What changed in this filing

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Item 1. Business

2021-02-24 compared with 2020-02-19 · 135 added, 116 removed, 383 unchanged (40% of the section changed)

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4 and Mine No.

As of December 31, 2019 , based on a reserve report prepared by Marshall Miller & Associates, Inc.

("Marshall Miller"), our two operating mines had approximately 105.3 million metric tons of recoverable reserves and, based on a reserve report prepared by Stantec Consulting Services, Inc.

("Stantec"), our undeveloped Blue Creek mine contained 103.0 million metric tons of recoverable reserves.

We strive to produce premium met coal in an efficient, safe and responsible manner, and environmental responsibility and sustainability are key principles in our business strategy.

Our HCC, mined from the Southern Appalachian region of the United States, is characterized by low-to-medium volatile matter (“VM”) and high coke strength after reaction (“CSR”).

These qualities make our coal ideally suited as a coking coal for the manufacture of steel.

As a result of our high quality coal, our realized price has historically approximated the Platts Premium Low Volatility (“LV”) Free-On-Board (“FOB”) Australia Index price (the “Platts Index”).

In contrast, coal produced in the Central Appalachian region of the United States is typically characterized by medium-to-high VM and a CSR that is below the requirements of the Australian Index price.

Our operations utilize longwall mining techniques, which is the most productive coal mining method available, and allows mining at the lowest cost per ton.

We are able to utilize longwall mining as a result of the medium to thick coal seams of Mine No.

4 and Mine No.

Additionally, our operations benefit from a highly competitive initial Collective Bargaining Agreement (“CBA”) with the United Mine Workers of America (“UMWA”), which has enabled us to structurally reduce our cash costs.

Our two operating mines and Blue Creek are located approximately 300 miles from our export terminal at the Port of Mobile, Alabama, which we believe to be the shortest mine-to-port distance of any U.S.-based met coal producer.

Our low and variable cost structure, flexible and efficient rail and barge network underpins our cost advantage and dependable access to the seaborne markets.

We sell our coal to a diversified customer base of blast furnace steel producers, primarily located in Europe, South America and Asia.

We enjoy a shipping time and distance advantage serving our customers throughout the Atlantic Basin relative to competitors located in Australia and Western Canada.

Our mining operations also consist of other surface met and thermal coal mines, five of which are currently under lease to third parties and four of which are not operating and are not currently planned to be operated in the future.

Our met coal production totaled 7.1 million in 2020.

Our natural gas operations remove and sell natural gas from the coal seams owned or leased by reducing natural gas levels in our mines.

We operate as a single reportable segment.

See the financial statements beginning on page F-1 of this Annual Report for our consolidated revenues, profit/loss and total assets.

Warrior Met Coal, LLC was formed on September 3, 2015 by certain Walter Energy, Inc.

("Walter Energy") lenders under the 2011 Credit Agreement, dated as of April 1, 2011 and the noteholders under the 9.50% Senior Secured Notes due 2019 in connection with the acquisition by the Company of certain core operating assets of Walter Energy under section 363 of Chapter 11 of Title 11 of the U.S.

Bankruptcy Code in the Northern District of Alabama, Southern Division.

(the "Asset Acquisition").

On January 8, 2016, the Bankruptcy Court approved the Asset Acquisition which closed on March 31, 2016.

Corporate Conversion and IPO

On April 12, 2017, we completed the corporate conversion pursuant to which Warrior Met Coal, LLC was converted into a Delaware corporation and renamed Warrior Met Coal, Inc.

On April 19, 2017, we completed our initial public offering (“IPO”) of 16,666,667 shares of common stock at a price to the public of $19.00 per share.

All of the shares were offered and sold by selling stockholders.

We did not receive any of the net proceeds from the IPO.

Our Competitive Strengths

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Coal from Mine No.

7 is classified as a premium LV HCC and coal from Mine No.

7 is classified as a premium low-volatility ("LV") HCC and coal from Mine No.

4 is classified as premium LV to mid-volatility ("MV") HCC.

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Other publicly-listed U.S.

coal companies sell a higher proportion of lower rank met coals, including high-volatility, semi-soft coking coal (“SSCC”), and pulverized coal injection (“PCI”) coal.

These lower rank coals typically have lower realized prices compared to LV and MV met coals due to their relative availability and lower quality characteristics.

For example, the premium LV HCC that we produce has sold at a premium of 1%, 9%, 26% and 31% of the prices realized for MV, high-volatility, PCI and SSCC coals, respectively, based on five-year average prices reported by Wood Mackenzie.

coal companies sell a higher proportion of lower quality met coals, including high-volatility, semi-soft coking coal (“SSCC”), and pulverized coal injection (“PCI”) coal.

These lower quality coals typically have lower realized prices compared to LV and MV met coals due to their relative availability and lower quality characteristics.

Additionally, these companies typically have significant thermal coal production that further reduces their realized price and operating margin per metric ton.

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High Vol A has traditionally priced at a slight discount to the Australian premium LV and the U.S.

however, in the last eighteen months, it has been priced at or slightly above these coals.

however we have observed extended periods in which they achieved a premium over these indices.

