Item 2. Properties
Item 2. PROPERTIES
Coal Mining Segment - Operations
NACCO-owned Properties
1.0 INTRODUCTION
Information concerning our mining properties in this Form 10-K have been prepared in accordance with the requirements of subpart 1300 of Regulation S-K. As used in this Report on Form 10-K, the terms mineral resource, measured mineral resource, indicated mineral resource, inferred mineral resource, mineral reserve, proven mineral reserve and probable mineral reserve are defined and used in accordance with subpart 1300 of Regulation S-K. Under subpart 1300 of Regulation S-K, mineral resources may not be classified as mineral reserves unless the determination has been made by a qualified person that the mineral resources can be the basis of an economically viable project. Readers are specifically cautioned not to assume that any part or all of the mineral deposits (including any mineral resources) in these categories will ever be converted into mineral reserves, as defined by the subpart 1300 of Regulation S-K.
Readers are cautioned that, except for that portion of mineral resources classified as mineral reserves, mineral resources do not have demonstrated economic value. Inferred mineral resources are estimates based on limited geological evidence and sampling and have too high of a degree of uncertainty as to their existence to apply relevant technical and economic factors likely to influence the prospects of economic extraction in a manner useful for evaluation of economic viability. Estimates of inferred mineral resources may not be converted to a mineral reserve. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. A significant amount of exploration must be completed in order to determine whether an inferred mineral resource may be upgraded to a higher category. Therefore, readers are cautioned not to assume that all or any part of an inferred mineral resource exists, that it can be the basis of an economically viable project, or that it will ever be upgraded to a higher category. Likewise, readers are cautioned not to assume that all or any part of measured or indicated mineral resources will ever be converted to mineral reserves. See Item 1A - Risk Factors on page 18.
The information that follows is derived, for the most part, from, and in some instances is an extract from, the technical report summary (TRS) prepared in compliance with the Item 601(b)(96) and subpart 1300 of Regulation S-K. The TRS was prepared by certain of our employees. Portions of the following information are based on assumptions, qualifications and procedures that are not fully described herein. Reference should be made to the full text of the TRS, incorporated herein by reference and made a part of this Report on Form 10-K. The information regarding MLMC was reviewed by our employees that are qualified persons as defined by subpart 1300 of Regulation S-K.
Coteau, Falkirk, Coyote Creek and MLMC, each wholly-owned subsidiaries of NACCO, operate surface coal mines under long-term contracts with power generation companies pursuant to a service-based business model.
Locations of the properties subject to SEC Section 1300 reporting are shown in Figure 1.1 Surface Coal Mines Operational During 2024 Subject to SEC Section 1300 Reporting.
29
Table of Contents
Figure 1.1 Surface Coal Mines Operational During 2024 Subject to SEC Section 1300 Reporting
A summary of coal production at the Mines subject to SEC Section 1300 Reporting for the past three years has been tabulated and is presented on Table 1.1 Production Summary.
Tons (in millions)
2022 2023 2024
The Coteau Properties Company
13.4 11.4 11.9
The Falkirk Mining Company
7.6 6.6 7.5
Coyote Creek Mining Company
1.8 2.2 1.9
Mississippi Lignite Mining Company
3.2 2.7 1.9
Totals
26.0 22.9 23.2
Table 1.1 Production Summary
2.0 MINING PROPERTIES SUBJECT TO SUBPART 1300 OF REGULATION S-K REPORTING
2.1 Red Hills Mine — Mississippi Lignite Mining Company
MLMC is the owner and operator of the Red Hills Mine. The Red Hills Mine is a lignite surface mine in production. Prior to MLMC, there were no previous mining operations on the Red Hills Mine property.
The MLMC contract is the only operating coal contract in which we are responsible for all operating costs, capital requirements and final mine reclamation; therefore, MLMC is consolidated within our financial statements. 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. Profitability at MLMC is affected by customer demand for coal and changes in the indices that determine sales price and actual costs incurred.
30
Table of Contents
A summary of coal production at MLMC for the past three years has been tabulated and is presented on Table 2.1 Production Summary.
Tons (in millions)
2022 2023 2024
Mississippi Lignite Mining Company
3.2 2.7 1.9
Table 2.1 Production Summary
The Red Hills Mine generally produces between 2 million and 3 million tons of lignite coal annually. The Red Hills Mine started operations in 2000 for plant commissioning, with initial commercial deliveries starting in 2001, and full production and commercial deliveries starting in 2002. All production from the mine is delivered to MLMC's customer's Red Hills Power Plant. During 2023, MLMC received notice from its customer related to a boiler issue at the Red Hills Power Plant that began on December 15, 2023. While this issue has been resolved, it resulted in a reduction in customer demand which had a significant impact on our 2024 results of operations.
The Red Hills Mine, operated by MLMC, is located approximately 120 miles northeast of Jackson, Mississippi (Figure 2.1). 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 8,090 acres of surface interest and 5,150 acres of coal interests. MLMC holds leases granting the right to mine approximately 5,423 acres of coal interests and the right to utilize approximately 4,890 acres of surface interests. MLMC holds subleases under which it has the right to mine approximately 1,683 acres of coal interest. 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.
The towns of Ackerman, Eupora, Starkville, Louisville, Kosciusko, and numerous smaller communities are within a 40-mile radius of the Red Hills Mine and provide a vast employment base. Furthermore, Mississippi State University (MSU) is located approximately 30 miles east of the mine in Starkville. MLMC has a history of partnership with MSU as well as the local community colleges for science, technology, engineering, and mathematics (STEM) research and skilled trades training.
The Red Hills Mine sources power for mine office facilities and operations from 4-County Electric Power Association, and water for the mine office facilities from the Reform Water Association. Fuel for equipment is supplied by a local vendor. The Red Hills Mine has, or is currently constructing, all supporting infrastructure for mining operations.
Local access to the Red Hills Mine is by way of Highway 9 between Ackerman, Mississippi and Eupora, Mississippi which connects to Pensacola Road that leads to the Red Hills Mine paved access road. Pensacola Road connects with Highway 9 approximately 5 miles north of Ackerman, MS. The mine road is approximately 1 mile west from Highway 9 along Pensacola Road.
