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Item 1A. Risk Factors

2021-02-24 compared with 2020-02-19 · 325 added, 299 removed, 502 unchanged (55% of the section changed)

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Additional risks and uncertainties not presently known to us or that we currently deem to be immaterial may also adversely affect us.

Summary of Risk Factors

The following is a summary of some of the risks and uncertainties that could materially adversely affect our business, financial condition and results of operations.

You should read this summary together with the more detailed description of each risk factor contained below.

Risks Related to Our Business

• Global pandemics, such as the COVID-19 pandemic, may occur which could adversely affect our business, financial condition and results of operations;

• Deterioration in global economic conditions may adversely affect our business, results of operations and cash flows;

• If we fail to implement our business strategies successfully, our financial performance could be harmed;

• We may be unsuccessful or delayed in developing Blue Creek, which could significantly affect our operations and/or limit our long-term growth;

• If transportation for our met coal is disrupted, unavailable or more expense for our customers, our ability to sell met coal could suffer;

• Work stoppages, labor shortages and other labor relations matters may harm our business.

Union-represented labor creates an increased risk of work stoppages and higher labor costs;

• We require a skilled workforce to run our business.

If we cannot hire qualified people to meet replacement or expansion needs, we may not be able to achieve planned results;

• Significant competition, as well as changes in foreign markets or economies, could harm our sales, profitability and cash flows;

• Our sales in foreign jurisdictions are subject to risks and uncertainties, such as new tariffs and other trade measures, which could adversely affect our results of operations, financial position and cash flows;

Risks Related to Our Industry

• Our business may suffer from a substantial or extended decline in met coal pricing and demand or other factors beyond our control, which could negatively affect our operating results and cash flows;

• Substantially all of our revenues are derived from the sale of met coal.

This lack of diversification of our business could adversely affect our financial condition, results of operations and cash flows;

• Met coal mining involves many hazards and operating risks, and is dependent upon many factors and conditions beyond our control, which may cause our profitability and financial position to decline;

• Negative views with respect to environmental and social matters and related governance considerations could harm the perception of our Company by certain investors and financial institutions, including banks and insurance companies, adversely affecting our ability to obtain financing and insurance coverage, among others;

• Our inability to develop met coal reserves in an economically feasible manner or our inability to acquire additional met coal reserves that are economically recoverable may adversely affect our business;

• Any significant downtime of our major pieces of mining equipment could impair our ability to supply met coal to our customers and materially and adversely affect our results of operations and cash flows;

• We may not recover our investments in our mining, exploration and other assets, which may require us to recognize impairment charges related to those assets;

Risks Related to Regulatory Compliance

• We are responsible for medical and disability benefits for black lung disease under federal law.

Changes in the estimated claims to be paid or changes in the amount of collateral required may affect our operating results and cash flows;

• Extensive federal and state environmental, health and safety laws and regulations impose significant costs on our operations and future regulations could increase these costs, limit our ability to produce or adversely affect our ability to meet our customers' demands;

• Failure to obtain or renew surety bonds on acceptable terms could affect our ability to secure reclamation and coal lease obligations and, therefore, our ability to mine or lease met coal;

• We have reclamation and mine closing obligations.

If the assumptions underlying our accruals are inaccurate, we could be required to expand greater amounts than anticipated;

Risks Related to our Financial Results and Finances

• Our substantial indebtedness could adversely affect our ability to raise additional capital to fund our operations and dividend policy, limit our ability to react to changes in the economy or our industry and prevent us from making debt service payments on the Notes;

• We may be unable to generate sufficient taxable income from future operations, which may limit or eliminate our ability to utilize our significant tax NOLs or our deferred tax assets;

• Changes in the method pursuant to which LIBOR rates are determined and potential phasing out of LIBOR after 2021 may affect our financial results;

Risks Related to the Ownership of our Common Stock

• The market price of our common stock may fluctuate significantly and investors in our common stock could incur substantial losses;

• If securities or industry analysts adversely change their recommendations regarding our stock or if our operating results do not meet their expectations, our stock price could decline;

• Any declaration and payment of future dividends to holders of our common stock may be limited by restrictive covenant of our ABL Facility and the indenture governing the Notes, and will be on the sole discretion of the Board and will also depend on many factors;

• Our common stock is subject to the 382 Transfer Restrictions (as defined below) under our certificate of incorporation and the Rights Agreement which are intended to prevent a Section 382 "ownership change," which if not complied with, could result in the forfeiture of such stock and related dividends or substantial dilution of the stock ownership, respectively;

• Delaware law and our charter documents may impede or discourage a takeover or change of control, which could adversely affect the price of our common stock.

Risks Related to Our Business

Our activities may be adversely affected by global pandemics, including the global outbreak of the novel coronavirus (COVID-19), which may prevent us from meeting our targeted production levels and/or executing our planned development initiatives (including, but not limited to, the development of Blue Creek), negatively impact our customers’ demand for met coal and their ability to honor or renew contracts, adversely affect the health and welfare of Company personnel or prevent our vendors and contractors from performing normal and contracted activities.

The outbreak of COVID-19, which was first detected in Wuhan, China in December 2019 and declared a pandemic by the World Health Organization in March 2020, could have a material and adverse effect on our business, financial condition and results of operations.

The outbreak has resulted, and may continue to result, in disruptions to economic and industrial activity worldwide.

Though the global impact of COVID-19 is rapidly evolving and remains highly uncertain, the outbreak may ultimately cause a significant decline in global steel production and, in turn, reduce demand for met coal.

As mentioned elsewhere in this Annual Report, we are highly dependent on the global steel industry.

Our sales are primarily derived from coal shipments to customers located in regions that are, or may become, heavily affected by the COVID-19 outbreak, particularly Asia and Europe.

Not only is steel production in these regions at risk of decline, but we may also face additional challenges in the event that transportation restrictions are put in place that affect our ability to deliver coal to our customers in these regions.

These factors may influence our customers’ ability to honor or renew their contracts.