We expect High Vol A coals will continue to become increasingly scarce as a result of Central Appalachian producers mining thinner and deeper reserves, which is expected to continue to support prices.

We believe this creates an opportunity for Blue Creek to take advantage of favorable pricing dynamics driven by the declining supply of premium High Vol A coals.

On February 19, 2020, we announced the commencement of the development of the Blue Creek project with expected capital expenditures related to this project in 2020 of $25.0 million.

Due to the uncertainties regarding the duration of the COVID-19 pandemic and its overall impact on the global economy, in the first quarter of 2020, we decided to delay the capital expenditures related to this project.

We now have delayed the development of this project until at least the summer of 2021.

Highly flexible cost structure protects through-the-cycle profitability .

We have “variabilized” our cost structure in our labor, royalties and logistics contracts, increasing the proportion of our cost structure that varies in response to changes in HCC prices based on a variety of indices.

Our initial CBA, combined with our flexible rail, port and barge logistics and our royalty structure, results in a highly variable operating cost profile that allows our cash cost of sales to move with changes in the price we realize for our coal.

Our Collective Bargaining Agreement ("CBA") with the United Mine Workers of America ("UMWA"), combined with our flexible rail, port and barge logistics and our royalty structure, results in a highly variable operating cost profile that allows our cash cost of sales to move with changes in the price we realize for our coal.

Approximately two-thirds of our cash cost of sales relate to the cost of production at our mines, while the remaining one-third relates to our logistics costs from mine to port as well as royalties.

Our logistics costs are structured to reduce cash requirements in lower HCC price environments and to increase cash requirements within a range with higher HCC prices.

Our logistics costs are structured to reduce cash requirements

in lower HCC price environments and to increase cash requirements within a range with higher HCC prices.

Our royalties are calculated as a percentage of the price we realize and therefore increase or decrease with changes in HCC prices.

Our initial CBA includes variable elements that tie compensation to HCC prices.

Our CBA includes variable elements that tie compensation to HCC prices.

In addition, we can adjust our usage of continuous miner units in response to HCC pricing.

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These alternatives include direct rail access at the mine sites and a wholly-owned barge load-out facility, enabling us to utilize the lowest cost option between the two at any given point in time.

We believe our logistics costs are highly competitive following negotiations in 2016 that led to a reduction in rail, barge and port costs.

In addition, we have a contract with the Port of Mobile, Alabama, that provides us up to 8.0 million metric tons of annual port capacity through July 2026 for our coal at very competitive rates.

The total annual throughput capacity of the McDuffie Coal Terminal at the Port of Mobile, Alabama is approximately 27.2 million metric tons and this coal terminal is presently utilized for all of our coal exports.

We believe our logistics costs are highly competitive.

In addition, we have a contract with the Port of Mobile in Alabama, that provides us up to 8.0 million metric tons of annual port capacity through July 2026 for our coal at very competitive rates.

The total annual throughput capacity of the McDuffie Coal Terminal at the Port of Mobile in Alabama is approximately 27.2 million metric tons and this coal terminal is presently utilized for all of our coal exports.

We believe, and representatives of the McDuffie Coal Terminal have informed us that they believe, that there is ample capacity to support the full production rates of Blue Creek, and we are working with the McDuffie Coal Terminal to achieve the needed capacity.

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7 are two of the lowest cost met coal mines in North America.

Our low cost position is derived from our operations’ favorable geology, automated long-wall mining methods, and significant flexibility allowed under our initial CBA.

Our low cost position is derived from our operations’ favorable geology, automated long-wall mining methods, and significant flexibility allowed under our CBA.

Additionally, given our highly flexible cost structure, we believe we will be able to maintain our industry leading margins in all coal market conditions, which we expect should allow us to continue to outperform our competitors.

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As a result of these tax assets, and the repeal of the corporate alternative minimum tax (“AMT”) beginning after December 31, 2017 (see Note 7 to our consolidated financial statements included elsewhere in this Annual Report), we believe our effective cash tax rate will be approximately 0%, exclusive of the AMT credit refunds, until our NOLs generated prior to 2018 are fully utilized or expire, which will enable strong cash conversion from our operating profits.

We also expect to receive approximately $24.3 million in 2020 to 2022 as a result of the refunding of the AMT credits acquired from the Predecessor.

Disciplined financial policies to ensure stable performance .

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We plan to continually evaluate our liquidity needs based on our estimated capital needs.

As of December 31, 2019 , we had approximately $309.5 million of available liquidity consisting of $116.1 million of borrowing capacity under the ABL Facility (calculated net of $8.95 million of letters of credit outstanding at such time) and $193.4 million of cash and cash equivalents.

As of December 31, 2020, we had approximately $243.5 million of available liquidity consisting of $31.6 million of borrowing capacity under the ABL Facility and $211.9 million of cash and cash equivalents.

In the event we generate cash flow in excess of the needs of our business, we plan to take a holistic approach to capital allocation and will evaluate a range of options, including debt repayment.

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7, and over 30 years of experience in longwall coal mining.

Furthermore, following the Asset Acquisition, we hired several key personnel with extensive direct operational experience in met coal longwall mining, including our Chief Operating Officer, Jack Richardson, and our Chairman, Stephen D.

