quite yet. But just given the strength in the market of late and your comments around near-term maybe stability, could you at least kind of frame of reference direction of travel here, 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 given some of the comments around somewhat improving markets in the press release, but just I didn't want to read too much into that. Maybe any sense of where we should be expecting pricing heading into next year?

Randall Atkins

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

Jason Fannin

Yes, Brian, this is Jason. Yes. I mean, certainly, we've seen prices up Q3. I think our export netbacks have tracked those. We've seen them come up further, what roughly on average, the basket of the U.S. indices is up about 9% quarter-over-quarter from where we sit today versus Q3. So I'd expect a similar uptick in Q4, 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 gain.

But yes, as Randy mentioned, going into '27, I mean, we feel good about the projection of the market. And 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 up to the back half of this year. So yes, certainly, we have reasons, we think, to be optimistic as far as next year's pricing goes.

Brian Lee

Fair enough. That's helpful. And then since you mentioned the cost, 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 ability to offset some of those cost inflation measures, especially on the freight side? Or is this something where 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?

Jason Fannin

Yes. I'll take it on this. Yes, Brian, I'll start out just a little bit on the sales side and then hand off to Chris on the ops side. But yes, I mean, the sales end, we're seeing most of the impact back to our bottom line, of course, on the vessel freights, on the freight differentials going to Pacific. The best way we can mitigate that, of course, is be smart in the deals we're doing. As the year winds down, of course, there's less and less spot availability out there. I'd say for some of the deals we've done most recently, we've taken a view on a fixed 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 that have the ability to hedge those as well.

Christopher Blanchard

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.

Brian Lee

Yes. Makes sense. Last one for me, and I'll pass it on. The delay in the pilot plant 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 customer engagements and the potential to convert more offtakes?

Michael Woloschuk

Yes. It's Mike. Let me take that one. It's due to the late start of our internal lab. So I mentioned the fume hoods were late to come for the carbo chlorination. We need to get those installed. That -- those bench scale results are to generate design criteria for the pilot plant. So as we -- that's what shifted out from kind of middle of the year into the second half. We don't anticipate any delays at this stage of offtakes. 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 offtakers even from bench scale data. So we don't see anything that's going to be an issue for us.

Operator

Our next question comes from Matthew Key of Texas Capital.

Matthew Key

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 million pretty much what we should expect in regards to the domestic book as we look out to next year?

Jeremy Sussman

Yes. No, I mean, I think what you'll see is this is usually an additional couple of hundred thousand tons, and it's among our highest priced business. So I mean, this will probably take us just short of 2 million tons, somewhere in that range, and it will add a few dollars to our average realizations. And maybe just a follow-up to one of the previous questions. I mean, I think when you look at the fact that high-vol A pricing is up about 26% year-to-date, as Randy noted in his remarks, coupled with 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. Go ahead, Jason.

Matthew Key

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

Jeremy Sussman

Yes. 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 in 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, at least into kind of mid-year. So yes, 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 will 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.

Operator

Our next question comes from Nathan Martin of StoneX.

Nathan Martin

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?

Randall Atkins

We're not Chinese sellers, sorry. No, we have not sold tons directly to China nor is that on our wavelength for next year. We do sell some coal tons into 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.

Nathan Martin

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.

Jason Fannin

Yes. Sure, Nate. Yes, 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 and about 40% going to Asia. I'd say the rough numbers, you have the same exposure to PLV there as well as the tons going to Asia, that percentage. So on a ton-for-ton basis, I think fairly similar to Q3. And of course, we're seeing the indices today up versus Q3. So yes, should those hold, we should see a like increase as well in those netbacks.

Nathan Martin

Appreciate that, Jason. And 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 with the commercial facility before year-end next year. Any further comments would be helpful.

Randall Atkins

Yes. I mean we view the refinery as a separate project financing, obviously, from the pilot phase, which 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 nongovernmental, 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 fully capitalized to do so, but it's a relatively modest sum, certainly in comparison to the refinery. And we're fully capable of getting everything to the point with a 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.

Operator

Our next question comes from Nick Giles of B. Riley.

Nick Giles

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.

