What changed in this filing

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Item 1. Business

2022-03-02 compared with 2021-03-03 · 241 added, 501 removed, 422 unchanged (64% of the section changed)

NACCO Industries, Inc.

® (“NACCO” or the “Company”), through a portfolio of mining and natural resources businesses, operates under three business segments:

® (“NACCO” or the “Company”) brings natural resources to life by delivering aggregates, minerals, reliable fuels and environmental solutions through its robust portfolio of NACCO Natural Resources businesses.

The Company operates under three business segments:

Coal Mining, North American Mining ("NAMining") and Minerals Management.

The Coal Mining segment operates surface coal mines under long-term contracts with power generation companies and an activated carbon producer pursuant to a service-based business model.

The NAMining segment provides value-added contract mining and other services for producers of aggregates, lithium and other minerals.

The Minerals Management segment acquires and promotes the development of oil, gas and coal mineral interests, generating income primarily from royalty-based lease payments from third parties.

In addition, the Company has a business providing stream and wetland mitigation solutions.

The Company has items not directly attributable to a reportable segment which are not included as part of the measurement of segment operating profit, which are primarily administrative costs related to public company reporting requirements at the parent company and the financial results of Mitigation Resources of North America ® (“MRNA”) and Bellaire Corporation (“Bellaire”).

MRNA generates and sells stream and wetland mitigation credits (known as mitigation banking) and provides services to those engaged in permittee-responsible stream and wetland mitigation.

The Coal Mining segment operates surface coal mines for power generation companies and an activated carbon producer.

The NAMining segment is a trusted mining partner for producers of aggregates, lithium and other minerals.

The Minerals Management segment, which includes the Catapult Mineral Partners (“Catapult”) business, acquires and promotes the development of mineral interests.

In addition, Mitigation Resources of North America ® (“Mitigation Resources”) provides stream and wetland mitigation solutions.

The Company has items not directly attributable to a reportable segment that are not included as part of the measurement of segment operating profit, which primarily includes administrative costs related to public company reporting requirements at the parent company and the financial results of Mitigation Resources and Bellaire Corporation ("Bellaire").

Bellaire manages the Company’s long-term liabilities related to former Eastern U.S.

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NACCO was incorporated as a Delaware corporation in 1986 in connection with the formation of a holding company structure for a predecessor corporation organized in 1913.

The Company has continued to operate as an essential business during the COVID-19 pandemic because it supports critical infrastructure industries.

The extent to which COVID-19 impacts the Company going forward will depend on numerous factors and future developments that remain uncertain.

Business Strategy

The Company is leveraging its core mining and natural resources management skills to develop a strong and diverse portfolio of affiliated businesses operating in the mining and natural resources industries while maintaining a conservative capital structure.

Diversified strategic growth is the key to enhancing net income as well as increasing free cash flow available to continue to reinvest in and expand the businesses.

NAMining continues to expand the scope of its business development activities to grow and diversify by targeting geographically diverse customers who require a broad range of minerals and materials.

NAMining also continues to leverage the Company’s core mining skills to expand the range of contract mining services provided, in addition to providing comprehensive mining services to operate entire mines when appropriate, such as the long-term mining contract with Lithium Americas to provide mining services for its Thacker Pass lithium project in Nevada.

The Company’s efforts to grow and diversify the Minerals Management segment include acquiring additional mineral interests or similar investments in the energy industry.

Once mineral and royalty interests have been acquired, the Minerals Management segment will benefit from the continued development of its mineral properties without the need for investment of additional capital.

This business model can deliver higher average operating margins over the life of a reserve than traditional oil and gas companies that bear the cost of exploration, production and/or development.

MRNA creates and sells stream and wetland mitigation credits and provides services to those engaged in permittee-responsible mitigation.

This business offers opportunity for growth and diversification in an industry where the Company has substantial knowledge and expertise.

MRNA has achieved impressive initial growth and is positioned for additional growth.

One of the Company’s core strategies is to pursue activities which can provide resiliency to its existing coal mining

The Company works to drive down coal production costs and maximize efficiencies and operating capacity at mine locations to help customers with management fee contracts be more competitive.

During 2021, the Company launched a new branding campaign.

The new branding creates a unified identity and underscores NACCO’s commitment to all of its businesses, while focusing on the execution of its two key strategies – Protect the Core and Grow and Diversify.

NACCO’s portfolio of businesses now operates under the umbrella of NACCO Natural Resources.

The new branding provides each business with its own unique identity that can easily be linked back to the NACCO legacy brand and includes new websites for each business, including NACCO Natural Resources, new business-specific logos and a new tagline “Bringing Natural Resources to Life”.

The Company is pursuing growth and diversification by strategically leveraging its core mining and natural resources management skills to build a strong portfolio of affiliated businesses.

Management continues to be optimistic about the long-term outlook for growth in the NAMining and Minerals Management segments and in the Company's Mitigation Resources business.

Each of these businesses continues to expand its pipeline of potential new projects with opportunities for growth and diversification.

NAMining is pursuing growth and diversification by expanding the scope of its business development activities to include potential customers who require a broad range of minerals and materials and by leveraging the Company’s core mining skills to expand the range of contract mining services it provides.

The goal is to build NAMining into a leading provider of contract mining services for customers who produce a wide variety of minerals and materials.

The Company believes NAMining can grow to be a substantial contributor to operating profit, delivering unlevered after-tax returns on invested capital in the mid-teens as this business model matures and achieves significant scale, but the pace of achieving these objectives will be dependent on the mix and scale of new projects.

The Minerals Management segment continues to grow and diversify by selectively acquiring mineral and royalty interests in the United States, in a market and price environment that the Company believes remains well-aligned with its strategy and objectives.

The Minerals Management segment will benefit from the continued development of its mineral properties without additional capital investment, as all further development costs are borne entirely by third-party producers who lease the minerals.

The Company believes this business model can deliver substantial operating margins over the life of a reserve without the costs and risk that traditional oil and gas companies bear for the cost of exploration, production and/or development.

Catapult, the Company’s business unit focused on managing and expanding the Company’s portfolio of oil and gas mineral and royalty interests, has developed a strong network to source and secure new acquisitions, and has several potential acquisitions under review.

The goal is to construct a diversified portfolio of high-quality oil and gas mineral and royalty interests in the United States that deliver near-term cash flow yields and long-term projected growth.

The Company believes this business will provide unlevered after-tax returns on invested capital in the low-to-mid-teens as the portfolio of reserves and mineral interests grows and this business model matures.

Mitigation Resources continues to expand its business, which creates and sells stream and wetland mitigation credits and provides services to those engaged in permittee-responsible mitigation.

This business offers an opportunity for growth and diversification in an industry where the Company has substantial knowledge and expertise and a strong reputation.

The Mitigation Resources business has achieved several early successes and is positioned for additional growth.

The Company's

goal is to grow Mitigation Resources into one of the ten largest U.S.

providers of mitigation solutions, largely focused on streams and wetlands, initially in the southeast United States.

While this business is in the early stages of development, the Company believes that Mitigation Resources can provide solid rates of return as this business matures.

The Company also continues to pursue activities which can strengthen the resiliency of its existing coal mining operations.

The Company remains focused on managing coal production costs and maximizing efficiencies and operating capacity at mine locations to help customers with management fee contracts be more competitive.

These activities benefit both customers and the Company's Coal Mining segment, as fuel cost is a significant driver for power plant dispatch.

Increased power plant dispatch results in increased demand for coal by the Coal Mining segment's customers.

The Company evaluates opportunities to expand its coal mining business, but opportunities are few.

Low natural gas prices and growth in renewable energy sources, such as wind and solar, are likely to continue to unfavorably affect the amount of electricity dispatched from coal-fired power plants.

The political and regulatory environment is not receptive to development of new coal-fired power generation projects which would create opportunities to build and operate new coal mines.

However, the Company would consider opportunities where it can apply its management fee business model to assume operation of existing

surface coal mining operations in the United States.

Outright acquisitions of existing coal mines or mining companies with exposure to fluctuating coal commodity markets, or structures that would create significant leverage, are outside the Company’s area of focus.

Fluctuating natural gas prices and availability of renewable energy sources, such as wind and solar, affect the amount of electricity dispatched from coal-fired power plants.

Coal and natural gas traditionally have been the two largest sources of electricity generation in the United States.

In many areas of the country, these two fuels compete to supply electricity based on their relative costs.

natural gas prices have been more volatile than coal prices, so the cost of natural gas often determines the relative share of generation provided by natural gas and coal.

Between 2015 and 2020, the cost of natural gas delivered to electric generators remained relatively low and stable.

During 2021, however, natural gas prices were much higher than in recent years, generally resulting in increased dispatch of coal-fired power plants.

The Company continues to look for opportunities to expand its coal mining business where it can apply its management fee business model to assume operation of existing surface coal mining operations in the United States.

However, opportunities are very limited in the current environment.

In addition, the political and regulatory environment is not receptive to development of new coal-fired power generation projects which would create opportunities to build and operate new coal mines.

The Company is committed to maintaining a conservative capital structure as it continues to grow and diversify, while avoiding unnecessary risk.

Strategic diversification will generate cash that can be re-invested to strengthen and expand the businesses.

In all of its business endeavors, the Company continues to maintain the highest levels of customer service and operational excellence, with an unwavering focus on safety, environmental stewardship and people.

The Company is passionately committed to working hard, doing what’s right, and bringing America's natural resources to life.

Business Developments

During 2020, the Minerals Management segment acquired mineral interests for approximately 65.5 thousand gross acres and 1.2 thousand net royalty acres in the Permian Basin in Texas for a total purchase price of approximately $14.2 million.

The acquired interests align with the Company’s strategy of selectively acquiring mineral interests with a balance of near-term cash flow yields and long-term growth potential, in oil-rich basins offering diversification from the Company’s legacy mineral interests in predominately natural gas-rich basins.

The Sabine Mining Company (“Sabine”) operates the Sabine Mine in Texas.

All production from Sabine is delivered to Southwestern Electric Power Company's (“SWEPCO”) Henry W.

Pirkey Plant (the “Pirkey Plant”).

SWEPCO is an American Electric Power (“AEP”) company.

On November 5, 2020, AEP announced it intends to retire the Pirkey Plant in 2023 in order to comply with the U.S.

Environmental Protection Agency’s Coal Combustion Residuals rule.

The Sabine Mine delivered 1.9 million and 2.6 million tons to the Pirkey Plant in 2020 and 2019, respectively.

During 2020, SWEPCO reduced its expected future annual delivery requirements to be between 1.4 million and 1.7 million tons.

The Sabine Mine contributed $3.9 million and $4.6 million to NACCO’s Earnings from Unconsolidated Operations during 2020 and 2019, respectively.

Coal Mining Segment

Effective September 30, 2021, the contract mining agreement between Bisti Fuels Company, LLC (“Bisti”) and its customer, Navajo Transitional Energy Company ("NTEC") was terminated.

As required under the agreement, NTEC paid the Company a termination fee of $10.3 million.

As of October 1, 2021, NTEC assumed control and responsibility for operation and all reclamation of the Navajo Mine.

The Coteau Properties Company (“Coteau”) operates the Freedom Mine in North Dakota.

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Basin Electric utilizes the coal at the Great Plains Synfuels Plant (the “Synfuels Plant”), Antelope Valley Station and Leland Olds Station.

