Ramaco Resources: Strategic Pivot Financed by Convertible Notes and Stock Dividend

Ramaco Resources Inc A US75134P6007

Ramaco Resources Inc. has unveiled a dual financial strategy, announcing a stock-based quarterly dividend while securing capital through a convertible debt offering. These moves are designed to fund the company's expansion into the rare earth elements sector while maintaining shareholder returns, raising questions about the balance between strategic investment and financial stability.

In November, Ramaco bolstered its balance sheet by issuing $300 million in 0% convertible senior notes due 2031. The net proceeds from this offering were approximately $290.9 million. Of this total, roughly $28.5 million was allocated to fund capped call transactions, a common hedge against potential dilution from conversion. The remaining capital is earmarked for the development of its rare earth project, other strategic growth initiatives, and general corporate purposes.

This financing provides immediate resources for the company's ambitious pivot. Ramaco aims to establish a dual-platform business model, built upon its existing metallurgical coal operations and a new venture into rare earth and critical minerals. The goal is to have a commercial rare earth oxide facility operational by late 2026 or early 2027.

Quarterly Dividend Paid in Stock

Concurrent with its financing activities, the company declared a quarterly dividend for Q4 2025. However, this distribution will be made in stock rather than cash.

• Dividend Rate: A Class B stock dividend of $0.1780 per share.
• Key Dates: The dividend is payable on December 19 to shareholders of record as of December 5.
• Mechanics: The dividend will be paid in shares of common stock. The share amount is calculated based on the Class B closing price of $12.37 on the record date, resulting in 0.014390 new Class B shares for each share held.
• Cash in Lieu: Any fractional shares will be settled in cash based on the same record-date closing price.
• Yield: As of December 12, the forward dividend yield stood at 6.06%.

This structure provides shareholders with a tangible return while preserving the company's liquidity for its strategic projects.

Operational Performance and Market Sentiment

The company's recent operational results present a mixed picture as it navigates this transition. For the third quarter of 2025, Ramaco reported a net loss of $13 million, alongside an adjusted EBITDA of $8.4 million. The firm also revised its full-year 2025 production guidance downward to a range of 3.7 to 3.9 million tons.

Despite the quarterly loss, Ramaco's liquidity position reached a record $272 million in Q3 2025, marking a 237% year-over-year increase. This strong cash position, combined with the proceeds from the convertible notes, forms the war chest for its rare earth ambitions.

Market reaction to the Q3 earnings was negative, with shares falling 7.95% in pre-market trading following the release. The rare earth initiative itself remains in a pilot phase, with no current production or immediate revenue diversification beyond coal. Industry observers have noted that ambitions for products like scandium oxide are viewed as highly speculative.

Analyst opinions reflect this uncertainty:
* Benchmark maintained a "Buy" rating with a $38.00 price target (October 28).
* Morgan Stanley set a price target of $17.50, implying a 5.23% upside (December 5).
* Goldman Sachs issued a "Sell" rating with a $16.00 target (November 18).

The consensus price target among ten covering analysts is $34.25.

Outlook: Execution is Key

In the near term, Ramaco's combination of record liquidity and new capital provides clear funding for project development. The critical milestones are now centered on execution: advancing the rare earth project from pilot to commercial production and managing the operational performance of its core coal business. The stock dividend will be distributed on December 19, and the convertible notes will remain outstanding until 2031, supporting the planned strategic investments. The company's ability to successfully manage this dual-track strategy will be the primary focus for investors moving forward.