Travel to the Red Hills Mine by air is possible using the Jackson-Medgar Wiley Evers International Airport in Jackson, Mississippi, approximately 104 miles south of the mine, and then using ground transportation, traveling via Highway 25, Highway 15, and Highway 9. Alternatively, the Golden Triangle Regional Airport is a smaller airport approximately 50 miles from the Red Hills Mine by means of Highway 82 west, Highway 15 south, and Highway 9 north.
The Red Hills Mine is in close proximity to river ports of the Tennessee-Tombigbee Waterway and the Mississippi River. The Lowndes County Port is approximately 60 miles east of the mine. The Port of Greenville is approximately 135 miles west of the mine, and the Port of Vicksburg, approximately 150 miles southwest of the mine. All ports are connected by major state and federal highways.
In addition to transportation via roadways, air and waterways, the Kansas City Southern (KCS) railroad has a depot located approximately 5 miles south of the mine in Ackerman, and is accessible by Highway 9 and Highway 15. MLMC currently has all permits in place for the Red Hills Mine to operate and adhere to a mine plan projected through April 1, 2032. No mineral processing occurs at the Red Hills Mine.
31
Table of Contents
The geology encountered at the Red Hills Mine is stratigraphic in nature with depositional sequences of sands, silts, clays, and lignite. The vertical repetition of geologic strata facilitated a straightforward setting to establish and study the baseline geological, geochemical, geotechnical, and geohydrological conditions at the Red Hills Mine.
Development of the Red Hills Mine began in 1997, with full commercial deliveries commencing in 2002. The mining operation is comprised of four major equipment fleets. Primary removal of burden is achieved with one 82-cubic yard electric-powered dragline, four large track-type push dozers, and a truck and shovel fleet utilizing a 41-cubic yard electric rope shovel. Lignite is mined using a surface miner or a hydraulic backhoe to load a fleet of end dump haul trucks, and is directly shipped to the RHPP or the lignite stockpile. The overall average quality of the mined lignite seams meets the required power plant quality specifications. Therefore, no mineral processing is performed by MLMC.
The mine office facilities and original equipment fleets at the Red Hills Mine were constructed, acquired, or purchased new during the development stage of the mine. The facilities and equipment 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, MLMC evaluates what replacement option will be the most cost-efficient, including the evaluation of both new and used equipment.
The total cost of the property and equipment, net of applicable accumulated amortization, depreciation and impairment as of December 31, 2024 is $52.5 million.
The Red Hills Mine currently has no significant encumbrances to the property. No mining permit violations have been issued at the Red Hills Mine in the past ten years. One notice of violation (NOV) was issued in April 2020 for a water quality exceedance that was determined to not be the fault of Red Hills Mine and no further action was required. A second NOV was issued in June 2022 for a water sampling violation. Both NOVs were not related to the mining permit. Permitting requirements are discussed in Section 17.0 of the TRS.
Figure 2.1 – Red Hills Mine Location
32
Table of Contents
Mineral Resources and Reserves have been summarized from the December 31, 2024 TRS for MLMC. The Mineral Resources and Mineral Reserves as of December 31, 2024 are included as Table 2.2 and Table 2.3. Coal qualities are reported on an as-received moisture basis. Based on the December 31, 2024 TRS, prices in Table 2.2 are based on economic cut-off grades of $34.02 per ton at MLMC and prices in Table 2.3 are based on economic cut-off grades of $34.40 per ton at MLMC.
Material assumptions and criteria used in the determination of Mineral Resource and Mineral Reserves reported herein are provided within the filed TRS for the MLMC – Red Hills Mine dated December 31, 2024.
Section 11.0 of the TRS describes the key assumptions, parameters, and methods used for the estimation of Mineral Resources. Assumptions include a maximum cumulative stripping ratio of 18:1 based on an assumed lignite sales price of $34.02 per ton. A further description of the verified drilling data used to model the lignite deposit for estimation of Mineral Resources is provided in Section 7.2 Drilling Exploration, 8.0 Sample Preparation, Analyses, and Security, and Section 9.0 Data Verification.
Section 12.0 of the TRS describes the key assumptions, parameters, and methods used for the estimation of Mineral Reserves, and include the following:
• Maximum stripping ratio: 14:1;
• Mining production rates on a cubic yard and per ton basis remain relatively consistent with historical performance;
• Mining costs on a unit basis remain relatively consistent with historical performance;
• Minimum minable lignite thickness: 1.0 feet;
• Minimum parting thickness before seams are composited: 6.0 inches;
• Maximum depth of mining: approximately 320 feet;
• Lignite density defined by seam from coal core drilling data and modified by dilution parameters and approximately 80 lb/ft³; and
• Recovery rates by seam ranging from 67% to 100%.
Modifying factors including dilution parameters and technical information related to the mining process are described in detail under Section 13.0 Mining Methods. Economic factors to support the Mineral Reserve estimates are described in Section 18.0 Capital and Operating Costs and 19.0 Economic Analyses.
The Mineral Resources as of December 31, 2024 presented in Table 2.2 below have been estimated by applying a series of geologic and physical limits as well as high-level mining and economic constraints. The mining and economic constraints were limited to a level sufficient to support reasonable prospect for future economic extraction of the estimated Mineral Resources. The categorized Mineral Resources reported herein are exclusive of Mineral Reserves.
Lignite Coal
Resource Classification
Tonnage
( Kt)
Grades/Qualities
Calorific Value (Btu/lb)
Moisture (%wt)
Ash (%wt)
Sulfur (%wt)
Mississippi Lignite Mining Company
Measured
4,400 5,200 44.6 13.0 0.6
Mississippi Lignite Mining Company
Indicated
400 5,180 44.1 13.6 0.6
Mississippi Lignite Mining Company
Measured + Indicated
4,700 5,200 44.5 13.0 0.6
Mississippi Lignite Mining Company
Inferred
100 5,200 45.5 12.0 0.5
Note:
– Mineral Resources estimates have been prepared by a qualified person employed by NACCO Natural Resources as of December 31, 2024.
– Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability and there is no certainty that all or any part of such Mineral Resources will be converted into Mineral Reserves.
– Mineral Resources are in-situ and exclusive of 22.9 million tons (Mt) of Mineral Reserves.
– Mineral Resources are reported using an economic cutoff of $34.02 per ton.
– Resources are presented with a minimum 1 foot seam thickness, a maximum as received moisture basis ash content of 30%, and a minimum calorific value of 4000 BTU/lb on an as received moisture basis cutoff.
