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Item 2. Properties

2022-03-07 compared with 2021-03-15 · 121 added, 129 removed, 2 unchanged (99% of the section changed)

Coal Reserves

We prepared our estimates of reserves which were audited by Marshall Miller & Associates, Inc.

(“MM&A”), and MM&A reviewed our methodology, assumptions and reserve factors utilized in determining these estimates.

In the few instances where MM&A recommended revisions to reserve figures, MM&A worked with our team to modify reserve estimates.

MM&A relied on their independent pro-forma economic analysis for ultimate reserve determination;

this analysis is further discussed in the Costs & Calculations section below.

We maintain an internal staff of engineers and geoscience professionals who work closely with independent reserve engineers to ensure the integrity, accuracy and timeliness of the data used to calculate our estimated reserves.

Our internal technical team members meet with independent reserve engineers periodically to discuss the assumptions and methods used in the proved reserve estimation process.

We provide historical information to the independent reserve engineers for their properties, such as ownership interest, production, test data, commodity prices and operating and development costs.

These estimates are based on engineering, economic and geologic data, coal ownership information and current and proposed mine plans.

Our proven and probable coal reserves are reported as “recoverable coal reserves,” which is the portion of the coal that could be economically and legally extracted or produced at the time of the reserve determination, taking into account mining recovery and preparation plant yield.

These estimates are periodically updated to reflect past coal production, new drilling information and other geologic or mining data.

Acquisitions or dispositions of coal properties will also change these estimates.

Changes in mining methods may increase or decrease the recovery basis for a coal seam, as will changes in preparation plant processes.

“Reserves” are defined by the SEC Industry Guide 7 as that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination.

Industry Guide 7 divides reserves between “proven (measured) reserves” and “probable (indicated) reserves,” which are defined as follows:

• “Proven (Measured) Reserves.” Reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes;

grade and/or quality are computed from the results of detailed sampling and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well-established.

• “Probable (Indicated) Reserves.” Reserves for which quantity and grade and/or quality are computed from information similar to that used for proven (measured) reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced.

The degree of assurance, although lower than that for proven (measured) reserves, is high enough to assume continuity between points of observation.

On October 31, 2018, the SEC voted to adopt amendments to modernize the property disclosure requirements for mining registrants and related guidance under the Securities Act of 1933 and the Securities Exchange Act of 1934.

The final rules provide a three-year transition period, thus, we will be required to begin to comply with the new rules for the fiscal year beginning on January 1, 2021 (reported in the Annual Report on Form 10-K for the year ended December 31, 2021).

We are in the process of assessing the impact the new rules will have on our disclosures.

As of December 31, 2020, we had estimated reserves totaling 623.5 million tons, of which 331.1 million tons, or 53%, were “assigned” recoverable reserves that were either being mined, were controlled and accessible from a then active mine, or located at idled facilities where limited capital expenditures would be required to initiate operations when conditions warrant.

The remaining 292.4 million tons were classified as “unassigned,” representing coal at currently non-producing locations that we anticipate mining in the future, but which would require significant additional development capital before operations could begin.

The following table provides the location and coal reserves associated with each of our reportable segments and related significant mines as of December 31, 2020:

As of December 31, 2020

(in thousands of short tons) (1)

Recoverable Reserves

Reportable Segment Location Reserves Proven Probable Assigned (2)

Unassigned (2)

Deep Mine 41 Virginia 28,475 22,685 5,790 28,475 —

Road Fork 52 West Virginia 32,803 23,238 9,565 16,759 16,044

Black Eagle West Virginia 17,387 12,483 4,904 17,387 —

Lynn Branch West Virginia 23,228 12,298 10,930 23,228 —

Met Other Virginia, West Virginia, Pennsylvania 517,206 370,410 146,796 240,816 276,390

CAPP - Thermal West Virginia 4,444 3,911 533 4,444 —

623,543 445,025 178,518 331,109 292,434

(1) 1 short ton is equivalent to 0.907185 metric tons.