In addition to the potential impact on global met coal demand, COVID-19 or any other global pandemic may result in disruptions or restrictions on our employees’ ability to operate our coal mines in the ordinary course of business, which would restrict our production capacity.

Similarly, we cannot predict how, if at all, the outbreak will affect our suppliers’ ability to provide the mining materials and equipment we require.

If our production capacity or our ability to meet our supply needs is affected, our business and our financial results could be materially and adversely affected.

Finally, the COVID-19 pandemic has substantially affected national and international financial markets, which could affect our ability to obtain financing for our business and/or pursue our planned development projects, including the development of our Blue Creek mine.

The extent to which COVID-19 or any other global pandemic will impact our business and our financial results will depend on future developments, which are highly uncertain and cannot be predicted.

Such developments may include the geographic spread of the virus, the severity of the disease, the duration of the outbreak, the actions that may be taken by various governmental authorities in response to the outbreak and the impact on the U.S.

or global economy.

Deterioration in global economic conditions as they relate to the steelmaking industry, as well as generally unfavorable global economic, financial and business conditions, may adversely affect our business, results of operations and cash flows.

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As a result, if economic conditions in the global steelmaking industry deteriorate as they have in past years, the demand for met coal may decrease.

In addition, the global financial markets have been experiencing volatility and disruption over the last several years.

In addition, the global financial markets have been experiencing volatility and disruption over the last several years and, more recently, due to the COVID-19 pandemic.

These markets have experienced, among other things, volatility in security prices, commodities and currencies, diminished liquidity and credit availability, rating downgrades and declining valuations of certain investments.

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In addition, future governmental policy changes in foreign countries may be detrimental to the global coal market.

For example, the Chinese government has from time to time implemented regulations and promulgated new laws or restrictions on their domestic coal industry, sometimes with little advance notice, which has impacted worldwide coal demand, supply and prices.

During the past several years, the Chinese government has initiated a number of anti-smog measures aimed at reducing hazardous air emissions through temporary production capacity restrictions with the steel, coal and coal-fired power sectors.

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In addition, the current level of met coal prices may not be sustainable.

Our business may suffer as a result of a substantial or extended decline in met coal pricing or the failure of any recovery or stabilization of met coal prices to endure, as well as any substantial or extended decline in the demand for met coal and other factors beyond our control, which could negatively affect our operating results and cash flows.

Our profitability depends on the prices at which we sell our met coal, which are largely dependent on prevailing market prices.

A substantial or extended decrease in met coal pricing or the failure of a price recovery or stabilization following such decrease will negatively affect our operating cash flows.

We have experienced significant price fluctuations in our met coal business, and we expect that such fluctuations will continue.

For example, in the first quarter of 2016, the Australian HCC Benchmark settlement price fell to $81 per metric ton, while in late 2016 spot market prices passed $300 per metric ton with a first quarter 2017 Australian HCC Benchmark settlement price of $285 per metric ton.

In 2019, the average Platts Index price for the first half of 2019 was $204.53 compared to an average price of $150.83 in the second half of 2019.

In November 2019, the Platts Index price hit a three year low of approximately $132.00 per metric ton.

Demand for, and therefore the price of, met coal is driven by a variety of factors, including, but not limited to, the following:

the domestic and foreign supply and demand for met coal;

the quantity and quality of met coal available from competitors;

the demand for and price of steel;

adverse weather, climatic and other natural conditions, including natural disasters;

domestic and foreign economic conditions, including slowdowns in domestic and foreign economies and financial markets;

global and regional political events;

domestic and foreign legislative, regulatory and judicial developments, environmental regulatory changes and changes in energy policy and energy conservation measures that could adversely affect the met coal industry;

capacity, reliability, availability and cost of transportation and port facilities, and the proximity of available met coal to such transportation and port facilities.

The met coal industry also faces concerns with respect to oversupply from time to time, which could materially adversely affect our financial condition and results of operations.

In addition, reductions in the demand for met coal caused by reduced steel production by our customers, increases in the use of substitutes for steel (such as aluminum, composites or plastics) or less expensive substitutes for met coal and the use of steelmaking technologies that use less or no met coal can significantly adversely affect our financial results and impede growth.

Our natural gas business is also subject to adverse changes in pricing due to, among other factors, changes in demand and competition from alternative energy sources.

Our customers are continually evaluating alternative steel production technologies which may reduce demand for our product.

Our product is primarily used as HCC for blast furnace steel producers.

High-quality HCC commands a significant price premium over other forms of coal because of its value in use in blast furnaces for steel production.

High-quality HCC is a scarce commodity and has specific physical and chemical properties which are necessary for efficient blast furnace operation.

Alternative technologies are continually being investigated and developed with a view to reducing production costs or for other reasons, such as minimizing environmental or social impact.

If competitive technologies emerge or are increasingly utilized that use other materials in place of our product or that diminish the required amount of our product, such as electric arc furnaces or pulverized coal injection processes, demand and price for our met coal might fall.

Many of these alternative technologies are designed to use lower quality coals or other sources of carbon instead of higher cost high-quality HCC.

While conventional blast furnace technology has been the most economic large-scale steel production technology for a number of years, and while emergent technologies typically take many years to commercialize, there can be no assurance that over the longer term competitive technologies not reliant on HCC could emerge which could reduce demand and price premiums for HCC.

We sell most of our met coal under fixed supply contracts primarily with indexed pricing terms that vary and volume terms of one to three years and are therefore exposed to commodity price risk on our sales.

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Our ability to do so generally depends on a variety of factors, including the quality and price of our products, our ability to market these products effectively, our ability to deliver on a timely basis and the level of competition that we face.

If our customers do not honor contract commitments, or if they terminate agreements or exercise force majeure provisions allowing for the temporary suspension of performance during specified events beyond the parties’ control and we are unable to replace the contract, our revenues will be materially and adversely affected.