– Resources are estimated using Vulcan Software.
– Tonnages and qualities have been rounded to an accuracy level deemed appropriate by the QP. Summation errors due to rounding may exist.
33
Table of Contents
Table 2.2 Mineral Resources Summary as of December 31, 2024
The Mineral Reserves as of December 31, 2024 presented in Table 2.3 below were determined to be the economically mineable portion of the measured and indicated Mineral Resources after the consideration of modifying factors related to the mining process. Inferred Mineral Resources were not considered for Mineral Reserves.
Lignite Coal Reserve Classification Tonnage
(Kt) Grades/Qualities
Calorific Value (Btu/lb) Moisture (%wt) Ash (%wt) Sulfur (%wt)
Mississippi Lignite Mining Company Proven 18,200 5,090 43.3 14.9 0.6
Mississippi Lignite Mining Company Probable 4,700 5,080 43.1 15.1 0.6
Mississippi Lignite Mining Company Total 22,900 5,090 43.3 14.9 0.6
Note:
– Mineral Reserves Estimates have been prepared by a qualified person employed by MLMC as of December 31, 2024.
– Mineral Reserves have been demonstrated to be economic based on a positive cash flow
– Mineral Reserves are stated on a Run of Mine basis
– An economic cutoff in the Life of Mine plan averaged $34.41 per ton and was used to demonstrate coal reserves
– Recovery varies by coal seam and ranges from 67% to 100%
– Mineral Reserves use an economic cut-off of a maximum cumulative stripping ratio of 14:1. There are some instances where the stripping ratio for a single year could exceed 14:1, but the average for the entire area evaluated is less than 14:1.
– Historical coal recovery rates at Red Hills Mine have been applied to generate the Mineral Reserve tonnages.
– Mineral Reserves are estimated using Vulcan Software.
– Tonnages and qualities have been rounded to an accuracy level deemed appropriate by the QP. Summation errors due to rounding may exist.
Table 2.3 Mineral Reserves Summary as of December 31, 2024
Table 2.4 describes the difference between the Mineral Reserves and Mineral Resources reported as of December 31, 2023 and December 31, 2024.
Resource Classification December 31, 2023 Tonnage (Kt)
December 31, 2024 Tonnage (Kt)
Percent Change
Measured 4,300 4,400 2%
Indicated 500 400 (20)%
Measured + Indicated 4,800 4,700 (2)%
Inferred 1,600 100 (94)%
Reserve Classification December 31, 2023 Tonnage (Kt)
December 31, 2024 Tonnage (Kt)
Percent Change
Proven 15,100 18,200 21%
Probable 7,400 4,700 (36)%
Proven + Probable 22,500 22,900 2%
Table 2.4. Net difference of reported Mineral Resources and Mineral Reserves from previous reporting period to current reporting period.
The Mineral Resources and Mineral Reserves as of December 31, 2024 reflect modifications from mining extraction of Mineral Reserves, acquisition of additional leased tracts which increased Mineral Reserves and an update to the resource model which allowed conversion of portions of Mineral Resources to Mineral Reserves. The update to the resource model added 31 quality
34
Table of Contents
core holes and 10 structural drill holes to the resource model. Mining extraction is occurring solely in Mine Area 3. Additionally, MLMC delivered 1.9 million tons during 2024.
2.2 Material Properties with no Mineral Resources or Mineral Reserves
The lignite coal tonnages at Coteau, Falkirk and Coyote Creek have not been classified as measured resources, indicated resources, or inferred resources as defined in Items 1300 through 1305 of Regulation S-K, and as a result, do not have any proven or probable reserves under such definition and are therefore classified as an Exploration Stage Property pursuant to Items 1300 through 1305 of Regulation S-K. Coteau, Falkirk and Coyote Creek will continue to be classified as exploration stage properties until such time as proven or probable mineral reserves have been established in accordance with subpart 1300 of Regulation S-K, even though they continue to deliver lignite to their respective customers.
At Coteau, Coyote Creek and Falkirk, we are 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. inflation. The customers are responsible for funding all mine operating cost, including final mine reclamation, and directly or indirectly providing all of the capital required to build and operate the mine. This contract structure eliminates our exposure to spot coal market price fluctuations.
Coteau, Coyote Creek and Falkirk each have only one customer for which they extract and deliver coal. These customers operate coal-fired electric generation power plants adjacent to each mine location (and in the case of Coteau, a synthetic natural gas and chemical/fertilizer production facility).
The sales price under the Coteau, Coyote Creek and Falkirk contracts are not market driven. Unlike traditional sales made based on market factors, under the provisions of the long-term mining agreements, the coal sales price at Coteau, Coyote Creek and Falkirk includes (i) all costs incurred to extract, process and deliver coal (i.e. the cost of production) and (ii) the agreed-upon profit per ton of coal or MMBtu unit delivered to the customer. Cost of production includes all the costs actually incurred in the operation of the mine including mining, processing and delivery of coal. Costs included within revenue include all production, transportation and maintenance costs including, without limitation, the following types of costs:
◦ Labor, which include wages and all related payroll taxes, benefits and fringes, including welfare plans; group insurance, vacations and other comparable benefits of employees
◦ Materials and supplies,
◦ Tools,
◦ Machinery and equipment not capitalized or leased,
◦ Costs of acquiring interests in coal reserves and surface lands,
◦ Rental of machinery and equipment,
◦ Power costs,
◦ Reasonable and necessary services by third parties
◦ Insurance including worker’s compensation
◦ Certain taxes, and
◦ Cost of reclamation
The contractually-determined coal sales price includes reimbursement of all costs incurred and the agreed-upon profit. The agreed-upon profit adjusts based on changes in the level of established indices (e.g., CPI-U and/or PPI indices). The cost-plus nature of the contracts provide assurance that all costs incurred, including contemporaneous and final reclamation, will be reimbursed by the respective customer and negates any risk of loss which allows the mines to remain cash flow positive through the end of the contract terms. The coal sales price as well as profitability at Coteau, Falkirk and Coyote Creek are not subject to any change based on market factors. Profitability at these mines is affected by two factors: demand for coal (because this impacts units of agreed profit that are charged) and changes in the indices that determine coal sales price (because this adjusts the agreed-upon per unit profit). Under any scenario, Coteau, Coyote Creek and Falkirk will be cash flow positive as a result of the terms of the mining agreements.
