Item 2. Properties
Item 2. Properties
We operate two underground mines based in Alabama, Mine No. 4 and Mine No. 7 and own property in Alabama for the development of the Blue Creek mine. Mine No 4. and Mine No. 7 are deep underground mines with a long history of operations as discussed in further detail below. Mine No. 4, Mine No. 7 and Blue Creek were considered material properties. Our mining operations also consist of other surface steelmaking and thermal coal mines, two of which are currently under lease to third parties and four of which are not operating.
Information concerning our mining properties in this Annual Report on Form 10-K has been prepared in accordance with the requirements of subpart 1300 of Regulation S-K, which first became applicable to us for the fiscal year ended December 31, 2021. These requirements differ significantly from the previously applicable disclosure requirements of SEC Industry Guide 7. Among other differences, subpart 1300 of Regulation S-K requires us to disclose our mineral resources, in addition to our mineral reserves, as of the end of the most recently completed fiscal year both in the aggregate and for each of our individually material mining properties.
As used in this Annual Report on Form 10-K, the terms "mineral resource," "measured mineral resource," "indicated mineral resource," "inferred mineral resource," "mineral reserve," "proven mineral reserve" and "probable mineral reserve" are defined and used in accordance with subpart 1300 of Regulation S-K. Under subpart 1300 of Regulation S-K, mineral resources may not be classified as "mineral reserves" unless the determination has been made by a qualified person that the mineral resources can be the basis of an economically viable project. As such, you are cautioned that, except for that portion of mineral resources classified as mineral reserves, mineral resources do not have demonstrated economic value. Likewise, you are cautioned not to assume that all or any part of measured and indicated mineral resources will ever be converted to mineral reserves.
Technical Report Summary
The information that follows relating to our individually material properties: Mine No. 4, Mine No. 7 and Blue Creek, is derived, for the most part, from, and in some instances is an extract from, the technical report summaries ("TRS") relating to such properties prepared in compliance with Item 601(b)(96) and subpart 1300 of Regulation S-K by Marshall Miller & Associates, Inc.. Portions of the following information are based on assumptions, qualifications and procedures that are not fully described herein. Reference should be made to the full text of the TRSs, incorporated herein by reference and made a part of this Annual Report on Form 10-K. With regard to Mine No. 7 and Mine No. 4, there have been no material changes in the mineral reserves or mineral resources from the TRSs filed for Mine No. 7 and Mine No. 4 as Exhibits 96.1 and 96.2, respectively, to the Amendment No. 1 on Form 19-K/A to the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “2023 Mine No. 7 and Mine No. 4 TRSs”). The Company is therefore not filing new TRSs for Mine No. 7 and Mine No. 4 in connection with this Annual Report and is incorporating the 2023 Mine No. 7 and Mine No. 4 TRSs herein by reference.
Overview and Highlights
As of December 31, 2023, and under the SEC's new rules governing mineral reserves, specifically subpart 1300 of Regulation S-K under the Modernization of Property Disclosures for Mining Registrants, we had estimated reserves totaling 159.1 million metric tons and estimated mineral resources exclusive of reserves of 39.7 million metric tons. Mine No. 4 and Mine No. 7, our two operating mines, had approximately 82.9 million metric tons of recoverable reserves and our undeveloped
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Blue Creek mine contained 67.6 million metric tons of recoverable reserves and 39.7 million metric tons of in-place mineral resources exclusive of reserves, which total 107.3 million metric tons.
The following map shows the major locations of our mining operations.
In addition to our underground and surface mines, we utilize a substantial amount of existing infrastructure which includes administration buildings, a central supply maintenance shop, a central supply warehouse, a training center, a central lab for coal quality testing, and a barge loading facility.
Our operations are located in Tuscaloosa County in central Alabama and our headquarters is in the town of Brookwood, Alabama. The nearest major population centers are Tuscaloosa, Alabama and Birmingham, Alabama. Infrastructure in the areas surrounding our operations are very diverse, well established and robust due to the large populations and current industrial activity in the surrounding metropolitan areas of Birmingham and Tuscaloosa. An international airport is located approximately 30 miles to the east of our operations. Access to all of our properties is via well maintained, paved, two-lane public roads with interstate access in close proximity. All of the primary infrastructure that our operations need to operate (power, water, transportation/roads) is available with reasonable access requirements. All of our operations receive power provided by Alabama Power Company. Our operations also are well serviced by major mining equipment manufacturers,
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rebuild facilities, and mine supply vendors. Specialized mining service providers including slope, shaft, and preparation plant construction companies are located in the immediate area.
The following table provides the production (in thousands of metric tons) for our operating mines for each of the three years ended December 31, 2023, 2022 and 2021:
Production
Location/Mine
2023 2022 2021
Alabama:
Warrior Met Coal Mining, LLC
No. 4 2,272 1,415 736
No. 7 4,664 4,314 4,349
Total Alabama 6,936 5,729 5,085
All mining operations are subject to federal and state laws and must obtain permits to operate mines, coal preparation and related facilities, haul roads, and other incidental surface disturbances necessary for mining to occur. Permits generally require that the permittee post a performance bond in an amount established by the regulatory program to provide assurance that any disturbance or liability created during mining operations is properly restored to an approved post-mining land use and that all regulations and requirements of the permits are fully satisfied before the bond is returned to the permittee. Significant penalties exist for any permittee who fails to meet the obligations of the permits including cessation of mining operations, which can lead to potential forfeiture of the bond. We have obtained all mining and discharge permits to operate our mines and processing loadout or related facilities. As of December 31, 2023, we had outstanding surety bonds with parties for post-mining reclamation at all of our mining operations totaling $44.3 million and $5.2 million for miscellaneous purposes.
A substantial amount of the coal that the Company mines is produced from mineral reserves leased from third-party landowners. These leases convey mining rights to the Company in exchange for royalties to be paid to the landowner as either a fixed amount per ton or as a percentage of the sales price. Although coal leases have varying renewal terms and conditions, they generally last for the economic life of the reserves. Coal royalty expense was $120.5 million, $138.9 million, and $65.4 million, for the years ended December 31, 2023, December 31, 2022, and December 31, 2021, respectively.
The following table provides the location and quality of our proven and probable mineral reserves as of December 31, 2023.
Summary of Mineral Reserves as of December 31, 2023 (1)
(in millions of metric tons) (2)
Mineral Reserves (3)(5)
Quality (Dry Basis)
Location/Mine
Status of Operation (4)
Proven (3)
Probable (3)
Reserves (3)
Owned
Leased
% Ash
% Sulfur
% VM
Alabama:
No. 4 Production 36.0 0.5 36.5 — 36.5 10.2 1 30
No. 7 Production 34.1 12.3 46.4 0.3 46.1 10.2 0.7 22
Blue Creek (6)
Development 43.3 24.3 67.6 11.3 49.2 10.0 0.7 32
Other (7)
Various 8.6 — 8.6 6.9 1.7 3.2 - 23.5 0.7 - 6.01 N/A
Total 122.0 37.1 159.1 18.5 133.5
Total Warrior Met Coal 122.0 37.1 159.1 18.5 133.5
(1) The price used and the time frame and point of reference used is discussed in the description of each mine below.
(2) 1 metric ton is equivalent to 1.102311 short tons.
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(3) Reserves are further categorized as Proven and Probable as defined by subpart 1300 of Regulation S-K under the Modernization of Property Disclosures for Mining Registrants. Proven reserves are reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling and (b) the sites of inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well-established. Probable reserves are reserves for which quantity and grade and/or quality are computed from information similar to that used for proven reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than for proven reserves, is high enough to assume continuity between points of observation. The range of steelmaking coal sales prices used to assess our Mine No. 4 reserves were based on 98 percent of the average of premium low-vol and mid-vol forecast through 2030 and was held constant beyond that date and varies between $152 to $187 per metric ton. The range of steelmaking coal sales prices used to assess our Mine No. 7 reserves were based on 98 percent of the premium low-vol forecast through 2030 and was held constant beyond that date and varies between $156 to $191 per metric ton. The range of steelmaking coal sales prices used to assess our Blue Creek reserves were based on the IHS High Volatile A price forecast through 2030 and was held constant beyond that date and varies between $172 to $206 per metric ton. The categories for proven and probable coal reserves are based on distances from valid points of measurement as determined by the qualified person for the area under consideration. Measured resources, which may convert to proven reserves, is based on a 0.25 mile radius from a valid point of observation. The distance between 0.25 and 0.75 of a mile radius was selected to define indicated resources. Inferred resources are commonly assumed to be located between 0.75 miles and 3 miles from a point of observation. The mineral reserves were estimated within an accuracy threshold of plus or minus 15 percent.
(4) The “Status of Operation” for each mine is classified as follows: Development - an established commercially mineable deposit (reserves) is being prepared for extraction but that is not yet in production. Production - the mine is actively operating. Various - consists of idle mines and mines that are actively operating under third party leases.
(5) See a description of the material mineral reserve estimates for each mine below. Coal reserve tons were estimated at a 10% moisture and represent the saleable product from the property. Our mineral reserves are controlled either through direct ownership of the property or through third-party leases. Third-party leases have initial terms extending up to 30 years and generally provide for terms or renewals through the anticipated life of the associated mine. These renewals are conditioned upon the payment of minimum royalties. Under current mining plans, Mine No. 4 and Mine No. 7 will be mined out within the period of existing leases or within the time period of probable lease renewal periods. All mineral reserves reported are either 100% owned or controlled through lease agreements.
(6) Total Blue Creek Mine reserve tonnage includes: 11.3 million owned, 49.2 million leased, and an additional 7.1 million with option to mine.
(7) Our other mines consist of other surface steelmaking and thermal coal mines, two of which are currently under lease to third parties and four of which are not operating. The proven and probable mineral reserves for these properties were prepared by McGehee Engineering Corporation.
The following table provides the location and quality of our measured, indicated and inferred mineral resources, exclusive of reserves, as of December 31, 2023.
Summary of Mineral Resources Exclusive of Reserves as of December 31, 2023 (1)
(in millions of metric tons) (2)
Demonstrated Coal Resources (in-place)
Quality (Dry Basis)
Location/Mine
Status of Operation (3)
Measured
Indicated
Measured + Indicated
Inferred
% Ash
% Sulfur
% VM
Alabama:
Blue Creek Development — 39.7 39.7 — 18.8 1.4 31
Total Alabama — 39.7 39.7 —
Total Warrior Met Coal — 39.7 39.7 —
(1) The price used and the time frame and point of reference used is discussed in the description of Blue Creek below.
(2) 1 metric ton is equivalent to 1.102311 short tons.
(3) The “Status of Operation” for each mine is classified as follows: Development - an established commercially mineable deposit (reserves) is being prepared for extraction but that is not yet in production.
Material Mining Properties
The information that follows relating to our individually material properties: Mine No. 4, Mine No. 7 and Blue Creek, is derived, for the most part, from, and in some instances is an extract from, the TRS relating to such properties prepared in compliance with Item 601(b)(96) and subpart 1300 of Regulation S-K by Marshall Miller and Associates, Inc.. Portions of the
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following information are based on assumptions, qualifications and procedures that are not fully described herein. Reference should be made to the full text of the TRSs, incorporated herein by reference and made a part of this Annual Report on Form 10-K.
The following table provides a comparison of our material proven and probable mineral reserves as of December 31, 2023 and December 31, 2022:
Summary of Material Mineral Reserves as of December 31, 2023 as compared to December 31, 2022
(in millions of metric tons) (1)
As of December 31, Change
Mine
2023 2022 Tons
%
No. 4
Material Reserves (2)
Proven (3)
36.0 38.7 (2.7) (7) %
Probable (3)
0.5 0.5 — — %
Reserves (2)
36.5 39.2 (2.7) (7) %
No. 7
Material Reserves (2)
Proven (3)
34.1 38.4 (4.3) (11) %
Probable (3)
12.3 11.3 1.0 9 %
Reserves (2)
46.4 49.7 (3.3) (7) %
Blue Creek
Material Reserves (2)
Proven (3)
43.3 42.8 0.5 1 %
Probable (3)
24.3 25.4 (1.1) (4) %
Reserves (2)
67.6 68.2 (0.6) (1) %
(1) 1 metric ton is equivalent to 1.102311 short tons.
(2) See a description of the material mineral reserve estimates for each mine below. Coal reserve tons were estimated at a 10% moisture and represent the saleable product from the property.
(3) Reserves are further categorized as Proven and Probable as defined by subpart 1300 of Regulation S-K under the Modernization of Property Disclosures for Mining Registrants. Proven reserves are reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling and (b) the sites of inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well-established. Probable reserves are reserves for which quantity and grade and/or quality are computed from information similar to that used for proven reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than for proven reserves, is high enough to assume continuity between points of observation.
The Mine No. 4 and Mine No. 7 change in proven and probable mineral reserves and quality is primarily attributable to production and incorporation of additional exploration drilling and associated coal quality data. The Blue Creek change in proven and probable mineral reserves is primarily due to results from additional exploration and changes in property control.
The following table provides a comparison of our material mineral resources exclusive of reserves as of December 31, 2023 and December 31, 2022:
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Summary of Material Mineral Resources as of December 31, 2023 as compared to December 31, 2022
(in millions of metric tons) (1)
As of December 31, Change
Mine
2023 2022 Tons
%
Blue Creek
Mineral Resources
Measured — — — — %
Indicated 39.7 39.2 0.5 1 %
Measured + Indicated 39.7 39.2 0.5 1 %
(1) 1 metric ton is equivalent to 1.102311 short tons.
The Blue Creek change in coal resources exclusive of reserves is primarily due to results from additional exploration and labratory testing.
Mine No. 4
Mine No. 4 was opened by Jim Walter Resources in 1974 and has been in operation since. In 2015, in connection with the chapter 11 filing by Walter Energy, Mine No. 4 was idled. Upon our acquisition of Mine No. 4 in April 2016, the mine began production. The property has been extensively explored as early as 1916 by subsurface drilling efforts carried out by numerous entities, the majority of which were completed prior to our acquisition of the assets including: by Tennessee Coal, Iron & Railroad Company, U.S. Steel, The Pittsburgh & Midway Coal Mining Company and Walter Energy, Inc. The majority
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of the drilling was accomplished by means of conventional core hole exploration and air rotary drilling with geophysical logging for coalbed methane wells.
The following shows the current property and facilities layout of Mine No 4.
Mine No 4 is located at approximately 87°19’32” latitude and 33°19’49”N longitude which is approximately 20 miles east of Tuscaloosa, Alabama and 30 miles southwest of Birmingham, Alabama. Access to Mine No. 4 is by State Route 59 ("Lock 17 Road"), a well maintained, paved, two-lane road with interstate access in close proximity to the south, and a short access road to the main entrance of the mine. All of the facilities are in close proximity to high quality, public roads and lie within 2 miles of each other. On site facilities include an administration building, maintenance shop, preparation plant and a stock yard. Mine No. 4 preparation plant services the mine via a skip system which transports extracted coal from an underground bunker to the surface facility. The Mine No. 4 preparation plant has a capacity to process 1,300 raw metric tons per hour.
Rail transportation for the mine sites is provided by CSX railroad and river transportation is available on the Black Warrior River. The rail line and Black Warrior River serves as the primary means of transportation of coal from the mine.
Mine No. 4 is a longwall operation that uses a longwall shearing machine for the extraction of coal at the production face. A chain conveyor is used to remove coal from the longwall face for discharge onto the conveyor belt which then ultimately delivers the coal to a skip system. Development for the longwall is conducted by the extraction of coal from the production faces using continuous miners and haulage using shuttle cars to a feeder-breaker located at the tail of the section conveyor belt. The feeder-breaker crushes large pieces of coal and rock and regulates coal feed onto the mine conveyor. Other
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supplemental equipment is used in the production, development and maintenance of the mine such as roof-bolting machines, battery scoops, personnel carriers, supply vehicles, belts, high-voltage cables, transformers, etc.
Mine No. 4 has had multiple improvements to the infrastructure by adding new portal facilities in 2019 and 2021. The Mine No. 4 North portal development was completed in 2023. These facilities have helped to decrease travel time to the active sections, as well as improving the safety of the miners by having shafts closer to the main work areas.
Currently the mine operates a single longwall with advanced features that improves horizon control, dust control, and the latest shield technology for partial automation. The mine routinely updates or rebuilds equipment and during this process, adds the latest safety or production features available. Mine No. 4 preparation plant has also routinely been upgraded with the latest technology. This preparation plant runs the most modern circuits, including an ultrafine coal recovery system. The preparation plant has had numerous upgrades since its original construction, which has helped it to continue to capture a higher percentage of coal with each upgrade. Mine No. 4 preparation plant most recently completed a new fine coal recovery system in 2020, to further improve overall plant recovery. The net book value of property, plant and equipment associated with Mine No. 4 as of December 31, 2023, was $213.8 million.