If our customers do not honor contract commitments, or if they terminate agreements or exercise force majeure provisions allowing for the temporary suspension of performance during specified events beyond the parties’ control, such as the COVID-19 pandemic, and we are unable to replace the contract, our revenues will be materially and adversely affected.

Changes in the met coal industry may cause some of our customers not to renew, extend or enter into new met coal supply agreements or to enter into agreements to purchase fewer metric tons of met coal or on different terms than in the past.

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Our ability to receive payment for met coal sold and delivered depends on the continued creditworthiness and financial stability of our customers.

A significant number of our customers are affected by the COVID-19 pandemic, which may result in a deterioration of their financial stability and, in some cases, a bankruptcy.

If we determine that a customer is not creditworthy or if a customer declares bankruptcy, we may not be required to deliver met coal sold under the customer’s sales contract.

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For the year ended December 31, 2020, we derived approximately 64.5% of our total sales revenues from our five largest customers.

There are inherent risks whenever a significant percentage of total revenues are concentrated with a limited number of customers, and it is not possible for us to predict the future level of demand for our met coal that will be generated by our largest customers.

There are inherent risks whenever a significant percentage of total revenues are concentrated with a limited

number of customers, and it is not possible for us to predict the future level of demand for our met coal that will be generated by our largest customers.

We expect to renew, extend or enter into new supply agreements with these and other customers;

however, we may be unsuccessful in obtaining such agreements with these customers and these customers may discontinue purchasing met coal from us, reduce the quantity of met coal that they have historically purchased from us or pressure us to reduce the prices that we charge for our met coal due to market, economic or competitive conditions.

If any of our major customers were to significantly reduce the quantities of met coal they purchase from us and we are unable to replace these customers with new customers (or we fail to obtain new, additional customers), or if we are otherwise unable to sell met coal to those customers on terms as favorable to us as the terms under our current agreements, our profitability could suffer significantly.

Substantially all of our revenues are derived from the sale of met coal.

This lack of diversification of our business could adversely affect our financial condition, results of operations and cash flows.

We rely on the met coal production from our two active met coal mines for substantially all of our revenues.

For the year ended December 31, 2019 , revenues from the sale of met coal accounted for approximately 97.5% of our total revenues.

As noted above, demand for met coal depends on domestic and foreign steel demand.

At times, the pricing and availability of steel can be volatile due to numerous factors beyond our control.

When steel prices are lower, the prices that we charge steelmaking customers for our met coal may decline, which could adversely affect our financial condition, results of operations and cash flows.

Since we are heavily dependent on the steelmaking industry, adverse economic conditions in this industry, even in the presence of otherwise favorable economic conditions in the broader coal industry, could have a significantly greater impact on our financial condition and results of operations than if our business were more diversified.

In addition, our lack of diversification may make us more susceptible to such adverse economic conditions than our competitors with more diversified operations and/or asset portfolios, such as those that produce thermal coal in addition to met coal.

All of our mining operations are located in Alabama, making us vulnerable to risks associated with having our production concentrated in one geographic area.

All of our mining operations are geographically concentrated in Alabama.

As a result of this concentration, we may be disproportionately exposed to the impact of delays or interruptions in production caused by significant governmental regulation, transportation capacity constraints, constraints on the availability of required equipment, facilities, personnel or services, curtailment of production, extreme weather conditions, natural disasters or interruption of transportation or other events that impact Alabama or its surrounding areas.

If any of these factors were to impact Alabama more than other met coal producing regions, our business, financial condition, results of operations and cash flows will be adversely affected relative to other mining companies with operations in unaffected regions or that have a more geographically diversified asset portfolio.

Met coal mining involves many hazards and operating risks, and is dependent upon many factors and conditions beyond our control, which may cause our profitability and financial position to decline.

Our mining operations, including our preparation and transportation infrastructure, are subject to inherent hazards and operating risks that could disrupt operations, decrease production and increase the cost of mining for varying lengths of time.

Specifically, underground mining and related processing activities present risks of injury to persons and damage to property and

In addition, met coal mining is dependent upon a number of conditions beyond our control that can disrupt operations and/or affect our costs and production schedules at particular mines.

These risks, hazards and conditions include, but are not limited to:

variations in geological conditions, such as the thickness of the met coal seam and amount of rock embedded in the met coal deposit and variations in rock and other natural materials overlying the met coal deposit, that could affect the stability of the roof and the side walls of the mine;

mining, process and equipment or mechanical failures, unexpected maintenance problems and delays in moving longwall equipment;

the unavailability of raw materials, equipment (including heavy mobile equipment) or other critical supplies such as tires, explosives, fuel, lubricants and other consumables of the type, quantity and/or size needed to meet production expectations;

adverse weather and natural disasters, such as heavy rains or snow, forest fires, flooding and other natural events, including seismic activities, ground failures, rock bursts or structural cave-ins or slides, affecting our operations or transportation to our customers;

railroad delays or derailments;

environmental hazards, such as subsidence and excess water ingress;

delays and difficulties in acquiring, maintaining or renewing necessary permits or mining rights;

availability of adequate skilled employees and other labor relations matters;

security breaches or terroristic acts;

unexpected mine accidents, including rock-falls and explosions caused by the ignition of met coal dust, natural gas or other explosive sources at our mine sites or fires caused by the spontaneous combustion of met coal or similar mining accidents;

competition and/or conflicts with other natural resource extraction activities and production within our operating areas, such as natural gas extraction or oil and gas development;

other hazards that could also result in personal injury and loss of life, pollution and suspension of operations.

These risks and conditions could result in damage to or the destruction of our mineral properties, equipment or production facilities, personal injury or death, environmental damage, delays in mining, regulatory investigations, actions and penalties, repair and remediation costs, monetary losses and legal liability.

In addition, a significant mine accident could potentially cause a suspension of operations or a complete mine shutdown.

Our insurance coverage may not be available or sufficient to fully cover claims that may arise from these risks and conditions.