Extraction of Coteau, Coyote Creek and Falkirk’s lignite tonnages is only economically viable as a result of the long-term mining agreements in place with each mine’s respective customer. The development of the Coteau, Coyote Creek and Falkirk mines was conducted in tandem with the development of the respective mine mouth power plants each serve. The power plants were designed to operate exclusively on the coal provided by the adjacent mines. No other market exists for the lignite at Coteau, Coyote Creek and Falkirk as the cost of transportation makes sales to any entity other than the current mine-mouth operator unprofitable.
35
Table of Contents
Coteau, Coyote Creek and Falkirk meet the definition of a VIE. In each case, NACCO is not the primary beneficiary of the VIE as it does not exercise financial control; therefore, NACCO does not consolidate the results of these operations within our financial statements. Instead, these contracts are accounted for as equity method investments. The income before income taxes associated with these VIEs is reported as Earnings of unconsolidated operations on the Consolidated Statements of Operations, and our investment is reported on the line Investments in unconsolidated subsidiaries in the Consolidated Balance Sheets.
Coteau
The Freedom Mine, operated by Coteau, generally produces between 11.5 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. In March 2025, the term of the existing lignite sales agreement was extended until 2032. The term may be extended for an additional five year period, or until 2037, at the option of Coteau.
The Freedom Mine is located approximately 90 miles northwest of Bismarck, North Dakota (Figure 2.2). The main entrance to the Freedom Mine is accessed by means of a paved road and is located on County Road 15. Coteau holds 355 leases granting the right to extract approximately 32,748 acres of coal interests and the right to utilize approximately 22,771 acres of surface interests. In addition, Coteau owns in fee 33,888 acres of surface interests and 4,117 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.
Figure 2.2 – Freedom Mine Location
The towns of Beulah, Hazen, and Stanton along with other smaller communities are within a 40-mile radius of the Freedom Mine and provide a vast supply of the employment base. Employees also come from the cities of Bismarck, Minot, and Dickinson, all of which are less than 100 miles away from the mine.
36
Table of Contents
The Freedom Mine sources power for mine office facilities and operations from Roughrider Electric Cooperative, and water for the mine office facilities from the Southwest Water Authority. Fuel for equipment is supplied by multiple local vendors. The Freedom Mine has, or is currently constructing, all supporting infrastructure for mining operations.
The main entrance to the Freedom Mine is accessed by traveling north of Beulah on Highway 49 for one mile, then north on County Road 21 for two miles, then west on County Road 26 for three miles, and then north on County Road 15 for two miles as shown on Figure 2.2. Location of the Freedom Mine.
Travel to the Freedom Mine by air is possible by means of the Bismarck Municipal Airport, Bismarck, ND, which is approximately 90 miles southeast of the mine. From the airport, the mine is accessed by means of ground transportation by traveling west approximately 50 miles via Interstate 94, taking exit 110 and traveling north approximately 28 miles on ND Highway 49 to Beulah, ND, and so on as explained in the previous paragraph.
Travel to the Freedom Mine by rail is possible using the Amtrak Network, which runs through northern North Dakota mostly along the US Highway 2 corridor, and passes through the larger cities of Williston, Minot, Grand Forks, and Fargo, and smaller cities of Stanley, Rugby, and Devils Lake. From these locations, the mine can be accessed via ground transportation on Interstate 29 or Interstate 94 and various highways. The main highways are US Highway 2, US Highway 83, US Highway 85, US Highway 200, and US Highway 281.
North Dakota’s freight rail service is largely provided by Burlington Northern Santa Fe Railway and Canadian Pacific Railway.
The coal tonnages are located in Mercer County, North Dakota, starting approximately two miles north of Beulah, North Dakota. The formations of sedimentary origin were deposited in the Williston Basin, the dominant structural feature of western 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 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.
Fill-in drilling programs are routinely conducted by Coteau for the purpose of refining guidance related to ongoing operations. It is common practice at the Freedom Mine to tighten the drilling density within the three to four-year block ahead of active operations to an average drill hole spacing of 660-feet. However, additional exploration may also be scheduled in areas farther out to increase confidence in future mine plan projections.
Coteau utilizes standard surface mining techniques to extract coal from the proposed permit area. Mining operations will typically occur in a sequence of seven events: suitable plant growth material removal, overburden removal, coal removal, overburden replacement, final grading, suitable plant growth material replacement, and revegetation.
The mine office facilities and original equipment fleets at the Freedom Mine were constructed, acquired, or purchased new during the development stage of the mine. The facilities and equipment 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, Coteau evaluates what replacement option will be the most cost-efficient, including the evaluation of both new and used equipment.
The total cost of the property, plant and equipment, net of applicable accumulated amortization, depreciation and impairment as of December 31, 2024 is $162.2 million.
The Freedom Mine currently has no significant encumbrances to the property. No NOVs have been issued at the Freedom Mine in the past three years. Coteau currently has all permits in place for the Freedom Mine to operate through 2031. Permit expansions required to extend the life of the mine through 2045 will be acquired as needed. No mineral processing occurs at the Freedom Mine.
Falkirk Mine
The Falkirk Mine generally produces between 7 million and 8 million tons of lignite coal annually. The mine started delivering coal in 1978 primarily for the Coal Creek Station, an electric power generating station. Coal Creek Station was owned by GRE until May 1, 2022 when it was purchased by Rainbow Energy. The initial production period is expected to run through May 1,
37
Table of Contents
2032, but the coal sales agreement may be extended or terminated early under certain circumstances. In 2014, Falkirk began delivering coal to Spiritwood Station, another electric power generating station owned by GRE.
The Falkirk Mine, operated by Falkirk, is located approximately 50 miles north of Bismarck, North Dakota on a paved access road off U.S. Highway 83 (Figure 2.3). Falkirk holds 334 leases granting the right to extract approximately 43,015 acres of coal interests and the right to utilize approximately 22,964 acres of surface interests. In addition, Falkirk owns in fee 41,034 acres of surface interests and 1,788 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 towns of Underwood and Washburn are located within ten miles of the mine, with other small communities also nearby. Numerous employees also reside in Bismarck and Mandan, a distance of about 50 miles.
The Falkirk Mine receives both power and water from Coal Creek Station. However, Falkirk’s East shift change building receives water from McLean-Sheridan Rural Water. Fuel for equipment is supplied by multiple local vendors including: Farstad Oil, Missouri Valley Petroleum, and Enerbase Cooperative Resources.
The main entrance to the Falkirk Mine is accessed by traveling north from Bismarck on State Highway 83 for approximately 50 miles, then going west on the access road, 1st Street SW located four miles south of Underwood. The mine office is located two miles to the west.
Travel to the Falkirk Mine by air is possible using the Bismarck Airport in Bismarck, ND, approximately 55 miles south of the mine, and then using ground transportation, traveling via US Highway 83.
The main railway systems near the Falkirk Mine are Canadian Pacific, BNSF, and Dakota Missouri Valley & Western (DMVW). DMVW crosses through the Falkirk Mine Reserve.
The coal tonnages 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 coal occurs 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.
Operationally, overburden and interburden removal are accomplished using scrapers, dozers, front end loaders, truck shovel fleets, and draglines. Lignite is mined with front end loaders or hydraulic backhoes, and loaded into haul trucks to transport to the stockpile or directly to the customer via truck dumps and conveyors.
Fill-in drilling programs are routinely conducted by Falkirk for the purpose of refining guidance related to ongoing operations. It is common practice at the Falkirk Mine to tighten the drilling density within the three to four-year block ahead of active operations to an average drill hole spacing of 1320-feet. However, additional exploration may also be scheduled in areas farther out to increase confidence in future mine plan projections.
The mine office facilities and original equipment fleets at the Falkirk Mine were constructed, acquired, or purchased new during the development stage of the mine. The facilities and equipment 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, Falkirk evaluates what replacement option will be the most cost-efficient, including the evaluation of both new and used equipment.
The total cost of the property, plant and equipment, net of applicable accumulated amortization, depreciation and impairment as of December 31, 2024 is $58.7 million.
The Falkirk Mine currently has no significant encumbrances to the property. No Notice of Violations (NOVs) have been issued at the Falkirk Mine in the past three years. There are no outstanding permits related to the LOM plan awaiting regulatory approval. The Falkirk Mining Company currently has all permits in place to operate and adhere to the current mine plan. No mineral processing occurs at the Falkirk Mine.
38
Table of Contents
Figure 2.3 – Falkirk Mine Location
Coyote Creek
The Coyote Creek Mine generally produces between 1.5 million and 2.0 million tons of lignite annually. The mine began delivering coal in 2016 to the Coyote Station owned by Otter Tail Power Company, Northern Municipal Power Agency, Montana-Dakota Utilities Company and Northwestern Corporation. The term of the existing lignite sales agreement terminates in 2040.
The Coyote Creek Mine is located approximately 70 miles northwest of Bismarck, North Dakota (Figure 2.4). 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.
39
Table of Contents
Figure 2.4 – Coyote Creek Mine Location
The towns of Beulah, Hazen, and Stanton along with other smaller communities are within a 40-mile radius of the Coyote Creek Mine and provide a vast supply and employment base. A vast supply and employment base also come from some of the major cities of Bismarck, Minot, and Dickinson, all of which are less than 100 miles away from the mine.
The Coyote Creek Mine sources power for mine office facilities and operations from Roughrider Electric Cooperative and Montana-Dakota Utilities Co., and water for the mine office facilities from the Southwest Water Authority. Fuel for equipment is supplied by multiple local vendors. The Coyote Creek Mine has all supporting infrastructure for mining operations.
The main entrance to the mine will be accessed by traveling south of Beulah on Highway 49 for five miles, then west on County Road 25 for four miles. The general location of the Coyote Creek Mine is shown in Figure 1.0 Location of Coyote Creek Mine.
Travel to the Coyote Creek Mine by air is possible using the Bismarck Municipal Airport, Bismarck, ND, approximately 75 miles southeast of the mine. From the airport, the mine is accessed using ground transportation by traveling west approximately 50 miles via Interstate 94, taking exit 110 and traveling north approximately 21 miles on ND Highway 49 to County Road 25, then west for four miles on County Road 25.
Travel to the Coyote Creek Mine by rail is possible using the Amtrak Network, which runs through northern North Dakota mostly along the US Highway 2 corridor, and passes through the larger cities of Williston, Minot, Grand Forks, and Fargo, and smaller cities of Stanley, Rugby, and Devils Lake. From these locations, the mine can be accessed via ground transportation on Interstate 29 or Interstate 94 and various highways. The main highways are US Highway 2, US Highway 83, US Highway 85, US Highway 200, and US Highway 281.
North Dakota’s freight rail service is largely provided by Burlington Northern Santa Fe Railway and Canadian Pacific Railway.
40
Table of Contents
The coal tonnages are located in Mercer County, North Dakota, starting approximately six miles southwest of Beulah, North Dakota. The formations of sedimentary origin were deposited in the Williston Basin, the dominant structural feature of western 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 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.
Fill-in drilling programs are routinely conducted by Coyote Creek for the purpose of refining guidance related to ongoing operations. It is common practice at the Coyote Creek Mine to tighten the drilling density within the three to four-year block ahead of active operations to an average drill hole spacing of 660-feet. However, additional exploration may also be scheduled in areas farther out to increase confidence in future mine plan projections.
Operationally, overburden removal is accomplished using scrapers, dozers, front end loaders, excavators, truck fleets, and a dragline. Lignite is mined with front end loaders, and loaded into haul trucks to transport to the coal stockpile.
The mine office facilities and original equipment fleets at the Coyote Creek Mine were constructed, acquired, or purchased during the development stage of the mine. The facilities and equipment 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, Coyote Creek evaluates what replacement option will be the most cost-efficient, including the evaluation of both new and used equipment.
The total cost of the property, plant and equipment, net of applicable accumulated amortization, depreciation and impairment as of December 31, 2024 is $105.9 million.
The Coyote Creek Mine currently has no significant encumbrances to the property. No NOVs have been issued at the Coyote Creek Mine in the past three years. There are no outstanding permits related to the LOM plan awaiting regulatory approval. Coyote currently has all permits in place for the Coyote Creek Mine to operate and adhere to a mine plan projected through 2040. No mineral processing occurs at the Coyote Creek Mine.
3.0 Internal Control Disclosure Over Mineral Resources and Reserves
The modeling and analysis of our resources and reserves has been developed by our mine personnel and reviewed by several levels of internal management, including the QPs. The development of such resources and reserves estimates, including related assumptions, was a collaborative effort between the QPs and Company staff. This section summarizes the internal control considerations for our development of estimations, including assumptions, used in resource and reserve analysis and modeling.
When determining resources and reserves, as well as the differences between resources and reserves, management developed specific criteria, each of which must be met to qualify as a resource or reserve, respectively. These criteria, such as demonstration of economic viability, points of reference and grade, are specific and attainable. The QPs and our management team agree on the reasonableness of the criteria for the purposes of estimating resources and reserves. Calculations using these criteria are reviewed and validated by the QPs.
Estimations and assumptions were developed independently for each significant mineral location. All estimates require a combination of historical data and key assumptions and parameters. When possible, resources and data from generally accepted industry sources were used to develop these estimations. Review teams were created by utilizing subject matter experts from across all of NACCO to review the cost assumptions and estimations used as the basis of the classification of mineral resources and reserves.
Geological modeling and mine planning efforts serve as a base assumption for resource estimates at MLMC. These outputs have been prepared and reviewed by Company personnel. Mine planning decisions are determined and agreed upon by our management. Management adjusts forward-looking models by reference to historic mining results, including by reviewing actual versus predicted levels of production from the mineral deposit, and if necessary, re-evaluating mining methodologies if production outcomes were not realized as predicted. Ongoing mining of the mineral deposit, coupled with product quality validation pursuant to our and our customer expectations, provides further empirical evidence as to the homogeneity, continuity and characteristics of the deposit. Geologic modeling assumptions are evaluated to historic mining results and are adjusted if necessary to better reflect actual mining results. Ongoing quality validation of production also provides a means to monitor for
41
Table of Contents
any potential changes in quality. Also, ongoing monitoring of ground conditions within the mine, surveying for evidence of subsidence and other visible signs of deterioration that may signal the need to re-evaluate rock mechanics and structure of the mine ultimately inform extraction ratios and mine design, which underpin mineral reserve estimates.
Management also assesses risks inherent in mineral resource and reserve estimates, such as the accuracy of geophysical data that is used to support mine planning, changes in QPs, identifying hazards and informing operations of the presence of mineable deposits. Also, management is aware of risks associated with potential gaps in assessing the completeness of mineral extraction licenses, entitlements or rights, or changes in laws or regulations that could directly impact the ability to assess mineral resources and reserves or impact production levels. Risks inherent in overestimated reserves can impact financial performance when revealed, such as changes in amortizations that are based on life of mine estimates.
4.0 Customer-owned Properties
South Hallsville No. 1 Mine — The Sabine Mining Company
The Sabine Mining Company (Sabine) operated the Sabine Mine in Texas. All production from Sabine was delivered to Southwestern Electric Power Company's (SWEPCO) Henry W. Pirkey Plant (the Pirkey Plant). SWEPCO is an American Electric Power (AEP) company. As a result of the early retirement of the Pirkey Plant, Sabine ceased deliveries in the first quarter of 2023 and commenced final reclamation on April 1, 2023. Funding for mine reclamation is the responsibility of SWEPCO, and Sabine receives compensation for providing mine reclamation services. Sabine will provide mine reclamation services through September 30, 2026. As of October 1, 2026, SWEPCO has an obligation to acquire all of the capital stock of Sabine and complete the remaining mine reclamation.
5.0 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 mining method and total cost of the property, plant and equipment, net of applicable accumulated amortization, depreciation and impairment as of December 31, 2024 is set forth in the chart below:
Location Mining Method Total Historical Cost of Mine
Property, Plant and Equipment, Net of Applicable Accumulated
Amortization, Depreciation and Impairment
Unconsolidated Mining Operations (in millions)
Freedom Mine — The Coteau Properties Company Dragline operation with 3 draglines $ 162.2
Falkirk Mine — The Falkirk Mining Company Dragline operation with 4 draglines $ 58.7
Coyote Creek Mine — Coyote Creek Mining Company, LLC Dragline operation with 1 dragline $ 105.9
Consolidated Mining Operations
Red Hills Mine — Mississippi Lignite Mining Company Dragline operation with 1 dragline $ 52.5
NAMining Segment - Operations
NAMining provides contract mining services for independently owned mines and quarries, primarily operating and maintaining draglines at limestone quarries and utilizing other mining equipment at sand and gravel quarries. At December 31, 2024, NAMining operated 31 draglines and other equipment at 23 quarries. Of the 31 draglines, 7 are owned by us and 24 are owned by customers. At December 31, 2024, NAMining had $72.7 million in property, plant and equipment, net of applicable accumulated amortization, depreciation and impairment.
42
Table of Contents
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. The following mines were operational during 2024:
Location Name Aggregate Location State Customer Year NACCO Started Operations
White Rock — North Limestone Miami FL WRQ 1995
Krome Limestone Miami FL Cemex 2003
Alico Limestone Ft. Myers FL Cemex 2004
FEC Limestone Miami FL Cemex 2005
SCL Limestone Miami FL Cemex 2006
Central State Aggregates Limestone Zephyrhills FL McDonald Group 2016
Mid Coast Aggregates Limestone Sumter County FL McDonald Group 2016
West Florida Aggregates Limestone Hernando County FL McDonald Group 2016
St. Catherine Limestone Sumter County FL Cemex 2016
Center Hill Limestone Sumter County FL Cemex 2016
Inglis Limestone Crystal River FL Cemex 2016
Titan Corkscrew Limestone Ft. Myers FL Titan America 2017
Palm Beach Aggregates Limestone Loxahatchee FL Palm Beach Aggregates 2017
Perry Limestone Lamont FL Martin Marietta 2018
SDI Aggregates Limestone Florida City FL Martin Marietta 2018
Queenfield Sand and gravel King William County VA Holcim Group
2018
Newberry Limestone Alachua County FL Summit Materials/Quikrete 2019
Seven Diamonds Limestone Pasco County FL Summit Materials/Quikrete 2021
Little River Sand and gravel Ashdown AR Heidelberg Materials
2021
Rosser Sand and gravel Ennis TX Heidelberg Materials
2021
Brooksville Cement Plant Limestone Brooksville FL Cemex 2021
Ash Grove Limestone Louisville NE Ash Grove, A CRH Company
2022
MDL (a)
Phosphate
Polk County
FL
Mineral Development, LLC
2024
(a) The MDL quarry was idled during 2024. NAMining mined de minimis amounts at this location during 2024.
NAMining's customers control all of the limestone and sand reserves within their respective mines. NAMining has no title, claim, lease or option to acquire any of the reserves at any of the mines where it provides services.
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 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.
43
Table of Contents
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 Queenfield Mine is by means of paved road from Dabney's Mill Road (SR 604).
Access to the Newberry mine is by means of paved road from NW County Road 235 (CR 235).
Access to the Seven Diamonds mine is by means of a paved road from US-41 S/Broad St.
Access to the Little River mine is by means of an unpaved road from Little River 60.
Access to the Rosser mine is by means of a paved road from TX-34 S.
Access to Brooksville Cement plant is by means of a paved road from Cement Plant Road.
Access to Ash Grove Louisville Quarry is by means of a paved road from HWY 50.
Access to MDL Quarry is by means of Noralyn Mine Road.
Minerals Management - Operations
As an owner of royalty and mineral interests, our access to information concerning activity and operations of our royalty and mineral interests is limited. We do 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 our mineral interests at a given point in time is not determinable. The following table sets forth our estimate of the number of gross and net productive wells:
December 31, 2024 December 31, 2023
Gross Net Gross Net
Oil 1,295 4.3 1,646 6.6
Natural Gas 922 18.5 246 13.5
Total 2,217 22.8 1,892 20.1
Gross wells are the total wells in which an interest is owned.
Net wells are calculated based on our net royalty interest, factoring in both ownership percentage of gross wells and royalty rate.
The majority of our producing mineral and royalty interest acreage now, or in the future, can be pooled with third-party acreage to form pooled units. Pooling proportionately reduces our royalty interest in wells drilled in a pooled unit, and it proportionately increases the number of wells in which we have such reduced royalty interest.
The following table includes our estimate of acreage for oil and gas mineral interests, NPRIs, and ORRIs:
December 31, 2024 December 31, 2023
Gross Acres Net Royalty Acres
Gross Acres
Net Royalty Acres
Appalachia
34,661 36,199 34,661 36,199
Gulf Coast
27,932 20,105 27,932 20,105
Permian
121,437 4,568 120,636 4,556
Rockies
13,233 659 326 72
Williston
1,194 2,388 1,194 2,388
Total
198,457 63,919 184,749 63,320
We may own more than one type of interest in the same tract of land, but the overlap is not significant. Net royalty acres are calculated based on our ownership and royalty rate, normalized to a standard 1/8 th royalty lease, and assumes a 1/4 th royalty rate for unleased acres.
44
Table of Contents
The following table includes our estimate of developed and undeveloped acreage based on the gross acres in a basin or region and includes mineral interests, NPRIs, and ORRIs:
December 31, 2024 December 31, 2023
Developed Acreage Undeveloped Acreage Gross Acreage Developed Acreage Undeveloped Acreage Gross Acreage
Appalachia 32,156 2,505 34,661 32,156 2,505 34,661
Gulf Coast 22,191 5,741 27,932 22,191 5,741 27,932
Permian 118,021 3,416 121,437 117,220 3,416 120,636
Rockies 7,696 5,537 13,233 326 — 326
Williston — 1,194 1,194 — 1,194 1,194
Total 180,064 18,393 198,457 171,893 12,856 184,749
Undeveloped acres are either unleased and open or are leased acres on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil or natural gas, regardless of whether such acreage contains proved reserves.
Production and Price History
The following table sets forth the estimated oil and natural gas production data related to our mineral and royalty interests as well as certain price and cost information for the years ended December 31:
2024 (4)
2023 (4)
Production data:
Oil (bbl) (1)
149,529 98,553
NGL (bbl) (1)
65,053 56,768
Residue gas (Mcf) (2)
8,482,414 7,601,521
Total BOE (3)
1,628,318 1,422,241
Average realized prices:
Oil (bbl) (1)
$ 78.45 $ 72.19
NGL (bbl) (1)
$ 22.94 $ 23.33
Residue gas (Mcf) (2)
$ 2.08 $ 2.37
Average unit cost
BOE (3)
$ 2.79 $ 3.32
(1) Bbl. One stock tank barrel, or 42 U.S. gallons liquid volume.
(2) Mcf. One thousand cubic feet of natural gas at the contractual pressure and temperature bases.
(3) BOE. Barrel of Oil Equivalent, a conversion factor of 6 MCF of gas was used for 1 equivalent bbl of oil.
(4) As an owner of mineral and royalty interests, our access to information concerning activity and operations of our royalty and mineral interests is limited. As a result, we estimated the last two months of 2024 and 2023 production and pricing data using projections based on decline rates of wells and prior expense information.
Evaluation and Review of Reserves
The reserve estimates as of December 31, 2024 were prepared by Haas & Cobb Petroleum Consultants (Haas & Cobb). Haas & Cobb is an independent, third-party, petroleum engineering firm that meets industry-standards for qualifications, independence, objectivity and confidentiality. The primary technical person, Franklin Stagg, responsible for preparing the Reserve Report, Licensed Professional Engineer in the State of Texas, has been practicing consulting petroleum engineering at Haas & Cobb since 2016 and has over 9 years of industry experience. Haas & Cobb does not own an interest in NACCO or any of our properties, nor is it employed on a contingent basis. A copy of Haas & Cobb's estimated proved reserve report as of December 31, 2024 is incorporated by reference herein to Exhibit 99.1 to this Form 10-K.
The properties evaluated for proved reserves are located in Alabama, Louisiana, New Mexico, Ohio, Pennsylvania, Texas, Utah and Wyoming and represent all of our oil and gas reserves. A reserves audit is not the same as a financial audit. Reserve engineering is a subjective process of estimating volumes of economically recoverable oil and natural gas that cannot be measured in an exact manner. The accuracy of any reserve estimate is a function of the quality of available data and of
45
Table of Contents
engineering and geological interpretation. As a result, the estimates of different engineers often vary. In addition, the results of drilling, testing, and production may justify revisions of such estimates. Accordingly, reserve estimates often differ from the quantities of oil and natural gas that are ultimately recovered. Estimates of economically recoverable oil and natural gas and of future net revenues are based on several variables and assumptions, all of which may vary from actual results, including geologic interpretation, prices, and future production rates and costs.
The reserves estimates have been prepared using standard engineering practices generally accepted by the petroleum industry. Decline curve analysis was used to estimate the remaining reserves of pressure depletion reservoirs with enough historical production data to establish decline trends. Reservoirs under non-pressure depletion drive mechanisms and non-producing reserves were estimated by volumetric analysis, research of analogous reservoirs, or a combination of both. Reserves have been estimated using deterministic and probabilistic methods. The appropriate methodology was used, as deemed necessary, to estimate reserves in conformance with SEC regulations. The maximum remaining reserves life assigned to wells included in this report is 50 years.
Total net proved reserves are defined as our natural gas and hydrocarbon liquid reserves after deducting all royalties, overriding royalties, and reversionary interests owned by outside parties that become effective upon payout of specified monetary balances. All reserves estimates have been prepared using standard engineering practices generally accepted by the petroleum industry and conform to guidelines developed and adopted by the SEC.
Technologies Used in Reserve Estimation
The SEC’s reserves rules allow the use of techniques that have been proved effective by actual production from projects in the same reservoir or an analogous reservoir or by other evidence using reliable technology that establishes reasonable certainty. The term reasonable certainty implies a high degree of confidence that the quantities of oil, natural gas and/or NGLs actually recovered will equal or exceed the estimate. To achieve reasonable certainty, we employed technologies that have been demonstrated to yield results with consistency and repeatability. The technologies and economic data used in the estimation of our proved reserves include, but are not limited to, well logs, geologic maps, seismic data, well test data, production data, historical price and cost information and property ownership interests. The accuracy of the estimates of our reserves is a function of:
• the quality and quantity of available data and the engineering and geological interpretation of that data;
• estimates regarding the amount and timing of future operating costs, development costs and workovers, all of which may vary considerably from actual results;
• future prices of oil, natural gas and NGLs, which may vary considerably from those estimated; and
• the judgment of the persons preparing the estimates.
The following table presents our estimated net proved oil and natural gas reserves based on the reserve report prepared by Haas & Cobb, our independent petroleum engineering firm. All of our reserves are located in the United States.
Net reserves as of December 31, 2024 Net reserves as of December 31, 2023
Oil (bbl) (1)
NGL (bbl) (1)
Residue gas (Mcf) (2)
Oil (bbl) (1)
NGL (bbl) (1)
Residue gas (Mcf) (2)
Proved developed 620,790 443,650 27,491,840 656,370 380,650 23,596,110
Proved undeveloped 74,400 30,280 135,830 9,020 3,720 26,420
Total 695,190 473,930 27,627,670 665,390 384,370 23,622,530
(1) Bbl. One stock tank barrel, or 42 U.S. gallons liquid volume.
(2) Mcf. One thousand cubic feet of natural gas at the contractual pressure and temperature bases.
We do not currently have any material investments under which it would be required to bear the cost of exploration, production or development. We did not make capital expenditures to convert proved undeveloped reserves from undeveloped to developed.
Internal Control Disclosure
Our internal staff works closely with Haas & Cobb to ensure the integrity, accuracy and timeliness of the data used to calculate proved reserves relating to NACCO's assets. Internal technical team members met with independent reserve engineers periodically during the period covered by the reserves report to discuss the assumptions and methods used in the proved reserve estimation process.
46
Table of Contents
The preparation of our proved reserve estimates is completed in accordance with internal control procedures. These procedures, which are intended to ensure reliability of reserve estimations, include the following:
• Review and verification of historical production data, which data is based on actual production as reported by third-party producers who lease our royalty and mineral interests;
• Preparation of reserve estimates by Haas & Cobb under the direct supervision of internal staff; and
• Verification of property ownership by our land department.
The Minerals Management Segment’s Vice President of Engineering and Finance is the technical person primarily responsible for overseeing the preparation of the internal reserve estimates and for coordinating with Haas & Cobb in the preparation of the third-party reserve report. The Vice President of Engineering and Finance has over 15 years of industry experience with positions of increasing responsibility and reports directly to the President of Catapult Mineral Partners, our business unit focused on managing and expanding our portfolio of oil and gas mineral and royalty interests.
Estimated Proved Reserves
The following table summarizes changes in proved reserves during the year ended December 31, 2024:
Estimated Proved Reserves
Oil (bbl) (1)
NGL (bbl) (1)
Residue gas (Mcf) (2)
December 31, 2023 665,390 384,370 23,622,530
Purchases 14,005 1,233 29,268
Extensions and discoveries 236,491 85,087 7,040,710
Revisions of previous estimates (3)
(105,479) 63,441 (498,627)
Production (32,077) (15,687) (1,843,911)
Other (83,140) (44,514) (722,300)
December 31, 2024 695,190 473,930 27,627,670
Estimated Proved Undeveloped Reserves (PUDs)
The following table summarizes changes in PUDs during the year ended December 31, 2024:
Estimated Proved Undeveloped Reserves
Oil (bbl) (1)
NGL (bbl) (1)
Residue gas (Mcf) (2)
December 31, 2023 9,020 3,720 26,420
Purchases 2,208 38 5,237
Extensions and discoveries 69,716 27,902 126,724
Conversions
(3,322) (1,914) (10,017)
Revisions of previous estimates (3)
(3,222) 534 (12,534)
December 31, 2024 74,400 30,280 135,830
(1) Bbl. One stock tank barrel, or 42 U.S. gallons liquid volume.
(2) Mcf. One thousand cubic feet of natural gas at the contractual pressure and temperature bases.
(3) Revisions of previous estimates include technical revisions due to changes in commodity prices, historical and projected performance and other factors.
As an owner of mineral and royalty interests, we generally do not have evidence or approval of operators’ development plans. As a result, proved undeveloped reserve estimates are limited to those relatively few locations for which drilling permits have been publicly filed. As of December 31, 2024, PUD reserves consists of 89 wells in various stages of drilling or completions. As of December 31, 2024, less than 1% of our total proved reserves were classified as PUDs.
Headquarter locations
NACCO leases office space in Highland Hills, Ohio, a suburb of Cleveland, Ohio, which serves as our corporate headquarters.
Coal Mining and Minerals Management lease corporate headquarters office space in Plano, Texas.
47
Table of Contents
NAMining leases office and warehouse space in Medley, Florida.