The Synfuels Plant is a coal gasification plant that manufactures synthetic natural gas and produces fertilizers, solvents, phenol, carbon dioxide, and other chemical products for sale.

On November 5, 2020, Basin Electric informed its employees and Coteau that it is considering changes that may result in modifications to its Synfuels Plant that could potentially reduce or eliminate coal requirements at the Synfuels Plant beginning in 2026.

The Synfuels Plant is a coal gasification plant, owned by Dakota Gasification Company (“Dakota Gas’), a subsidiary of Basin Electric, that manufactures synthetic natural gas and produces fertilizers, solvents, phenol, carbon dioxide, and other chemical products for sale.

During 2020, Basin Electric informed Coteau that it is considering changes that may result in modifications to its Synfuels Plant that could potentially reduce or eliminate coal requirements at the Synfuels Plant.

During August 2021, Bakken Energy (“Bakken”) and Basin Electric signed a non-binding term sheet to transfer ownership of the assets of Dakota Gas to Bakken.

Bakken stated the closing date is expected to be April 1, 2023.

As part of the term sheet between Basin Electric and Bakken, Basin Electric indicated that the Synfuels Plant will continue existing operations through 2025.

The closing is subject to the satisfaction of specified conditions.

Basin Electric is also considering other options for the Synfuels Plant if the transaction with Bakken does not close.

Basin Electric indicated that if it decides to proceed with any changes that could reduce or eliminate the use of coal, the feedstock change is not expected to occur before 2026.

As a result, coal deliveries to the Synfuels Plant are expected to continue until at least 2026.

On September 30, 2020, Caddo Creek Resources Company, LLC's (“Caddo Creek's”) customer, a division of Cabot Corporation, entered into a long-term supply agreement with a subsidiary of Advanced Emissions Solutions (“AES”) as well as an agreement for the sale of the Marshall Mine, operated by Caddo Creek, to a subsidiary of AES.

AES announced its intent to close the Marshall Mine.

The Falkirk Mining Company ("Falkirk") operates the Falkirk Mine in North Dakota.

Falkirk is the sole supplier of lignite coal to the Coal Creek Station power plant pursuant to a contract under which Falkirk also supplies approximately 0.3 million tons of lignite coal per year to Spiritwood Station power plant.

Coal Creek Station and Spiritwood Station are owned by Great River Energy (“GRE”).

In May 2020, GRE announced its intent to sell or retire Coal Creek Station and modify Spiritwood Station to be fueled by natural gas.

During June 2021, GRE entered into an agreement to sell Coal Creek Station and the adjacent high-voltage direct current transmission line to Bismarck, North Dakota-based Rainbow Energy Center, LLC (“Rainbow Energy”) and its affiliates.

closing of this sale is subject to the satisfaction of certain conditions and presently, the transaction is expected to close in the second quarter of 2022.

Upon completion of the sale of Coal Creek Station, the existing Coal Sales Agreement, the existing Mortgage and Security Agreement and the existing Option Agreement between GRE and Falkirk will terminate.

Falkirk and GRE have entered into a termination and release of claims agreement.

Upon completion of the sale of Coal Creek Station, GRE will pay Falkirk $14.0 million in cash, as well as transfer ownership of an office building located in Bismarck, North Dakota, and convey membership units in Midwest AgEnergy to The North American Coal Corporation® (“NACoal”), a wholly-owned subsidiary of NACCO.

NACCO currently holds a $5.0 million investment in Midwest AgEnergy, which operates two ethanol facilities in North Dakota.

If GRE's efforts to sell the power plant are successful, a new Coal Sales Agreement (“CSA”) between Falkirk and Rainbow Energy will become effective and Falkirk will supply all coal requirements of Coal Creek Station concurrent with Rainbow Energy’s acquisition of the power plant.

Falkirk will no longer make any coal deliveries to GRE’s Spiritwood Station.

Falkirk will be paid a management fee and Rainbow Energy will be responsible for funding all mine operating costs and directly or indirectly providing all of the capital required to operate the mine.

The CSA specifies that Falkirk will perform final mine reclamation, which will be funded in its entirety by Rainbow Energy.

The initial production period is expected to run ten years from the effective date of the CSA, but the CSA may be extended or terminated early under certain circumstances.

If Rainbow Energy terminates the CSA and closes Coal Creek Station before 2027, Falkirk will be entitled to an additional payment from GRE under the terms of the termination and release of claims agreement.

The additional payment amount ranges from $8 million if the closure occurs before 2024 to $2 million if the closure occurs in 2026.

To support the transfer to new ownership, Falkirk has agreed to a reduction in the current per ton management fee from the effective date of the new CSA through May 31, 2024.

After May 31, 2024, the per ton management fee increases to a higher base in line with current fee levels, and thereafter adjusts annually according to an index which tracks broad measures of U.S.

If GRE’s efforts to sell the power plant are not successful and GRE elects to prematurely close Coal Creek Station, the early termination of the CSA would have a material adverse effect on the Company's business, financial condition and results of operations.

The Sabine Mining Company (“Sabine”) operates the Sabine Mine in Texas.

All production from Sabine is delivered to Southwestern Electric Power Company's (“SWEPCO”) Henry W.

Pirkey Plant (the “Pirkey Plant”).

SWEPCO is an American Electric Power (“AEP”) company.

During 2020, AEP announced its intent to retire the Pirkey Plant in 2023.

SWEPCO expects deliveries from Sabine to continue until the first quarter of 2023 at which time Sabine expects to begin final reclamation.

Funding for mine reclamation is the responsibility of SWEPCO.

During 2020, Caddo Creek Resources Company, LLC (“Caddo Creek”) ceased all mining and delivery of lignite and commenced mine reclamation.

Funding for mine reclamation is the responsibility of a subsidiary of Advanced Emissions Solutions (“AES”).

Caddo Creek entered into a contract with a subsidiary of AES to perform the required mine reclamation.

The Marshall Mine delivered 0.1 million and 0.2 million tons during 2020 and 2019, respectively.

The contract mining agreement between Camino Real Fuels, LLC (“Camino Real”) and its customer, Dos Republicas Coal Partnership (“DRCP”), terminated effective July 1, 2020 as a result of the unexpected termination by Comisión Federal de Electricidad (“CFE”) of its coal supply contract with an affiliate of DRCP.

The termination of the contract between CFE and DRCP eliminated DRCP’s need for coal from Camino Real's Eagle Pass Mine, and resulted in mine closure.

Mine reclamation is the responsibility of DRCP.

Camino Real has no legal obligation to perform mine reclamation.

The Eagle Pass Mine delivered 0.3 million and 1.6 million tons during 2020 and 2019, respectively.

On May 7, 2020, Great River Energy ("GRE"), Falkirk Mine's customer, announced its intent to retire the Coal Creek Station power plant in the second half of 2022 and modify the Spiritwood Station power plant to be fueled by natural gas.

As noted in the announcement, GRE is willing to consider opportunities to sell Coal Creek Station.

Falkirk Mine is the sole supplier of lignite coal to Coal Creek Station pursuant to a long-term contract under which Falkirk also supplies approximately 0.3 million tons of lignite coal per year to Spiritwood Station.

Falkirk delivered a total of 7.2 million and 7.4 million tons of lignite coal and contributed $16.1 million and $15.9 million to NACCO’s Earnings from Unconsolidated Operations during 2020 and 2019, respectively.

In 2019, NAMining, through a new subsidiary, Sawtooth Mining, entered into a mining agreement to serve as exclusive contract miner for the Thacker Pass lithium project in northern Nevada.

The Thacker Pass Project is 100% owned by Lithium Nevada Corp, a subsidiary of Lithium Americas Corp.

Lithium Nevada plans to develop a lithium production facility near what is believed to be the largest known lithium deposit in the United States.

Sawtooth Mining will provide comprehensive mining services similar to the Company's typical scope of work in the Coal Mining segment.

The mining agreement provides that

Lithium Nevada will reimburse Sawtooth Mining for its operating and mine reclamation costs, and pay Sawtooth Mining a management fee per metric ton of lithium delivered during the 20-year contract term commencing with receipt of construction and operating permits by Lithium Nevada.

The reclamation at Caddo Creek is expected to be substantially complete during the first half of 2022.

During 2020, the contract mining agreement between Camino Real Fuels, LLC (“Camino Real”) and its customer, Dos Republicas Coal Partnership (“DRCP”), terminated and resulted in mine closure.

Funding for mine reclamation is the responsibility of DRCP.

NAMining Segment

In the third quarter of 2021, NAMining entered into contracts with a new customer to perform all mining operations at two sand and gravel quarries located in Texas and Arkansas.

The initial term of each contract is two years, and one of the contracts automatically extends an additional two years provided NAMining is not in default under that contract.

In the second quarter of 2021, NAMining entered into a one-year mining services contract with an existing customer for a sand and gravel quarry in Indiana.

In the first quarter of 2021, NAMining entered into a 15-year mining services contract with a new customer at a limestone quarry in Central Florida.

NAMining will operate two smaller draglines at this quarry while it relocates and commissions a larger dragline that will increase production capacity.

The relocated dragline is anticipated to be commissioned in the second half of 2022.

During 2021, NAMining also amended a contract with a current customer to provide additional services at a limestone quarry in Florida.

In addition, NAMining will serve as exclusive contract miner for the Thacker Pass lithium project in northern Nevada.

Thacker Pass is owned by Lithium Nevada Corp., a subsidiary of Lithium Americas Corp.

Lithium Americas Corp.

owns the lithium reserves at Thacker Pass and will be responsible for the processing and sale of the lithium

At maturity, the Thacker Pass management fee contract is expected to deliver fee income similar to a mid-sized management fee coal mine.

Minerals Management Segment

During 2021 and 2020, the Minerals Management segment acquired additional mineral interests, primarily in the Eagle Ford and Permian Basins in Texas.

During the second quarter of 2021, the Minerals Management segment, through its Catapult business, acquired a combination of mineral and overriding royalty interests in the Eagle Ford Basin, which includes approximately 14.1 thousand gross acres and 1.7 thousand net royalty acres, for an initial payment of $4.7 million.

Under the terms of the transaction, Catapult could make additional payments for each additional well developed on the acquired assets during 2022 of up to a maximum of $0.6 million.

Catapult also completed a small acquisition of royalty interests in the Delaware Basin during 2021 for a purchase price of $0.3 million.

Minerals Management intends to continue to make future acquisitions of mineral and royalty interests that meet the Company’s acquisition criteria as part of its growth strategy.

Coal Mining Segment

The Coal Mining segment, operating as North American Coal Corporation ® ("NACoal"), operates surface coal mines under long-term contracts with power generation companies and an activated carbon producer pursuant to a service-based business model.

Coal is surface-mined in North Dakota, Texas, Mississippi, Louisiana and on the Navajo Nation in New Mexico.

The Coal Mining segment, NACoal, operates surface coal mines under long-term contracts with power generation companies and an activated carbon producer pursuant to a service-based business model.

Coal is surface mined in North Dakota, Texas, Mississippi and Louisiana.

Through September 30, 2021, the Company provided contract mining services on the Navajo Nation in New Mexico.

Each mine is fully integrated with its customer's operations.

During 2021, the Company's operating coal mines were:

Bisti Fuels Company, LLC (“Bisti”), Caddo Creek, Camino Real, Coteau, Coyote Creek Mining Company, LLC (“Coyote Creek”), Demery Resources Company, LLC (“Demery”), Falkirk, Mississippi Lignite Mining Company (“MLMC”) and Sabine.

Bisti, Coteau, Coyote Creek Mining Company, LLC (“Coyote Creek”), Demery Resources Company, LLC (“Demery”), Falkirk, Mississippi Lignite Mining Company (“MLMC”) and Sabine.

Coteau, Coyote, Falkirk, MLMC and Sabine supply lignite coal for power generation.

Bisti supplies sub-bituminous coal for power generation.

Demery supplies lignite coal for the production of activated carbon.

Each of these mines deliver their coal production to adjacent or nearby power plants, synfuels plants or an activated carbon processing facility under long-term supply contracts.

Demery supplies lignite coal for the production of activated carbon products.

Each mine is the exclusive supplier of coal to its customers' facilities.

MLMC’s coal supply contract contains a take or pay provision;

all other coal supply contracts are requirements contracts under which earnings can fluctuate.

In addition, certain coal supply contracts can be terminated early, which would result in a reduction to future earnings.

Each of these mines delivers its coal production to adjacent or nearby power plants, synfuels plants or an activated carbon processing facility under long-term supply contracts.

MLMC’s lignite sales agreement contains a minimum annual take provision;

all other coal supply contracts are requirements contracts under which earnings can fluctuate based on customer requirements.

Certain coal supply contracts can be terminated early, which would result in a reduction to future earnings.

At all operating coal mines other than MLMC, the Company is paid a management fee per ton of coal or heating unit (MMBtu) delivered.

Each contract specifies the indices and mechanics by which fees change over time, generally in line with broad measures of U.S.

The customers are responsible for funding all mine operating costs, including final mine reclamation, and directly or indirectly providing all of the capital required to build and operate the mine.

This contract structure eliminates exposure to spot coal market price fluctuations while providing cash flow with minimal capital investment.

The customers are responsible for funding all mine operating costs, including final mine reclamation, and directly or indirectly provide all of the capital required to build and operate the mine.

This contract structure eliminates the Company's exposure to spot coal market price fluctuations while providing income and cash flow with minimal capital investment.

Other than at Coyote Creek, debt financing provided by or supported by the customers is without recourse to NACCO and NACoal.

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See Note 17 to the Consolidated Financial Statements in this Form 10-K for further information on the Unconsolidated Subsidiaries.

The Company performs contemporaneous reclamation activities at each mine in the normal course of operations.

Under all of the Unconsolidated Subsidiaries’ contracts, the customer has the obligation to fund final mine reclamation activities.

Under certain contracts, the Unconsolidated Subsidiary holds the mine permit and is therefore responsible for final mine reclamation activities.

To the extent the Unconsolidated Subsidiary performs such final reclamation, it is compensated for providing those services in addition to receiving reimbursement from customers for costs incurred.

Caddo Creek met the definition of a VIE prior to the cessation of mining on September 30, 2020.

The terms of the contract to perform mine reclamation contain a fixed-price component and therefore, Caddo Creek has been consolidated within the Company's financial statements since October 1, 2020.

The MLMC contract is the only operating coal contract in which the Company is responsible for all operating costs, capital requirements and final mine reclamation;

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Profitability at MLMC is affected by customer demand for coal and changes in the indices that determine sales price and actual costs incurred.

As diesel fuel is heavily weighted among the indices used to determine the coal sales price, the persistence of low diesel fuel prices can negatively affect earnings at MLMC.

As diesel fuel is heavily weighted among the indices used to determine the coal sales price, fluctuations in diesel fuel prices can result in significant fluctuations in earnings at MLMC.

MLMC delivers coal to the Red Hills Power Plant in Ackerman, Mississippi.

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The decision of which power plants to dispatch is determined by TVA.

The coal reserves at Coteau, Falkirk, Coyote, MLMC and Centennial Natural Resources ("Centennial") are owned or controlled by the Company.

The coal reserves at all other mines are owned or controlled by the respective mine’s customer.

Total coal reserves approximate 1.9 billion tons (including the unconsolidated coal mining subsidiaries), with approximately 0.7 billion tons committed to customers pursuant to long-term contracts.

The Company performs contemporaneous reclamation activities at each mine in the normal course of operations.

Under all of the Unconsolidated Subsidiaries’ contracts, the customer has the obligation to fund final mine reclamation activities.

certain contracts, the Unconsolidated Subsidiary holds the mine permit and is therefore responsible for final mine reclamation activities.

To the extent the Unconsolidated Subsidiary performs such final reclamation, it is compensated for providing those services in addition to receiving reimbursement from customers for costs incurred.

Reduction in dispatch of the Red Hills Power Plant will result in reduced coal deliveries and earnings at MLMC.

Properties" on page 31 in this Form 10-K for discussion of the Company's mineral resources and mineral reserves.

NAMining Segment

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materials handling and processing, product sales and distribution.

NAMining operates primarily at limestone quarries in Florida, but is focused on expanding outside of Florida and into mining materials other than limestone.

In addition, NAMining will serve as exclusive contract miner for the Thacker Pass lithium project in northern Nevada.

NAMining historically operated primarily at limestone quarries in Florida, but is focused on expanding outside of Florida, mining materials other than limestone and expanding the scope of mining operations provided to its customers.

As of December 31, 2021, NAMining operates mines in Florida, Texas, Arkansas and Indiana and will serve as exclusive contract miner for the Thacker Pass lithium project in northern Nevada.

NAMining utilizes both fixed price and management fee contract structures.

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The Minerals Management segment derives income primarily by leasing its royalty and mineral interests to third-party exploration and production companies, and, to a lesser extent, other mining companies, granting them the rights to explore, develop, mine, produce, market and sell gas, oil, and coal in exchange for royalty payments based on the lessees' sales of those minerals.

During 2020, the Minerals Management segment acquired mineral interests in the Permian Basin in Texas and intends to make future acquisitions of mineral and royalty interests that meet the Company’s acquisition criteria as part of its growth strategy.

The acquisition criteria includes building a blended portfolio of mineral and royalty interests (i) with new wells anticipated to come online within one to two years of investment, (ii) in areas with forecasted future development within five years after acquisition, or (iii) with existing producing wells further along the decline curve that will generate stable cash flow.

In addition, acquisitions should extend the geographic footprint to diversify across multiple basins with a preliminary focus on the more oil-rich Permian and Williston basins and a secondary focus on other diversifying basins to increase regional exposure.

The acquisition criteria for building a blended portfolio of mineral and royalty interests includes (i) new wells anticipated to come online within one to two years of investment, (ii) areas with forecasted future development within five years after acquisition, or (iii) existing producing wells further along the decline curve that will generate stable cash flow.

In addition, acquisitions should extend the geographic footprint to diversify across multiple basins with a preliminary focus on the more oil-rich Permian basin and a secondary focus on other diversifying basins to increase regional exposure.

While the current focus is on the acquisition of mineral and royalty interests, the Company would also consider investments in overriding royalty interests, non-participating royalty interests or non-operated working interests under certain circumstances.

The current acquisition strategy does not contemplate any near-term working interest investments in which the Company would act as the operator.

Total consideration for the 2020 acquisitions of mineral and royalty interests was $14.2 million, of which $12.0 million closed in December 2020, $2.0 million closed in November 2020 and $0.2 million closed in August 2020.

Total consideration for the 2021 and 2020 acquisitions of mineral and royalty interests was $5.3 million and $14.2 million, respectively.

The 2021 acquisitions include 20.6 thousand gross acres and 1.8 thousand net royalty acres.

The Company did not acquire any mineral interests in 2019.

Including the 2020 acquisitions, total mineral and royalty interests include approximately 109.2 thousand gross acres and 58.1 thousand net royalty acres.

The Company’s legacy royalty and mineral interests are located in Ohio (Utica and Marcellus shale natural gas), Louisiana (Haynesville shale and Cotton Valley formation natural gas), Texas (Cotton Valley and Austin Chalk formation natural gas), Mississippi (coal), Pennsylvania (coal, coalbed methane and Marcellus shale natural gas), Alabama (coal, coalbed methane and natural gas) and North Dakota (coal, oil and natural gas).

The 2020 acquisitions include 65.5 thousand gross acres and 1.2 thousand net royalty acres.

Total mineral and royalty interests include approximately 127.8 thousand gross acres and 59.9 thousand net royalty acres at December 31, 2021.

Mississippi (coal), Pennsylvania (coal, coalbed methane and Marcellus shale natural gas), Alabama (coal, coalbed methane and natural gas) and North Dakota (coal, oil and natural gas).

The majority of the Company’s legacy reserves were acquired as part of its historical coal mining operations.

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Typically, the resulting royalty interest is a cost-free percentage of production revenues for minerals extracted from the acreage.

Holders of royalty interests are generally not responsible for capital expenditures or lease operating expenses, but may be responsible for certain post-production expenses, and typically have no environmental liability.

A holder of royalty interests is generally not responsible for capital expenditures or lease operating expenses, but may be responsible for certain post-production expenses, and typically have no environmental liability.

Royalty interests expire upon the expiration of the oil and gas lease.

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The Minerals Management segment does not have any investments under which it would be required to bear the cost of exploration, production or development.

As an owner of royalty and mineral interests, the Company’s access to information concerning activity and operations of its royalty and mineral interests is limited.

The Company does not have information that would be available to a company with oil and natural gas operations because detailed information is not generally available to owners of royalty and mineral interests.

Consequently, the exact number of wells producing from or drilling on the Company’s mineral interests at a given point in time is not determinable.

The following table sets forth information about Company’s best estimate of the number of gross and net productive wells as of December 31, 2020:

Natural Gas 408 26.5

Total 687 26.7

Gross wells are the total wells in which an interest is owned.

Net wells are the sum of the fractional interest owned in gross wells.

The majority of the Company’s producing mineral and royalty interest acreage is, or in the future, can be pooled with third-party acreage to form pooled units.

Pooling proportionately reduces the Company’s royalty interest in wells drilled in a pooled unit, and it proportionately increases the number of wells in which the Company has such reduced royalty interest.

Properties" on page 31 in this Form 10-K for discussion of the Company's proved reserves.

The principal customers of the Coal Mining segment are electric utilities, an independent power provider and a producer of activated carbon.

The principal customers of the NAMining segment are limestone producers.

The principal customers of the NAMining segment are limestone producers and to a lesser extent, sand and gravel producers.

In addition, NAMining will serve as exclusive contract miner for the Thacker Pass lithium project in northern Nevada.

The Minerals Management segment generates income primarily from royalty-based lease payments from oil, gas and to a lesser extent, coal producers.

The pricing of oil, gas and coal sales is primarily determined by supply and demand in the marketplace

and can fluctuate considerably.

The pricing of oil, gas and coal sales is primarily determined by supply and demand in the marketplace and can fluctuate considerably.

As a royalty owner and non-operator, the Company has limited access to timely information, involvement, and operational control over the volumes of oil, gas and coal produced and sold and the terms and conditions on which such volumes are marketed and sold.

In 2020, two customers individually accounted for more than 10% of consolidated revenue.

In 2019, two customers and an oil and gas lessee individually accounted for more than 10% of consolidated revenue.

The following represents the revenue attributable to each of these entities as a percentage of consolidated revenue for those years:

Percentage of Consolidated Revenue

In 2021 and 2020, two customers individually accounted for more than 10% of consolidated revenues.

The following represents the revenue attributable to each of these entities as a percentage of consolidated revenues for those years:

Percentage of Consolidated Revenues

Segment 2021 2020

1 unchanged sentence

NAMining customer 19 % 19 %

Minerals Management lessee less than 10% 12 %

The loss of either of these customers or the lessee could have a material adverse effect on the results of operations attributable to the applicable segment and on the Company's consolidated results of operations.

The loss of either of these customers could have a material adverse effect on the results of operations attributable to the applicable segment and on the Company's consolidated results of operations.

In addition to the customers listed above, the Company has certain subsidiaries that meet the definition of a VIE;

2 unchanged sentences

For the year ended December 31, 2021, the Coal Mining segment derived approximately 68% of the Earnings of Unconsolidated Operations from two customers, Basin Electric and GRE.

GRE announced its intent to close Coal Creek station in 2022.

The loss of either of these contracts could have a material adverse effect on the Earnings of Unconsolidated Operations of the Coal Mining segment and a material adverse effect on the Company's Consolidated Statements of Operations.

4 unchanged sentences

In addition, it competes with subsidized sources of energy, primarily wind and solar.

Among the factors that affect competition are the price and availability of oil and natural gas, environmental and related political considerations, the time and expenditures required to develop new energy sources, the cost of transportation, the cost of compliance with governmental regulations, the impact of federal and state energy policies, the impact of subsidies on renewable pricing and the Company's customers' dispatch decisions, which may take into account carbon dioxide emissions.

The ability of the Coal Mining segment to maintain comparable levels of coal production at existing facilities and to market and develop its reserves will depend upon the interaction of these factors.

Electricity generating units are chosen to run primarily based on operating costs, of which fuel costs account for the largest share.

Sustained low natural gas prices have resulted in an increase in electricity generated from natural gas leading to a decline in the use of coal-fired capacity in the United States.

Natural gas-fired power plants have the most potential to continue to displace coal-fired electric baseload power generation in the near term.

There also continues to be an increase in the amount of electricity generated by wind and solar.

As an example, the Company estimates wind capacity in North Dakota has increased over 60% since 2015 to approximately 3,600 megawatts and wind developers have expressed an interest in building more than 3,000 megawatts of additional wind generation in North Dakota over the next several years.

Fluctuations in natural gas prices and the availability of renewable generation, particularly wind, can contribute to changes in power plant dispatch and customer demand for coal.

The significant increase in natural gas prices in 2021 compared to natural gas prices in 2020 contributed to an increase in customer power plant dispatch and coal deliveries in 2021.

Sustained higher natural gas prices could lead to increased demand for coal and positively affect Coal Mining segment results.

Over the longer term, the Company continues to believe that customer demand will remain pressured by continuing increases in subsidized renewable generation sources, particularly wind.

Federal and state mandates for increased use of electricity derived from renewable energy sources have also negatively affected demand for coal.

1 unchanged sentence

The Taxpayer Certainty and Disaster Tax Relief Act of 2020 extended the production tax credit (“PTC”) under Section 45 of the Internal Revenue Code and the investment tax credit (“ITC”) under Section 48 of the Code.

The PTC for wind was extended at the current phase-out level (60% of the otherwise allowable credits) for facilities where construction begins in 2021.

The PTC for wind was extended at the current phase-out level (60% of the otherwise allowable credits) for facilities where construction began in 2021.

The ITC for solar was extended at 26% for energy property where construction begins in 2021-2022 and at 22% where construction begins in 2023-2025.

Solar energy property placed in service after December 31, 2025 receives only a 10% ITC.

Certain of the Coal Mining segment's customers continue to invest in efficiency and environmental upgrades to their facilities.

Because the Coal Mining segment's customers’ power plants are competitive suppliers of electricity in their respective dispatch

areas relative to other coal-fired generating units in those dispatch areas, the Company considers its surface coal mining operations to be well positioned relative to most other mines servicing coal-fired generating units.

Based on industry information, the Company believes it was one of the five largest coal producers in the U.S.

Solar energy property placed in service after December 31, 2025 will receive a 10% ITC.

Environmental, social and governance considerations can also have an impact on power plant dispatch and demand for coal.

Based on industry information, the Company believes it was one of the ten largest coal producers in the U.S.

in 2021 based on total coal tons produced.

NAMining faces competition from aggregates producers which choose to self-perform mining operations and from other mining companies.

NAMining faces competition from producers of aggregates, lithium or other minerals that choose to self-perform mining operations and from other mining companies.

In the Minerals Management segment, the oil and gas industry is intensely competitive;

the Company primarily competes with companies and investors for the acquisition of oil and gas properties, some of which have greater resources and who may be able to pay more for productive oil and natural gas properties or to define, evaluate, bid for and purchase a greater number of properties than the Company’s financial or human resources permit.

the Company primarily competes with companies and investors for the acquisition of oil and gas properties, some of which have greater resources and may be able to pay more for productive oil and natural gas properties or to define, evaluate, bid for and purchase a greater number of properties than the Company’s financial resources permit.

Additionally, many of the Minerals Management segment's competitors are, or are affiliated with, operators that engage in the exploration and production of their oil and gas properties, which allows them to acquire larger assets that include operated properties.

2 unchanged sentences

The Minerals Management segment’s ability to acquire additional properties in the future will be dependent upon its ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment.

In addition, because the Company has fewer financial and human resources than many companies in the oil and gas industry, the Company may be at a disadvantage in bidding for oil and natural gas properties.

In addition, because the Company has fewer financial resources than many companies in the oil and gas industry, the Company may be at a disadvantage in bidding for oil and natural gas properties.

The Company has experienced limited variability in its results due to the effect of seasonality;

2 unchanged sentences

The NAMining segment extracts a significant amount of the annual limestone produced in Florida.

The Florida construction industry can be affected by the cyclicality of the economy, seasonal weather conditions and pandemics, all of which can result in variations in limestone demand.

The Florida construction industry can be affected by the cyclicality of the economy, seasonal weather conditions and pandemics, all of which can result in variations in demand for aggregates.

In the Minerals Management segment, oil and natural gas wells have high initial production rates and follow a natural decline before settling into relatively stable, long-term production.

Decline rates can vary due to factors like well depth, well length, formation pressure, and facility design.

Decline rates can vary due to factors like well depth, well length, geology, formation pressure, and facility design.

In addition to the natural production decline curve, royalty income can fluctuate favorably or unfavorably in response to a number of factors outside of the Company's control, including the number of wells being operated by third parties, fluctuations in commodity prices (primarily oil and natural gas), fluctuations in production rates associated with operator decisions, regulatory risks, the Company's lessees' willingness and ability to incur well-development and other operating costs, and changes in the availability and continuing development of infrastructure.

Human Capital

As of December 31, 2020, the Company and its subsidiaries had approximately 2,000 employees, including approximately 1,500 employees at the Company’s unconsolidated mining operations, of which 261 are represented by a union at Bisti.

NACCO believes it has good relations with both union and non-union employees.

NACCO believes its employees are critical to its success and invests in its employees by offering a competitive total rewards package that includes a combination of salaries and wages, health and wellness benefits, retirement benefits and educational benefits.

As of December 31, 2021, the Company and its subsidiaries had approximately 1,600 employees, including approximately 1,100 employees at the Company’s unconsolidated mining operations, none of which are represented by a collective bargaining agreement.

NACCO believes it has good relations with its employees.

Market-Based Compensation:

NACCO believes its employees are critical to its success and invests in its employees by offering a market-based competitive total rewards package that includes a combination of salaries and wages and a benefits package that promotes employee well-being across all aspects of their lives.

The Company provides employee wages that are competitive and consistent with employee positions, skill levels, experience, knowledge and geographic location.

The Company recognizes the sustainability of its culture and success is strengthened when employees are respected, motivated and engaged.

The Company works to match employees with assignments to capitalize on the skills, talents and potential of each employee.

Benefits offered to employees include:

• Medical, dental and vision benefits for employee, spouse and dependents;

• Flexible spending accounts for both healthcare and dependent care;

• Health savings accounts and health reimbursement accounts, both of which receive a company contribution;

• Paid vacation and holidays;

• Parental leave;

• Short-term and long-term disability benefits;

• Wellness incentives for employees;

• Life and AD&D insurance benefits;

• Charitable donation matches;

• Employee assistance program.

Employee Development:

The Company recognizes that its culture and success is strengthened when employees are respected, motivated and engaged.

The Company works to match employees with assignments that capitalize on the skills, talents and potential of each employee.

The Company believes in hiring, engaging, developing and promoting people who are fully able to meet the demands of each position, regardless of race, color, religion, gender, sexual orientation, gender identity, national origin, age, veteran status or disability.

Employee safety in the workplace is one of the Company’s core values.

The Company is committed to strict compliance with applicable laws and regulations regarding workplace safety and provides on-going safety training, education and communication.

Hazards in the workplace are actively identified and management tracks incidents so remedial actions can be taken to improve workplace safety.

The Company believes communication related to “near misses,” safety incidents and protocols is essential to continuously developing and maintaining best-practices related to safety and enables identification and correction of operational practices that might impair employee safety or health.

Company Ethics:

The Company has processes in place for compliance with its Code of Corporate Conduct, Insider Trading Policy and Anti-Corruption Policy.

All of the Company's Directors and employees annually complete certifications with respect to compliance with the Company's Code of Corporate Conduct.

In addition, all employees of the Company are required to complete annual Code of Corporate Conduct training.

Ethics are deeply embedded in the Company’s values and business processes.

The Company also maintains an ethics related hotline, managed by a third party, through which individuals can anonymously raise concerns or ask questions about business behavior.

Community Engagement:

The Company supports its local communities and is committed to helping them remain safe, healthy and resilient.

The Company's past activities include corporate donations, volunteerism and education.

Community engagement is encouraged and supported through the Company's matching gift program.

The Company will match employee contributions up to $5,000 per employee if program criteria are met.

Available Information

The Company makes its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports available, free of charge, through its website, www.nacco.com, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”).

The content of the Company's website is not incorporated by reference into this Form 10-K or in any other report or document filed with the SEC, and any reference to the Company's website is intended to be inactive textual references only.

Under Rule 12b-2 of the Exchange Act, the Company qualifies as a “smaller reporting company” because its public float as of the last business day of the Company’s most recently completed second quarter was less than $250 million.

For as long as the Company remains a “smaller reporting company,” it may take advantage of certain exemptions from the SEC’s reporting requirements that are otherwise applicable to public companies that are not smaller reporting companies.

SEC Industry Guide 7 Information

The following map shows the Coal Mining segment's locations:

The location, mine type, reserve data, coal quality characteristics, sales tonnage and contract expiration date for the Coal Mining segment were as follows:

COAL MINING OPERATIONS ON AN “AS RECEIVED” BASIS

Proven and Probable Reserves (a)(b)

Contract Uncommitted Total Tons

(Millions) Owned

(Millions) Contract

Mine/Reserve Type of Mine (Millions of Tons)

Unconsolidated Mines

Freedom Mine (c)-

The Coteau Properties Company Surface Lignite 438.0 — 438.0 12.6 3 % 97 % 432.8 13.5 2022 (d)

Falkirk Mine (c)(e)-

The Falkirk Mining Company Surface Lignite 12.0 358.6 370.6 7.2 1 % 99 % 375.7 7.4 2045 (e)

South Hallsville No.

1 Mine (c)(f)(g)-

The Sabine Mining Company Surface Lignite 3.4 97.3 100.7 1.9 (f)(g) (f)(g) 102.6 2.6 2035 (g)

Five Forks Mine (c)(f)-

Demery Resources Company, LLC Surface Lignite 4.9 — 4.9 0.2 (f) (f) 4.9 0.1 2030

Marshall Mine (c)(f)(h)-

Caddo Creek Resources Company, LLC Surface Lignite (h) (h) (h) 0.1 (f)(h) (f)(h) 19.2 0.2 (h)

Eagle Pass Mine (c)(f)(i)-

Camino Real Fuels, LLC Surface

Bituminous (i) (i) (i) 0.3 (f)(i) (f)(i) 15.6 1.5 (i)

Coyote Creek Mine (c)-

Coyote Creek Mining Company, LLC Surface Lignite 72.4 — 72.4 2.0 0 % 100 % 69.6 1.7 2040

Navajo Mine (c)(j)- Bisti Fuels Company Surface

Sub-bituminous (j) (j) (j) 4.2 (j) (j) (j) 5.0 2031

Consolidated Mines

Red Hills Mine-

Mississippi Lignite Mining Company Surface Lignite 161.0 76.3 237.3 2.5 44 % 56 % 240.0 2.6 2032

Centennial Natural Resources Surface Bituminous 17.0 — 17.0 — 40 % 60 % 43.0 — (k)

Total Developed 708.7 532.2 1,240.9 31.0 1,303.4 34.6

Undeveloped Mines

North Dakota — 221.4 221.4 — 100 % 243.9 —

Texas — 210.3 210.3 — 100 % 222.5 —

Eastern (l) — 41.0 41.0 — 100 % 41.0 —

Mississippi — 188.2 188.2 — 100 % 188.2 —

Total Undeveloped — 660.9 660.9 — 695.6 —

Total Developed/Undeveloped 708.7 1,193.1 1,901.8 1,999.0

Average Coal Quality (As received)

Mine/Reserve Type of Mine Coal Formation or

Coal Seam(s) Average Seam

Thickness (feet) Average

Depth (feet) BTUs/lb Sulfur

(%) Moisture (%)

Unconsolidated Mines

Freedom Mine (c)-

The Coteau Properties Company Surface Lignite Beulah-Zap Seam 16 100 6,700 0.90 % 9 % 36 %

Falkirk Mine (c)-

The Falkirk Mining Company Surface Lignite Hagel A&B, Tavis

Creek, Kinneman Creek Seams 8 115 6,200 0.62 % 11 % 38 %

South Hallsville No.

1 Mine (c)(f)-

The Sabine Mining Company Surface Lignite Wilcox Formation 3 85 6,448 0.79 % 18.2 % 32 %

Five Forks Mine (c)(f)-

Demery Resources Company, LLC Surface Lignite Wilcox Formation I Seam 4.4 44 7,033 0.44 % 7.8 % 37 %

Marshall Mine (c)(f)(h)-

Caddo Creek Resources Company, LLC Surface Lignite (h) (h) (h) (h) (h) (h) (h)

Eagle Pass Mine (c)(f)(i)-

Camino Real Fuels, LLC Surface Bituminous (i) (i) (i) (i) (i) (i) (i)

Coyote Creek Mine (c)-

Coyote Creek Mining Company, LLC Surface Lignite Beulah-Zap Seam 10 95 6,900 0.93 % 9 % 35 %

Navajo Mine (c)(j)- Bisti Fuels Company Surface

Sub-bituminous (j) (j) (j) (j) (j) (j) (j)

Consolidated Mines

Red Hills Mine-

Mississippi Lignite Mining Company Surface Lignite C, D, E, F, G, H Seams 3.4 150 5,100 0.60 % 15 % 43 %

Centennial Natural Resources Surface Bituminous Black Creek, New Castle, Mary Lee, Jefferson, American, Nickel Plate, Pratt Seams 1.75 178 13,226 2.00 % 10 % 4 %

Undeveloped Mines

North Dakota — Fort Union Formation 13 130 6,500 0.8 % 8 % 38 %

Texas — Wilcox Formation 5 120 6,800 1.0 % 16 % 30 %

Eastern — Freeport & Kittanning Seams 4 400 12,070 3.3 % 12 % 3 %

Mississippi — Wilcox Formation 5 130 5,200 0.6 % 13 % 44 %

(a) Committed and uncommitted tons represent in-place estimates.

The projected extraction loss is approximately 10% of the proven and probable reserves, except with respect to the Eastern Undeveloped Mines, in which case the projected extraction loss is approximately 50% of the proven and probable reserves.

(b) The Company's reserve estimates are generally based on the entire drill hole database for each reserve, which was used to develop a geologic computer model using triangulation methods and inverse distance to the second power as an interpolator for NACCO's reserves.

As such, all reserves are considered proven (measured) within the Company's reserve estimate.

None of the Company's coal reserves have been reviewed by independent experts.

The Company’s estimate of the economic viability of the proven and probable reserve estimates for tons committed to customers pursuant to long-term contracts are supported by existing long-term contracts to mine coal on behalf of customers and life-of-mine plans associated with those contracts.

The contracts with each customer of the Unconsolidated Mines eliminate Company exposure to spot coal market price fluctuations.

At the Unconsolidated Mines, compensation from each customer to the Company includes reimbursement of all mine operating costs plus a contractually-agreed fee based on the amount of coal delivered.

Red Hills Mine - MLMC sells coal to its customer at a contractually agreed-upon price which adjusts monthly, primarily based on changes in the level of established indices which reflect general U.S.

inflation rates.

MLMC is the exclusive supplier of coal to its customer’s power plant under its contract that runs through 2032.

The Company’s assessment of the economic viability of the mineral reserves associated with MLMC takes into account estimated customer demand, including the minimum annual take provision in the contract, as well as cost of production.

The economic viability of the uncommitted reserves assumes coal would be mined in a mine-mouth operation that minimizes or eliminates transportation costs and under contract terms, which are similar to those contained in the Company’s existing long-term management fee contracts, or leased to other miners.

The majority of the Company’s uncommitted reserves are located in close proximity to power generation or other facilities, which could allow a mine-mouth operation.

Lessees of this coal generally would mine the coal if the coal sale price would exceed the lessee operating costs.

As to coal mined and sold by lessees, the Company would receive a royalty based on a percentage of the sale price.

See footnote (h) for coal reserves currently leased to others.

(c) The contracts for these mines require the customer to cover the cost of the ongoing replacement and upkeep of the plant and equipment of the mine.

(d) Although the term of the existing coal sales agreement terminates in 2027, the term may be extended for two additional periods of five years, or until 2037, at the option of the Company.

(e) On May 7, 2020, GRE, Falkirk Mine's customer, announced its intent to retire the Coal Creek Station power plant in the second half of 2022 and modify the Spiritwood Station power plant to be fueled by natural gas.

(f) These reserves are owned or controlled by customers.

The Company conducts activities to extract these customer-owned and controlled reserves pursuant to long-term service contracts.

(g) On November 5, 2020, AEP, Sabine Mine's customer, announced its intent to retire the Pirkey Plant in 2023 in order to comply with the U.S.

Environmental Protection Agency’s Coal Combustion Residuals rule.

(h) On September 30, 2020, a division of Cabot Corporation, Marshall Mine's customer, entered into an agreement for the sale of the Marshall Mine to a subsidiary of AES.

AES announced its intent to close the Marshall Mine.

Caddo Creek entered into a contract with a subsidiary of AES to perform the required mine reclamation.

(i) The contract mining agreement between Camino Real and its customer, DRCP, terminated effective July 1, 2020 and resulted in the closure of Camino Real's Eagle Pass Mine.

(j) These reserves are owned or controlled by Bisti's customer and it controls proven and probable reserve data.

Bisti’s customer declined to allow us to include the proven and probable reserve data in this Form 10-K.

The Company conducts activities to extract these customer-owned and controlled reserves pursuant to a long-term service contract.

(k) Centennial ceased active mining operations at the end of 2015.

(l) The proven and probable reserves included in the table do not include coal that is leased to others.

The Company had 69.0 million tons and 70.0 million tons in 2020 and 2019, respectively, of Eastern Undeveloped Mines with leased coal committed under contract.

Unconsolidated Mines

Freedom Mine — The Coteau Properties Company

The Freedom Mine generally produces between 12.5 million and 13.5 million tons of lignite coal annually.

The mine started delivering coal in 1983.

All production from the mine is delivered to Dakota Coal Company, a wholly owned subsidiary of Basin Electric.

Dakota Coal Company then sells the coal to the Synfuels Plant, Antelope Valley Station and Leland Olds Station, all of which are operated by affiliates of Basin Electric.

The Synfuels Plant is a coal gasification plant that manufactures synthetic natural gas and produces fertilizers, solvents, phenol, carbon dioxide, and other chemical products for sale.

Basin Electric indicated that if it decides to proceed with any changes that could reduce or eliminate the use of coal, the feedstock change is not expected to occur before 2026.

As a result, coal deliveries to the Synfuels Plant are expected to continue until at least 2026.

The Freedom Mine, operated by Coteau, is located approximately 90 miles northwest of Bismarck, North Dakota.

The main entrance to the Freedom Mine is accessed by means of a paved road and is located on County Road 15.

Coteau holds 381 leases granting the right to mine approximately 34,715 acres of coal interests and the right to utilize approximately 23,575 acres of surface interests.

In addition, Coteau owns in fee 33,525 acres of surface interests and 4,107 acres of coal interests.

Substantially all of the leases held by Coteau were acquired in the early 1970s and have been replaced with new leases or have lease terms for a period sufficient to meet Coteau’s contractual production requirements.

The reserves are located in Mercer County, North Dakota, starting approximately two miles north of Beulah, North Dakota.

The center of the basin is located near the city of Williston, North Dakota, approximately 100 miles northwest of the Freedom Mine.

The economically mineable coal in the reserve occurs in the Sentinel Butte Formation, and is overlain by the Coleharbor Formation.

The Coleharbor Formation unconformably overlies the Sentinel Butte Formation.

It includes all of the unconsolidated sediments resulting from deposition during glacial and interglacial periods.

Lithologic types include gravel, sand, silt, clay and till.

The modified glacial channels are in-filled with gravels, sands, silts and clays overlain by till.

The coarser gravel and sand beds are generally limited to near the bottom of the channel fill.

The general stratigraphic sequence in the upland portions of the reserve area consists of till, silty sands and clayey silts.

Falkirk Mine — The Falkirk Mining Company

The Falkirk Mine started delivering coal in 1978 primarily for the Coal Creek Station, an electric power generating station owned by GRE.

In 2014, Falkirk began delivering coal to Spiritwood Station, another electric power generating station owned by GRE.

On May 7, 2020, GRE announced its intent to retire the Coal Creek Station power plant in the second half of 2022 and modify the Spiritwood Station power plant to be fueled by natural gas.

The Falkirk Mine delivered 7.2 million and 7.4 million tons of lignite coal, primarily for the Coal Creek Station, during 2020 and 2019, respectively.

The terms of the contract between the Company and GRE specify that GRE is responsible for all costs related to mine closure, including but not limited to, final mine reclamation costs, post-retirement medical benefits and pension costs with respect to Falkirk employees.

The Falkirk Mine, operated by Falkirk, is located approximately 50 miles north of Bismarck, North Dakota on a paved access road off U.S.

Falkirk holds 311 leases granting the right to mine approximately 43,084 acres of coal interests and the right to utilize approximately 24,061 acres of surface interests.

In addition, Falkirk owns in fee 41,275 acres of surface interests and 1,789 acres of coal interests.

Substantially all of the leases held by Falkirk were acquired in the early 1970s with initial terms that have been further extended by the continuation of mining operations.

The reserves are located in McLean County, North Dakota, from approximately nine miles northwest of the town of Washburn, North Dakota to four miles north of the town of Underwood, North Dakota.

Structurally, the area is located on an intercratonic basin containing a thick sequence of sedimentary rocks.

The economically mineable coals in the reserve occur in the Sentinel Butte Formation and the Bullion Creek Formation and are unconformably overlain by the Coleharbor Formation.

The Sentinel Butte Formation conformably overlies the Bullion Creek Formation.

The general stratigraphic sequence in the upland portions of the reserve area (Sentinel Butte Formation) consists of till, silty sands and clayey silts, main hagel lignite bed, silty clay, lower lignite of the hagel lignite interval and silty clays.

Beneath the Tavis Creek, there is a repeating sequence of silty to sand clays with generally thin lignite beds.

South Hallsville No.

1 Mine — The Sabine Mining Company

The South Hallsville No.

1 Mine started delivering coal in 1985.

All production from the mine is delivered to Southwestern Electric Power Company's ("SWEPCO") Henry W.

Pirkey Plant (the "Pirkey Plant").

SWEPCO is an American Electric Power (“AEP”) company.

On November 5, 2020, AEP announced it intends to retire the Pirkey Plant in 2023 in order to comply with the U.S.

Environmental Protection Agency’s Coal Combustion Residuals rule.

The South Hallsville No.

1 Mine delivered 1.9 million and 2.6 million tons to the Pirkey Plant in 2020 and 2019, respectively.

During the third quarter of 2020, SWEPCO reduced its expected future annual delivery requirements to be between 1.4 million and 1.7 million tons.

The terms of the contract between the Company and SWEPCO specify that SWEPCO is responsible for all costs related to mine closure, including but not limited to, final mine reclamation costs, post-retirement medical benefits and pension costs with respect to Sabine employees.

The South Hallsville No.

1 Mine, operated by Sabine, is located approximately 150 miles east of Dallas, Texas on FM 968.

The entrance to the mine is by means of a paved road.

Sabine has no title, claim, lease or option to acquire any of the reserves at the South Hallsville No.

Southwestern Electric Power Company controls all of the reserves within the South Hallsville No.

Five Forks Mine — Demery Resources Company, LLC

The Five Forks Mine, operated by Demery, began delivering coal in 2012 and is located approximately three miles north of Creston, Louisiana on State Highway 153.

Access to the Five Forks Mine is by means of a paved road.

Demery has no title, claim, lease or option to acquire any of the reserves at the Five Forks Mine.

Demery's customer, Five Forks Mining, LLC, controls all of the reserves within the Five Forks Mine.

Marshall Mine — Caddo Creek Resources Company, LLC

On September 30, 2020, Caddo Creek's customer, a division of Cabot Corporation, entered into a long-term supply agreement with a subsidiary of AES as well as an agreement for the sale of the Marshall Mine to a subsidiary of AES.

AES announced its intent to close the Marshall Mine.

Caddo Creek entered into a contract with a subsidiary of AES to perform the required mine reclamation.

The Marshall Mine delivered 0.1 million and 0.2 million tons during 2020 and 2019, respectively.

Eagle Pass Mine — Camino Real Fuels, LLC

The Eagle Pass Mine, operated by Camino Real, began delivering coal in 2015 to Camino Real's customer, Dos Republicas Coal Partnership ("DRCP").

The contract mining agreement between Camino Real and DRCP terminated effective July 1, 2020 as a result of the unexpected termination by Comisión Federal de Electricidad (“CFE”) of its coal supply contract with an affiliate of DRCP.

The termination of the contract between CFE and DRCP eliminated DRCP’s need for coal from Camino Real's Eagle Pass Mine, and resulted in mine closure.

Mine reclamation is the responsibility of DRCP.

Camino Real has no legal obligation to perform mine reclamation.

The Eagle Pass Mine delivered 0.3 million and 1.6 million tons during 2020 and 2019, respectively.

Coyote Creek Mine - Coyote Creek Mining Company, LLC

In 2016, the Coyote Creek Mine began delivering coal to the Coyote Station owned by Otter Tail Power Company, Northern Municipal Power Agency, Montana-Dakota Utilities Company and Northwestern Corporation.

The Coyote Creek Mine generally produces approximately 1.5 million to 2.5 million tons of lignite coal annually when Coyote Station is operating at anticipated levels.

The Coyote Creek Mine is located approximately 70 miles northwest of Bismarck, North Dakota.

The main entrance to the Coyote Creek Mine is accessed by means of a four-mile paved road extending west off of State Highway 49.

Coyote Creek holds a sublease to 86 leases granting the right to mine approximately 8,129 acres of coal interests and the right to utilize approximately 15,168 acres of surface interests.

In addition, Coyote Creek Mine owns in fee 160 acres of surface interests and has four easements to conduct coal mining operations on approximately 352 acres.

The reserves are located in Mercer County, North Dakota, starting approximately six miles southwest of Beulah, North Dakota.

The center of the basin is located near the city of Williston, North Dakota, approximately 110 miles northwest of the Coyote Creek Mine.

The economically mineable coal in the reserve occurs in the Sentinel Butte Formation, and is overlain by the Coleharbor Formation.

The Coleharbor Formation unconformably overlies the Sentinel Butte Formation.

It includes all of the unconsolidated sediments resulting from deposition during glacial and interglacial periods.

Lithologic types include gravel, sand silt, clay and till.

The modified glacial channels are in-filled with gravels, sands, silts and clays overlain by till.

The coarser gravel and sand beds are generally limited to near the bottom of the channel fill.

The general stratigraphic sequence in the upland portions of the reserve area consists of till, silty sands and clayey silts.

Navajo Mine - Bisti Fuels Company, LLC

Bisti has been the contract miner at Navajo Transitional Energy Company's ("NTEC's") Navajo Mine since 2017.

Bisti generally delivers approximately 5.0 million tons of sub-bituminus coal to the Four Corners Power Plant when the plant is operating at anticipated levels.

The Navajo Mine is located approximately 25 miles southwest of Farmington, New Mexico, off Indian Service Road 3005, and is on the Navajo Nation.

Access to the Navajo Mine is by means of a paved road.

Bisti has no title, claim, lease or option to acquire any of the reserves at Navajo Mine.

NTEC, a wholly-owned limited liability company of The Navajo Nation, controls all of the reserves within the Navajo Mine.

Consolidated Mines

Red Hills Mine — Mississippi Lignite Mining Company

The Red Hills Mine generally produces between 2 million and 3 million tons of lignite coal annually.

The Red Hills Mine started delivering coal in 2000.

All production from the mine is delivered to its customer's Red Hills Power Plant.

The Red Hills Mine, operated by MLMC, is located approximately 120 miles northeast of Jackson, Mississippi.

The entrance to the mine is by means of a paved road located approximately one mile west of Highway 9.

MLMC owns in fee approximately 7,061 acres of surface interest and 4,162 acres of coal interests.

MLMC holds leases granting the right to mine approximately 5,953 acres of coal interests and the right to utilize approximately 5,850 acres of surface interests.

MLMC holds subleases under which it has the right to mine approximately 1,541 acres of coal interests.

The majority of the leases held by MLMC were originally acquired during the mid-1970s to the early 1980s with terms extending 50 years, many of which can be further extended by the continuation of mining operations.

The lignite deposits of the Gulf Coast are found primarily in a narrow band of strata that outcrops/subcrops along the margin of the Mississippi Embayment.

The potentially exploitable tertiary lignites in Mississippi are found in the Wilcox Group.

The outcropping Wilcox is composed predominately of non-marine sediments deposited on a broad flat plain.

Centennial Natural Resources

Centennial ceased active mining operations at the end of 2015.

Centennial and its affiliate, North American Coal Royalty Company, own in fee approximately 5,602 acres of coal interests and approximately 2,323 acres of surface interests in Alabama.

Centennial holds leases in Alabama granting the right to mine approximately 3,907 acres of coal interests and the right to utilize approximately 4,698 acres of surface interests.

The majority of the leases held by Centennial were originally acquired between 2000 and 2012 with terms that can be extended by the continuation of mining activities.

North American Mining

NAMining primarily operates and maintains draglines to mine limestone and sand at the following mines in Florida and Virginia pursuant to mining services agreements with the mine owners:

Location Name Location Customer Year NACCO Started Operations

White Rock — North Miami WRQ 1995

Krome Miami Cemex 2003

Myers Cemex 2004

FEC Miami Cemex 2005

SCL Miami Cemex 2006

Card Sound Florida City Cemex 2009

Central State Aggregates Zephyrhills McDonald Group 2016

Mid Coast Aggregates Sumter County McDonald Group 2016

West Florida Aggregates Hernando County McDonald Group 2016

Catherine Sumter County Cemex 2016

Center Hill Sumter County Cemex 2016

Inglis Crystal River Cemex 2016

Titan Corkscrew Ft.

Myers Titan America 2017

Palm Beach Aggregates Loxahatchee Palm Beach Aggregates 2017

Perry Lamont Martin Marietta 2018

SDI Aggregates Florida City Blue Water Industries 2018

Queensfield King William County, VA King William Sand and Gravel Company, Inc.

County Line Pasco County K&M Pasco 130 Holdings, LLC 2019

Newberry Alachua County Argos USA, LLC 2019

Titan Pennsuco Miami Titan America 2020

NAMining's customers control all of the limestone and sand reserves within their respective mines.

Access to the White Rock mine is by means of a paved road from 122nd Avenue.

Access to the Krome mine is by means of a paved road from Krome Avenue.

Access to the Alico mine is by means of a paved road from Alico Road.

Access to the FEC mine is by means of a paved road from NW 118th Avenue.

Access to the SCL mine is by means of a paved road from NW 137th Avenue.

Access to the Card Sound mine is by means of a paved road from SW 408th Street.

Access to the Central State Aggregates mine is by means of a paved road from Yonkers Boulevard.

Access to the Mid Coast Aggregates mine is by means of a paved road from State Road 50.

Access to the West Florida Aggregates mine is by means of a paved road from Cortez Boulevard.

Access to the St.

Catherine mine is by means of a paved road from County Road 673.

Access to the Center Hill mine is by means of a paved road from West Kings Highway.

Access to the Inglis mine is by means of a paved road from Highway 19 South.

Access to the Titan Corkscrew mine is by means of a paved road from Corkscrew Road.

Access to the Palm Beach Aggregates mine is by means of a paved road from State Road 80.

Access to the Perry mine is by means of paved road from Nutall Rise Road.

Access to the SDI Aggregates mine is by means of paved road from SW 167 th AVE.

Access to the Queensfield Mine is by means of paved road from Dabney's Mill Road (SR 604).

Access to the County Line mine is by means of paved road from 18744 County Line Road.

Access to the Newberry mine is by means of paved road from NW County Road 235 (CR 235).

Access to the Titan Pennsuco mine is by means of a paved road from NW 121 st Way.

NAMining has no title, claim, lease or option to acquire any of the reserves at any of the mines where it provides services.

General Information

The leases held by Coteau, Coyote Creek, Falkirk and MLMC have a variety of continuation provisions, but generally permit the leases to be continued beyond their fixed terms.

Centennial holds the mining rights to certain of its reserves through fee ownership, and leases and licenses from the coal and surface owners.

NACCO expects coal will be available to meet customers' future production requirements utilizing land and reserves that are currently owned or leased or accessible through ownership acquisition or new leases.

Previous Operators .

There were no previous operators of the Freedom Mine, Falkirk Mine, South Hallsville No.

1 Mine, Five Forks Mine, Marshall Mine, Eagle Pass Mine, Coyote Creek Mine or Red Hills Mine.

NTEC's Navajo Mine was previously operated by a third party.

Exploration and Development .

All coal mines are well past the exploration stage.

Additional pit development is under way at each operating mine.

Drilling programs are routinely conducted for the purpose of refining guidance related to ongoing operations.

For example, at the Red Hills Mine, the lignite coal reserve has been defined by a drilling program that is designed to provide 500-foot spaced drill holes for areas anticipated to be mined within four years of the current pit.

Drilling beyond the four-year horizon ranges from 1,000 to 2,000-foot centers.

Drilling is conducted annually to stay current with the advance of mining operations.

Geological evaluation is in process at all operating locations.

Facilities and Equipment .

The facilities and equipment for each of the coal mines are maintained to allow for safe and efficient operation.

The equipment is well maintained, in good physical condition and is either updated or replaced periodically with newer models or upgrades available to keep up with modern technology.

As equipment wears out, the mines evaluate what

replacement option will be the most cost-efficient, including the evaluation of both new and used equipment, and proceed with that replacement.

The majority of electrical power for the draglines, shovels, coal crushers, coal conveyors and facilities generally is provided by the power generation customer for the applicable mine.

Electrical power for the Sabine facilities is provided by Upshur Rural Electric Co-op.

Electrical power for the Sabine dragline operating in the South Marshall permit area is provided by Southwestern Electric Power Company.

Electrical power for the draglines operating in Sabine's Rusk permit area is provided by Rusk County Electric Co-op.

Electrical power for the MLMC draglines and shovels is provided by 4-County Electric Power Association.

The remainder of the equipment generally is powered by diesel fuel or gasoline.

The mining method and total cost of the property, plant and equipment, net of applicable accumulated amortization, depreciation and impairment as of December 31, 2020 is set forth in the chart below:

Location Mining Method Total Historical Cost of Mine

Property, Plant and Equipment

(excluding Coal Land, Real Estate

and Construction in Progress), Net of

Applicable Accumulated

Amortization, Depreciation and Impairment

( in millions)

Unconsolidated Mining Operations

Freedom Mine — The Coteau Properties Company Dragline operation with 3 draglines $ 81.5

Falkirk Mine — The Falkirk Mining Company Dragline operation with 4 draglines $ 157.6

South Hallsville No.

1 Mine — The Sabine Mining Company Dragline operation with 4 draglines $ 110.5

Five Forks Mine — Demery Resources Company, LLC Truck-shovel operation $ —

Coyote Creek Mine — Coyote Creek Mining Company, LLC Dragline operation with 1 dragline $ 140.9

Navajo Mine — Bisti Fuels Company, LLC Dragline operation with 2 draglines $ —

Consolidated Mining Operations

Red Hills Mine — Mississippi Lignite Mining Company Dragline operation with 1 dragline $ 63.6

Marshall Mine — Caddo Creek Resources Company, LLC N/A $ —

Eagle Pass Mine — Camino Real Fuels, LLC N/A $ —

NAMining (a) $ 12.0

Other N/A $ 1.2

(a) During 2020, NAMining operated 32 draglines and one rope shovel at 20 quarries.

Of the 32 draglines, 8 are owned by the Company and 24 are owned by customers.

The mining process at the limestone mines involves excavating limestone from a water-filled quarry utilizing draglines.

The excavated limestone is transported and processed by the customer.

Predominantly all of Bisti and Demery's machinery and equipment is owned by the customer of the respective mines.

All of the Company’s coal mines are surface mines that are located adjacent to, or nearby, the customer’s power plant, synfuels plant or activated carbon facility.

Overburden, the material between the surface of the land and the coal seam, is removed using draglines, dozers and/or trucks and shovels, including electric rope shovels.

Coal is then extracted and loaded onto haul trucks using surface miners, excavators, dozers, scrapers, backhoes and other machinery and equipment.

Coal is taken to a stockpile or delivered directly to customers via conveyor or short haul rail.

After mining, draglines and/or trucks and shovels are used to backfill the overburden that was removed at the beginning of the process to allow for site reclamation.

Government Regulation

The Company's operations are subject to various federal, state and local laws and regulations on matters such as employee health and safety, and certain environmental laws relating to, among other matters, the reclamation and restoration of coal mining properties, air pollution, water pollution, the disposal of wastes and effects on groundwater.

The Company's operations are subject to various federal, state and local laws and regulations on matters such as employee health and safety, and certain environmental laws and regulations relating to, among other matters, the reclamation and restoration of coal mining properties, air pollution, water pollution, the disposal of wastes and effects on groundwater.

In addition, the electric power generation industry is subject to extensive regulation regarding the environmental impact of its power generation activities that could affect demand for coal from the Company's Coal Mining segment.

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Numerous governmental permits and approvals are required for coal mining operations.

The Company's subsidiaries hold or will hold the necessary permits at all of its coal mining operations except Demery, Caddo Creek, Bisti and Camino Real, where the customers hold, or held, the respective permits.

The Company believes, based upon present information provided to it by these third-party mine permit holders, that these third parties have all permits necessary for the Company to operate or reclaim Caddo Creek, Demery and Bisti;

The Company's subsidiaries hold or will hold the necessary permits at all of its coal mining operations except Demery and Caddo Creek, where the customers hold the respective permits.

however, the Company cannot be certain that these third parties will be able to maintain all such permits in the future.

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• the Resource Conservation and Recovery Act ("RCRA");

• the National Environmental Policy Act of 1970 (“NEPA”);

• the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA").

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Where state regulatory agencies have adopted federal mining programs under SMCRA, the state becomes the primary regulatory authority.

With the exception of the Navajo Nation in New Mexico, which is directly regulated by the Office of Surface Mining Reclamation and Enforcement ("OSMRE") under their Indian Lands Program, all of the states where the Company has active coal mining operations have achieved primary control of enforcement through federal authorization under SMCRA.

Coal mine operators must obtain SMCRA permits and permit renewals for coal mining operations from the applicable regulatory agency.

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In addition, the Abandoned Mine Land Fund also makes transfers annually to the United Mine Workers of America Combined Benefit Fund (the “Fund”), which provides health care benefits to retired coal miners who are beneficiaries of the Fund.

The fee is currently $0.08 per ton on lignite coal produced and $0.28 per ton on other surface-mined coal.

The 2021 Infrastructure Investment and Jobs Act reauthorized the Abandoned Mine Land fee at a reduced rate.

The fee for lignite coal was reduced from $0.08 per ton to $0.064 per ton and for other surface-mined coal from $0.28 per ton to $0.224 per ton.

These fees have been reauthorized until the end of fiscal year 2035.

SMCRA establishes operational, reclamation and closure standards for surface coal mines.

The Company accrues for the costs of current mine disturbance and final mine closure, including the cost of treating mine water discharges, at mines where the Company's subsidiaries hold the mining permit.

These obligations are unfunded, with the exception of the final mine closure costs for the Coyote Creek Mine, which are being funded throughout the production stage.

These obligations are largely unfunded, with the exception of the final mine closure costs for the Coyote Creek Mine, which are being funded throughout the production stage.

SMCRA stipulates compliance with many other major environmental programs, including the CAA and CWA.

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None of the power plants supplied by the Company are within non-attainment areas for ozone.

In November 2020, EPA published a proposed “Revised Cross-State Air Pollution Rule” to address the remand of the CSAPR update.

If promulgated as drafted, this proposed rule will require no further obligations in states where the Company’s customers operate a power plant.

In March 2021, EPA finalized the “Revised Cross-State Air Pollution Rule” to address the remand of the CSAPR update.

The final rule requires no further obligations in states where the Company’s customers operate a power plant.

The CAA Acid Rain Control Provisions were promulgated as part of the CAA Amendments of 1990 in Title IV of the CAA (“Acid Rain Program”).

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In 2016, the EPA finalized revisions to the Regional Haze Rule which addresses requirements for the second planning period.

In September 2019, the EPA issued final regional haze

guidance that indicates that a re-evaluation of sources already subject to best available retrofit technologies ("BART") is likely unnecessary.

In September 2019, the EPA issued final regional haze guidance that indicates that a re-evaluation of sources already subject to best available retrofit technologies ("BART") is likely unnecessary.

The guidance also encourages states to balance visibility benefits against other factors in selecting the measures necessary to make “reasonable progress” toward natural visibility conditions.

Finally, when comparing various control options to determine which ones may be “cost-effective,” the final guidance recommends comparing cost to visibility benefits.

SIPs will be required by July 31, 2021.

In July of 2021, the EPA released a memorandum to clarify the guidance issued in 2019.

While this clarification memorandum attempted to reverse some of the core conclusions made in the 2019 guidance, it was released after the air analyses to develop individual SIPs had been completed and just prior to the SIP submittal deadline to the EPA, which was July 31, 2021.

Many SIP submittals were delayed due to emissions modeling and continue to be developed and scrutinized.

SIPs will be sent to the EPA for approval following both review by federal land managers of the National Park Service, the United States Fish and

Wildlife Service and the United States Forest Service and all corresponding public comment periods.

See "Item 1A - “Risk Factors” on page 20 for further discussion of the regional haze program.

Under the CAA, new and modified sources of air pollution must meet certain new source standards (the “New Source Review Program”).

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The rule makes it clear that both emissions increases and decreases from a major modification at an existing source are to be considered during Step 1 of the two-step NSR applicability test which is designed to determine if there is a “significant emission increase”.

The remaining litigation and the uncertainty around the NSR program rules could adversely impact demand for coal.

In October 2021, the EPA denied a petition for reconsideration and administrative stay of the final rule;

however, the remaining litigation and the uncertainty around the NSR program rules could adversely impact demand for coal.

Any additional new controls may have an adverse impact on the demand for coal, which may have a material adverse effect on the Company’s business, financial condition or results of operations.

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The ACE rule was challenged by a suite of petitioners before the U.S.

Circuit Court of Appeals, District of Columbia Circuit ("DC Circuit") which subsequently ruled that the EPA erred when it rescinded the Clean Power Plan and vacated the ACE rule .

It is anticipated that the Biden administration will draft a new rule to regulate CO2 emissions which, depending on the scope and applicability of the rule, may have a material adverse effect on the Company’s business, financial condition or results of operations.

In addition, in early 2021, the EPA issued an endangerment/significant contribution finding for CO2 emissions from coal-fired power plants.

This endangerment/significant contribution finding is likely to be challenged in the DC Circuit;

the outcome of the legal challenge may have a material adverse effect on the Company’s business, financial condition or results of operations.

