Ramaco, which began trading in early February, is a metallurgical coal producer. The company is transitioning from development phase into production phase, with four projects expected to result in annual metallurgical coal production of about 1.1 million tons in 2017, growing to about 4.4 million tons by 2022.
Curt Woodworth of Credit Suisse says Ramaco offers compelling growth in the US / seaborne coking coal market with a cost structure that should provide meaningful FCF generation and dividend payouts once at scale.
“We are bullish on the medium-term fundamentals for seaborne coking coal driven by global growth in steel production and structural capacity reduction in China of coal and steel, which should support above-mid-cycle prices in 2017-19,” Woodworth wrote in a note.
Woodworth, who has a price target of $14, also noted that Ramaco has virtually no debt, no legacy liabilities and has a strong management team.
Similarly, BMO’s David Gagliano noted that Ramaco expects cash costs below $60/t through 2025, which would place the company in the first quartile among US met coal producers selling domestically. The analyst has a price target of $15.
“In our view, Ramaco has compelling potential to be a lowcost US met coal producer with a clean balance sheet, significant organic growth, and longer-term free cash flow generation, translating to an attractive investment option for those seeking exposure to metallurgical coal markets,” Gagliano wrote in a note.
In a related development, Seaport Global also launched coverage of Ramaco with a Buy rating and $14 price target.
Shares of Ramaco closed Tuesday’s trading at $10.90.
Latest Ratings for METC
|Feb 2017||Seaport Global||Initiates Coverage On||Buy|
|Feb 2017||BMO Capital||Initiates Coverage On||Outperform|
|Feb 2017||Credit Suisse||Initiates Coverage On||Outperform|
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