Furthermore, following the acquisition of certain assets of Walter Energy, we hired several key personnel with extensive direct operational experience in met coal longwall mining, including our Chief Operating Officer, Jack Richardson, and our Chairman, Stephen D.

We have a strong record of operating safe mines and are committed to environmental excellence.

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4 and 3.06 at Mine No.

7 for the year ended December 31, 2019 , which was a record low for the Company and is considerably lower than the national total reportable incidence rate for all underground coal mines in the United States of 4.69 for the nine months ended September 30, 2019, which represents the latest data available.

7 for the year ended December 31, 2020, which is considerably lower than the national total reportable incidence rate for all underground coal mines in the United States of 4.47 for the nine months ended September 30, 2020, which represents the latest data available.

Strong focus on reducing greenhouse gas emissions.

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Much of this methane is sold into the natural gas market.

remainder of the methane is released through our mines’ ventilation systems as coal mine methane (“CMM”) emissions.

The remainder of the methane is released through our mines’ ventilation systems as coal mine methane (“CMM”) emissions.

These emissions that are released into the environment are extremely diluted.

We have also partnered with a third-party to build a demonstrator plant that destroys CMM at our fan sites, as discussed under “Our Business Strategies - Capitalize on opportunities for technological innovation to continue to reduce our impact on the environment.”

We have also partnered with a third-party to utilize new technology to increase the efficiency of methane reductions where practical.

Currently, we have planned to install the first full-scale methane destroying unit in early 2021, as discussed under “Our Business Strategies - Capitalize on opportunities for technological innovation to continue to reduce our impact on the environment.”

From its inception, the Company has participated in the EPA’s voluntary program aimed at CMM emission reductions.

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Maximize profitable production .

In the year ended December 31, 2019 , we produced a record 7.7 million metric tons of met coal from Mine No.

In the year ended December 31, 2020, we produced 7.1 million metric tons of met coal from Mine No.

7 and Mine No.

We have the flexibility in our new initial CBA that allows us to increase annual production with minimal incremental capital expenditures.

We have the flexibility in our CBA that allows us to increase annual production with minimal incremental capital expenditures.

Based on our management’s operational experience, we are confident in our ability to continue to produce at or close to this capacity in a safe and efficient manner, and with a comparable cost profile to our current costs, should market conditions warrant.

Maximize organic growth.

We recently announced the commencement of the development of Blue Creek into a new, world-class longwall mine located in Alabama near our existing mines.

In the first quarter of 2020, we announced the commencement of the development of Blue Creek into a new, world-class longwall mine located in Alabama near our existing mines.

Due to COVID-19, we delayed spending the $25.0 million that we budgeted for the development of Blue Creek until at least summer 2021 .

The new single longwall mine at Blue Creek is expected to have the capacity to produce an average of 3.9 million metric tons per annum of premium High-Vol A met coal over the first ten years of production.

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and global seaborne hard coking coal cost curve and to be approximately 25 to 30% lower than our existing mines today.

We believe the combination of a low production cost and the high quality of the High Vol A product, if we achieve the expected price realizations, will generate some of the highest met coal margins in the U.S., generate strong investment returns and achieve a rapid payback across a range of met coal price environments.

We expect to invest approximately $550 to $600 million over the next five years to develop Blue Creek.

Based on the current schedule, we expect first development tons from continuous miner units to occur in the third quarter of 2023 with the longwall scheduled to start up in the second quarter of 2025.

We believe the combination of a low production cost and the high quality of the High Vol A product, if we achieve the expected price

realizations, will generate some of the highest met coal margins in the U.S., generate strong investment returns and achieve a rapid payback across a range of met coal price environments.

We expect to invest approximately $550 to $600 million over five years to develop Blue Creek once development begins.

Based on the current schedule, we expect first development tons from continuous miner units to occur in 2023 with the longwall scheduled to start up in 2025.

Our strong cash flow generation and current available liquidity, as well as the ability to finance $110 - $120 million of capital expenditures through equipment leases, allows us to be opportunistic as we evaluate funding options for Blue Creek.

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While we have already achieved significant structural cost reductions at our two operating mines, we see further opportunities to reduce our costs over time.

Our initial CBA with the UMWA allows for these ongoing cost optimization initiatives.

For example, in our initial CBA, we have additional flexibility in our operating days and alternative work schedules as compared to certain optional and more expensive provisions under the Walter Energy collective bargaining agreement.

Our CBA with the UMWA allows for these ongoing cost optimization initiatives.

For example, in our CBA, we have additional flexibility in our operating days and alternative work schedules as compared to certain optional and more expensive provisions under the predecessor, Walter Energy, Inc.

("Walter Energy"), collective bargaining agreement.

We have variable elements that tie compensation to HCC prices.

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For the year ended December 31, 2020, our sales geographic customer mix was 56% in Europe, 25% in South America and 19% in Asia.

Since February 2017, we have had an arrangement with Xcoal Energy & Resource (“Xcoal”) to serve as Xcoal’s strategic partner for exports of LV HCC.

Under this arrangement, Xcoal takes title to and markets coal that we would historically have sold on the spot market, in an amount of the greater of (i) 10% of our total production during the applicable term of the arrangement or (ii) 250,000 metric tons.