(2) “Assigned” reserves represent recoverable reserves that are either currently being mined, reserves that are controlled and accessible from a currently active mine or reserves at idled facilities where limited capital expenditures would be required to initiate operations.

“Unassigned” reserves represent coal at currently non-producing locations that would require significant additional capital spending before operations begin.

The following table provides the breakdown between the quantity of reserves that is currently covered by an active mining permit or not permitted and the quantity of reserves that is met coal or thermal coal associated with each of our reportable segments and related significant mines as of December 31, 2020:

As of December 31, 2020

(in thousands of short tons) (1)

Reserve Control By Permit Status By Coal Market Type (2)

Reportable Segment Owned Leased Permitted Not Permitted Met Thermal

Deep Mine 41 — 28,475 25,673 2,802 28,475 —

Road Fork 52 237 32,566 2,422 30,381 32,803 —

Black Eagle — 17,387 12,944 4,443 17,387 —

Lynn Branch 813 22,415 14,479 8,749 23,228 —

Met Other 61,983 455,223 123,185 394,021 460,281 56,925

CAPP - Thermal — 4,444 4,444 — — 4,444

Our Properties

Refer to “Item 1.

Business” for information on our active mining properties.

Our corporate headquarters consists of approximately 50,000 square feet of leased office space at 340 Martin Luther King Jr.

Boulevard in Bristol, Tennessee.

Coal Reserves and Resources

As of December 31, 2021, we estimate that we owned or controlled approximately 351.1 million tons of marketable proven and probable bituminous coal reserves and approximately 381.7 million tons of in situ bituminous coal resources.

Our coal reserve and resource estimates were prepared by Marshall Miller & Associates, Inc.

(“Marshall Miller”), an independent professional mine engineering and geological consulting firm.

Technical Summary Reports prepared by Marshall Miller, as a Qualified Person, for each of our material mining properties are filed as exhibits to this Annual Report on Form 10-K and incorporated herein by reference.

Coal reserve and resource estimates are based on data obtained from drilling activities and other available geologic data.

Estimating reserves and resources requires the use of a geologic, engineering, and economic assumptions.

Our engineering, land and operational support personnel work closely with Marshall Miller to ensure the integrity and accuracy of the data used to calculate the estimates as well as to ensure the assumptions used are reasonable based on our historical results as well as current and future anticipated mine plans.

We provide Marshall Miller with historical property information including property maps, deed, lease, and permit information, drilling and lab results, mine plans, production quantities, development, capital, and operating costs as well as market information.

For each of our active and development mining properties, Marshall Miller performs an initial assessment and based on the level of geological evidence estimates our coal resources and classifies such resources as either inferred, indicated or measured.

For each of our active and material mining properties, Marshall Miller further conducts a pre-feasibility study to estimate our coal reserves and classify such reserves as either proven or probable.

The estimates and reports prepared by Marshall Miller are reviewed by our personnel to ensure such reports have been prepared in accordance with applicable rules and regulations and that estimates are based on reasonable assumptions and reflect known facts and circumstances updated through year-end.

Economic analysis is a required part of the process to estimate coal reserves and resources.

For a coal reserve or resource to be considered economic, generally revenue generated from its sale must exceed its total cost of production (including consideration of development, capital, and operating costs).

In determining coal reserves as of December 31, 2021, the following estimated market pricing was utilized:

Coal quality Market Pricing Per Ton (1) (2)

(1) Market pricing shown on U.S.

East Coast basis.

(2) Met and thermal pricing based on 10-year and 3-year average, respectively of forecasted pricing from pricing services.

