The Coal & The Echo

by

Many years later, as the dust from the Brook Mine settled on the ledgers of Potrero Capital Research, I remembered the scent of damp earth clinging to the boots of old man Tiberio, who predicted fortunes in the veins of coal, a gift passed down through generations. He’d have seen this coming, of course – the subtle shift in the market’s breath, the way a fund trims its holdings not from fear, but from the quiet understanding that even the most promising seams eventually run thin. It wasn’t a divestment born of panic, no. It was a reckoning, a gentle release of 234,584 shares of Ramaco Resources (METC 0.78%) in the fourth quarter, a transaction estimated at $6.16 million, measured against the relentless march of time and the fickle whims of the industrial heartland.

Potrero, it seems, has been whispering to the market, a reduction in their Ramaco stake, a gesture barely perceptible amidst the roar of the exchanges. The fund’s remaining position, once a robust pillar, has diminished to $9.52 million, a phantom weight in the portfolio. It’s a dance as old as the hills, this constant recalibration, this trimming of the sails to catch the prevailing winds. They’ve lessened their grip, allowing Ramaco to drift a little further from their core, a subtle acknowledgement that even the most carefully constructed narratives require pruning.

The current holdings tell a story of their own – TLN, a beacon at $29.05 million, followed by TAC, BL, MSFT, and STX, each a star in a carefully plotted constellation. Ramaco, now accounting for a mere 0.69% of reportable assets, has slipped into the periphery, a distant moon orbiting larger, more dependable planets. The share price, however, remains a defiant bloom – up 69.4% over the past year, a remarkable ascent that has left the S&P 500 trailing in its wake, a full 51.13 percentage points behind. A fleeting miracle, perhaps, or a harbinger of something more enduring?

Ramaco, for those unfamiliar with its shadowed depths, is a producer of metallurgical coal, its fortunes inextricably linked to the blast furnaces and coke plants that feed the insatiable appetite of industry. Its properties – Elk Creek, Berwind, Knox Creek, and the RAM Mine – are not merely tracts of land, but veins pulsing with the dark energy of the earth. It operates on a simple principle: extract, sell, and repeat, a rhythm as ancient and unforgiving as the mountains themselves. The market capitalization stands at $885.87 million, a considerable sum, yet dwarfed by the vastness of the resources it controls. Revenue for the trailing twelve months reached $579.50 million, but a net income of ($32.88 million) whispers of the costs inherent in wresting wealth from the earth.

The current price of $16.06 per share is a fragile thing, balanced on the precipice of expectation. The third quarter, however, offered a cautionary tale. A wider-than-expected net loss of $13.3 million and adjusted EBITDA of $8.4 million served as a reminder that even the most promising ventures are susceptible to the vagaries of fate. Metallurgical coal pricing dipped 12% year over year to $120 per ton, a subtle tremor that sent ripples through the market. Yet, cash costs remained firm at $97 per ton, maintaining a modest margin of $23 per ton. Liquidity, thankfully, reached a record $272 million, and the company ended the quarter with over $77 million in net cash, a comforting cushion against the inevitable storms.

The reduction of the stake to 0.69% is not a condemnation, but a pragmatism. TransAlta and BlackLine, those steadfast behemoths, remain the core holdings, the anchors of Potrero’s portfolio. The true test for Ramaco lies at the Brook Mine, a place shrouded in mystery and promise. The rare earth platform, if it can be realized, could be transformative, a gateway to a new era of prosperity. But it is a capital-intensive endeavor, a gamble with the future, and the path to success is fraught with peril. The market, like a restless spirit, waits to see if Ramaco can truly unlock the secrets hidden within the earth, or if it will fade into the shadows, another forgotten echo in the vast landscape of industry.

Read More

2026-02-21 03:53