Since February 2017, we have had an arrangement with Xcoal Energy & Resource (“Xcoal”) to serve as Xcoal’s strategic partner for exports of LV HCC into certain markets.

Under this arrangement, Xcoal takes title to and markets coal that we would historically have sold on the spot market to certain markets, in an amount of the greater of (i) 10% of our total production during the applicable term of the arrangement or (ii) 250,000 metric tons.

While the volumes being sold through this arrangement with Xcoal are relatively limited, we are positioned to potentially benefit from Xcoal’s expertise and relationships across all coal that we sell.

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Capitalize on opportunities for technological innovation to continue to reduce our impact on the environment.

We strive to ensure that our business is focused on limiting environmental impact and on being an environmental steward in the communities where we live and work.

We focus our opportunities for technological innovation around GHG emissions, water management, waste management and biodiversity impact.

As described above, the Company currently captures approximately 67% of the coalbed methane that is produced during our mining activities as part of our commitment to reduce the Company’s GHG emissions.

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To prove one such technology, the Company built a pilot or demonstrator plant.

This plant ran for a period of time sufficient to prove the technology was successful, and a larger scale operation is currently planned to be in service by the year ended December 31, 2020.

This plant successfully operated from 2014 to 2017.

During the demonstration period, the plant effectively destroyed coal mine methane released from our underground operations.

We and a third party also have plans to install the first full-scale methane destroying unit in early 2021.

We also successfully achieved a 99.8% compliance record with the Environmental Protection Agency ("EPA") National Pollutant Discharge Elimination System program, which addresses water pollution by regulation point source discharges.

This reflects that we only had two minor instances of non-compliance with water quality standards within the annual period ending in the second quarter of 2020 and each of these were related to heavy rainfall events.

We currently have a goal to reduce water usage at our current facilities by 25% by 2030.

The Company’s management and board of directors (the "Board") are increasingly focused on these and other opportunities for technical innovation.

Description of Our Business

Our mining operations consist of two active underground met coal mines in Southern Appalachia’s coal seam (Mines No.

4) and other surface met and thermal coal mines, five of which are currently under lease to third parties and four of which are not operating and are not currently planned to be operated in the future.

For a comprehensive summary of all of our coal properties and of our coal reserves and production levels as of December 31, 2019 , see the tables summarizing our coal reserves and production in “Part I, Item 2.

Properties-Estimated Recoverable Coal Reserves.” Our met coal production totaled 7.7 million metric tons in 2019 .

Our natural gas operations remove and sell natural gas from the coal seams owned or leased by us and others as a byproduct of coal production.

Our degasification operations improve mining operations and safety by reducing natural gas levels in our mines.

Our underground mining operations are headquartered in Brookwood, Alabama and as of December 31, 2020, based on a reserve report prepared by Marshall Miller, were estimated to have approximately 97.5 million metric tons of recoverable reserves located in west central Alabama between the cities of Birmingham and Tuscaloosa.

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The met coal is mined using longwall extraction technology with development support from continuous miners.

We extract met coal primarily from Alabama’s Blue Creek coal seam, which contains high-quality bituminous coal.

Blue Creek coal offers high coking strength with low coking pressure, low sulfur and low-to-medium ash content.

Our two operating mines and Blue Creek are located approximately 300 miles from our export terminal at the Port of Mobile in Alabama, which we believe to be the shortest mine-to-port distance of any U.S.-based met coal producer.

Our low and variable cost structure, flexible and efficient rail and barge network underpins our cost advantage and dependable access to the seaborne markets.

We sell our coal to a diversified customer base of blast furnace steel producers, primarily located in Europe, South America and Asia.

We enjoy a shipping time and distance advantage serving our customers throughout the Atlantic Basin relative to competitors located in Australia and Western Canada.

Our HCC, mined from the Southern Appalachian region of the United States, is characterized by low-to-medium volatile matter (“VM”) and high coke strength after reaction (“CSR”).

These qualities make our coal ideally suited as a coking coal for the manufacture of steel.

The met coal from our Mines No.

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Both mines also have access to our barge load-out facility on the Black Warrior River.

Service via both rail and barge culminates in delivery to the Port of Mobile in Mobile, Alabama, where shipments are exported to our international customers via ocean vessels.

Service via both rail and barge culminates in delivery to the Port of Mobile in Alabama, where shipments are exported to our international customers via ocean vessels.

Substantially all of our met coal sales consist of sales to international customers.

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For more information regarding our customers, see Note 2 to our consolidated financial statements included elsewhere in this Annual Report.

We have an arrangement with Xcoal to serve as Xcoal’s strategic partner for exports of LV HCC.

We have an arrangement with Xcoal to serve as Xcoal’s strategic partner for exports of LV HCC into certain markets.

Xcoal has specialized marketing capabilities and deep technical expertise as the largest met coal marketer in the United States.

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Trade Names, Trademarks and Patents

As part of the Asset Acquisition, we acquired all intellectual property, including copyrights, patents, trademarks, trade names and trade secrets, owned by Walter Energy and its subsidiaries and used or held for use in the business or our assets.