The following is a summary of our estimated marketable proven and probable coal reserves as of December 31, 2021 as determined by Marshall Miller:

Coal Reserves (Tons in thousands)

Marketable Coal Reserves (1)

Reserve Control Stage / Permit Status Production Stage

Mining Complex Location Total Proven Probable Owned Leased Permitted Not Permitted

Aracoma WV 44,181 26,237 17,944 5,250 38,931 15,134 29,047

Kepler WV 48,611 26,831 21,780 259 48,352 20,097 28,514

Kingston WV 32,489 19,477 13,012 607 31,882 15,082 17,407

Marfork WV 145,741 72,826 72,915 2,084 143,657 74,477 71,264

McClure/Toms Creek VA 80,077 55,041 25,036 — 80,077 48,658 31,419

Total 351,099 200,412 150,687 8,200 342,899 173,448 177,651

(1) Minimum seam height 30 inches for underground mines.

Coal Reserves (Tons in thousands)

Coal Type/Quality

Met Coal by Volatility Thermal Sulfur Recovery Percentage (2)

Mining Complex Location High-Vol A High-Vol B Mid-Vol Low-Vol Thermal (1)

Aracoma WV — 44,181 — — — 41,950 2,231 27 %

Kepler WV — — 5,942 42,669 — 47,694 917 43 %

Kingston WV 15,676 — 1,418 9,091 6,304 13,002 19,487 43 %

Marfork WV 103,069 6,819 2,300 26,195 7,358 122,526 23,215 29 %

McClure/Toms Creek VA 485 1,926 75,998 — 1,668 80,077 — 31 %

Total 119,230 52,926 85,658 77,955 15,330 305,249 45,850

(1) Kingston thermal reserves primarily proven and >1% sulfur;

Marfork thermal reserves primarily probable and >1% sulfur;

McClure/Toms Creek thermal reserves primarily probable and <1% sulfur.

(2) Recovery percentage defined as estimated coal reserves divided by related estimated in situ measured and indicated coal resources.

In determining an initial assessment for purposes of determining coal resources as of December 31, 2021, the following estimated market pricing was utilized:

Complex Market Pricing Per Ton (1) (2)

Kingston $141

McClure/Toms Creek $164

(1) Market pricing shown on U.S.

East Coast basis.

(2) Pricing shown for primary product judgmentally selected by qualified person based on review of historical average pricing for each complexes coal products over the past 5 years.

The following is a summary of the Company’s estimated in situ inferred, indicated, and measured coal resources (exclusive of coal reserves) as of December 31, 2021 as determined by Marshall Miller:

Coal Resources (1) (Tons in thousands)

In Situ Coal Resources (2)

Reserve Control Stage / Permit Status Exploration Stage

Mining Complex Location Total Indicated Measured Owned Leased Permitted Not Permitted

Aracoma WV 140,657 53,692 86,965 49,236 91,421 17,206 123,451

Kepler WV 58,734 29,916 28,818 596 58,138 9,555 49,179

Kingston WV 21,254 21,254 — 13,651 7,603 — 21,254

Marfork WV 128,786 46,605 82,181 61,168 67,618 19,976 108,810

McClure/Toms Creek VA 32,281 10,382 21,899 — 32,281 11,558 20,723

Total 381,712 161,849 219,863 124,651 257,061 58,295 323,417

(1) Amounts shown exclusive of coal reserves.

(2) Inferred Resources were not considered material and have not been presented.

Coal Resources (1) (Tons in thousands)

Coal Type/Quality

Met Coal by Volatility Thermal Sulfur Expected Recovery Percentage (2)

Mining Complex Location High-Vol A High-Vol B Mid-Vol Low-Vol Thermal < 1% > 1%

Aracoma WV — 140,657 — — — 45,154 95,503 18 %

Kepler WV — — 7,334 51,400 — 45,264 13,470 41 %

Kingston WV — — — 21,254 — 21,254 — 28 %

Marfork WV 62,890 18,117 1,854 43,800 2,125 35,020 93,766 31 %

McClure/Toms Creek VA — 585 31,696 — — 12,376 19,905 22 %

Total 62,890 159,359 40,884 116,454 2,125 159,068 222,644

(1) Amounts shown exclusive of coal reserves.

(2) Expected recovery percentage defined as potential estimated recoverable tons included in the initial assessment divided by estimated in situ measured and indicated coal resources.

