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, 2022, we estimate that we owned or controlled approximately 336.7 million tons of marketable proven and probable bituminous coal reserves and approximately 527.3 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 our active and certain idled Met 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. When considered cost beneficial by the Company, 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
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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 of estimating 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, 2022, the following estimated market pricing was utilized:
Coal quality Market Pricing Per Ton (1) (2)
High-Vol. A $151
High- Vol. B $130
Mid-Vol. $152
Low-Vol. $152
Thermal $140
(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, 2022 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 40,114 24,655 15,459 5,335 34,779 22,174 17,940
Kepler WV 43,954 24,770 19,184 258 43,696 16,910 27,044
Kingston WV 32,892 19,135 13,757 652 32,240 15,228 17,664
Marfork WV 106,210 55,393 50,817 2,199 104,011 58,424 47,786
McClure/Toms Creek VA 72,094 49,271 22,823 — 72,094 41,591 30,503
Elk Run WV 41,442 20,929 20,513 139 41,303 12,111 29,331
Total 336,706 194,153 142,553 8,583 328,123 166,438 170,268
(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 — 40,114 — — — 37,643 2,471 26 %
Kepler WV — — 5,943 38,011 — 43,037 917 42 %
Kingston WV 15,452 — 1,526 9,724 6,190 13,787 19,105 41 %
Marfork WV 71,315 — 2,620 26,194 6,081 93,279 12,931 31 %
McClure/Toms Creek VA 7,272 — 63,052 — 1,770 72,094 — 31 %
Elk Run WV 29,895 11,547 — — — 33,115 8,327 22 %
Total 123,934 51,661 73,141 73,929 14,041 292,955 43,751
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(1) Kingston thermal reserves primarily proven and >1% sulfur; Marfork and 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, 2022, the following estimated market pricing was utilized:
Complex Market Pricing Per Ton (1) (2)
Aracoma $147
Kepler $155
Kingston $176
Marfork $165
McClure/Toms Creek $177
Power Mountain $140
Elk Run $138
(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, 2022 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 143,815 53,540 90,275 46,647 97,168 26,686 117,129
Kepler WV 34,246 26,223 8,023 596 33,650 4,895 29,351
Kingston WV 21,453 21,075 378 13,031 8,422 873 20,580
Marfork WV 159,115 49,056 110,059 61,168 97,947 13,946 145,169
McClure/Toms Creek VA 43,044 12,706 30,338 — 43,044 20,486 22,558
Power Mountain WV 57,777 24,617 33,160 18,308 39,469 7,761 50,016
Elk Run WV 67,883 22,360 45,523 — 67,883 8,503 59,380
Total 527,333 209,577 317,756 139,750 387,583 83,150 444,183
(1) Amounts shown exclusive of coal reserves.
(2) Inferred Resources were not considered material and have not been presented.
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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 — 143,815 — — — 60,889 82,926 21 %
Kepler WV — — 7,334 26,912 — 30,514 3,732 48 %
Kingston WV — — 873 20,580 — 21,453 — 28 %
Marfork WV 105,070 — 3,729 43,799 6,517 58,024 101,091 31 %
McClure/Toms Creek VA 299 — 42,745 — — 23,139 19,905 25 %
Power Mountain WV — 57,777 — — — 7,760 50,017 29 %
Elk Run WV 14,204 53,679 — — — — 67,883 28 %
Total 119,573 255,271 54,681 91,291 6,517 201,779 325,554
(1) Amounts shown exclusive of coal reserves.
(2) Expected recovery percentage defined as potential estimated recoverable tons 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 “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, 2022:
Changes in Coal Reserves (Tons in thousands)
12/31/2021 12/31/2022
Mining Complex Coal Reserves Acquired/Leased Production Pre-Feasibility (1)
Change in Mine Plan Other (2)
Coal Reserves
Met
Aracoma 44,181 1,803 (2,612) — (3,258) — 40,114
Kepler 48,611 — (1,813) — (2,844) — 43,954
Kingston 32,489 633 (2,112) — 1,882 — 32,892
Marfork 145,741 — (4,123) 8,106 (2,072) (41,442) 106,210
McClure/Toms Creek 80,077 — (3,538) — (4,445) — 72,094
Elk Run — — — — — 41,442 41,442
Total 351,099 2,436 (14,198) 8,106 (10,737) — 336,706
(1) Mineral areas initially subjected to Pre-feasibility study in current period.