Promptly following the closing of the Asset Acquisition, Walter Energy, was required to discontinue the use of its name (and any other trade names or “d/b/a” names utilized by its subsidiaries) and may not subsequently change its name to or otherwise use or employ any name which includes the words “Walter.” We do not believe that any one such trademark is material to our individual segments or to the business as a whole.

As part of the acquisition of certain assets of Walter Energy, we acquired all intellectual property, including copyrights, patents, trademarks, trade names and trade secrets, owned by Walter Energy and its subsidiaries and used or held for use in the business or our assets.

Promptly following the closing of the acquisition, Walter Energy, was required to discontinue the use of its name (and any other trade names or “d/b/a” names utilized by its subsidiaries) and may not subsequently change its name to or otherwise use or employ any name which includes the words “Walter.” We do not believe that any one such trademark is material to our individual segments or to the business as a whole.

Substantially all of our met coal sales are exported.

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We continue to improve our land reclamation efforts, which has yielded success across all of our sites and facilities.

We received approval from Alabama Surface Mining Commission (ASMC) in 2018 for the final release of 667 reclaimed acres.

We began an aggressive reclamation campaign in 2017, which has successfully reduced reclamation liability by 1,333 acres.

Finally, the Company is highly proactive in planning all ongoing and future activities to minimize negative impacts to wildlife and their habitats by mining activities.

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Through their efforts, as well as oversight by our senior management and the Board, we continue to make significant progress in improving our environmental stewardship.

The Environmental, Health & Safety Committee of the Board is tasked with assessing the effectiveness of the Company’s environmental, health and safety policies, programs and initiatives, as well as reviewing and monitoring the Company’s compliance with applicable environmental, health and safety laws, rules and regulations.

compliance with applicable environmental, health and safety laws, rules and regulations.

This committee receives quarterly reports from Company management, during which the committee reviews and discusses the Company’s various environmental, health and safety initiatives and any issues related to these areas.

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Compliance with these laws and regulations may be costly and time-consuming and may delay commencement, continuation or expansion of exploration or production at our operations.

These laws are constantly evolving and may become increasingly stringent.

The ultimate impact of complying with existing laws and regulations is not always clearly known or determinable due in part to the fact that certain

implementing regulations for these environmental laws have not yet been promulgated and in certain instances are undergoing revision or judicial review.

These laws are constantly evolving and may become more stringent.

The ultimate impact of complying with existing laws and regulations is not always clearly known or determinable due in part to the fact that certain implementing regulations for these environmental laws have not yet been promulgated and in certain instances are undergoing revision or judicial review.

These laws and regulations, particularly new legislative or administrative proposals (or judicial interpretations of existing laws and regulations) related to the protection of the environment, could result in substantially increased capital, operating and compliance costs and could have a material adverse effect on our operations and/or, along with analogous foreign laws and regulations, our customers’ ability to use our products.

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In addition, certain of our subsidiaries are responsible for medical and disability benefits for black lung disease under the Federal Coal Mine Health and Safety Act of 1969, the Mine Act and the Black Lung Benefits Revenue Act of 1977 and the Black Lung Benefits Reform Act of 1977 (together, the “Black Lung Benefits Act”), each as amended, and are insured under a guaranteed cost insurance policy beginning on April 1, 2016 through May 31, 2018 for black lung claims of any of our employees.

Since June 1, 2018, the Company has had a deductible policy where the Company is responsible for the first $0.5 million for each black lung claim from any of our employees.

From June 1, 2018 to May 31, 2020, the Company had a deductible policy where the Company is responsible for the first $0.5 million for each black lung claim from any of our employees.

We also assumed all of the black lung liabilities of Walter Energy and its U.S.

subsidiaries.

We are self-insured for these black lung liabilities and have posted certain collateral with Department of Labor as described below.

We are self-insured for these black lung liabilities and have posted $17.0 million in surety bonds and $8.5 million of collateral recognized as short term investment in addition to maintaining a black lung trust of $3.0 million that was acquired from Walter Energy.

We received a letter from the Department of Labor on February 21, 2020 under its new process for self-insurance renewals that would require us to increase the amount of collateral posted to $39.8 million, but we have appealed such increase.

Changes in the estimated claims to be paid or changes in the amount of collateral required by the Department of Labor may have a greater impact on our profitability and cash flows in the future.” Under the Black Lung Benefits Act, as amended, each coal mine operator must make payments to a trust fund for the payment of benefits and medical expenses to claimants who last worked in the coal industry prior to January 1, 1970.

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Fish & Wildlife Service was not consulted with respect to possible effects on endangered species under terms of the Endangered Species Act.

At present, an earlier 1983 rule is in place, which requires coal companies to keep operations 100 feet from streams or otherwise minimize any damage.

On December 20, 2016, the OSM published a new, finalized “Stream Protection Rule,” setting standards for “material damage to the hydrologic balance outside the permit area” that are applicable to surface and underground mining operations.

However, on February 16, 2017, President Trump signed a joint congressional

resolution disapproving the Stream Protection Rule pursuant to the Congressional Review Act.

Accordingly, the regulations in effect prior to the Stream Protection Rule apply, including OSM’s 1983 rule.

It remains unclear whether and how additional actions by the Trump Administration could further impact regulatory or enforcement activities pursuant to the SMCRA.

However, on February 16, 2017, former President Trump signed a joint congressional resolution disapproving the Stream Protection Rule pursuant to the Congressional Review Act.

Accordingly, the regulations in effect prior to the Stream Protection Rule apply, including OSM’s 1983 rule, which requires coal companies to keep operations 100 feet from streams or otherwise minimize any damage.

It remains unclear whether and how additional actions by the Biden Administration could further impact regulatory or enforcement activities pursuant to the SMCRA.

Drainage flowing from or caused by mining activities can be acidic with elevated levels of dissolved metals, a condition referred to as “acid mine drainage” (“AMD”).

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In response to these bankruptcies, the OSM issued a Policy Advisory in August 2016 to state agencies that are authorized under the SMCRA to implement the act in their states, notifying those state agencies that the OSM would more closely review self-bonding arrangements.

Certain states had previously announced that they would no longer accept self-bonding to secure reclamation obligations under the state mining laws.

Certain states had previously announced that they would no longer accept self-bonding to secure reclamation obligations under the state mining

Although the Policy Advisory was rescinded in October 2017, some states may be reluctant to approve self-bonding arrangements.

This may lead to increased demand for other forms of financial assurance, which may strain capacity for those instruments and increase our costs of obtaining and maintaining the amounts of financial assurance needed for our operations.

Individually and collectively, these revised various financial assurance requirements may increase the amount of financial assurance needed and limit the types of acceptable instruments, straining the capacity of the surety markets to meet demand.

These actions, individually and collectively, may increase the amount of financial assurance needed and limit the types of acceptable instruments, straining the capacity of the surety markets to meet demand.

This may increase the time required to obtain, and increase the cost of obtaining, the required financial assurances.

Although Alabama’s regulatory framework technically allows for self-bonding, as a practical matter, due to the onerous regulatory requirements for self-bonding, mining companies in Alabama utilize surety bonds, collateral bonds, or letters of credit to meet their financial assurance requirements.

As of December 31, 2019 , we had outstanding surety bonds with parties for post-mining reclamation at all of our mining operations totaling $40.6 million , and $2.2 million for miscellaneous purposes.

As of December 31, 2020, we had outstanding surety bonds with parties for post-mining reclamation at all of our mining operations totaling $40.8 million, $17.0 million for black lung liabilities and $3.6 million for miscellaneous purposes.

Climate Change

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In May 2010, the EPA adopted regulations that, among other things, established Prevention of Significant Deterioration (“PSD”) and Title V permit reviews for certain large stationary sources, such as coal-fueled power plants, that are potential major sources of GHG emissions.

The so-called Tailoring Rule established new GHG

emissions thresholds that determine when stationary sources must obtain permits under the PSD and Title V programs of the Clean Air Act.

The so-called Tailoring Rule established new GHG emissions thresholds that determine when stationary sources must obtain permits under the PSD and Title V programs of the Clean Air Act.

On June 23, 2014, the Supreme Court held that stationary sources could not become subject to PSD or Title V permitting solely by reason of their GHG emissions.

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The proposed rule was published in the Federal Register on October 3, 2016 and the public comment period closed on December 16, 2016.

It is unclear when a final rule will be issued and/or whether and how additional actions by the Trump Administration could impact further regulatory developments in this area.

It is unclear when a final rule will be issued and/or whether and how additional actions by the Biden Administration could impact further regulatory developments in this area.

In June 2010, Earthjustice petitioned the EPA to make a finding that emissions from coal mines may reasonably be anticipated to endanger public health and welfare, and to list them as a stationary source subject to further regulation of emissions.

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In addition, in August 2015, the EPA announced three separate, but related, actions to address carbon dioxide pollution from power plants, including final Carbon Pollution Standards for new, modified and reconstructed power plants, a final Clean Power Plan to cut carbon dioxide pollution from existing power plants, and a proposed federal plan to implement the Clean Power Plan emission guidelines.

Upon publication of the Clean Power Plan on October 23, 2015, more than two dozen states as well as industry and labor groups challenged the Clean Power Plan in the D.C.

Circuit Court of Appeals.

In addition, on March 28, 2017, President Trump signed an executive order directing the EPA to review all three actions and, if appropriate, initiate a rulemaking to rescind or revise the rules consistent with the stated policy of promoting clean and safe development of the nation’s energy resources, while at the same time avoiding regulatory burdens that unnecessarily encumber energy production.

Accordingly, on July 8, 2019, the EPA published a final replacement rule that would "reduce the compliance burden" of the Clean Power Plan.

Several state and environmental groups have challenged the replacement rule.

Also, on December 20, 2018, the EPA published a proposed rule to amend the standards for new, modified and reconstructed stationary power plants.

If the EPA's actions to repeal the Clean Power Plan are not upheld, and if it ultimately is retained in its current form, it could have a material adverse impact on the demand for thermal coal nationally.

However, on March 28, 2017, the Trump Administration issued an executive order directing the EPA to review all three actions and, if appropriate, initiate a rulemaking to rescind or revise the rules consistent with the stated policy of promoting clean and safe development of the nation’s energy resources, while at the same time avoiding regulatory burdens that unnecessarily encumber energy production.

Accordingly, on December 20, 2018, the EPA published a

proposed rule to amend the standards for new, modified and reconstructed stationary power plants.

Also, on July 8, 2019, the EPA published a final replacement rule that would "reduce the compliance burden" of the Clean Power Plan.

However, on January 20, 2021, President Biden issued an executive order directing federal agencies, including the EPA, to immediately review all federal regulations promulgated during the last four years that conflict with specified objectives, including the reduction of greenhouse gas emissions.

If the Clean Power Plan is retained in its original form, it could have a material adverse impact on the demand for thermal coal nationally.

While the Clean Power Plan does not affect our marketing of met coal, the continued regulatory focus could lead to future GHG regulations for the mining industry and its steelmaking customers, which ultimately could make it more difficult or costly for us to conduct our operations or adversely affect demand for our products.

Furthermore, on January 15, 2016, the Secretary of Interior directed the Bureau of Land Management to prepare an environmental study analyzing potential leasing and management reforms to the current federal coal program, including how best to address the climate impacts of the federal program to meet both the nation’s energy needs and its climate goals.

Pending this review, the Secretary placed a moratorium on new applications for thermal (steam) coal leases or lease modification on federal land, subject to certain exceptions.

However, pursuant to President Trump’s March 28, 2017 executive order, on March 29, 2017, the Secretary of Interior reversed these actions, halting the environmental study, lifting the moratorium, and directing the Bureau of Land Management to expeditiously process coal lease applications.

Several states and environmental groups challenged these actions, resulting in a court order mandating additional environmental review.

In May 2019, the Bureau of Land Management prepared an environmental assessment addressing the impacts of restarting coal leasing.

While the moratorium did not affect our operations, any renewed regulatory focus could lead to future GHG regulations for the mining industry and its steelmaking customers, which could ultimately make it more difficult or costly for us to conduct our operations or adversely affect demand for our products.

Demand for met coal and natural gas also may be impacted by international efforts to reduce GHG emissions.

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The Paris Agreement establishes a framework for the parties to cooperate and report actions to reduce GHG emissions.

However, on June 1, 2017, President Trump announced that the United States would withdraw from the Paris Agreement, and begin negotiations to either re-enter or negotiate an entirely new agreement with more favorable terms for the United States.

The Paris Agreement sets forth a specific exit process, whereby a party may not provide notice of its withdrawal until three years from the effective date, with such withdrawal taking effect one year from such notice.

On November 4, 2019, the Trump Administration submitted its formal notification of

withdrawal to the United Nations.

It is not clear what steps, if any, will be taken to negotiate a new agreement, or what terms would be included in such an agreement.

In response to the withdrawal announcement, many state and local leaders have stated their intent to intensify efforts to uphold the commitments set forth in the international accord.

Although the United States withdrew from the Paris Agreement, effective November 4, 2020, President Biden issued an executive order on January 20, 2021 to rejoin the Paris Agreement, which took effect on February 19, 2021.

Furthermore, many state and local leaders have stated their intent to intensify efforts to support the commitments set forth in the international accord.

It is possible that the Paris Agreement and subsequent domestic and international regulations will have adverse effects on the market for met coal, natural gas, and other fossil fuel products.

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The CWA and corresponding state laws affect our operations by imposing restrictions on discharges of wastewater into creeks and streams.

These restrictions, more often than not, require us to pre-treat the wastewater prior to discharging it.

These restrictions, more often than not, require us to pre-treat the wastewater

prior to discharging it.

Permits requiring regular monitoring and compliance with effluent limitations and reporting requirements govern the discharge of pollutants into regulated waters.

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However, new requirements under the CWA and corresponding state laws may cause us to incur significant additional costs that could adversely affect our operating results.

For instance, stringent water quality standards for materials such as selenium have recently been issued.

We have begun to incorporate these new requirements into our current permit applications;

For instance, in 2016, the EPA published stringent water quality standards for selenium.

We have begun to incorporate these new standards into our current permit applications;

however, there can be no guarantee that we will be able to meet these or any other new standards with respect to our permit applications.

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The USACE is authorized to issue general “nationwide” permits for specific categories of activities that are similar in nature and that are determined to have minimal adverse effects on the environment.

Permits issued pursuant to Nationwide Permit 21 generally authorize the

disposal of dredged and fill material from surface coal mining activities into waters of the United States, subject to certain restrictions.

Permits issued pursuant to Nationwide Permit 21 generally authorize the disposal of dredged and fill material from surface coal mining activities into waters of the United States, subject to certain restrictions.

The USACE may also issue individual permits for mining activities that do not qualify for Nationwide Permit 21.

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On June 29, 2015, the EPA and the USACE jointly promulgated final rules redefining the scope of waters protected under the CWA, revising regulations that had been in place for more than 25 years.

The new rules may expand the scope of CWA jurisdiction, making more waters subject to the CWA’s permitting and other requirements in the case of discharges.

The rules are subject to ongoing litigation and have been stayed in more than half the States, including Alabama.

Also, on December 11, 2018, the EPA and the USACE released a proposed rule that would replace the 2015 rule, and significantly reduce the waters subject to federal regulation under the Clean Water Act.

Such proposal is currently subject to public review and comment, after which additional legal challenges are anticipated.