We have also seen adverse geological conditions in the mines, such as variations in met coal seam thickness, variations in the competency and make-up of the roof strata, fault-related discontinuities in the met coal seam and the potential for ingress of excessive amounts of natural gas or water.

Such adverse conditions may increase our cost of sales and reduce our profitability, and may cause us to decide to close a mine.

Any of these risks or conditions could have a negative impact on our financial condition, results of operations and cash flows.

In addition, if any of the foregoing changes, conditions or events occurs and is not excusable as a force majeure event, any resulting failure on our part to deliver met coal to the purchaser under our contracts could result in economic penalties, suspension or cancellation of shipments or ultimately termination of the agreement, any of which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

If we fail to implement our business strategies successfully, our financial performance could be harmed.

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We may not be able to implement our business strategies successfully or achieve the anticipated benefits.

we are unable to do so, our long-term growth, profitability and ability to service any debt we incur in the future may be materially adversely affected.

If we are unable to do so, our long-term growth, profitability and ability to service any debt we incur in the future may be materially adversely affected.

Even if we are able to implement some or all of the key elements of our business plan successfully, our operating results may not improve to the extent we anticipate, or at all.

Implementation of our business strategies, including the development of Blue Creek, could also be affected by a number of factors beyond our control, such as global economic conditions, met coal prices, domestic and foreign steel demand, and environmental, health and safety laws and regulations.

Implementation of our business strategies, including the development of Blue Creek, could also be affected by a number of factors beyond our control, such as global economic conditions (including effects of the COVID-19 pandemic), met coal prices, domestic and foreign steel demand, and environmental, health and safety laws and regulations.

A key element of our business strategy involves increasing production at our existing mines and developing Blue Creek recoverable reserves in a cost efficient manner.

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Accordingly, we may not be able to complete the development of Blue Creek on schedule, at the budgeted cost or at all, and any such delays or increased costs could have a material adverse effect on our financial condition, results of operations or cash flows.

We initially delayed spending the $25.0 million that we budgeted for the development of the Blue Creek project until at least July 1, 2020 and have now further delayed the development of that project until at least summer 2021.

Our planned development of Blue Creek involves numerous risks, including, but not limited to, the following:

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• unanticipated facility or equipment malfunctions or breakdowns;

delays from unexpected adverse geological and/or weather conditions and from accidents;

• delays from unexpected adverse geological and/or weather conditions, accidents, and other factors beyond our control, including the COVID-19 pandemic;

• failure to obtain, or delays in obtaining, all necessary governmental and third-party rights-of-way, easements, permits, licenses and approvals;

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In addition, federal, state or local regulatory agencies have the authority to order certain of our mines to be temporarily or permanently closed under certain circumstances, which could materially and adversely affect our ability to meet our customers’ demands.”

Our business is subject to inherent risks, some for which we maintain third party insurance.

We may incur losses and be subject to liability claims that could have a material adverse effect on our financial condition, results of operations or cash flows.

We maintain insurance policies that provide limited coverage for some, but not all, potential risks and liabilities associated with our business.

The insurance that we maintain may contain certain deductible amounts and cover risks and liabilities typical for a coal mining business including, but not limited to, property, general liability and business interruption.

Although we maintain insurance for a number of risks and hazards, we may not be insured or fully insured against the losses or liabilities that could arise from a significant accident in our coal operations.

We may elect not to obtain insurance for any or all of these risks if we believe that the cost of available insurance is excessive relative to the risks presented.

Moreover, a significant mine accident could potentially cause a mine shutdown.

The occurrence of an event that is not fully covered by insurance could have a material adverse effect on our business, financial condition, results of operations and cash flows.

As a result of market conditions, premiums and deductibles for certain insurance policies can increase substantially, and in some instances, certain insurance may become unavailable or available only for reduced amounts of coverage.

As a result, we may not be able to renew our existing insurance policies or procure other desirable insurance on commercially reasonable terms, if at all.

In addition, certain environmental, contamination and pollution risks generally are not fully insurable.

Even where insurance coverage applies, insurers may contest their obligations to make payments.

Our financial condition, results of operations and cash flows could be materially and adversely affected by losses and liabilities from uninsured or under-insured events, as well as by delays in the payment of insurance proceeds, or the failure by insurers to make payments.

We also may incur costs and liabilities resulting from claims for damages to property or injury to persons arising from our operations.

We must compensate employees for work-related injuries.

If we do not make adequate provision for our workers’ compensation and black lung liabilities, or we are pursued for applicable sanctions, costs and liabilities, our operations and profitability could be adversely affected.

Certain of our subsidiaries are responsible for medical and disability benefits for black lung disease under federal law and are insured beginning April 1, 2016 for claims made by or on behalf of any of our employees.

As a result of our limited operating history as a stand-alone company, the Department of Labor required us to provide insurance coverage rather than be self-insured for these obligations.

We are responsible for medical and disability benefits for black lung disease under federal law.

We assumed certain historical self-insured black lung liabilities of Walter Energy and its subsidiaries incurred prior to April 1, 2016 in connection with the Asset Acquisition.

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

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.

We 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 Act, each as amended, and are self-insured for black lung related claims asserted by or on behalf of former employees of Walter Energy and its subsidiaries as assumed in the Asset Acquisition for the period prior to April 1, 2016.

We perform an annual actuarial evaluation of the overall black lung liabilities as of each December 31 st .

The calculation is performed using assumptions regarding rates of successful claims, discount factors, benefit increases and mortality rates, among others.

If the number of or severity of successful claims increases, or we are required to accrue or pay additional amounts because the successful claims prove to be more severe than our original assessment, our operating results and cash flows could be negatively impacted.

Our self-insurance program for these legacy liabilities is unique to the industry and was specifically negotiated with the Department of Labor requiring us to post $17.0 million in surety bonds or Treasury bills as collateral in addition to maintaining a black lung trust of $3.3 million that was acquired in the Asset Acquisition.

For additional information see “Part I, Item 1.

