Ramaco Resources, Inc. (NASDAQ:METC) Q3 2022 Earnings Call Transcript

Ramaco Resources, Inc. (NASDAQ:METC) Q3 2022 Earnings Call Transcript November 8, 2022

Ramaco Resources, Inc. misses on earnings expectations. Reported EPS is $0.6 EPS, expectations were $1.14.

Operator: Good day, and welcome to the Ramaco Resources Incorporated Third Quarter 2022 Results Conference Call. All participants will be in a listen-only mode. Please note, this event is being recorded. I would now like to turn the conference over to Mr. Jeremy Sussman. Please go-ahead sir.

Jeremy Sussman: Thank you. On behalf of Ramaco Resources, I’d like to welcome all of you to our third quarter 2022 earnings conference call. With me this morning is Randy Atkins, our Chairman and CEO; Chris Blanchard, our Chief Operating Officer; and Jason Fannin, our Chief Commercial Officer. 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 results discussed in the forward-looking statements.

Any forward-looking statements 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 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. Lastly, I’d encourage everyone on this call to go onto our website ramacoresources.com and download today’s investor presentation under the events calendar. With that said, let me introduce our Chairman and CEO, Randy Atkins.

Randy Atkins: Thanks, Jeremy, and good morning to all. Q3 was another record quarter for us. In fact, the first three quarters of ’22, we generated almost as much adjusted EBITDA as we did in the previous five years combined. With that said, our Q3 results came in below what we hoped. Headwinds were due to the Berwind Ignition event in July, a 45% decline in seaboard coal pricing in the past few quarters and continued logistical rail and trucking challenges in shipping our coal. With that said, we are positioned for both a record fourth quarter and full year 2022. Here’s a quick look at some of our accomplishments over the past quarter. We recently completed the rehab of our Berwind preparation plan. This will lower our cash costs moving forward as we no longer need to truck coal over 25 miles to our Knox Creek plant.

On the sales front, we are now fully sold out for 22 at an average price of $211 per ton. We have also successfully placed a good portion of our anticipated fourth quarter coal in the European thermal markets. For 2020 to ’23, we have placed roughly 1.8 million tons or about 45% of expected production. For sale on an average price of $210 per ton. Next year, we project that over 60% of production will sell into export markets, much of that at index-based pricing. Lastly, in September, we closed on the Maben acquisition, we’re beginning to bring that mine online and anticipated being a meaningful earnings contributor in 2023. As we look down the road, 2023 indeed looks to be more of a transformational year for us than even 2022. Among other reasons, we anticipate doubling production next year to roughly 4 million tons as compared to 2021 levels.

That should also reflect themselves in a commensurate increase in our cash generation. We previously guided that we would tailor our 2023 sales strategy to whatever markets would yield the best net back pricing. We have done that. We committed a meaningfully lower amount of coal to traditional domestic steel mills in 2023 and a meaningful portion into Europe at fixed prices well above our domestic business. On the back of these milestones, we would like to provide an initial framework on our plan 2023 shareholder return program. To understand our progression. I would remind everyone that Q1 ’22 was the first time we even paid a dividend on our stock, which we doubled before the first payment had been made. It remains our intention to each year progressively increase dividends on all our stock.

This summer we announced the second leg of shareholder return by filing to register a class fee tracking stock. This stock is now in SEC registration and once it is effective, we will be able to communicate more about the security. Today we are articulating a framework for the third leg of the stool, which is our future share buyback program, which we’ll address next month at our Board Meeting. We’re expecting to generate increasing amounts of free cash flow next year as our production ramps. Accordingly in ’23, we hope to commence a return to free cash flow towards share buybacks in addition to our regular cash dividends. We will continue to grow organic production from internal funds, pay-off the relatively limited debt we have and pivot to execute on new production from the reserve acquisitions we have made over the past year.

We now have a sufficient number of in-house reserve projects that we could internally grow without looking to new M&A opportunities. We anticipate sufficient cash flow later in ’23 that will allow us to meet all our CapEx requirements for both normal maintenance and planned production CapEx as well as for full debt repayment. We also want to maintain a cash cushion of roughly $100 million. And beyond that we anticipate allocating capital return to share repurchases after payment for regular cash dividends. Specifically, we will propose taking the some of the cash dividends paid on our shares and invest a ratable amount towards share repurchases. This would of course be subject to meeting our performance objectives and through approval by our Board.