(2) Mineral reclassified based on change in expected processing location. The Company plans to develop a new underground mine and re-start its idled Elk Run processing plant (acquired in 2018) in 2024. Coal is expected to be processed at the Elk Run plant and loaded on the CSX rail for delivery to customers.
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Changes in Coal Resources (Tons in thousands)
12/31/2021 12/31/2022
Mining Complex Coal Resources Initial Assessment (1)
Change in Mine Plan Other (2)
Coal Resources
Met
Aracoma 140,657 2,325 833 — 143,815
Kepler 58,734 — (24,488) — 34,246
Kingston 21,254 — 199 — 21,453
Marfork 128,786 95,245 2,967 (67,883) 159,115
McClure/Toms Creek 32,281 — 10,763 — 43,044
Power Mountain — 57,777 — — 57,777
Elk Run — — — 67,883 67,883
Total 381,712 155,347 (9,726) — 527,333
(1) Mineral areas subjected to initial assessment in current year.
(2) Mineral reclassified based on change in expected processing location. The Company plans to develop a new underground mine and re-start its idled Elk Run processing plant (acquired in 2018) in 2024. Coal is expected to be processed at the Elk Run plant and loaded on the CSX rail for delivery to customers.
Internal Controls Disclosure
The preparation of coal reserve and resource estimates is conducted in accordance with the Company’s prescribed internal control procedures, which are designed to ensure the reliability of such estimates. On an annual basis, Company personnel meet with the independent qualified person to provide updates to the data and assumptions to be used in performing the reserve and resource estimates. Company personnel review the work of the qualified person to ensure such work is prepared in accordance with applicable rules and regulations and that the data and assumptions used are supportable based on historical results and current and future mine plans and reflect known facts and circumstances through the reporting date. For example, the Company’s land personnel verify the property maps and control areas used by the qualified person based on review of underlying deed and lease records. The Company’s engineering personnel ensure estimates are based on current mine plans, incorporate the most recent drilling and lab data, properly reflect changes in permitting status, consider known encumbrances, and are consistent with operating knowledge and expectations in terms of mining methods, recovery rates, minimum seam heights or maximum strip ratios, and saleable qualities. The Company’s operations support personnel endeavor to ensure that estimates are prepared in accordance with applicable rules and regulations, that rationale for changes in estimates from prior years are reasonable and supportable, and that cash flow projections are based on reasonable and supportable assumptions with respect to forecasted production rates, coal pricing, and operating and capital costs.
The Company’s drilling, sample preparation and laboratory analysis are conducted in accordance with internal policies and procedures. For example, core drilling is conducted by reputable third-party drillers and core samples are tagged. Laboratory testing is performed by American National Standards Institute (“ANSI”) certified laboratories and samples are analyzed in accordance with procedures defined under American Society for Testing and Materials (“ASTM”) standards. Core drilling and laboratory testing results are logged into a database with restricted access. In addition, the Company’s qualified person performs independent data verification procedures to ensure data is of sufficient quantity and reliability to reasonably support the coal reserve and resource estimates.
Coal reserve and resource amounts are estimates and as estimates have inherent risks due to data accuracy, uncertainty from geologic interpretation, mine plan assumptions, uncontrolled property rights and permit availability, uncertainty with respect to future market supply and demand, and changes in laws and regulations. The Company’s current coal reserves and resource estimates are based on the best information available and are subject to re-assessment when conditions change. Also refer to Item 1A. Risk Factors for further discussion of risks associated with the estimates of the Company’s reserves and resources.
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The following map shows the locations of our material mining properties and corporate headquarters: