Item 2. Properties
Item 2. Properties
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.
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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)
High-Vol. A $138
High- Vol. B $117
Mid-Vol. $144
Low-Vol. $144
Thermal $76
(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
Met
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)
< 1% > 1%
Met
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:
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Complex Market Pricing Per Ton (1) (2)
Aracoma $153
Kepler $162
Kingston $141
Marfork $171
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
Met
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%
Met
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
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“Item 1. 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
Mining Complex Coal Reserves Acquired/Leased Disposed Production Initial Assessment (1)
Change in Mine Plan Other (2)
Coal Reserves
Met
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) —
All Other
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
Mining Complex Coal Resources S-K Rule
Adoption (1)
Coal Resources
Met
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:
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