Our coal reserves and resources are owned or are controlled through leases with third parties which have varied expiration dates and either have options to renew or are expected to be renewed until all mineable and merchantable coal is exhausted.

Leases require the payment of production royalties to lessors based on a stated percentage of sales revenue less freight cost and may contain annual minimum payment requirements.

We permit coal reserves and resources in advance of mining.

Currently, there are no known permitting issues that would impact the reporting of our coal reserves or resources.

However, also refer to

Business—Environmental and Other Regulatory Matters” and “Item 1A.

Risks Factors—Risks relating to regulatory and legal developments.”

Our coal reserve and resource estimates are updated periodically to reflect coal production, acquisitions and dispositions of mineral interests, new drilling, mine or geological data, and changes in regulations, market conditions or other economic factors.

As coal seams in the United States have been mined for many years and are well established, we do not conduct material exploration activity.

However, we periodically conduct drilling of additional core holes to provide additional geological evidence as part of our routine mine permitting and planning processes.

The following is a summary of the changes in our coal reserves and resources for the year-ended December 31, 2021:

Changes in Coal Reserves (Tons in thousands)

12/31/2020 12/31/2021

(1) 1 short ton is equivalent to 0.907185 metric tons.

(2) Classification of coal market type is based on available quality information and is subject to change with shifting market conditions and/or additional exploration.

The following table provides a summary of the quality of our reserves for each of our reportable segments and related significant mines as of December 31, 2020:

As of December 31, 2020

(in thousands of short tons) (1)

Sulfur Content Average Btu

Reportable Segment Reserves Primary Coal Type (2)

<1% Sulfur 1 - 1.5% Sulfur >1.5% Sulfur >12,500 <12,500

Deep Mine 41 28,475 MVM 28,475 — — 28,475 —

Road Fork 52 32,803 LVM 32,803 — — 32,803 —

Black Eagle 17,387 HVM 17,387 — — 17,387 —

Lynn Branch 23,228 HVM 23,228 — — 23,228 —

Met Other 517,206 HVM 397,385 114,837 4,984 497,865 19,341

CAPP - Thermal 4,444 T 4,444 — — — 4,444

Mining Complex Coal Reserves Acquired/Leased Disposed Production Initial Assessment (1)

Change in Mine Plan Other (2)

Coal Reserves

Aracoma 83,351 479 (2,259) (2,317) (20,232) (14,841) — 44,181

Kepler 58,461 — — (1,471) (10,605) 2,226 — 48,611

Kingston 36,864 9,091 — (2,005) (10,914) (547) — 32,489

Marfork 264,824 — (4,945) (4,017) (26,792) (24,913) (58,416) 145,741

McClure/Toms Creek 87,060 — — (3,783) — (3,200) — 80,077

Other 88,541 — — (842) — — (87,699) —

Other 4,444 — — (1,178) — — (3,266) —

Total 623,545 9,570 (7,204) (15,613) (68,543) (41,275) (149,381) 351,099

(1) Mineral areas subjected to initial assessment only and reported as coal resources.

(2) In adopting the SEC’s new subpart 1300 of Regulation S-K, the Company focused efforts on material and active mining properties and concluded that, for certain inactive and/or immaterial mining properties, preparing reserve/resource reports was not cost beneficial.

Additional reserve/resource reports may be prepared in the future if such properties become active and/or material.

Changes in Coal Resources (Tons in thousands)

12/31/2020 12/31/2021

(1) 1 short ton is equivalent to 0.907185 metric tons.

(2) Coal Type:

Metallurgical Coal;

HVM=High-Vol.

Metallurgical Coal .

The following table provides a summary of information regarding our mining operations for each of our reportable segments and related significant mines as of December 31, 2020:

Transportation

Reportable Segment Reserves (thousands of short tons) (1)

Mining Equipment (3)

Rail Other (4)

Deep Mine 41 28,475 U CM CSX B

Road Fork 52 32,803 U CM NS B

Black Eagle 17,387 U CM CSX B

Lynn Branch 23,228 U CM CSX —

Met Other 517,206 U/S CM/S/H NS/CSX B

CAPP - Thermal 4,444 U CM NS/CSX B

(1) 1 short ton is equivalent to 0.907185 metric tons.

