Shares of Ramaco Resources, Inc. (METC) recently soared following a Wall Street Journal article that hyped its Brook Mine as a potential source of up to $37 billion in rare earth elements (REE). METC has been on a national media blitz as the article sparked excitement across major news outlets and retail shareholders alike.
There’s just one problem: There is no way to profitably mine them. In fact, we generously estimate METC would lose ~$88 billion if they were ever able to extract, process and sell $37 billion of REEs from the Brook Mine.
METC claims they discovered a “world-class” accumulation of REEs. What they aren’t telling you is that anybody standing on Earth’s rocky surface probably has a higher concentration of REEs under their feet than at their Brook Mine. Rare earths aren’t rare, and one Wikipedia search is all it takes to learn that Ramaco’s REE concentrations are less than the average abundance of the Earth’s outer crust.
The CEO has asserted that costs for the project will be low because their REEs are in soft clays instead of in hard rocks. But estimates of processing costs alone for peer ionic clay projects range from $7.13 to $11.00/tonne. This cost is more than twice as much as the $3.59 we estimate METC could extract per tonne of material. An expert we spoke with said that even if METC could magically levitate REEs out of the ground by waving a wand, the Brook Mine would still be unprofitable.
Curiously, management has omitted mention of a typical PH4 and PH1 test to see what portion of Brook Mine’s REEs can be easily extracted. This test can be conducted on site using a beaker and cheap solvents for less than $500 per test. PH4 and PH1 test results can be turned around in weeks, yet METC says it will take years to get answers on extractability.
If this recoverability test is too expensive for METC, we are offering to pay for it ourselves. We believe METC has likely performed these tests and is sitting on disappointing results.
Yorktown Partners, a PE fund that specializes in energy and mining and knows Brook Mine and the management team better than anyone, has sold ~12% of its holdings since November. Overall, insiders have dumped $96.3 million in stock since the start of November.
The history of METC’s Brook Mine is one of failed ventures: it started with a failure to sell the thermal coal to powerplants or local homeowners, and then pivoted to a failed “coal to cars” initiative led by convicted felon, Charles “Charlie” Atkins, brother of METC’s current CEO, Randall Atkins. Now the CEO is trying to convince investors that this failed asset is a world-class rare earth mine.
CEO Randall Atkins also has a troubled history, marred by a $32 million judgment after a federal bankruptcy judge held in 1988 that he was “guilty of conversion” for his role in Charlie’s tax fraud.
We are short METC.