Ramaco Resources Inc (METC) 2021 Q4 法說會逐字稿

Welcome to the Ramaco Resources, Inc. Fourth Quarter 2021 Earnings Conference Call. My name is John. And I'll be your operator for today's call. (Operator Instructions) And I will now turn the call over to Jeremy Sussman, Chief Financial Officer. Please go ahead.

Thank you. On behalf of Ramaco Resources, I'd like to welcome all of you to our fourth quarter 2021 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 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.

Lastly, I'd encourage everyone on this call to go on to 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.

Thank you, Jeremy. We always look forward to discussing results with everyone interested in following Ramaco. As you know now from our earnings release, we have been quite busy during the past month or so.

To start, we had our strongest quarter on record in Q4 '21. So far, in 2022, we have committed sales on about 70% of this year's production. Through these sales, we have already basically printed year-to-date roughly $270 million of EBITDA, $195 million of net income, which translates to about $4.40 of earnings per share. So after less than 2 months into the new year, we have greater than 3x more EBITDA and 4x more net income than we did for the entire year of 2021.

We still have the balance of roughly 1 million tons of dry powder left to sell for the balance of the year. This will go into export markets with currently record index pricing. We have now essentially derisked 2022 and are now on track to basically produce our highest annual earnings and sales metrics by several multiples.

On our last call, we telegraphed that we are on the verge of a very special transition. This is now happening perhaps much sooner and much stronger than we envisioned. I can think of no other public coal group which is currently doubling production, paying for it from internal funds and simultaneously making meaningful shareholder returns of capital. It is a nice place to find ourselves.

First, looking down the road, we hope to move our production up by about 50% this year to roughly 3.3 million tons. We are on track to essentially double last year's 2.2 million ton production level to roughly 4 million to 4.5 million tons by 2024. To reemphasize, for anyone concerned about our capital spending to get there, we intend to pay for all CapEx for new mine production from internally generated funds. From this level of production, we are on track to generate a great deal of both free cash flow and cash buildup over the coming years. This is net of our budgeted capital expenditures for mine expansion.

As a result, last week, we announced the doubling of our base regular dividend before, I might add, we had even made the first payment. We intend to revisit dividend levels later this year. And our hope is to not only increase this base level by 8% to 10% annually but also to consider further shareholder return in the form of share buybacks.

Now let me look back on some of the overall metrics. 2021 marked our most successful year financially, operationally and safety-wise since inception. Earlier this month marked our 5-year anniversary as a public company. For the record books, Ramaco mined its first ton of coal in April '17. As we sit, we have now mined about 8 million tons in total and will hit our 10 million ton production mark later this year. When we think about our 2021 results, I note that in the fall of 2020, we sold roughly 2/3 of our '21 production to domestic steel groups at what were, in hindsight, pretty low prices.

Despite that headwind, we managed to record our best financial year in 2021. We massively exceeded every metric we had set for ourselves. A quick list, EBITDA was up over 325% year-over-year to $79 million. Net income increased to $40 million, up over 900%. Earnings per share were $0.90, up about 880%. Free cash flow jumped by about 890% to $50 million. Our stock price rose year-over-year by over 370% from $2.88 per share to $13.60 at year-end. Our market capitalization rose about 390% from $123 million to $600 million.

As I said earlier, today, we have more forward visibility on this year's performance than we've ever had before this early in the year. Some of our 2022 highlights to date are that we've committed to sell roughly 2.3 million tons or 70% of this year's production, which we estimate will total 3.3 million tons. In the fall of 2021, as we've stated before, we locked in 2022 domestic sales of about 1.7 million tons or half of our production to North American steel customers at an average fixed price of about 196 FOB mine. We view this as a good hedge against any possible future downward price adjustments.

Since the end of the year, we have sold roughly another 0.5 million tons, mostly into export markets. Prices have averaged $270 per ton FOB mine at today's spot prices. Roughly 50% of these new tons shipped before the end of the first quarter. Based on our expected cost for the year, we estimate that these committed domestic and export sales currently translate, as I said, into net income of $195 million and roughly $270 million of EBITDA. We still have 30% of production left to sell. Most of these recent international sales have been index-priced. Recently, that price has exceeded over $400 per ton on the vessel and remains at $380 per ton for high-vol A, giving us a netback margin currently at about $200 FOB per ton.