As of the filing of this annual report Mine No. 4 is currently active with three continuous mining sections and one longwall. Mine No. 4, inclusive of depleted mine works and future reserve areas, is composed of approximately 46,000 total acres. Of the 46,000 acres, approximately 7,200 are associated with future mining areas. Future mining areas include approximately 6,100 acres of leased mineral holdings and approximately 1,000 acres of uncontrolled mineral holdings. Our controlled reserves are either through direct ownership of the property or through third-party leases. Third-party leases have initial terms extending up to 30 years and generally provide for terms or renewals through the anticipated life of the associated mine. These renewals are conditioned upon the payment of minimum royalties. Under current mining plans, assigned reserves reported will be mined out within the period of existing leases or within the time period of probable lease renewal periods. All recoverable reserves reported are either 100% owned or controlled through lease agreements. There are no significant title encumbrances to the property.
Mine No. 7
Mine No. 7 was opened by Jim Walter Resources in 1974 and has been in operation since. In connection with the acquisition of certain assets of Walter Energy, we acquired the mineral rights for Mine No. 7 in April 2016. The property has been extensively explored as early as 1916 by subsurface drilling efforts carried out by numerous entities, the majority of which were completed prior to our acquisition of the assets including: U.S. Steel, Tennessee Coal, Iron & Railroad Company and Walter Energy, Inc. The majority of the drilling was accomplished by means of conventional core hole exploration and air rotary drilling with geophysical logging for coalbed methane wells.
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The following shows the current property and facilities layout of Mine No 7.
Mine 7 is located at approximately 87°14’46” latitude and 33°19’35”N longitude which is approximately 20 miles east of Tuscaloosa, Alabama and 30 miles southwest of Birmingham, Alabama. Access to Mine No. 7 is by Hannah Creek road, a well maintained, paved, two-lane road with interstate access in close proximity to the south via Lock 17 Road. All of the facilities are in close proximity to high quality, public roads. On site facilities include an administration building, maintenance shop, preparation plant and a stock yard. Mine No. 7 preparation plant services the mine via skip system which transports extracted coal from an underground bunker to the surface facility. Mine No. 7 also uses the No. 5 preparation plant via an
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overland conveyor. The Mine No. 7 preparation plant has a capacity to process 1,260 raw metric tons per hour and the Mine No. 5 preparation plant has the capacity to process 900 raw metric tons per hour.
Rail transportation for the mine sites is provided by CSX railroad and river transportation is available on the Black Warrior River. The rail line and Black Warrior River serve as the primary means of transportation of coal from the preparation plants.
Mine No. 7 is a longwall operation that uses a longwall shearing machine for the extraction of coal at the production face. A chain conveyor is used to remove coal from the longwall face for discharge onto the conveyor belt which then ultimately delivers the coal to a skip system. Development for the longwall is conducted by the extraction of coal from the production faces using continuous miners and haulage using shuttle cars to a feeder-breaker located at the tail of the section conveyor belt. The feeder-breaker crushes large pieces of coal and rock and regulates coal feed onto the mine conveyor. Other supplemental equipment is used in the production, development and maintenance of the mine such as roof-bolting machines, battery scoops, personnel carriers, supply vehicles, belts, high-voltage cables, transformers, etc.
Mine No. 7 has had multiple improvements to the infrastructure by adding new portal facilities in 2009 and 2018, among others. These facilities have helped to decrease travel time to the active sections, as well as improving the safety of the miners by having shafts closer to the main work areas. Currently the mine operates two longwalls with advanced features that improve horizon control, face alignment, dust controls, and the latest shield technology for partial automation. The mine routinely updates or rebuilds equipment and during this process, adds the latest safety or production features available.
Mine No. 7 and Mine No. 5 preparation plants also are routinely upgraded with the latest technology. These preparation plants run the most modern circuits, including ultrafine coal recovery systems. Both preparation plants have had numerous upgrades since their construction, which has helped them to continue to capture a higher percentage of coal with each upgrade. Mine No. 7 most recently completed a new fine coal recovery system, with another system also currently under construction, at the same plant, to further improve overall plant recovery. The net book value of property, plant and equipment associated with Mine No. 7 as of December 31, 2023, was $328.1 million.
As of the filing of this annual report Mine No. 7 is currently active with two longwall sections and six continuous mining sections. Mine No. 7, inclusive of depleted mine works and future reserve areas, is composed of approximately 43,000 total acres. Of the 43,000 acres, approximately 10,100 are associated with future mining areas. Future mining areas include approximately 10,000 acres of leased mineral holdings and approximately 100 acres of owned mineral holdings and 300 acres of uncontrolled mineral holdings. Our controlled reserves are either through direct ownership of the property or through third-party leases. Third-party leases have initial terms extending up to 30 years and generally provide for terms or renewals through the anticipated life of the associated mine. These renewals are conditioned upon the payment of minimum royalties. Under current mining plans, assigned reserves reported will be mined out within the period of existing leases or within the time period of probable lease renewal periods. All recoverable reserves reported are either 100% owned or controlled through lease agreements. There are no significant title encumbrances to the property.
Blue Creek
We believe that Blue Creek represents one of the few remaining untapped reserves of premium High Vol A steelmaking coal in the United States and that it has the potential to provide us with meaningful growth. We believe that the combination of a low production cost and the high quality of the High Vol A steelmaking coal mined from Blue Creek, assuming we achieve our expected price realizations, will generate some of the highest steelmaking coal margins in the U.S., generate strong investment returns for us and achieve a rapid payback of our investment across a range of steelmaking coal price environments.
Based on the current schedule, we expect the first development tons from continuous miner units to occur in the third quarter of 2024 with the longwall scheduled to start in the second quarter of 2026. We initially expected to invest approximately $650.0 to $700.0 million over five years to develop Blue Creek. These costs include, among others, costs to construct a preparation plant and coal handling facility, longwall and continuous miner equipment, belts and advancement material, outside facilities and related matters. Beyond the initial investment, additional capital will be required for sustaining production. This includes rebuilds and replacement of equipment, mine development and multiple bleeder, intake and return shafts.
More than a year after the relaunch of the Blue Creek mine development in May 2022, Warrior has initiated important and highly beneficial project scope changes that will require incremental capital expenditures over the life of the project while lowering operating costs, increasing flexibility to manage risks, and making better use of multi-channel transportation methods.
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Most of these scope changes are transportation and logistics-related, with additional amounts related to inflation for these changes only. These scope changes are expected to increase total capital expenditures for the Blue Creek mine by approximately $120 - $130 million over the remainder of the project development period.
While the Company originally planned on a single channel to transport coal from the Blue Creek mine via an overland belt to a third-party owned and operated barge loadout facility, it now plans to build a belt conveyor system to a railroad loadout to transport the majority of the coal. We expect this change to de-risk the single channel to market, lower operating cost and move volumes faster to the port. Warrior will also build and operate a barge loadout itself rather than utilizing a third-party provider. The Company believes that the potential economic benefits associated with these scope changes should provide Warrior with an inherently robust and cost competitive outbound logistics model that will provide additional flexibility to manage alternative transportation methods. The inclusion of the benefits and incremental capital expenditures relating to these specific scope changes did not have a material impact to the project economic metrics of net present value and internal rate of return.
In addition, the Company has experienced inflationary cost increases ranging from 25 to 35 percent in both operating expenses and capital expenditures for its existing mining operations since late 2021. The Company is also experiencing inflationary pressures at Blue Creek, especially in relation to labor, construction materials and certain equipment, that is expected to continue during the remainder of the project development period. As a number of key material contracts are currently being negotiated, and due to uncertainty regarding future inflation rates, the Company is not providing an estimate of the impact of inflation at this time. However, as the Company negotiates and enters into contracts for the larger project components, the Company expects that more information will become available to allow it to provide revised guidance. While cost inflation has impacted the cost of the project, these inflationary pressures are expected to be offset by an inflationary increase in the long-term price assumption for steelmaking coal.
The Blue Creek mine will be a similar operation to our currently active operations, Mine No. 4 and Mine No. 7. The net book value of property, plant and equipment associated with Blue Creek as of December 31, 2023, was $371.9 million.
The mine property is located approximately 87°26’35” latitude and 33°35’21”N longitude. Access to the Blue Creek property is by State Route 69, a well maintained, paved, two-lane road with interstate access in close proximity to both the north and south. The current mine plan allows for three continuous mining sections and a longwall unit to mine simultaneously through the initial stages of mine development. We believe we will have the ability to add a second longwall subsequent to finalization of development. The project includes surface facilities to be constructed at multiple locations in close proximity. Rail transportation for the proposed mine site is a major rail line and river transportation is available on the Black Warrior River.