Randall Atkins

Yes. 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 mean, I think most of the personnel is going to be around lab technicians and things of that -- folks of that nature, which are not high-spend ticket groups of hires. But Mike, please give some more color, if you'd like.

Michael Woloschuk

Yes. I think I highlighted some of the leadership that we needed across the disciplines to run these programs. But as Randy said, we'll have some -- 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.

Randall Atkins

Yes. I think the one takeaway that I'd like to make sure everybody understands, 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. 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 the real problem that the U.S. faces is that there is no midstream capability here. And so therefore, we are perhaps like others, having to design and build our own capacity for midstream operations, which will put us in a rather unique spot once we're there. But until we get there, we are pretty much self-contained and fully financed, so.

Nick Giles

Got it. That's helpful. I guess just trying to better understand that $25 million. Is that just the CapEx? Or I'm just -- 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?

Jeremy Sussman

Yes. 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 3 items. And yes, the OpEx, I would say, will probably continue at similar rates. And then that basically gets us to a point on the final investment decision.

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 met coal business and the rare earth business. If you look, even in a really depressed pricing environment, I mean, the met coal business has generated about $25 million of EBITDA year-to-date. That's almost exactly in line with maintenance CapEx. So 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 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.

Nick Giles

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

Randall Atkins

Yes. I think as you view a dropdown of a separate operation, we certainly wouldn't orphan it from the mothership, so to speak. And I think in terms of any capital market transactions, you obviously want to time that to coincide with a fairly robust book of business, 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 revenue recognition from the critical mineral side.

But I think in terms of separating the businesses now, we will be guided by 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. We designed this thing in the Hatch report, as you saw, with sort of 2 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 slate to get started and then bolt on as we go.

So I think all of those kind of questions will answer themselves as we get a little bit further out on the diving board. And I think in terms of a capital market transactions, we want to have as many of these items nailed down before we go and start any type of a float of a separate entity.

Operator

Our next question comes from Jeff Grampp of Northland Capital Markets.

Jeffrey Grampp

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?

Michael Woloschuk

Yes. 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 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 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 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 are quite excited by the results that we have obtained through a suite of tests so far.

Jeffrey Grampp

Great. I appreciate those details. For my follow-up on the cost side of things on the met coal business, the guide looks like it's kind of implying Q4 cash cost should maybe be similar-ish to Q3. How are you guys seeing that trending into '27, given the -- both the mix in production shifting as well as the rail load out 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.

Jeremy Sussman

Yes, I'll start, and Chris can add any color. So yes, 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 we are certainly factoring that into the Q4 numbers, which I agree with at the midpoint of your numbers. Remember, you also have 2 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, diesel has 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 20 -- sorry, Slide 19 in our deck, I would point you to where you can see our mix changing for next year. Obviously, we're not guiding to volume, but you can see next year we are assuming about the same amount of low-vol production as high-vol A. That is about 35%, 36% up from less than 25% in 2026. So that's a good thing. Now that probably is about a $1 or so a ton on a cost headwind, but when you think about the fact that high-vol prices are up double digits compared to low-vol, that's another factor in our favor in terms of actual margin expansion.

So long-winded way of kind of giving you some of the puts and takes, Jeff. And as Randy noted in his remarks, we will come out with formal guidance for '27 in about a month after our board meeting.

Operator

Our next question comes from Alex Fuhrman of Lucid Capital Markets.

Alex Fuhrman

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 time line 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?

Randall Atkins

So I'm going to let Orin 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 will be -- 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 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 discussions, 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, 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, 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 as sort of the general market indexes begin to get some greater degree of transparency, and frankly, institutional acceptance that we'll be more comfortable than probably pricing off various types of index situations as we view the future. And Orin, [ please ] pick up on that and elaborate any way you want.

Orin Atkins

Yes, sure. I would just say just on the contractual front, I mean, we're in various stages of those conversations now of shifting from a nonbinding MoU to a more binding agreement and reviewing language and what that needs to look like and can provide guidance as we 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.

Operator

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.

Randall Atkins

Well, again, I thank everyone for joining us today. As Jeremy indicated, we'll probably be providing some further information will 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 to everybody for joining the call.

Operator

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