We think that the overall market still has legs. It is currently stretched tighter than a snare drum. I will let Jason share some more granular thoughts on the subject. But we still see a distinct imbalance in supply or lack thereof and demand. Ex China steel production is still recovering to pre-COVID levels. And candidly, at the moment, there is not enough met coal to go around. Anecdotally, even this week, a substantial steel group told us that if they did not get prompt delivery on a new requested shipment, they would be out of coal. It is that tight at the moment.

This year, we project about 6 million to 6.5 million new tons coming online in the U.S. In '21, met production was still down 9 million tons from pre-COVID levels. We are still not caught up to pre-2019 levels. Met coal mining CapEx has fallen by 75% since its peak in 2012. Given the industry's inability to access capital and increasing ESG concerns, it is unlikely to come back. However, even as supply languishes, the market is in the middle of a robust demand rebound post COVID. We are also experiencing some challenging market disruption issues of being overseas. Geopolitics is back in the energy markets. And energy is back in the geopolitics. So we should buckle up.

Turning to production. Our 2021 year-end mine costs were roughly $70 per ton, likely some of the lowest in the industry. This level will no doubt rise this year based on selling cost alone but is a nice place to start from. We've also taken steps to help rein in a good portion of those sales costs.

We just announced an agreement to purchase our affiliated private company, Ramaco Coal. We will be discussing that transaction in much greater detail once we close. But this deal has dual interest to us. One is meaningful cost containment by managing our royalty expense. About 25% of our overall costs are sales and marketing-related. And about 66% of those costs directly are royalties. In a market with strong prices and rising royalty-related expense, we feel anything we can reasonably do to control long-term cost is important. Secondly, we think the deal positions us to be one of the only coal producers thinking about a meaningful new form of transition in the emerging energy and sustainability narrative, which I will get to in a moment.

As we have grown, one thing we have focused on more is how we are postured from a stock market standpoint. I'm afraid, candidly, the U.S. coal industry does not enjoy much respect from the markets. As this analyst group knows well, overall, the industry trades at an EV multiple of about 2.5x of expected 2022 EBITDA. Oil and gas, other energy groups and industrial companies all trade at substantial higher multiples ranging from 5 to 15x. I think one reason for this underperformance is that irrespective of whether a coal company produces thermal or metallurgic coal, the market does not perceive a credible endgame for any form of sustainable energy transition for the industry. One goal we have set is to explore possible forms of a transition, which could be both profitable as well as have some possible long-term environmental benefit.

The Ramaco Coal acquisition, in addition to saving its royalty expense, will also support the company's expansion into exploring additional alternative uses of coal. Over the past several years, working with two of the Department of Energy's national laboratories, we have developed, patented and have exclusive licensing rights to a rather substantial portfolio of intellectual property. This IP is focused on coal's use as both a higher-tech and higher-value feedstock for the manufacture and commercialization of advanced carbon products and materials. For anyone interested in the subject, I would refer you to the white paper I chaired to then Secretary of Energy Perry in 2019 from the National Coal Council entitled Coal in a New Carbon Age.

We think in the future, there will be other markets which we'll develop where we and others might sell some of our coal for higher prices as feedstock for non-greenhouse gas-emitting uses. This is not an entirely new concept. Today, we already sell coals to specialty industrial customers at higher prices than we do to steel companies. But make no mistake, for a long time to come, this would be in addition to Ramaco's selling to conventional steel customers.

We are perhaps the first coal group that has developed some extensive background in this area. And we intend to explore how these new markets might be commercially developed. We will discuss that more in the months ahead. Rest assured, whatever form this transition might take, we are committed to selling coal to steel customers and to maintain the fiscal discipline we have always shown. We will look forward to seeing where that might lead us in the years ahead.

So in summary, where does this now put Ramaco? You should expect we will continue to meaningfully grow our size and production profile from internal funding. This will provide us increasing levels of free cash flow and cash generation, which we then intend to prioritize to, in turn, return capital to our shareholders. For 2022, we are off to a terrific start and have now committed sales, which will generate a substantial multiple of last year's net income and EBITDA. We still have an additional 1/3 of our production left to sell into currently strong markets.