Business-Environmental and Regulatory Matters-Workers’ Compensation and Black Lung.” Our estimated total black lung liabilities as of December 31, 2019 were $32.5 million (net of the black lung trust).

In future years, the Department of Labor could require us to increase the amount of the collateral which could negatively impact our cash flows.

Defects in title of any real property or leasehold interests in our properties or associated met coal reserves could limit our ability to mine or develop these properties or result in significant unanticipated costs.

All of our mining operations are conducted on properties owned or leased by us.

Our right to mine our met coal reserves may be materially adversely affected by defects in title or boundaries or if our property interests are subject to superior property rights of third parties.

We do not have title insurance for any of our real property or leasehold interests and, title to most of our owned or leased properties and mineral rights is not usually verified until we make a commitment to mine a property, which may not occur until after we have obtained necessary permits and completed exploration of the property.

Any challenge to our title or leasehold interests could delay the mining of the property, result in the loss of some or all of our interest in the property or met coal reserves and increase our costs.

In order to conduct our mining operations on properties where these defects exist, we may incur unanticipated costs perfecting title.

In addition, if we mine or conduct our operations on property that we do not own or lease, we could incur civil damages or liabilities for such mining operations and be subject to conversion, negligence, trespass, regulatory sanction and penalties.

Some leases have minimum production requirements or require us to commence mining operations in a specified term to retain the lease.

Failure to meet those requirements could result in losses of prepaid royalties and, in some rare cases, could result in a loss of the lease itself.

We face uncertainties in estimating our proven and probable met coal reserves, and inaccuracies in our estimates of our met coal reserves could result in decreased profitability from lower than expected revenues or higher than expected costs.

Our future performance depends on, among other things, the accuracy of our estimates of our proven and probable met coal reserves.

Reserve estimates are based on a number of sources of information, including engineering, geological, mining and property control maps and data, our operational experience of historical production from similar areas with similar conditions and assumptions governing future pricing and operational costs.

We update our estimates of the quantity and quality of proven and probable met coal reserves at least annually to reflect the production of met coal from the reserves, updated geological models and mining recovery data, the tonnage contained in new lease areas acquired and estimated costs of production and sales prices.

There are numerous factors and assumptions inherent in estimating met coal quantities, qualities and costs to mine, including many factors beyond our control, such as the following:

geological and mining conditions, including faults in the met coal seam;

historical production from the area compared with production from other producing areas;

the percentage of met coal ultimately recoverable;

the assumed effects of regulations and taxes and other payments to governmental agencies;

our ability to obtain, maintain and renew all required permits;

future improvements in mining technology;

assumptions concerning the timing of the development of the reserves;

assumptions concerning equipment and operational productivity, future met coal prices, operating costs, including those for critical supplies such as fuel, tires and explosives, capital expenditures and development and reclamation costs.

Each of these factors may vary considerably from the assumptions used in estimating the reserves.

As a result, estimates of the quantities and qualities of economically recoverable met coal attributable to any particular group of properties, classifications of reserves based on risk of recovery, estimated cost of production, and estimates of future net cash flows expected from these properties as prepared by different engineers or by the same engineers at different times may vary materially due to changes in the above factors and assumptions.

Actual production recovered from identified reserve areas and properties, and revenues and expenditures associated with our mining operations may vary materially from estimates.

Any inaccuracy in our estimates related to our reserves could result in decreased profitability from lower than expected revenues and/or higher than expected costs.

Our inability to develop met coal reserves in an economically feasible manner or our inability to acquire additional met coal reserves that are economically recoverable may adversely affect our business.

Our long-term profitability depends in part on our ability to cost-effectively mine and process met coal reserves that possess the quality characteristics desired by our customers.

As we mine, our met coal reserves decline.

As a result, our future success depends upon our ability to develop or acquire additional met coal reserves that are economically recoverable to replace the reserves that we produce.

Coal is economically recoverable when the price at which our met coal can be sold exceeds the costs and expenses of mining and selling such met coal.

We may not be able to obtain adequate economically recoverable replacement reserves when we require them and, even if available, such reserves may not be at favorable prices or we may not be capable of mining those reserves at costs that are comparable to our existing met coal reserves.

Our ability to develop or acquire met coal reserves in the future may also be limited by the availability of cash from our operations or financing under our existing or future financing arrangements, as well as certain restrictions under such arrangements.

If we are unable to develop or acquire replacement reserves, our future production may decrease significantly as existing reserves are depleted and this may have a material adverse impact on our cash flows, financial position and results of operations.

We may be unsuccessful in integrating the operations of any future acquisitions, including acquisitions involving new lines of business, with our existing operations, and in realizing all or any part of the anticipated benefits of any such acquisitions.

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Acquisitions may require substantial capital or the incurrence of substantial indebtedness.

Our capitalization and results of operations may change significantly as a result of future acquisitions.

Our capitalization and results of operations may change

significantly as a result of future acquisitions.

Acquisitions and business expansions involve numerous risks, including the following:

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If a new business generates insufficient revenue or if we are unable to efficiently manage our expanded operations, our results of operations may be adversely affected.

Our failure to obtain and renew permits necessary for our mining operations could negatively affect our business.

Mining companies must obtain numerous permits that impose strict regulations on various environmental and operational matters in connection with met coal mining.

These include permits issued by various federal, state and local agencies and regulatory bodies.

The permitting rules, and the interpretations of these rules, are complex, change frequently and are often subject to discretionary interpretations by the regulators, all of which may make compliance more difficult or impractical, and may possibly preclude the continuance of ongoing operations or the development of future mining operations.

The public, including non-governmental organizations, anti-mining groups and individuals, have certain statutory rights to comment upon and submit objections to requested permits and environmental impact statements prepared in connection with applicable regulatory processes, and otherwise engage in the permitting process, including bringing citizens’ lawsuits to challenge the issuance of permits, the validity of environmental impact statements or performance of mining activities.