Circuit Court of Appeals, District of Columbia Circuit ("DC Circuit") which subsequently ruled that the EPA erred when it rescinded the Clean Power Plan and they vacated the ACE rule .

In early 2021, the EPA issued an endangerment/significant contribution finding for carbon dioxide emissions from coal-fired power plants.

In addition, the DC Circuit court ruling was challenged by several parties, including the Company, and the Supreme Court of the United States recently granted certiorari.

The Supreme Court of the United States will hear the case in February 2022.

Depending on the outcome of the Supreme Court ruling, the EPA may draft a new rule to regulate carbon dioxide emissions which, depending on the scope and applicability of the rule, may have a material adverse effect on the Company’s business, financial condition or results of operations.

has not implemented the 1992 Framework Convention on Global Climate Change (“Kyoto Protocol”), which became effective for many countries on February 16, 2005.

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Army Corps of Engineers for operations in waters of the United States.

Army Corps of Engineers and EPA jointly revised the definition of a water of the United States in June 2020 which modified the types of regulated waters by eliminating ephemeral streams and certain other isolated wetlands.

The new definition is being challenged in court and if the new definition is overturned, some of the Company's operations could incur additional costs to mitigate streams and wetlands that are not currently regulated.

Army Corps of Engineers and EPA jointly revised the definition of a water of the United States ("WOTUS") in the June 2020 Navigable Water Protection Rule ("NWPR").

The new definition was challenged in court and two court cases resulted in vacatur of the NWPR.

In December 2021, the EPA and COE released a draft “Step One” rule to redefine WOTUS by formally rescinding the NWPR and replacing it with a new definition.

If the new definition is promulgated as drafted, some of the Company's operations could incur additional costs to mitigate streams and wetlands.

Bellaire is treating mine water drainage from coal refuse piles associated with two former underground coal mines in Ohio and one former underground coal mine in Pennsylvania, and is treating mine water from a former underground coal mine in Pennsylvania.

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This new rule may raise the cost for CCR disposal at coal-fired power plants, making them less competitive, and/or result in early closure which could have an adverse impact on demand for coal.

The EPA rule exempts CCRs disposed of at mine sites and reserves any regulation thereof to the OSMRE.

The EPA rule exempts CCRs beneficially used at mine sites and reserves any regulation thereof to the OSMRE.

The OSMRE suspended all rulemaking actions on CCRs, but could re-initiate them in the future.

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If the Company were unable to beneficially use CCRs, its revenues for handling CCRs from its customers may decrease and its costs may increase due to the purchase of alternative materials for beneficial uses.

National Environmental Policy Act

NEPA requires federal agencies to review the environmental impacts of their decisions and issue either an environmental assessment or an environmental impact statement.

There are certain actions associated with surface coal mining that may trigger these types of assessments by federal agencies.

When a NEPA action is required, the Company provides the required information to the appropriate federal agency so that they may complete the environmental assessment.

Historically, this process has been lengthy and may take several years to complete.

In July 2020, the White House Council on Environmental Quality ("CEQ") issued a final rule updating the original NEPA regulations;

however, it was immediately challenged by states and non-governmental organizations.

In October 2021, the CEQ issued a new draft rule rescinding many of the revisions from 2020 update.

If finalized as drafted, the revised NEPA regulations could adversely affect the Company’s ability to secure necessary permits.

Regulation of the Oil and Natural Gas Industry

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Numerous federal, state and local governmental agencies, such as the EPA, issue regulations that often require difficult and costly compliance measures that carry substantial administrative, civil and criminal penalties and may result in injunctive obligations for non-compliance.

closing earthen pits, result in the suspension or revocation of necessary permits, licenses and authorizations, require that additional pollution controls be installed and impose substantial liabilities for pollution resulting from operations.

These laws and regulations may require the acquisition of a permit before drilling commences, restrict the types, quantities and concentrations of various substances that can be released into the environment in connection with drilling and production activities, limit or prohibit construction or drilling activities on certain lands lying within wilderness, wetlands, ecologically sensitive and other protected areas, require action to prevent or remediate pollution from current or former operations, such as plugging abandoned wells or closing earthen pits, result in the suspension or revocation of necessary permits, licenses and authorizations, require that additional pollution controls be installed and impose substantial liabilities for pollution resulting from operations.

The strict, joint and several liability nature of such laws and regulations could impose liability upon the operators on the Company’s mineral interests, regardless of fault.

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Drilling and Production

The operations of the Company’s third-party lessee's are subject to various types of regulation at the federal, state and local level.

The operations of the Company’s third-party lessees are subject to various types of regulation at the federal, state and local level.

These types of regulation include requiring permits for the drilling of wells, drilling bonds and reports concerning operations.

The state, and some counties and municipalities, in which the Company operates also regulate one or more of the following:

The states, and some counties and municipalities, in which the Company has mineral interests also regulate one or more of the following:

• the location of wells;

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The effect of such future regulations may be to limit the amounts of oil and natural gas that may be produced from the Company’s mineral interests, negatively affect the economics of production from these wells or to limit the number of locations operators can drill.

Federal, state and local regulations provide detailed requirements for the abandonment of wells, closure or decommissioning of production facilities and pipelines and for site restoration in areas where the operators of the acreage underlying our royalties operate.

Army Corps of Engineers and many other state and local authorities also have regulations for plugging and abandonment, decommissioning and site restoration.

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This law requires that the well operator disclose the list of chemical ingredients subject to the requirements of the Occupational Safety and Health Act for disclosure on an internet website and also file the list of chemicals with the Texas Railroad Commission with the well completion report.

The total volume of water used to hydraulically fracture a well must also

be disclosed to the public and filed with the Texas Railroad Commission.

The total volume of water used to hydraulically fracture a well must also be disclosed to the public and filed with the Texas Railroad Commission.

Further, in May 2013, the Texas Railroad Commission issued a “well integrity rule,” which updates the requirements for drilling, putting pipe down, and cementing wells.

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Likewise, there have been calls to review protections in place for the Greater Sage Grouse, which can be found across a large swath of the northwestern United States in oil and gas producing states.

The listing of either of these species, or any others, in areas where the Company holds minerals interests could cause lessees to incur increased costs arising from species protection measures, delay the completion of exploration and production activities, and/or result in limitations on operating activities that could have an adverse impact the Minerals Management segment.

The listing of either of these species, or any others, in areas where the Company holds minerals interests could cause lessees to incur increased costs arising from species protection

measures, delay the completion of exploration and production activities, and/or result in limitations on operating activities that could have an adverse impact the Minerals Management segment.

Natural Gas Sales and Transportation

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Since 1978, various federal laws have been enacted which have resulted in the complete removal of all price and non-price controls for sales of domestic natural gas sold in “first sales.” Under the Energy Policy Act of 2005, FERC has substantial enforcement authority to prohibit the manipulation of natural gas markets and enforce its rules and orders, including the ability to assess substantial civil penalties.

FERC also regulates interstate natural gas transportation rates and service conditions and establishes the terms under which our operators may use interstate natural gas pipeline capacity, which affects the marketing of natural gas that our operators produce, as well as the revenues our operators receive for sales of natural gas and release of natural gas pipeline capacity.

FERC also regulates interstate natural gas transportation rates and service conditions and establishes the terms under which operators may use interstate natural gas pipeline capacity, which affects the marketing of natural gas that operators produce, as well as the revenues operators receive for sales of natural gas and release of natural gas pipeline capacity.

Commencing in 1985, FERC promulgated a series of orders, regulations and rule makings that significantly fostered competition in the business of transporting and marketing gas.

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However, the natural gas industry historically has been very heavily regulated;

therefore, the Company cannot guarantee that the less stringent regulatory approach currently pursued by FERC and Congress will continue indefinitely into the future nor can the Company determine what effect, if any, future regulatory changes might have on our natural gas-related activities.

Under FERC’s current regulatory regime, transmission services must be provided on an open-access, nondiscriminatory basis at cost-based rates or at market-based rates if the transportation market at issue is sufficiently competitive.

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Section 1(b) of the NGA exempts natural gas gathering facilities from regulation by FERC as a natural gas company under the NGA.

Although its policy is still in flux, FERC has in the past reclassified certain jurisdictional transmission facilities as non-jurisdictional gathering facilities, which has the tendency to increase our operators’ costs of transporting gas to point-of-sale locations.

Although its policy is still in flux, FERC has in the past reclassified certain jurisdictional transmission facilities as non-jurisdictional gathering facilities, which has the tendency to increase operators’ costs of transporting gas to point-of-sale locations.

Oil Sales and Transportation

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States also regulate the method of developing new fields, the spacing and operation of wells and the prevention of waste of oil and natural gas resources.

States may regulate rates of production and may establish maximum daily production allowables from oil and natural gas wells based on market demand or resource conservation, or both.

States may regulate rates of production and may establish maximum daily production allowable from oil and natural gas wells based on market demand or resource conservation, or both.

States do not regulate wellhead prices or engage in other similar direct economic regulation, but the Company cannot be certain that they will not do so in the future.

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Comprehensive Environmental Response, Compensation and Liability Act

The Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") and similar state laws create liabilities for the investigation and remediation of releases of hazardous substances into the environment and for damages to

natural resources.

The Company must also comply with reporting requirements under the Emergency Planning and Community Right-to-Know Act and the Toxic Substances Control Act.

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There exists no arrangement or understanding between any executive officer and any other person pursuant to which such executive officer was selected.

Certain executive officers of the Company listed below are also executive officers for NACoal.

EXECUTIVE OFFICERS OF THE COMPANY

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From prior to 2017 to September 2017, Assistant Secretary of Hamilton Beach Brands ("HBB") and Kitchen Collection ("KC").

Dilluvio 31 Associate Counsel and Assistant Secretary of NACCO and NACoal (from June 2019) From October 2016 to May 2019, Associate, Sidley Austin LLP (law firm).

From prior to 2016 to September

2016, Associate, White and Case LLP (law firm).

Dilluvio 32 Associate Counsel and Assistant Secretary of NACCO and NACoal (from June 2019) From prior to 2017 to May 2019, Associate, Sidley Austin LLP (law firm).

Loveman 52 Vice President and Controller and Principal Financial Officer (from prior to 2017)

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Name Age Current Position Other Positions

Anderson 45 President - MRNA (from March 2017) From prior to 2016 to February 2017, Environmental Manager, The Sabine Mining Company (an NACoal subsidiary)

Anderson 46 President - Mitigation Resources (from March 2017) From prior to 2017 to February 2017, Environmental Manager, The Sabine Mining Company (an NACoal subsidiary).

Berry 54 President - NAMining (from prior to 2017)

Dale 46 Treasurer and Senior Director, Financial Planning and Analysis, of NACoal (from January 2017) From prior to 2016 to November 2016, Vice President of Financial Planning and Analysis at Westmoreland Coal Company.

Dewing 64 Vice President - Operations of NACoal (from January 2017) From prior to 2016 to December 2016, President, The Coteau Properties Company (an NACoal subsidiary).

From prior to 2016 to December 2016, Vice President - North Dakota, Texas and Florida Operations, Human Resources and External Affairs of NACoal.

Dale 47 Treasurer and Senior Director, Financial Planning and Analysis, of NACoal (from January 2017)

Dewing 65 Vice President - Operations of NACoal (from January 2017)

Hart 43 Controller of NACoal (from September 2019) From November 2017 to August 2019, Assistant Controller of NACoal.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business