We expect to grow using little to no debt, little to no ARO or any other liabilities and end up bluntly with a lot of cash. This year and in the years ahead, we expect to have formidable cash generation and increasingly larger amounts of free cash flow from adding new low-cost production. We also hope to continue to be somewhat insulated from market pressures because of that low cost of production as well as our strong financial condition. And lastly, we expect to share that good fortune with our shareholders by returning increasing amounts of cash back to them. Today, that is in the form of a reliable increasing dividend and perhaps in the future, some share buybacks.

Now with that, I would like to turn the floor over to the rest of the team to dive into more detail on finances and operations in the market. So Jeremy, please run down our financial metrics.

Thank you, Randy. I'll start by going over our fourth quarter and full year 2021 financial highlights.

I am pleased to note that fourth quarter adjusted EBITDA of $62 million was our best quarter on record, up 78% from third quarter adjusted EBITDA of $18 million. Full year 2021 adjusted EBITDA of $79 million was up 328% from 2020's $18 million figure. I would note that we carried over roughly 75,000 tons into 2022, mainly due to railroad issues outside of our control, which negatively impacted fourth quarter adjusted EBITDA by almost $7 million. Fourth quarter earnings per share of $0.42 was up 164% from third quarter EPS of $0.16. Full year 2021 EPS of $0.90 was up over 875% from 2020's loss per share of $0.12.

Turning to our forward outlook. I would like to touch on a number of areas in our guidance tables. First, on production and sales, we are guiding to 3.0 million to 3.3 million tons in 2022. I would remind everyone on this call that our legacy Berwind mine is expected to reach full production sometime in the second quarter. As such, we anticipate production in the second half of the year to be higher than in the first half.

Second, on costs, as we start the year coming off 2021 costs averaging $70 per ton, we expect to see those numbers increase. We are guiding to $82 to $90 cost per ton for the full year. This is a wider range than normal. And I would expect cost to trend downward throughout the year, in line with our production ramp. This is also reflective of the dynamic environment we are in as it relates to inflationary pressures and sales-related costs, which, of course, fluctuate with price. The midpoint of our 2022 guidance reflects the $16 per ton increase versus actual 2021 costs. Almost 3/4 of this increase is due to higher sales-related costs with the remainder of the increase due to the other inflationary pressures, such as higher wage and raw material costs.

Third, other guidance, like depreciation and amortization of $32 million to $35 million, SG&A of $21 million to $24 million and interest expense of $4 million to $5 million, all represent an increase versus 2021 levels. As a reminder, we will be growing our production by up to 50% and these items are reflective of our growth profile. I would also note that we will likely exhaust our federal net operating losses and become a cash taxpayer at some point this year.

Lastly, we have a range of $65 million to $85 million for our 2022 capital expenditure guidance. About 1/3 is maintenance capital while roughly 2/3 relate to growth. Of the growth component, it is fairly evenly split in terms of Elk Creek and Berwind. The first bucket of growth is the Elk Creek preparation plant expansion and corresponding increase in production with the addition of two new mines, the crucible mine in 2022 and the surface #3 mine in Highwall Miner mainly in 2023. This spend will allow us to produce at least 2.5 million tons per annum at Elk Creek for the foreseeable future, beginning in the second half of 2023.

The second bucket of growth capital is the rehab of the Berwind preparation plant, which we acquired in the Amonate transaction, as well as the development of the associated reserves that were also required. When fully developed by the end of 2023, we anticipate the Berwind complex will produce at least 1.5 million tons per year with at least half of that production coming from the newly acquired reserves. The third bucket of growth capital is simply the completion of our legacy Berwind mine. This is the lesser of the two spends this year at Berwind.

Looking ahead, we continue to expect 2022 to produce more adjusted EBITDA by a wide margin than Ramaco has cumulatively generated since inception. As Randy pointed out, at this point in time, based on committed sales of 2.3 million tons through today, we have effectively locked in 3x our 2021 EBITDA of $80 million roughly using current spot pricing for our index-linked tons.