At today’s stock price, we regard buybacks of our stock as an attractive financial proposition. Importantly, as we return shareholder capital, we want to strike a strategic balance with long-term plans for low-cost organic production growth. Our goal is to increase Ramaco’s production substantially over what it is now. We feel there will be a continuing profitable future demand for high-quality medical for many years. Yet we see a constrained growth in supply. Our production growth as a relative new company will generate increasing amounts of cash flow available for capital return. While Jason is going to talk in more detail, I want to give some brief color as to what we are seeing in the markets today. The ongoing events in Ukraine created an unusual dynamic, where historic pricing between thermal and met coal inverted late this summer.

Over the past few months this relationship has since largely moderated with met coal prices moving higher, and API to European thermal prices lower. We recently spent time in London with several of our European customers and investors. Our main takeaway is it in terms of having to replace Russian coal, European utilities are covered through year-end but 2023 is a different story. Many customers have focused on securing near-term tons and have large open positions for next year. Even with a drop in gas prices, given global supply constraints, we struggled to see where the replacement tons will come from. We anticipate an upward move in European thermal coal pricing perhaps in early ’23. And I’d also like to point out the pricing for our main met product, U.S. high vol A has remained resilient with current netback pricing around $225 per ton.

So in closing, we remain on track to have a record year in ’22, this is despite a host of challenges so far, such as labor tightness, inflationary pressures, logistical rail and trucking constraints and the Berwind ignition event. We anticipate 2023 to be meaningfully more profitable than ’22 with greater production in cash generation, and we also look forward to returning increasing amounts of cash to our shareholders. Now with that, I would like to turn the floor over to the rest of the team to discuss more detail on finances operations in the market. So Jeremy please run down our financial metrics.

Jeremy Sussman: Thank you, Randy. I’ll start by going over our third quarter 2022 financial highlights. Adjusted EBITDA of $51 million was 185% higher than our previous Q3 record. Net income of point $27 million was 282% above our previous Q3 record. Diluted EPS was $0.60, versus just $0.16 in the third quarter of 2021. Adjusted EBITDA was negatively impacted by $5 million due to idle costs at our Berwind mine post the July Ignition event. Net income and EPS were negatively affected by $4 million and $0.09 respectively. I would like to take a moment to note that we have now generated almost as much net income and adjusted EBITDA through the first three quarters of 2022 as the prior five years combined. Importantly, we anticipate 2023 results to be even better due to roughly 50% volume growth with almost half of our 2023 coal already sold at very strong margins as Randy noted.

Unfortunately, in the third quarter, we built another 56,000 tons of inventory, largely on the back of continued logistical issues, bringing the year-to-date inventory builds to 235,000 tons. We anticipate the bulk of this inventory buildup to unwind in 2023 as logistical challenges hopefully ease. Now turning to our full year 2022 outlook, I would like to touch on a few of the key areas in our guidance tables. First, we are lowering production guidance from 2.8 million to 3.1 million tons to 2.7 million to 2.9 million tons. We expect sales to come in roughly 200,000 tons below production, due largely to the aforementioned logistical challenges. Midpoint of production guidance is down modestly at each of our three complexes, as we have experienced a bit slower than anticipated production ramp at our new mine.

This is due to a number of factors such as labor and equipment availability. However, I am pleased to report that we are now at over 700 employees compared to around just 400 employees this time last year. We anticipate that our recent hiring success will yield meaningful increases in production as we move into 2023. Second, we’re increasing our cost guidance from $89 to $97 per ton to $98 to $102 per ton. The increase is the result of industry wide inflationary pressures, such as continued high sales related and raw material costs. However, we did start to see some of these pressures ease in the third quarter with overall costs down $8 per ton from the second quarter, and $98 per ton. Looking out across the landscape, I believe our third quarter costs of $93 per ton at Elk Creek were among the lowest of the peer group, which is ultimately where we expect our cost to remain on a relative basis.

We continue to anticipate costs moving lower on stronger production, moderating raw material prices and the positive impact from the startup of the Berwind preparation plant. Lastly, on the 2022 guidance front, we are increasing our CapEx guidance from 105 million to 125 million to 120 million to 130 million, this $10 million increase at the midpoint is reflective of a switch from a contractor to an owner operator model in a couple of our smaller mines, as well as general inflationary pressure on things like equipment. Turning to our growth outlook, we are maintaining our medium-term target of 6.5 million tons of production. I’d like to point you to Slide six and seven in our presentation. We continue to show our multi-year production growth in detail with an expectation of producing 4 million tons in 2023 reflective of an early spring restarted our Berwind that we of course hope this occurs sooner.

