What changed in this filing

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Item 1. Business

2022-11-18 compared with 2021-03-12 · 44 added, 46 removed, 490 unchanged (16% of the section changed)

12 unchanged sentences

Efforts to diversify revenue streams have led to the establishment of additional subsidiaries;

American Metals LLC (AM) which is focused on the recovery and sale of recovered metal and steel and American Rare Earth LLC (ARE) which is focused on the aggregation and monetization of critical and rare earth element deposits.

We have not classified, and as a result, do not have any “proven” or “probable” reserves as defined in United States Securities and Exchange Commission Industry Guide 7, and as a result, our company and its business activities are deemed to be in the exploration stage until mineral reserves are defined on our properties.

We have not classified, and as a result, do not have any “proven” or “probable” reserves as defined in United States Securities and Exchange Commission Items 1300 through 1305 of Regulation S-K, and as a result, our company and its business activities are deemed to be in the exploration stage until mineral reserves are defined on our properties.

Since mid-2019, we have not mined or sold coal which is sold into the thermal coal markets.

6 unchanged sentences

McCoy Elkhorn Coal LLC

Located primarily within Pike County, Kentucky, McCoy Elkhorn is currently comprised of two active mines (Mine #15 and the Carnegie 1 Mine), one mine in “hot idle” status (the PointRock Mine), two coal preparation facilities (Bevins #1 and Bevins #2), and other mines in various stages of development or reclamation.

Located primarily within Pike County, Kentucky, McCoy Elkhorn is currently comprised of one active mine (the Carnegie 1 Mine), one mine in “idle” status (the Mine#15 Mine), two coal preparation facilities (Bevins #1 and Bevins #2), and other mines and permits in various stages of development or reclamation.

McCoy Elkhorn sells its coal to a variety of customers, both domestically and internationally, primarily to the steel making industry as a high-vol “B” coal or blended coal.

The coal controlled at McCoy Elkhorn (along with our other subsidiaries) has not been classified as either “proven” or “probable” as defined in the United States Securities and Exchange Commission Industry Guide 7, and as a result, do not have any “proven” or “probable” reserves under such definition and are classified as an “Exploration Stage” pursuant to Industry Guide 7.

The coal controlled at McCoy Elkhorn (along with our other subsidiaries) has not been classified as either “proven” or “probable” as defined in the United States Securities and Exchange Commission Items 1300 through 1305 of Regulation S-K, and as a result, do not have any “proven” or “probable” reserves under such definition and are classified as an “Exploration Stage” pursuant to Items 1300 through 1305 of Regulation S-K.

Within the McCoy Elkhorn subsidiary, Carnegie 1 is deemed material under Items 1304 of Regulation S-K.

Mine #15 is an underground mine in the Millard (also known as Glamorgan) coal seam and located near Meta, Kentucky.

5 unchanged sentences

The Company acquired Mine #15 as an idled mine, and since acquisition, the primary work completed at Mine #15 by the Company includes changing working sections within the underground mine, air ventilation enhancements primarily through brattice work and the use of overcasts and installing underground mining infrastructure as the mine advances due to coal extraction.

In 2020, Mine #15 produced approximately 461,570 tons and sold the coal at an average price of $70.28 per ton.

In 2021, Mine #15 produced approximately 0 tons.

In 2020, Mine #15 produced approximately 5,568.65 tons and sold the coal at an average price of $59.09 per ton.

During 2021 and 2020, 100% and 100%, respectively, of the coal extracted from Mine #15 was high-vol “B” metallurgical coal quality, of which 100% was sold into the PCI market and 100% was sold into the metallurgical market, respectively.

The mineral available through Mine #15 is leased from various 3 rd party mineral holders.

Coal mined from the lease requires a payment of greater of $2.50 per ton or 5% of gross sales price.

The Carnegie 1 Mine is an underground mine in the Alma and Upper Alma coal seams and located near Kimper, Kentucky.

6 unchanged sentences

The Company acquired the Carnegie 1 Mine as an idled mine, and since acquisition, the primary work completed at the Carnegie 1 Mine by the Company includes mine rehabilitation work in preparation for production, changing working sections within the underground mine, air ventilation enhancements primarily through brattice work, and installing underground mining infrastructure as the mine advances due to coal extraction.

In 2021, the Carnegie 1 Mine produced approximately 7,889.63 tons and sold at an average of $138.00 per ton.

In 2020, the Carnegie 1 Mine produced approximately 0 tons.