Accordingly, required permits may not be issued or renewed in a timely fashion or at all, or permits issued or renewed may be conditioned in a manner that may restrict our ability to efficiently and economically conduct our mining activities, any of which would materially reduce our production, cash flow and profitability.

If transportation for our met coal is disrupted, unavailable or more expensive for our customers, our ability to sell met coal could suffer.

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We typically depend upon overland conveyor, trucks, rail or barges to transport our products.

Disruption or delays of any of these transportation services due to weather related problems, which are variable and unpredictable, strikes or lock-outs, accidents, infrastructure damage, governmental regulation, third-party actions, lack of capacity or other events beyond our control could impair our ability to supply our products to our customers and result in lost sales and reduced profitability.

Disruption or delays of any of these transportation services due to weather related problems, which are variable and unpredictable, strikes or lock-outs, accidents, infrastructure damage, governmental regulation, third-party actions, lack of capacity or other events beyond our control, such as the COVID-19 pandemic, could impair our ability to supply our products to our customers and result in lost sales and reduced profitability.

In addition, increases in transportation costs resulting from emission control requirements and fluctuations in the price of gasoline and diesel fuel, could make met coal produced in one region of the United States less competitive than met coal produced in other regions of the United States or abroad.

All of our met coal mines are served by only one rail carrier, which increases our vulnerability to these risks, although our access to barge transportation partially mitigates that risk.

In addition, the majority of the met coal produced by our underground mining operations is sold to met coal customers who typically arrange and pay for transportation from the state-run docks at the Port of Mobile, Alabama to the point of use.

As a result, disruption at the docks, port congestion and delayed met coal shipments may result in demurrage fees to us.

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Further, delays of ocean vessels could affect our revenues, costs and relative competitiveness compared to the supply of met coal and other products from our competitors.

Any significant downtime of our major pieces of mining equipment could impair our ability to supply met coal to our customers and materially and adversely affect our results of operations and cash flows.

We depend on several major pieces of mining equipment to produce and transport our met coal, including, but not limited to, longwall mining systems, continuous mining units, our preparation plant and blending facilities, and conveyors.

Obtaining or repairing these major pieces of mining equipment often involves long lead times.

If any of these pieces of equipment or facilities suffer major damage or are destroyed by fire, abnormal wear, flooding, incorrect operation or otherwise, we may be unable to replace or repair them in a timely manner or at a reasonable cost, which would impact our ability to produce and transport met coal and materially and adversely affect our business, results of operations, financial condition and cash flows.

Moreover, MSHA and other regulatory agencies sometimes make changes with regards to requirements for pieces of equipment.

For example, in 2015, MSHA promulgated a new regulation requiring the implementation of proximity detection devices on all continuous mining machines.

Such changes could cause delays if manufacturers and suppliers are unable to make the required changes in compliance with mandated deadlines.

If either our preparation plant or river barge load-out facilities, or those of a third party processing or loading our met coal, suffer extended downtime, including major damage, or are destroyed, our ability to process and deliver met coal to prospective customers would be materially impacted, which would materially adversely affect our business, results of operations, financial condition and cash flows.

Our business is subject to the risk of increases or fluctuations in the cost, and delay in the delivery, of raw materials, mining equipment and purchased components.

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We use equipment in our met coal mining and transportation operations such as continuous mining units, conveyors, shuttle cars, rail cars, locomotives, roof bolters, shearers and shields.

Some equipment and materials are needed to comply with regulations, such as proximity detection devices on continuous mining machines.

Some equipment and materials are needed to comply with

regulations, such as proximity detection devices on continuous mining machines.

We procure some of this equipment from a concentrated group of suppliers, and obtaining this equipment often involves long lead times.

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In addition, there continues to be consolidation in the supplier base providing mining materials and equipment, which has resulted in a limited number of suppliers for certain types of equipment and supplies.

If any of our suppliers experiences an adverse event, decides to cease producing products used by the mining industry, or decides to no longer do business with us, we may be unable to obtain sufficient equipment and raw materials in a timely manner or at a reasonable price to allow us to meet our production goals and our revenues may be materially adversely impacted.

If any of our suppliers experiences an adverse event (including as a result of the COVID-19 pandemic), decides to cease producing products used by the mining industry, or decides to no longer do business with us, we may be unable to obtain sufficient equipment and raw materials in a timely manner or at a reasonable price to allow us to meet our production goals and our revenues may be materially adversely impacted.

We use considerable quantities of steel in the mining process.

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Using cash from operations will reduce cash available for maintaining or increasing our operations activities.

Our ability to obtain bank financing or our ability to access the capital markets for future equity or debt offerings, on the other hand, may be limited by our financial condition at the time of any such financing or offering and the covenants in our existing debt agreements, as well as by general economic conditions, contingencies and uncertainties that are beyond our control.

If cash flow generated by our operations or available borrowings under our bank financing arrangements are insufficient to meet our capital requirements and we are unable to access the capital markets on acceptable terms or at all, we could be forced to curtail the expansion of our existing mines and the development of our properties, which, in turn, could lead to a decline in our production and could materially and adversely affect our business, financial condition and results of operations..

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Union-represented labor creates an increased risk of work stoppages and higher labor costs.

As of December 31,

2019 , 68.17% of our employees were represented by the UMWA.

In connection with the Asset Acquisition, we negotiated a new initial CBA with the UMWA (the “UMWA CBA”), which was ratified by UMWA’s members on February 16, 2016 and has a five-year term.

If we are unable to negotiate the renewal of the UMWA CBA before its expiration date, our operations and our profitability could be adversely affected.

As of December 31, 2020, 67.2% of our employees were represented by the UMWA.

In connection with the acquisition of certain assets of Walter Energy, we negotiated the CBA with the UMWA, which was ratified by UMWA’s members on February 16, 2016 and has a five-year term.

If we are unable to negotiate the renewal of the CBA before its expiration date on April 1, 2021, our operations and our profitability could be adversely affected.