I would note that some of this growth is still subject to board approval, which is dependent on market conditions. As a reminder, Slide seven details that we believe we can get to 6.5 million tons of production in 2025 at a very favorable CapEx intensity. Specifically, for a total of $95 million in gross capital, split between 2023 and 2024, we anticipate completing our full build out of 6.5 million tons of annual production. This is almost tripled 2021 production of 2.2 million tons. Importantly, as Randy detailed, in addition to our industry leading production growth profile, we continue to anticipate returning increasing amounts of cash to shareholders while also maintaining a conservative balance sheet. In short, we view Ramaco as both a growth story and a capital return story, which we believe positions us uniquely among our peers.

I’d now like to turn the call over to our Chief Operating Officer, Chris Blanchard. Chris?

Chris Blanchard: Thank you, Jeremy. Before delving into the discussion of the operations, I want to recognize and congratulate the employees at our Elk Creek preparation plant for their continued excellence and safety performance. Later this week, they will be receiving the National Sentinel Safety Award for outstanding safety performance in the large preparation plant category. This is the second Sentinel awarded through the Ramaco operations in the past three years. These awards reflect Ramaco’s commitment to excellence and safety performance and the attitude and safety culture that our employees have developed as they strive to work everyday accident free and in full compliance. Now turning to some of our operational milestones, at Elk Creek we are beginning our upgrade and expansion of the Elk Creek prep plan.

Ultimately, this will raise the processing and shipping capacity of the Elk Creek complex by 50% annually to approximately 3 million tons per year. We expect the work to be completed late in the first quarter of 2023. We are budgeting a conservative ramp of the processing rate reaching full capacity at the plant by the end of the second quarter next year. With that preparation plant work underway. We have also started ramping additional underground and surface production at our high vol Elk Creek complex to support the new capacity at the plant. It causes a scarcity of skilled labor in the Central Appalachian coalfields in advance of the completion of the plant upgrade. We initiated staffing and production at the new underground sections. This excess production began in the third quarter and will continue until the Elk Creek plant is commissioned at its fully upgraded operational processing rate.

This mine expansion, in addition to the continued rail challenges is what will lead to overall production being higher than sales in 2022. With that said, we expect all of the additional inventory to be worked through by the end of ’23. We had another material milestone recently as the newly refurbished Berwind preparation plant process its first raw coal. While numerous delays pushed the startup of the plant out of the third quarter, we expect the plant in full operation, two shifts per day later in November. Equally important, we expect to load our first unit train from the complex in the next several days. We started two additional mines at the Berwind complex during the quarter, and both the Triple S surface mine and the Triad number two underground mine are fully ramped and currently producing at budgeted levels in the fourth quarter.

Triple S will add to our growth, while Triad number two replaces our original Triad mine. We expect both operations to have multiple years of operation to complement the base Pocahontas #4 times, when the Berwind mine resumes operation. Perhaps the biggest benefit of the plant startup at Berwind is the release on trucking logistics and moving the raw tons from these operations to our Knox Creek preparation plant. Now, the mine that this complex will either belt directly to the Berwind plant or the truck haul will be shortened by over two hours per round trip versus the Knox Creek plant. Depending on each mines, particular haul distance and washing recovery, the trucking savings will benefit these operations from between $15 to $30 per clean ton.

Additionally, this allows us to shift a scarce resource that of coal trucks and coal truck drivers to the shorter hauls into Knox Creek. Finally, an update on our Maven project. I’m pleased to report that we have mobilized our new highwall mining unit to Maven and are in the process of assembling it on site. We expect to begin moving rock and clearing highwall mine in the first quarter, with production to follow shortly thereafter. With that high level review of the new operations and projects, I would like to now turn the call over to our Chief Commercial Officer, Jason Fannin for a discussion on our view of the current and forward coal markets. Jason?