In 2019, the Carnegie 1 Mine produced approximately 4,276 tons and sold the coal at an average price of $76.40 per ton.

During 2020 100% of the coal extracted from the Carnegie 1 Mine was high-vol “B” metallurgical coal quality, of which 100% was sold into the metallurgical market.

Quest Energy acquired the PointRock Mine in April 2018.

The mineral being mined through Carnegie 1 is leased from a 3 rd party professional mineral company.

Coal mined from the lease requires a payment of greater of $1.75 per ton or 6% of gross sales price.

American Carbon acquired the PointRock Mine in April 2018.

On May 8, 2020, the PointRock Mine permits were released from the Company’s control upon the settlement agreement with Empire.

Beginning in January 2020 through the report date, Mine #15 and Carnegie 1 mines were idled due to the adverse market effects Covid-19 global pandemic.

The Carnegie 1 mine restarted during October 2021.

Processing & Transportation:

24 unchanged sentences

The idled mines at Knott County Coal are primarily underground mines that utilize room-and-pillar mining.

The coal controlled at Knott County Coal (along with our other subsidiaries) has not been classified as either “proven” or “probable” as defined in the United States Securities and Exchange Commission Industry Guide 7, and as a result, do not have any “proven” or “probable” reserves under such definition and are classified as an “Exploration Stage” pursuant to Industry Guide 7.

The coal controlled at Knott County Coal (along with our other subsidiaries) has not been classified as either “proven” or “probable” as defined in the United States Securities and Exchange Commission Items 1300 through 1305 of Regulation S-K, and as a result, do not have any “proven” or “probable” reserves under such definition and are classified as an “Exploration Stage” pursuant to Items 1300 through 1305 of Regulation S-K.

The Wayland Surface Mine is a surface waste-rock reprocessing mine in a variety of coal seams (primarily the Upper Elkhorn 1 coal seam) located near Wayland, Kentucky.

6 unchanged sentences

In 2021, the Wayland Surface Mine produced approximately 0 tons.

In 2019, the Wayland Surface Mine produced approximately 45,505 tons and sold the coal at an average price of $61.45 per ton.

In 2020, the Wayland Surface Mine produced approximately 0 tons.

During 2020, the Wayland Surface Mine was idled due to the company’s focus on the metallurgical and industrial markets.

16 unchanged sentences

The idled mining permits are either in various stages of development, reclamation or being maintained as idled, pending any changes to the coal market that may warrant re-starting production.

The coal controlled at Deane Mining (along with our other subsidiaries) has not been classified as either “proven” or “probable” as defined in the United States Securities and Exchange Commission Industry Guide 7, and as a result, do not have any “proven” or “probable” reserves under such definition and are classified as an “Exploration Stage” pursuant to Industry Guide 7.

The coal controlled at Deane Mining (along with our other subsidiaries) has not been classified as either “proven” or “probable” as defined in the United States Securities and Exchange Commission Items 1300 through 1305 of Regulation S-K, and as a result, do not have any “proven” or “probable” reserves under such definition and are classified as an “Exploration Stage” pursuant to Items 1300 through 1305 of Regulation S-K.

Access Energy is a deep mine in the Elkhorn 3 coal seam and located in Deane, Kentucky.

4 unchanged sentences

In 2021, Access Energy produced approximately 0 tons.

In 2019, Access Energy produced approximately 86,077.75 tons and sold the coal at an average price of $61.45 per ton.

During 2019, 17% of the coal sold from Access Energy was sold as PCI coal and 83% was sold as thermal coal.

In 2020, Access Energy produced approximately 0 tons.

During 2019, the permit related to the Access Energy mine was idled and is not expected to produce again under the Company’s control due to the continued focused on the metallurgical and industrial markets.

5 unchanged sentences

Razorblade Surface mine has the estimated capacity to produce up to approximately 8,000 tons per month of coal and started production in mid-2018 with nominal coal extracted and sold as thermal coal.

In 2020, Razorblade Surface produced approximately 0 tons.

In 2019, Razorblade Surface produced approximately 13,433.30 tons and sold the coal at an average price of $61.45 per ton.

100% of the coal sold from Razorblade Surface in 2019 was sold as thermal coal.

15 unchanged sentences

The two idled mining permits are undisturbed underground mines that are anticipated to utilize room-and-pillar mining.