(2) Type of Mine:

U = Underground.

(3) Mining Equipment:

S = Shovel/Excavator/Loader/Trucks;

CM = Continuous Miner;

H = Highwall Miner.

(4) Transportation:

B = Barge Loadout availability.

The following table provides a summary of information regarding our significant preparation plants as of December 31, 2020:

Preparation Plant(s)

Reportable Segment/Preparation Plant Capacity

(short tons per hr) (1)

Utilization % Source of Power

1,000 64% MP2 Energy

1,050 37% Old Dominion

Bandmill 1,200 51% AEP

Marfork 2,400 47% AEP

(1) 1 short ton is equivalent to 0.907185 metric tons.

Information provided within the previous tables concerning our properties has been prepared in accordance with applicable U.S.

federal securities laws.

All mineral reserve estimates have been prepared in accordance with SEC Industry Guide 7.

The following is a summary of information regarding our significant coal terminal as of December 31, 2020:

• DTA coal export terminal in eastern Virginia .

We own a 65.0% interest in DTA which provides us with the ability to fulfill a broad range of customer coal quality requirements through coal blending, while also providing storage capacity and transportation flexibility.

Costs & Calculations

Coal tonnage is classified as reserve when demonstrating profit on a fully loaded cost basis.

Pro forma testing conducted by MM&A demonstrated that our reserves are expected to generate cash and are profitable on a fully loaded cost basis.

Fully loaded costs were compared to two-year historical sales realizations for all potential reserve areas.

The classification of reserves is dependent upon the sum of all costs normalized to a per clean ton basis being less than the two-year historical sales price.

The two-year historical sales price includes the following average prices categorized by coal qualities:

Coal Qualities Two Year Historical Average Sales Price

Met High-Vol.

Thermal - CAPP-Thermal $56

For the surface mining reserve areas, the mining costs were estimated using the surface mining overburden ratios.

Direct mining costs were estimated for labor, blasting, fuel and lubrication supplies, repairs and maintenance, operating supplies and other costs.

The pro forma mining cost estimates for underground mining areas began with the computation of representative total seam thickness for each area evaluated.

The clean-tons-per-foot of mining advance was calculated to support mine production and productivity calculations.

All underground and highwall miner coal reserves are expected to require washing to remove coal partings and out-of-seam contamination.

Preparation plant yield was calculated by multiplying the in-seam recovery, out-of-seam contamination and plant efficiency factors.

In-seam recovery factors were obtained based upon the relative percentages of coal and rock within the seam.

Direct mining costs were estimated for labor, supplies, maintenance and repairs, mine power and other direct mining costs.

Sales, general and administration and environmental cost allocations were based on values typically observed by MM&A.

Sales variable costs for royalty payments, black lung excise tax and reclamation fees were calculated, along with cost components for other indirect mining costs.

The following map shows the locations of our significant properties, Met properties, CAPP - Thermal properties, and corporate headquarters.

Mining Complex Coal Resources S-K Rule

Coal Resources

Aracoma — 140,657 140,657

Kepler — 58,734 58,734

Kingston — 21,254 21,254

Marfork — 128,786 128,786

McClure/Toms Creek — 32,281 32,281

Total — 381,712 381,712

(1) Adoption of new SEC subpart 1300 of Regulation S-K required the Company to disclose coal resources beginning with the year ending December 31, 2021.

As coal reserve and resource amounts represent estimates, also refer to “Estimates of our economically recoverable coal reserves and coal resources involve uncertainties, and inaccuracies in our estimates could result in lower than expected revenues, higher than anticipated costs, decreased profitability and asset impairments” contained in “Item 1A.

Risk Factors.”

The following map shows the locations of our material mining properties and corporate headquarters:

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 2. Properties