It remains unclear whether and how the rules will be implemented, what litigation may result, and whether changes proposed by the Trump Administration could further impact regulatory developments in this area.

The new rules could expand the scope of CWA jurisdiction, making more waters subject to the CWA’s permitting and other requirements in the case of discharges.

However, on October 22, 2019, the agencies published a final rule to repeal the 2015 rules.

The 2015 rules and the 2019 repeal are subject to several ongoing legal challenges.

Also, on April 21, 2020, the EPA and the USACE published a final rule replacing the 2015 rule, and significantly reducing the waters subject to federal regulation under the Clean Water Act.

Several state and environmental groups have challenged the replacement rule.

As a result of such recent developments, it remains unclear whether and how the rules will be implemented.

Resource Conservation and Recovery Act

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In addition, the disposal, release or spilling of some products used by coal companies in operation, such as chemicals, could trigger the liability provisions of CERCLA or similar state laws.

Thus, we may be subject to liability under CERCLA and similar state laws for properties that (1) we currently own, lease or operate, (2) we, our predecessors, or former subsidiaries have previously owned, leased or operated, (3) sites to which we, our predecessors or former subsidiaries, sent waste materials, and (4) sites at which hazardous substances from our facilities’ operations have otherwise come to be located.

former subsidiaries, sent waste materials, and (4) sites at which hazardous substances from our facilities’ operations have otherwise come to be located.

Endangered Species Act and Similar Laws

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Demand for met coal is generally more heavily influenced by other factors such as the global economy, demand for steel, interest rates and commodity prices.

Employees and Labor

Human Capital

As of December 31, 2020, we had 1,401 employees, of whom 970 were hourly employees and 431 were salaried employees, and of whom approximately 67.2% were covered by the UMWA CBA, which expires on March 31, 2021.

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We believe that we have good relationships with our employees and with the unions representing our employees.

We are currently renegotiating our UMWA CBA.

There is no guarantee that we will reach an agreement in a timely manner, and if an agreement is not reached, there could be an interruption in production at each of our mines.

The Company prioritizes employee safety, wellbeing, personal and professional development, and diversity and inclusion.

At the direction of our Standing Committees of our Board of Directors, our human resource department is responsible for developing and executing our human capital strategy.

This includes the attraction, acquisition, development and engagement of talent to deliver on our strategy and the design of employee compensation, incentive, welfare and benefits programs.

We focus on the following factors in order to implement and develop our human capital strategy:

• Safety of Our Employees

• Evaluation of Employee Performance, Training and Talent Development

• Employee Health and Welfare

• Diversity and Inclusion

Safety of Our Employees

We incorporate safety principles into every aspect of our business.

We are proud of our safety record, which includes a safety incident rate that is 32% better than the U.S.

industry rate and an incident severity measure that is consistently less than half the national average.

To achieve such results, we have established a culture of awareness and incident prevention through numerous safety initiatives including, among others:

• 100% compliance with required annual MSHA safety training;

• Beginning all meetings with a safety share;

• Our "Stop and Correct Authority" that we have granted all employees, contractors, and visitors, we encourage anyone who observes unsafe acts or conditions to take corrective actions;

• Our Safety ACTion training program, with monthly trainings scheduled specific to the tasks that each individual is asked to perform.

Evaluation of Employee Performance, Training and Talent Development

We strive to recruit, hire and retain a talented and diverse team of people.

Our employees are supported with training and development opportunities to pursue their career paths and to ensure compliance with our policies.

Our training program incorporates industry best practices and includes the following for new employees, among others:

code of business conduct and ethics training, driving policy, employee handbook, safety policy and work rules.

We also require

the following annual trainings on certain topics among others:

Anti-Corruption and Anti-Bribery, cybersecurity, diversity and harassment, employee hazard, surface retraining, underground retraining and discipline specific retraining.

We are committed to developing and retaining our workforce.

Our employees make us who we are, and we offer tools to identify, grow and nurture our talent including:

• Future Leaders Development Program

• Annual Supervisor and Development Training

• Employee Education Assistance

• Annual Performance Evaluations

Employee Health and Welfare

Our compensation and benefits teams aim to develop and implement policies and programs that support our business goals, maintain competitiveness, promote shared fiscal responsibility among the Company and our employees, strategically align talent within our organization and reward performance, while also managing the costs of such policies and programs.

We provide our employees with competitive fixed and/or variable pay, and for eligible employees we currently provide access to medical, dental and life insurance benefits, disability coverage, 401(k) plan and employee assistance programs, among other benefits.

During the unprecedented COVID-19 global pandemic, we focused first and foremost on the safety of our employees, supporting our local community and ensuring our employees were able to remain employed.

We worked with the National Mining Association and other key national and local stakeholders to secure essential industry designation for the mining industry so that our employees and their families would not have to worry about financial stability during a time of great stress in our country.

We have put in place numerous safety procedures to protect our workforce during the pandemic and continue to enhance our practices to remain aligned with federal, state, local and international regulations and guidelines.

Further, despite the negative impact that the COVID-19 pandemic has had on our business, we have not cut salaries or hourly rates for our employees, nor have we adjusted our benefits coverage and we have not had to furlough any employees.

Available Information

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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 1. Business