Jason Fannin: Thanks, Chris and good morning, everyone. I will share what we are seeing in the markets in our current and forward sales outlook. Even though the coal markets pulled back during Q3, met coal prices, as well as thermal coal prices remain elevated compared to historical levels. The forward curves from both also project continued high pricing throughout 2023. While steel production and capacity utilization have eased on the back of a slower global macroeconomic environment, met coal supply continues to lag demand even in this environment. We still have persistently low spot met coal availability following years of underinvestment in the met space. We have also recently seen significant volumes of met coal crossing over to thermal and industrial applications that have provided strong price support to coking coal spot pricing.

The Australian premium low Vol spot price is now at over $320 per metric ton, while the U.S. high Vol A spot price is currently assessed at $300 per metric ton of nearly 25% from its low point during August. During much of Q3, U.S. high vol met coal pricing was strongly supported by the seaborne thermal market as Europe sought additional sources of thermal coal to replace banned Russian supply. While Europe appears to be covered in terms of coal supply for the winter, we believe Europe remains under bought for 2023 expect return to the market during early next year, driving continued supply tightness and additional pricing support in the met coal space. We are now fully sold out for 2022 and for the remainder of this year, we’ll focus on meeting delivery requirements and what remains a challenging logistics environment.

During Q3, we execute on our plan to diversify Ramaco’s sales portfolio to include additional industrial and niche specialty coal consumers. We delivered several test shipments during Q3 with excellent results that have now translated into additional sales during Q4 as well as term business for 2023. We expect these types of industrial and niche sales to become a significant part of our portfolio. Looking closer at 2023, we have locked in committed sales at 1.8 million tons, with 1.4 million tons fixed at an average price of over $200 per ton. Our committed volumes are a mix of domestic and seaborne sales to metallurgical, thermal and industrial customers. Additionally, 2023 will be our biggest year on a percentage basis in terms of seaborne sales, which will comprise at least 60% of our sales versus about 1/3rd of our sales being seaborne this year.

Overall, we like the current market conditions as they apply to Ramaco. We continue to see a protracted imbalance of coking coal supply and demand, which is supportive of a protracted period of elevated coking coal pricing levels. We also now see a European thermal market lacking supply certainty and looking to the U.S. for solutions. With that said, I would now like to return the call to the operator for the Q&A portion of the call. Operator?

Q&A Session

Operator: Thank you. We will now begin the question-and-answer session. And the first question will come from Curt Woodworth with Credit Suisse. Please go ahead.

Curt Woodworth: First question is just on I guess the capital return progression. And you made a comment about how you wanted to have consistent increases in the dividend and then I guess a rabbit hole level of buybacks. I know you have, obviously board level approval required. But what are you thinking on that like a deep plan to have kind of formulaic system where you want to pay out 30%, 40% of net income in capital return? Or can you give any color on what the potential framework could look like going forward?

Randy Atkins: Yes. I think when we get to the Board level, obviously, we’ll tweak it, perhaps somewhat, but where we are looking at it right now is, as I mentioned, registered a tracking stock which will be paid out in addition to our regular dividend on our Class A stock. So we’ve got really two dividend payments we’re looking at and what we’re thinking about right now is, when you would take both those two dividend payments and add them up, you’d have an X number. And then, we would think about paying an equal amount toward buybacks once we meet those relative gating issues that I laid forth. So that’s how we’re looking at it right now. It’s not a formula-matic X percent, because I’m not sure that we can calculate that without better understanding pricing and things of that nature.

Curt Woodworth: Okay. That’s fair. And then with respect to the hedge for the fixed price volume for next year, can you break that out in any more detail between what — how much thermal would be in there? And then what is the mix of that? I think you said 1.4 between domestic and seaborne.

Randy Atkins: I’m going to let Jeremy take that one. Go ahead Jeremy.

Jeremy Sussman: Yes. So for fixed price business, Curt, it’s a good mix of sorts of domestic steel business, plus some domestic industrial and actually some export thermal business in there. And so that’s about 1.4 million tons and then we’ve got 400,000 tons, it’s indexed. I’d say that’s mostly your kind of traditional export steel business or although there’s some a little bit of export in there as well. But that’s pretty small for . I think the interesting thing. Curt for us for 23 is, I highlighted is that the domestic steel businesses lower than we historically have done in the past, we just felt we could get a lot better realizations in other markets.

Curt Woodworth: Now that makes sense. And then, just final one for me in terms of thinking about your production cadence for next year, how do you think about how your production of the book, first half versus second half? And what you kind of think your X ray, your exit rate and production would be going into 24? Thanks, guys, and best of luck.