This is after our strongest year on record in 2021, where, as Randy also noted, we generated roughly $50 million of normalized free cash flow, which we simply define as adjusted EBITDA less CapEx. Looking out even further, with our internally funded growth projects, we now anticipate hitting our long-standing goal of 4 million to 4.5 million tons of production for the full year 2024 while, at the same time, returning increasing amounts of cash to our shareholders.

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

Good morning, everyone, and thank you, Jeremy. Before jumping into some current operational updates and discussing the growth projects that are ongoing, I want to spend just a moment reflecting on our safety performance for '21.

As Randy touched on in his opening remarks, 2021 was our best year in terms of employee safety. Not only were our total reportable incident rate the lowest for any year in our history, the total number of all employee incidents was also our lowest. This, despite the addition of new mines and expansion at our Berwind division and hiring many more employees. In fact, for the year, our surface mines and plants all operated the entire year without any lost time or reportable accidents. As much improved as 2021 was, our goal remains 0 accidents or impacts for any of our employees. And as we move into 2022, safety performance has continued to be strong, but we remain vigilant as the workforce continues to expand and new production is added.

Also, as we come out of the fourth quarter and start the first quarter of '22, we are seeing the COVID impacts on our workforce subside and stabilize. We track daily the number of impacted employees. And while we are not at 0, we were down to just a handful of employees, ill or quarantined, on any given day compared with over 5% of the workforce late in the fourth quarter. As a result, we are seeing productivity starting to improve relative to the end of the past year. The end of '21 was fairly momentous for Ramaco. The closing of the Amonate acquisition, coupled with a historically strong metallurgical market, allowed us to move forward on numerous fronts to realize our long-stated growth potential.

Turning first to the area of our current growth, the low volatile and mid-vol mines and reserves at Berwind and near Knox Creek. Immediately upon closing Amonate, we began the rehabilitation of the existing Laurel Fork mid-vol underground mine, which was acquired with the plant and reserves. Installation of infrastructure and mining equipment is progressing ahead of schedule. And we anticipate first coal late in March with a steady production ramp throughout the summer.

Early in January of this year, we began the actual demolition and upgrades at the Berwind preparation plant. Work is now in full swing. And we anticipate bringing the plant online in the third quarter at 50% capacity but with all modernized and efficient equipment and reaching full nameplate capacity by the end of September '22. At that time, of course, subject to recovery in rail service, the Berwind preparation plant will have a nameplate capacity of approximately 1.5 million annual clean tons.

At the Berwind mine, we completed the slopes to the Pocahontas #4 Seam during the fourth quarter and began all the construction and transition work to move into production mode with the first of our production units. Production ramped during the quarter while building the workforce and completing infrastructure and ventilation work to support this section. This section has now essentially reached a normal production mode. We continue to staff the mine for the active section as well as engage the remaining work to position the mine for the second section, which will start later this year when our Triad mine exhausts its reserves. Late in '22, we will further expand to take the Berwind Pocahontas 4 mine to 3 full operating sections.

At Elk Creek, design work for the Elk Creek plant expansion is nearly complete. We anticipate undertaking this upgrade while the plant continues to run at current capacity with only limited shutdown periods required during construction to tie in the additional equipment. Once fully activated in mid-'23, the production capacity at Elk Creek will increase from approximately 2.1 million annual tons to as much as 2.5 million tons per year. To support this additional capacity, we are planning to install two new mines, which will bring online during '22 in advance of the full plan expansion.

The first mine, the crucible underground mine, will primarily serve specialty coal markets. Our second edition, the RAM #3 surface mine in Highwall Miner, will start development late in '22 and begin production in the first half of '23. This surface mine will produce both a high-vol AB product as well as a stand-alone high-vol A product from the various seams that the surface mine in the Highwall Miner will access. As Jeremy noted, capital expenditures are currently underway for the crucible mine. And we will incur capital expenditures for the RAM mine later this year.