Future work stoppages, labor union issues or labor disruptions at our mining operations, as well as at the operations of key customers or service providers, could impede our ability to produce and deliver our products, to receive critical equipment and supplies or to collect payment.

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If a shortage of skilled workers exists and we are unable to train or retain the necessary number of miners, it could adversely affect our productivity, costs and ability to expand production.

Our executive officers and other key personnel are important to our success and the loss of one or more of these individuals could harm our business.

Our executive officers and other key personnel have significant experience in the met coal or other commodity businesses and the loss of certain of these individuals could harm our business.

Moreover, there may be a limited number of persons with the requisite experience and skills to serve in our senior management positions.

Although we have been successful in attracting qualified individuals for key management and corporate positions in the past, there can be no assurance that we will continue to be successful in attracting and retaining a sufficient number of qualified personnel in the future or that we will be able to do so on acceptable terms.

The loss of key management personnel could harm our ability to successfully manage our business functions, prevent us from executing our business strategy and have a material adverse effect on our results of operations and cash flows.

Significant competition, as well as changes in foreign markets or economies, could harm our sales, profitability and cash flows.

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dollar, on which our sales contracts are based, those customers may seek decreased prices for the met coal that we sell to them.

These factors, in addition to adversely

affecting the competitiveness of our met coal in international markets, may also negatively impact our collection of trade receivables from our customers and could reduce our profitability or result in lower met coal sales.

These factors, in addition to adversely affecting the competitiveness of our met coal in international markets, may also negatively impact our collection of trade receivables from our customers and could reduce our profitability or result in lower met coal sales.

Our sales in foreign jurisdictions are subject to risks and uncertainties that may have a negative impact on our profitability.

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• fluctuations in foreign currency exchange and interest rates;

political and economic instability, changes, hostilities and other disruptions, as well as unexpected changes in diplomatic and trade relationships.

• political and economic instability, changes, hostilities and other disruptions (including as a result of the COVID-19 pandemic), as well as unexpected changes in diplomatic and trade relationships.

Negative developments in any of these factors in the foreign markets into which we sell our met coal could result in a reduction in demand for met coal, the cancellation or delay of orders already placed, difficulty in collecting receivables, higher costs of doing business and/or non-compliance with legal and regulatory requirements, each or any of which could materially adversely impact our cash flows, results of operations and profitability.

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New tariffs and other trade measures could adversely affect our results of operations, financial position and cash flows.

On March 8, 2018, President Trump signed proclamations imposing a 25 percent tariff on imports of certain steel mill products and aluminum products.

has also imposed tariffs of 7.5 percent and 25.0 percent on certain Chinese-origin products.

On March 8, 2018, former President Trump signed proclamations imposing a 25 percent tariff on imports of certain steel mill products and aluminum products.

continues to impose tariffs of 7.5 percent and 25.0 percent on certain Chinese-origin products.

In response to the tariffs imposed by the U.S., other countries, including China and European Union member countries have announced tariffs on U.S.

goods and services.

The new tariffs, along with any additional tariffs or trade restrictions that may be implemented by the U.S.

The continuation of these tariffs, along with any additional tariffs or trade restrictions that may be implemented by the U.S.

or retaliatory trade measures or tariffs implemented by other countries, could result in reduced economic activity, increased costs in operating our business, reduced demand and changes in purchasing behaviors for met coal, limits on trade with the United States or other potentially adverse economic outcomes.

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to intensify, potentially resulting in additional downward pressure on domestic coal prices and our business, financial condition and results of operations.

A "phase one" trade deal signed between the U.S.

and China on January 15, 2020 accompanied a U.S.

decision to cancel a plan to increase tariffs on an additional list of Chinese products and to reduce the tariffs previously imposed on one list of Chinese products.

While the signing of the agreement signals a cooling of tensions between the U.S.

and China over trade, concerns over the stability of bilateral trade relations remain, particularly given the limited scope of the phase one agreement.

We may be subject to litigation, the disposition of which could negatively affect our profitability and cash flow in a particular period, or have a material adverse effect on our business, financial condition and results of operations.

Our profitability or cash flow in a particular period could be affected by an adverse ruling in any litigation that may be filed against us in the future.

In addition, such litigation could have a material adverse effect on our business, financial condition and results of operations.

See “Part I, Item 3.

Legal Proceedings.”

Terrorist attacks and cyber-attacks or other security breaches may negatively affect our business, financial condition and results of operations and cash flows.

Our business is affected by general economic conditions, fluctuations in consumer confidence and spending, and market liquidity, all of which can decline as a result of numerous factors outside of our control, such as terrorist attacks and acts of war.

Future terrorist attacks against U.S.

targets, rumors or threats of war, actual conflicts involving the United States or its allies, or military or trade disruptions affecting our customers could cause delays or losses in transportation and deliveries of met coal to our customers, decreased sales of our met coal and extension of time for payment of accounts receivable from our customers.

Strategic targets such as energy-related assets may be at greater risk of future terrorist attacks than other targets in the United States.

It is possible that any, or a combination, of these occurrences could have a material adverse effect on our business, financial condition and results of operations.

In addition, we have become increasingly dependent upon digital technologies, including information systems, infrastructure and cloud applications and services, to operate our businesses, process and record financial and operating data, communicate with our employees and business partners, analyze seismic and drilling information, estimate quantities of met coal reserves, as well as other activities related to our businesses.

As our dependence on digital technologies has increased, the risk of cyber incidents, including both deliberate attacks and unintentional events, also has increased.

A cyber-attack may involve persons gaining unauthorized access to our digital systems for purposes of gathering, monitoring, releasing, misappropriating or corrupting proprietary or confidential information, or causing operational disruption.

To that end, we have implemented security protocols and systems with the intent of maintaining the physical security of our operations and protecting our and our counterparties’ confidential information and information related to identifiable individuals against unauthorized access.

Despite such efforts, we may be subject to security breaches, which could result in unauthorized access to our facilities or the information that we are trying to protect.