The coal controlled at Wyoming County Coal (along with our other subsidiaries) has not been classified as either “proven” or “probable” as defined in the United States Securities and Exchange Commission Industry Guide 7, and as a result, do not have any “proven” or “probable” reserves under such definition and are classified as an “Exploration Stage” pursuant to Industry Guide 7.

The coal controlled at Wyoming County Coal (along with our other subsidiaries) has not been classified as either “proven” or “probable” as defined in the United States Securities and Exchange Commission Items 1300 through 1305 of Regulation S-K, and as a result, do not have any “proven” or “probable” reserves under such definition and are classified as an “Exploration Stage” pursuant to Items 1300 through 1305 of Regulation S-K.

The mining permits held by Wyoming County Coal are in various stages of planning with no mines currently in production.

23 unchanged sentences

The two idled mining permits are for underground mines and have been actively mined in the past and being maintained as idled, pending any changes to the coal market that may warrant re-starting production.

The coal controlled at Perry County Resources (along with our other subsidiaries) has not been classified as either “proven” or “probable” as defined in the United States Securities and Exchange Commission Industry Guide 7, and as a result, do not have any “proven” or “probable” reserves under such definition and are classified as an “Exploration Stage” pursuant to Industry Guide 7.

The coal controlled at Perry County Resources (along with our other subsidiaries) has not been classified as either “proven” or “probable” as defined in the United States Securities and Exchange Commission Items 1300 through 1305 of Regulation S-K, and as a result, do not have any “proven” or “probable” reserves under such definition and are classified as an “Exploration Stage” pursuant to Items 1300 through 1305 of Regulation S-K.

Within the Perry County subsidiary, E4-2 mine is deemed material under Items 1304 of Regulation S-K.

The E4-2 mine is an underground mine in the Elkhorn 4 (aka the Amburgy) coal seam located near the town of Hazard, Kentucky.

3 unchanged sentences

The E4-2 mine has the estimated capacity to produce up to approximately 80,000 tons per month of coal.

In 2020, during the period of ownership by the Company, the E4-2 mine produced approximately 1,200 tons and sold the coal at an average price of $52.30.

During the period of ownership by the Company, 100% of the coal sold was sold as industrial stoker.

In 2019, during the period of ownership by the Company, the E4-2 mine produced approximately 45,282.78 and sold the coal at an average price of $81.37.

During the period of ownership by the Company, 97% of the coal sold was sold as PCI with the remaining 3% being sold as industrial stoker.

Beginning in January 2020 through the report date, The E4-2 mine was idled due to the adverse market effects Covid-19 global pandemic.

The mineral available through the E4-2 mine is partially owned by the Company and partially leased from various mineral holders.

The lease terms are the greater of $1.50 per ton or 6% of gross sales price.

In 2021, the E4-2 mine produced approximately 79,546.75 tons and sold the coal at an average price of $83.17.

During the period of ownership by the Company, 100% of the coal sold was sold as industrial stoker and PCI.

In 2020, the E4-2 mine produced approximately 1,200 tons and sold the coal at an average price of $52.30.

During the period of ownership by the Company, 100% of the coal sold was sold as industrial stoker and PCI.

Beginning in January 2020, The E4-2 mine was idled due to the adverse market effects Covid-19 global pandemic.

The E4-2 Mine was restarted during March 2021.

Processing and Transportation:

17 unchanged sentences

Quest Processing LLC was the recipient of a New Markets Tax Credit loan that allowed for the payment of certain expenses of these preparation facilities.

As part of that financing transaction, Quest Energy loaned ERC Mining LLC, an entity owned by members of Quest Energy, Inc.’s management, $4,120,000 to facilitate the New Markets Tax Credit loan, of which is all outstanding as of December 31, 2020 and 2019, respectively.

As part of that financing transaction, Quest Energy loaned ERC Mining LLC, an entity owned by members of Quest Energy, Inc.’s management, $4,120,000 to facilitate the New Markets Tax Credit loan.

ERC Mining LLC is considered a variable interest entity and is consolidated into Quest Energy’s financial statements.

The credit facility obligation was fulfilled and forgiven in November 2021.

ERC Mining Indiana Corporation (the Gold Star Mine)

15 unchanged sentences

The Company’s operating subsidiaries, collectively, are parties to approximately 200 various Leases and other agreements required for the Company’s coal mining and processing operations.

The Leases are with a variety of Lessors, from individuals to professional land management firms such as the Elk Horn Coal Company LLC and Alma Land Company.