We do continue to see a very tight labor market across all of our operating areas. We have ramped up recruiting and retention efforts as we both work to maintain our skilled workforce and add as many as 150 new coal miners during this calendar year. We remain on schedule with our hiring through essentially the first 2 complete months of '22. But our human resource effort will continue to be critical to meeting our growth plans.

This tight labor market extends throughout the entire supply chain in our business. While we fully expected inflationary pressures on costs for labor and materials, we are starting to encounter availability issues related to capital equipment, repair components and even normal operating supplies. Labor shortages throughout our support industry have caused higher prices and longer lead times on capital items, equipment rebuild and construction and excavation projects. Even logistics constraints such as the availability of coal trucks and coal truck drivers have the potential to impact operations.

We continue to manage all of these issues aggressively. Fortunately, none of these issues have caused any material reduction in production from our mines or significant timing delays on any of our projects. While all of these are certainly challenges, we believe we can overcome and mitigate each with focused effort and execution. These issues are largely driven by the excellent market dynamics for steel and metallurgical coal, something that we surely welcome.

I'd now like to hand the call to Jason Fannin, our Chief Commercial Officer, to talk a little bit more about the strength of the markets. Jason?

Thanks, Chris, and good morning, everyone. In my remarks, I will share an overview of what we are seeing in the market and discuss our current and forward sales outlook. We continue to see very favorable coking coal market fundamentals with seaborne pricing remaining at record levels. We also expect to see continued higher price support, given the ongoing structural supply-demand imbalance.

Looking globally, apart from China, global hot metal production continued its post-pandemic recovery. 2021 crude steel production excluding China was up more than 13% year-over-year. Total production including China reached new record high of over 1.9 billion tons. After taking steps to moderate steel production during late 2021 and with the Chinese New Year and Winter Olympics behind them, we expect growth in Chinese steel production for the remainder of 2022, especially compared to second half of 2021 levels.

Indian steel producers continue to push forward with large-scale road projects. The country is currently on a 5-month streak of month-over-month increases in steel production. Additionally, we expect steel production in our primary markets of North America and Western Europe to remain robust for 2022 based on sustained strong demand, particularly in their auto sectors.

For a variety of reasons, we continue to see an overall imbalance between demand and supply. Even with current muted Chinese demand, seaborne coking coal prices have hit record levels in both the Atlantic and Pacific Basin. The supply response, however, remains subdued. Weather-related production and transportation issues in both Australia and Canada as well as COVID-19 effects on production in Australia, have impacted production and exports for both these major exporters.

Similarly, in the U.S., a tight labor market, COVID-19 and weather-related impacts to rail service and, to a lesser degree, port logistics have further restricted U.S. supply. And most recently, the Russia-Ukraine conflict has added more tension to an already stressed supply side. We believe the coking coal supply deficit and historically strong price momentum will last longer than past market upswings, providing strong tailwinds for Ramaco.

Looking ahead to 2022, considering our unsold position, we expect our sales mix to move closer to 50% to 55% domestic and 45% to 50% seaborne, becoming more diverse than in our past history. The majority of our remaining unsold volumes consist of low and medium volatile coking coal from our Berwind and Knox Creek operations. This includes newly restarted production from our recently acquired Amonate reserves. Amonate already enjoys an established reputation as a premium coking coal in the seaborne market. This year, we look forward to having our most diversified product mix with a broader range of coking coal products spread to a wider venue of customers.

For the current quarter of 2022, for all intents and purposes, we are sold out. We are still, however, receiving inquiries for prompt shipments, which have increased in recent days due to the Russia-Ukraine conflict. This speaks to the elasticity of the supply response to continued strong demand and the result of market tightness. We see that tightness also leading to a prolonged period of premium pricing levels.

With that said, I would now like to return the call to the operator for the Q&A portion of the call. Operator?

(Operator Instructions) Our first question is from Lucas Pipes from B. Riley Securities.

Nice job on operations and also the many strategic initiatives. I first wanted to ask about the deal regarding Ramaco Coal. And it sounds like you will sustainably lower your cost structure with this. And I wondered if you could give us some key metrics on that, like what the royalty is on the mineral rights that you are acquiring? And then roughly, what percentage of your production this year, next year, 2024, is part of Ramaco Coal's reserves today? And then I have a few follow-ups from there.

Okay. Well, I think is, as we said, royalty cost are a rather good chunk of our overall mine costs. So the whole main rationale behind the deal was to do something, on a longer-term basis, had a reasonably sustainable reduction in our overall cost structure, particularly where we saw the market spinning to move into a higher-priced condition for some extended period of time. We will get into a lot of the very specific metrics on cost savings once we've actually closed the deal. But Jeremy, you want to basically give Lucas a few more general metrics?

Yes. Lucas, great question, and so a couple of general metrics. So as Randy noted, about 25% or so of our costs this year will be sales-related and about 2/3 of that are royalties. If I think about sort of the second part of your question, how much do we mine on Ramaco Coal land? It fluctuates. But to give you some sort of guideposts, historically, it's been as low as about 30%, as high as about 40% in terms of our overall royalty payments, depending upon where we're mining. So obviously, you can kind of do the math and, I think, get to the conclusion as why we're super excited about this savings in perpetuity for us.

Very helpful. And then with just the payment terms, would this deal be cash-accretive here in year 1?

It will probably not be cash-accretive. But the way we have structured it is such that it is a very small draw on our cash generation for the year. We think that certainly within the next 36 months that we will probably be in a positive cash generation situation from the royalties against this deal.

Okay. No, that's helpful. I appreciate that. And then my second topic here is volume growth, 4 million to 4.5 million in 2024, I wondered if you could share with us a bridge by mine level between 2022 and 2024. And then should we think of 2023 as a bridge year, kind of somewhere in the middle or maybe higher, lower than that, would appreciate your color on those points as well.

Sure, Lucas, thanks. And what I'll -- before I turn it over to Jeremy to go sort of somewhat granular on your -- I would refer you to the deck that we put out this morning that basically on Slides 7 and 8 does a pretty good job of explaining where our growth will be over the next really 24 to 36 months. So Jeremy, you want to pick it up from there?

Thanks. Yes. And I think, Lucas, even if you go back to Slide 6, we kind of give you a breakdown by year since obviously our capital expenditure guidance certainly reflects really the finishing of the build-out of really our long-term stated goal of getting to 4 million to 4.5 million tons. And of course, we can go higher than that, but -- so this year, we're looking at 3 million to 3.5 million tons. In '23, again, as you can see on Slide 6, just like you suggested, it's basically a bridge between this and '24, kind of at about 3.7 million tons.

And then in '24, that's when we're going to be at that kind of 4 million to 4.5 million ton rate. And as we've said, when we're at that 4 million to 4.5 million ton rate, you're basically looking at Elk Creek somewhere in the 2.5 million, 2.5-plus million range, Berwind in the kind of 1.5 million, 1.6 million range. And then the rest will come from our Knox Creek Mining Complex. And again, from a cadence perspective, the additional tonnage at Elk Creek really comes online when the plant expansion is complete, which will be midyear next year. So hopefully, that helps give you some color.

Our next question is from David Gagliano from BMO Capital Markets.

First of all, thank you for the extensive update and slide presentation. As always, it's very helpful. Just a really quick question on the capital allocation, and it's kind of a philosophical question, but it's a good problem to have obviously even after the deal and the higher -- relatively speaking, higher cash costs, obviously going to generate a lot of cash. And the commentary continues to be about buybacks. How do you balance the focus on buybacks with the low free float?

Well, I think the way I would look at this, David, is we have -- the float has principally been "constrained" by the capital structure we created when we started, which was that we were essentially an outgrowth of a private equity -- two private equity groups that funded us to get started. And then when we did our IPO, obviously we began to put shares into the market. Both of those PE shops have held these investments in us for a considerable length of time. And probably over time, we'll also begin to sell down their positions. That's -- it's a natural phenomenon, which we have expected since day 1.

Indeed, I think publicly, Energy Capital Partners, one of our large shareholders, filed a shelf last fall, that they would be doing a sale of some of their shares. Yorktown has sold shares as well last fall. So we can expect, I think, over time that we will find that there is greater float in the markets as our two principal institutional investors began to distribute more shares out to their individual limited partners. So I think that colors our view on share buybacks as we move forward. So as we get a larger float, I think that becomes perhaps a more compelling financial tool in our kit, aside from just making increasingly larger cash dividends.