Unauthorized physical access to one of our facilities or electronic access to our information systems could result in, among other things, unfavorable publicity, litigation by affected parties, damage to sources of competitive advantage, disruptions to our operations, loss of customers, financial obligations for damages related to the theft or misuse of such information and costs to remediate such security vulnerabilities, any of which could have a substantial impact on our results of operations, financial condition or cash flows.

Our insurance may not protect us against such occurrences.

While to date we have not experienced any material losses relating to cyber incidents, as cyber incidents continue to evolve, we may be required to expend additional resources to continue to modify or enhance our protective measures or to investigate and remediate any vulnerability to cyber incidents.

Risks Related to Our Industry

Our profitability depends on the prices at which we sell our met coal, which are largely dependent on prevailing market prices.

A substantial or extended decrease in met coal pricing or the failure of a price recovery or stabilization following such decrease will negatively affect our operating cash flows.

We have experienced significant price fluctuations in our met coal business, and we expect that such fluctuations will continue.

Demand for, and therefore the price of, met coal is driven by a variety of factors, including, but not limited to, the following:

• the domestic and foreign supply and demand for met coal;

• the quantity and quality of met coal available from competitors;

• the demand for and price of steel;

• adverse weather, climatic and other natural conditions, including natural disasters;

• domestic and foreign economic conditions, including slowdowns in domestic and foreign economies and financial markets;

• global and regional political events;

• domestic and foreign legislative, regulatory and judicial developments, environmental regulatory changes and changes in energy policy and energy conservation measures that could adversely affect the met coal industry;

• capacity, reliability, availability and cost of transportation and port facilities, and the proximity of available met coal to such transportation and port facilities;

• other factors beyond our control, such as terrorism, war, and pandemics, including the COVID-19 pandemic.

The met coal industry also faces concerns with respect to oversupply from time to time, which could materially adversely affect our financial condition and results of operations.

Our natural gas business is also subject to adverse changes in pricing due to, among other factors, changes in demand and competition from alternative energy sources.

Our customers are continually evaluating alternative steel production technologies which may reduce demand for our product.

Our product is primarily used as HCC for blast furnace steel producers.

High-quality HCC commands a significant price premium over other forms of coal because of its value in use in blast furnaces for steel production.

High-quality HCC is a

scarce commodity and has specific physical and chemical properties which are necessary for efficient blast furnace operation.

Alternative technologies are continually being investigated and developed with a view to reducing production costs or for other reasons, such as minimizing environmental or social impact.

Many of these alternative technologies are designed to use lower quality coals or other sources of carbon instead of higher cost high-quality HCC.

Substantially all of our revenues are derived from the sale of met coal.

This lack of diversification of our business could adversely affect our financial condition, results of operations and cash flows.

We rely on the met coal production from our two active met coal mines for substantially all of our revenues.

For the year ended December 31, 2020, revenues from the sale of met coal accounted for approximately 97.3% of our total revenues.

As noted above, demand for met coal depends on domestic and foreign steel demand.

At times, the pricing and availability of steel can be volatile due to numerous factors beyond our control.

Recently, the COVID-19 pandemic has adversely affected the economies and financial markets of many countries, including those of our customers, which are primarily located in Europe, South America and Asia.

Any resulting economic downturn could adversely affect demand for our met coal and contribute to volatile supply and demand conditions affecting prices and volumes.

In addition, the ability of our suppliers' and customers' employees to work may be significantly impacted by individuals contracting or being exposed to COVID-19, or as a result of control measures taken by us, other businesses and the government to curtail the spread of the virus, which may significantly affect the demand for met coal.

When steel prices are lower, the prices that we charge steelmaking customers for our met coal may decline, which could adversely affect our financial condition, results of operations and cash flows.

All of our mining operations are located in Alabama, making us vulnerable to risks associated with having our production concentrated in one geographic area.

All of our mining operations are geographically concentrated in Alabama.

As a result of this concentration, we may be disproportionately exposed to the impact of delays or interruptions in production caused by significant governmental regulation, transportation capacity constraints, constraints on the availability of required equipment, facilities, personnel or services, curtailment of production, extreme weather conditions, natural disasters, pandemics (such as COVID-19) or interruption of transportation or other events that impact Alabama or its surrounding areas.

Met coal mining involves many hazards and operating risks, and is dependent upon many factors and conditions beyond our control, which may cause our profitability and financial position to decline.

Specifically, underground mining and related processing activities present risks of injury to persons and damage to property and equipment.

In addition, met coal mining is dependent upon a number of conditions beyond our control that can disrupt operations and/or affect our costs and production schedules at particular mines.

These risks, hazards and conditions include, but are not limited to:

• variations in geological conditions, such as the thickness of the met coal seam and amount of rock embedded in the met coal deposit and variations in rock and other natural materials overlying the met coal deposit, that could affect the stability of the roof and the side walls of the mine;

• mining, process and equipment or mechanical failures, unexpected maintenance problems and delays in moving longwall equipment;

• the unavailability of raw materials, equipment (including heavy mobile equipment) or other critical supplies such as tires, explosives, fuel, lubricants and other consumables of the type, quantity and/or size needed to meet production expectations;

• adverse weather and natural disasters, such as heavy rains or snow, forest fires, flooding and other natural events, including seismic activities, ground failures, rock bursts or structural cave-ins or slides, affecting our operations or transportation to our customers;

• railroad delays or derailments;

• environmental hazards, such as subsidence and excess water ingress;

• delays and difficulties in acquiring, maintaining or renewing necessary permits or mining rights;

• availability of adequate skilled employees and other labor relations matters;

• security breaches or terroristic acts;

• unexpected mine accidents, including rock-falls and explosions caused by the ignition of met coal dust, natural gas or other explosive sources at our mine sites or fires caused by the spontaneous combustion of met coal or similar mining accidents;

• competition and/or conflicts with other natural resource extraction activities and production within our operating areas, such as natural gas extraction or oil and gas development;

• other hazards that could also result in personal injury and loss of life, pollution and suspension of operations.