New Ramaco Price Target After 5-Year Rare Earths Deal With Energy Dept.

Yes, I admit it. I wrote to readers on Monday to inform them that I was reducing my long position in Ramaco Resources (METC) by half and reallocating those funds towards Lithium Americas (LAC) , a name that I already had a small, long position in. When I wrote that, METC had closed at $34.90 the night prior. The stock bottomed out at $27.24 two days later ahead of earnings where the firm lost less money than expected but also generated less revenue than expected. I had also told readers that I was not buying anymore two weeks ago when the last sale was $47.60. 

Since Wednesday's lows, the shares had rallied all the way up to $35.20 on Friday morning before the sellers took advantage and used that rally to lighten up some more. Am I still long half of what my position size in terms of share count was at the highs? Yes. Why? Because this space is so volatile and you just do not know what kind of news might come out at any point given that rare earths and critical minerals are a national security issue.

Thursday Night 

News crossed the tape that Ramaco Resources had signed an "Umbrella Cooperative Research and Development Agreement" with the federal government's Department of Energy's National Energy Technology Laboratory. The lab is also known as "NETL." There are multiple sources for this news. I saw it first at The Fly. The idea is to accelerate the discovery, mining, processing and creation of rare earths and critical minerals at the firm's Brook Mine in Sheridan, Wyoming. 

Ramaco believes this mine to be the largest unconventional rare earth deposit in the U.S. and the agreement establishes a framework for a collaborative effort on developmental projects concerning not just rare earth and critical metals and minerals, but carbon, carbon allotropes, coal derivatives (clean coal) and other advanced materials. Through this collaboration, Ramaco and NETL will strive to integrate quantum computing and AI in order to automate scientific workflows, while driving expedited discoveries and results via the use of big data analysis versus traditional means. The agreement will remain in effect for five years. There are also options to initiate multiple other collaborative efforts under the umbrella as discoveries/opportunities arise.

The Chart​ 

Readers will note that METC found support at nearly a precise 61.8% Fibonacci sequence retracement level of the Spring into Autumn rally. ​Now the shares are at a key crossroads. Why? Simple. On Friday morning, in response to that news, the stock pierced its 50-day SMA from below but failed to hold the level. That makes my job easier. It goes like this: METC fails to take and hold that line, I stay at 50% in terms of allocation. 

METC does take and hold that level, which is now my pivot? Then I buy back half of what I sold and return the stock to a 75% allocation. Easy peasy. Rather have allies on momentum then stock my head out for the guillotine, especially on Halloween. Rock, on, gang. No, I would not be pulling funds from LAC to make that purchase, it would come from cash.

Ramaco Resources (METC)

Target Price: $41 (down from $58)

Pivot: $33 (50-day SMA) 

Add: Down to the 61.8% Fib level ($27)

Panic: Loss of 200-day SMA (currently $17)

At the time of publication, Guilfoyle was long METC and LAC equity.