Okay. And some others in the industry have opted from a balanced or sort of a kind of a split between cash, special dividends and buybacks. I'm just curious, why only the buyback angle?

Well, I think from our perspective, the buybacks really return more value back to the company. I think a lot of hedge players, of course, like pure large special cash dividends. But those -- that doesn't really do anything long term for the company. It just simply does a one-shot cash return back to certain types of shareholders. So I think we're always going to focus on our shareholder return in a way which builds value for the company and its remaining shareholders.

Our next question is from Nathan Martin from The Benchmark Company.

You've definitely been busy, so congrats on some of those new initiatives.

Great. Thanks, Nate.

Maybe I'll drill down a little bit on cost and specifically kind of looking forward at some of your growth projects. If I assume a flat sales price to take that variable out of the equation, how might these new projects affect your overall cost structure?

Sure, I'll let Jeremy handle that one.

Sure. So Nate, I think let's use '21 as kind of the base year. Obviously, you can see our average realization just above $100 a ton, so sort of a normalized long-term price, i.e., not elevated like '22. So the way I would look at that, as we ramp up Elk Creek and certainly we ramp up the Berwind operations, sales-related costs aside, we should be -- we should have a 6 handle in front of us long term. I would remind you again, as Chris kind of said in his remarks, when the Berwind prep plant is fully up and running or at least 50% operational sometime in the third quarter and then obviously fully operational sometime thereafter, that's going to lower our trucking costs by double digits on a per ton basis from the Berwind complex to Knox Creek.

So again, sales-related costs aside, we will have that sort of important event and catalysts to kind of get our costs sustainably lower at Berwind. And of course, with the deal that was announced this morning, I kind of went through some of the royalty math with Lucas, clearly that's going to help keep our long-term costs with both complexes at a very, very comfortable level. So bottom line is most of the increase in '22 that you're seeing is sales-related.

Makes sense, very helpful, Jeremy. Appreciate that. And then you guys had mentioned 75,000 tons, I think, carried over here to the first quarter from the first quarter -- to the first quarter from the fourth quarter. Most of your peers have noted transportation and logistics issues leading to some delays as well. I think you guys also said you're sold out in this quarter, essentially sold out for the first quarter. How confident are you that those tons can move on time? How is service kind of progressing throughout the quarter? When do you think things could improve to levels to make you feel comfortable, I think, to hit the high end of that full year guidance at 3.3 million tons?

Sure. I'm going to let Jason handle that on the logistical side. Of course, well, like everybody else in Central Appalachia, we've had issues with our rail carriers. Some have been better than others and some have been able to work through their issues better than others. But I think we're confident we're going to be able to deliver to our customers on time. So Jason, do you want to go ahead and pick that up for me?

Sure, Randy. Yes, so we've -- we certainly had those tons carry over and out of '21 there late. Those tons have shipped earlier this quarter, been accounted for. As far as being booked out for this quarter and what we've got projected to load and timing of that, it's going to move, I think, within the quarter certainly. Like everyone else, as Randy mentioned, we've seen delays, both on the rail service side and at the ports as well due to queues and, of course, the delays of the wagons to getting to the ports.

We're starting to see that subside to some degree now already as the Omicron wave has started to subside as well. Certainly, there's been weather impacts, like last year and earlier this year, that have kind of added to that slowdown that we are starting to see some improvement. And again, I think what we've got booked this quarter, in my mind, is going to move this quarter, be delivered.

Got it. My other big-picture questions have pretty much been addressed. So I guess, I'll leave it there. Appreciate the information, guys, and best of luck in '22.

Okay, thanks, Nate.

I'd like to turn the call back over to Randall Atkins, CEO, for final remarks.

Okay. Great. Again, as always, we thank everyone for joining us. We're happy to say we think we're off to a remarkable start for '22, and we look forward to the year as it progresses and keeping everybody abreast of our progress as we go forward. So thank you very much again.

Thank you, ladies and gentlemen. This concludes today's call. Thank you for participating, and you may now disconnect.