Randy Atkins: Sure. Well, I think I’ll do the simple one first, and then turn it over to Chris. So the exit rate is going to be at about a 4 million ton run rate or actually probably a little bit higher than that. But Chris, go ahead and break it down.

Chris Blanchard: So by the end of the year, probably be at an exit run rate of about 4.4 million, the first half will be a little bit slower while we wait on the Elk Creek preparation plant to upgrade. So Elk Creek will be at — end the year at 3 million tons of high vol run rate. And presuming a lot of assumptions on the Berwind restart, over a million there and a little less than a million at Knox Creek run rate.

Randy Atkins: Curt, I would say for modeling purposes. I mean, obviously, you can back into our Q4 number and see that it’s the highest production figure for the year, but certainly, below the kind of the full year number for next year, which makes sense given we’re not including Berwind in there. So I would just say simplistically speaking, if you model production increases over the next X number of quarters, that’s probably the right way of thinking about it.

Curt Woodworth: All right, great. Thanks very much.

Randy Atkins: And lastly, Curt, not to belabor the point, but we’ve got a slide in our investment deck, I think it’s slide six, which is got a pretty decent layout of where we view production over the next, let’s call it 36 months, which gives you the cadence there per year.

Curt Woodworth: Understood. Thank you.

Operator: The next question will come from Lucas Pipes with B. Riley FBR. Please go ahead.

Lucas Pipes: B. Riley Securities. But thank you, operator and good morning, everyone. So my first question is on the cost side in Q3. Nice step into the right direction. And I wondered, does this fully reflect the royalty benefits from the Ramaco coal acquisition and then into Q4 and into 2023? Could you provide some color what your cost expectations are? Thank you very much.

Randy Atkins: Thanks, Lucas. I’ll start with this. So yes, short answer is Q3 does reflect the full benefits of the royalty business as its savings as it exists today. But remember, we’re ramping our Elk Creek plant from, call it 2 million tons to 3 million tons. So as we produce more coal at Elk Creek incrementally, we should see more royalty savings moving forward. So I’d answer both of those ways. Secondly, Elk Creek cash costs of $93 per ton. I mean, I focused on that, obviously, more than then Berwind and Knox where we’re ramping up. And I think we’re one of the last to report, I think you can kind of go through the others and I put that up against anyone on a relative basis. So I think Chris and the team did a fabulous job of kind of getting us back to where we think we fit in the overall la cadence.

Lucas Pipes: Very helpful.

Randy Atkins: And then for 23, I guess, what we’re going through our budgeting process right now, but certainly 23 should be below 2022 levels, even at current prices. We’ll have a full year of trucking savings with Berwind plant, operational and economies scale, I mean, as I said, we’ve got 700 employees today versus about 400 this time last year. And obviously, the mines are in ramp mode. So you didn’t get that full incremental benefit on a produced ton per produced ton basis. So, all in all, I liked the way our cadence looked in Q3, and I like where it looks heading into next year.

Lucas Pipes: That’s helpful. Thank you. Then another question on the commercial side, in terms of the index tons for 2023. Is that a met coal index or API 2 and then I recall, you sold some thermal coal here for the balance of the year if I remember, right. And I just wondered if that is fixed or floating with API 2 and how this might flow through in Q4. Thank you very much for your color.

Jason Fannin: Sure. This is Jason. Yes. On the thermal sales for the balance of this year, they are mixed primarily they are tied to the index. The back half of this year, for 23, those export steel, customer sales are tied to met coal pricing indices. Very, very small amount tied to the API 2 vast majority of that are tied to the U.S. met coal indices.

Lucas Pipes: They’re helpful. Thank you. Then for the balance of this year. Can you remind us what’s quantum are we — should we be thinking about for Q4, and again, just to confirm those would all still be floating with where API 2 is today. Thanks. That’s all I want.

Jeremy Sussman: Yes. Lucas, it’s Jeremy here. So I mean, the majority of our thermal funds in Q4, as Jason said, are floating with the API 2 index. We’ve got almost next to no API 2 floating exposure in 2023. The majority of the thermal business for next year is fixed.

Lucas Pipes: All right. I will leave it here. Really appreciate your color and best of luck.

Jeremy Sussman: Thank you.