We currently control approximately 28,200 total acres of mining rights associated with the Blue Creek project, approximately 85% of which is leased from various entities and individuals. We have plans to continue to acquire additional leases, which are primarily from private entities and individuals as well as federally owned coal via the Bureau of Land Management. Our controlled reserves are either through direct ownership of the property or through third-party leases. Third-party leases have initial terms extending up to 30 years and generally provide for terms or renewals through the anticipated life of the associated mine. These renewals are conditioned upon the payment of minimum royalties. Under current mining plans, assigned reserves reported will be mined out within the period of existing leases or within the time period of probable lease renewal periods. All recoverable reserves reported are either 100% owned or controlled through lease agreements. There are no significant title encumbrances to the property.
The Blue Creek property was formerly controlled by Jim Walter Resources, a subsidiary of Walter Energy. Walter Energy acquired the majority of its mineral rights for the Blue Creek property in 2010 through its purchase of Chevron Mining, Inc. In connection with the acquisition of certain assets of Walter Energy, Inc., we acquired the mineral rights for Blue Creek in April 2016. Since the acquisition, we have strategically purchased and leased mineral and surface rights to further assemble the project. The property has been extensively explored as early as 1957 by means of continuous coring and analytic testing, rotary drilling, ongoing drilling associated with coalbed methane production and by downhole geophysical logging methods. The property has been extensively explored by numerous entities, the majority of which were completed prior to our acquisition of the assets including: U.S. Steel, Tennessee Coal, Iron & Railroad Company, The Pittsburgh & Midway Coal Mining Company/Chevron and Walter Energy. We have performed ongoing exploration since acquiring the property and the data we have acquired is consistent with that of past drilling activities.
A life of mine plan was used by the TRS in developing the estimate of proven and probable reserves. The mine plan was generated based on previous mine plans, anticipated lease acquisitions, and operational criteria with modifications where necessary due to geologic mapping or other factors. Carlson Mining software was utilized to generate the life of mine plan.
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The range of steelmaking coal sales prices used to assess our reserves were based on IHS High Volatile A price forecast through 2030 and was held constant beyond that date and varies between $143 to $177 per metric ton. The categories for proven and probable coal reserves are based on distances from valid points of measurement as determined by the qualified person for the area under consideration. For the Blue Creek mine estimate, measured resources, which may convert to a proven reserve, is based on a 0.25 mile radius from a valid point of observation. The distance between 0.25 and 0.75 of a mile radius was selected to define indicated resources. Blue Creek mineral reserves were estimated within an accuracy threshold of plus or minus 15 percent.
Internal Controls and Material Assumptions
We maintain an internal staff of engineers and geoscience professionals who worked closely with our independent reserve engineers to ensure the integrity, accuracy and timeliness of the data used to calculate our estimated mineral reserves and resources. Our internal technical team members meet with our independent reserve engineers periodically to discuss the assumptions and methods used in the estimation process. We provide historical information to the independent reserve engineers for our properties, such as ownership interest, production, test data, commodity prices, coal quality and operating and development costs. The estimates of mineral reserves and resources may be materially affected if mining, quality, or infrastructure factors change from those currently anticipated.
These estimates are based on engineering, economic and geologic data, coal ownership information and current and proposed mine plans. Our proven and probable coal reserves are reported as mineral reserves, which is an estimate of tonnage and grade or quality of indicated and measured mineral resources that, in the opinion of the qualified person (as defined in the SEC rules), can be the basis of an economically viable project. More specifically, it is the economically mineable part of a measured or indicated mineral resource, which includes diluting materials and allowances for losses that may occur when the material is mined or extracted. These estimates are periodically updated to reflect past coal production, new drilling information and other geologic or mining data. Acquisitions or dispositions of coal properties will also change these estimates. Changes in mining methods may increase or decrease the recovery basis for a coal seam, as will changes in preparation plant processes.
Our reserve estimates are predicated on engineering, economic, and geological data assembled and analyzed by internal engineers, geologists and finance associates, as well as third-party consultants. We update our reserve estimates annually to reflect past coal production, new drilling information and other geological or mining data, and acquisitions or sales of coal properties.