In some instances, the Company has leases with Land Resources & Royalties LLC (LRR), a professional leasing firm that is an entity wholly owned by Quest MGMT LLC, an entity owned by members of Quest Energy Inc.’s management.

The Leases are with a variety of Lessors, from individuals to professional land management firms such as the Roadrunner Land Company.

In some instances, the Company has leases with Land Resources & Royalties LLC (LRR), a professional leasing firm that is an entity wholly owned by Wabash Enterprises, an entity owned by members of the Company’s management.

ARC sells its coal to domestic and international customers, some which blend ARC’s coal at east coast ports with other qualities of coal for export.

During the year ended December 31, 2020, coal sales came from the Company’s Perry’ E4-2 mine.

During the year ended December 31, 2021, coal sales came from the Company’s Perry’ E4-2 mine and McCoy’s Carnegie mine.

The Company may, at times, purchase coal from other regional producers to sell on its contracts.

58 unchanged sentences

The current per ton fee is $0.280 per ton for surface mined coal and $0.120 per ton for underground mined coal.

These fees are currently scheduled to be in effect until September 30, 2021.

These fees are currently scheduled to be in effect until December 31, 2021.

Mining Permits and Approvals

228 unchanged sentences

Our principal offices are located at 12115 Visionary Way, Fishers, Indiana 46038.

We pay $2,500 per month in rent for the office space with monthly rental of $5,726 and the rental lease expires December 2026.

We also rent office space from an affiliated entity, LRR, at 11000 Highway 7 South, Kite, Kentucky 41828 and pay $500 per month rent and the rental lease expires October 30, 2021.

We pay $5,726 per month in rent for the office space and the rental lease expires December 2026.

On January 1, 2022, the Company entered into an expansion lease for the site.

The amended lease has a ten year term and $5,869 per month rate.

We also rent office space from an affiliated entity, LRR, at 11000 Highway 7 South, Kite, Kentucky 41828 and pay $1,702 per month rent and the rental lease expires January 1, 2030.

On August 17, 2021, American Rare Earth entered into a Commercial Land Lease sublease agreement with Land Betterment for nearly 7 acres of land for the purpose of building a commercial grade critical element purification facility.

The sublease is for the period of 5 years with a rate of $3,500 a month.

On October 8, 2021, American Rare Earth entered into a Commercial Lease for 6,700 square feet of warehouse space for the purpose of building a commercial grade critical element purification facility.

The is for the period of 2 years with a rate of $4,745.83 a month.

The Company also utilizes various office spaces on-site at its coal mining operations and coal preparation plant locations in eastern Kentucky, with such rental payments covered under any surface lease contracts with any of the surface land owners.

1 unchanged sentence

The Company is continually evaluating the use of company employees and contract labor to determine the optimal mix of each, given the needs of the Company.

Currently, McCoy Elkhorn’s Mine #15, McCoy Elkhorn’s Carnegie 1 Mine, Perry’s E4-1 mine and Deane Mining’s Access Energy mine are primarily run by company employees, and Deane Mining’s Razorblade Surface mine is primarily run by contract labor, and the Company’s various coal preparation facilities are run by company employees.

The Company currently has approximately 10 direct employees, with a substantial majority based in eastern Kentucky.

Currently, McCoy Elkhorn’s Carnegie 1 Mine and Perry’s E4-1 mine and are primarily run by contract labor, and the Company’s various coal preparation facilities are run by contract labor.

The Company currently has approximately 10 direct employees.

The Company is headquartered in Fishers, Indiana with four members of the Company’s executive team based at this location.

Implications of Being an Emerging Growth Company

We qualify as an emerging growth company as that term is used in the JOBS Act.

An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies.

These provisions include:

A requirement to have only two years of audited financial statements and only two years of related MD&A;

Exemption from the auditor attestation requirement in the assessment of the emerging growth company’s internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002;

Reduced disclosure about the emerging growth company’s executive compensation arrangements;

No non-binding advisory votes on executive compensation or golden parachute arrangements.

We have already taken advantage of these reduced reporting burdens in this Form 10-K, which are also available to us as a smaller reporting company as defined under Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”) for complying with new or revised accounting standards.

We are choosing to utilize the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the JOBS Act.

This election allows our Company to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies.

As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.

We could remain an emerging growth company for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

We are a reporting company and file all reports required under sections 13 and 15d of the Exchange Act.

Risk Factors.

2 unchanged sentences

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/A

Item 1. Business