Operator: The next question will come from Nathan Martin with Benchmark Company. Please go ahead.

Nathan Martin: I mean, first, maybe just the modeling question. Could you please share the split between domestic and export sales in the quarter? And then maybe what that might look like in the fourth quarter as we kind of back into the full year expectations?

JeremySussman: Yes, I mean, so we were a bit more domestic in Q3, call it 70:30. And Q4, probably a little bit less than that. So, again, this will be kind of Randy noted in his remarks, this will kind of be, at least for the next five quarters, Q4 will be the last one where we’re heavier on the domestic side, for the most part, certainly next year will be at least 60% export. And most of that ultimately will be tied to index pricing.

Nathan Martin: Appreciate that, Jeremy. And then looking at the full year sales guidance, obviously a little bit decrease there. Just wondering for some more color on there, I mean anything on the operational side to consider is it really still mainly challenging logistics? And those that mostly rail, mostly trucking, is it both? Why do you think those are persisting and when do you guys see that improving?

Chris Blanchard: This is Chris. A little bit of both on the trucking and the rail, we have had a buildup of clean tones on both railroads on the — hauling it to our customers. But we’ve also had challenges moving raw coal, particularly at our Knox Creek and Berwind operations before the startup of the Berwind plant, trucking it to our Knox Creek plant to get it processed. So it’s not all on the railroad, some of its other logistics. And frankly, that there’s a limited amount of coal trucks and coal truck drivers and labor is scarce. So that’s been a big challenge in the third quarter, and the startup of the Berwind plant largely eliminates that exposure to that constraint.

Nathan Martin: Got it, Chris. Yes, that sounds like that’s coming on very timely. And then maybe next, just kind of looking at the Berwind mine. I think you guys mentioned hoped for a spring restart at the latest. Again, a full year ’23 production was pulled down a little bit and it was roughly 4.3 million before now we’re at roughly 4 million tons. Is that mainly Berwind and the delay there. And then, in regards to idling costs that we saw $5 million in the quarter. Is that kind of a good run rate you are seeing for now.

Chris Blanchard: So I’ll take the first. So most of the pull down in the production for next year is related to the late restart of Berwind as opposed to having two full sections full year. We’ve got the first section coming on late and then very conservative ramp as we get back in there. And then, I would say the 5 million per quarter is a little bit light, I think the fourth quarter will be a little bit higher. And presuming we go into full rehab mode those numbers should increase a little bit until we restart them on.

Nathan Martin: I appreciate that color, Chris. And then maybe just a final one. And I know it’s a little early. But thinking about CapEx. First, maybe how do we think about what maintenance CapEx looks like today, given some of the recent inflationary pressures, and really just trying to think about early thoughts on what full year ’23 CapEx look like? I know you guys have flagged around $35 million in the station for potential gross spending. It’d be great just to dip in early thoughts there. Appreciate it.

Randy Atkins: Thanks, Nate. Yes, so you’re correct about next year. So if we go ahead with all the projects that we’ve got laid out, it’s about $55 million of growth capital. I think we kind of listed on Slide seven plus maintenance capital. I mean, I guess the way I look at maintenance capital, and all that Chris kind of touched upon and inflation is — in a normal environment, it’s about $7 or $8 a ton. But again, some years, it’s much lower than that. Some years, it’s higher than that. It depends on whether you’ve got more rebuilds and things of that nature. So that’s, I think that’s a safe number to use over the cycle. But Chris, you want to touch on what you’re seeing on inflation, right.

Chris Blanchard: So obviously, everything that we do on maintenance CapEx is not directly linked, but it’s tied to steel pricing, and there’s a lag. So we have seen those prices increase this year and probably won’t see as much decrease as we’d like even next year. But then as we ramp the company every year, it just depends on the timing of the equipment rebuilds and how they fall. As we get larger and larger, those variations will smooth out and we’ll get more to a routinely $7 to $8 a ton. But when we’ve been sort of the smaller size, some years it swells, some years it . But overall, you’ll average to that $7, $8 range.

Nathan Martin: Got it. Very helpful, guys. Thanks for those thoughts. I’ll leave it there. Appreciate the time and best of luck in the fourth quarter.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Randy Atkins for any closing remarks. Please go ahead, sir.

Randy Atkins: All right. I just want to thank everybody for joining us today and we look forward to speaking to you I guess, next year. So take care. Thank you.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.