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What changed in WARRIOR MET COAL, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of WARRIOR MET COAL, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+655 added−651 removedSource: 10-K (2024-02-14) vs 10-K (2023-02-15)

Top changes in WARRIOR MET COAL, INC.'s 2023 10-K

655 paragraphs added · 651 removed · 521 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

120 edited+35 added−38 removed104 unchanged
Biggest changeThe coal from our mines is competitive in quality with the premium HCC produced in Australia, which is used to set pricing for the industry. The combination of low sulfur, low-to-medium ash, LV to MV and high coking strength drives our consistently high price realization relative to other U.S. met coal producers who typically focus on lower rank met coals.
Biggest changeThe combination of low sulfur, low-to-medium ash, Low Vol to High Vol A and high coking strength drives our consistently high price realization relative to other U.S. steelmaking coal producers who typically focus on lower rank steelmaking coals. We believe Mine No. 4 and Mine No. 7 are two of the lowest cost steelmaking coal mines in North America.
We have also elevated our efforts on minority and veteran recruiting by visiting and recruiting from Historically Black Colleges and Universities, growing existing and seeking new partnerships with groups to provide diverse internships, and attending and recruiting at military job fairs .
We have also elevated our efforts on minority and veteran recruiting by visiting and recruiting from Historically Black Colleges and Universities, growing existing partnerships and seeking new partnerships with groups to provide diverse internships, and attending and recruiting at military job fairs .
These efforts help employees 12 pursue career paths that are both interesting and rewarding, and will also assist in their pursuit of their individual goals, while at the same time helping to develop robust talent pipelines that support broader company succession planning efforts. Diversity, Equity and Inclusion: We work to foster an environment in which each person can thrive.
These 12 efforts help employees pursue career paths that are both interesting and rewarding, and will also assist in their pursuit of their individual goals, while at the same time helping to develop robust talent pipelines that support broader company succession planning efforts. Diversity, Equity and Inclusion: We work to foster an environment in which each person can thrive.
In the U.S., environmental laws and regulations include, but are not limited to, the federal Clean Air Act and its state and local counterparts with respect to air emissions; the Clean Water Act and its state counterparts with respect to water discharges and dredge and fill operations; the Resource Conservation and Recovery Act and its state counterparts with respect to solid and hazardous waste generation, treatment, storage and disposal, as well as the regulation of underground storage tanks; the Comprehensive Environmental Response, Compensation and Liability Act and its state counterparts with respect to releases, threatened releases and remediation of hazardous substances; the Endangered Species Act with respect to protection of threatened and endangered species; the National Environmental Policy Act with respect to the impacts of federal actions such as the issuance of permits and licenses; and the Surface Mining Control and Reclamation Act of 1977 and its state counterparts 13 with respect to environmental protection and reclamation standards for mining activities.
In the U.S., environmental laws and regulations include, but are not limited to, the Clean Air Act and its state and local counterparts with respect to air emissions; the Clean Water Act and its state counterparts with respect to water discharges and dredge and fill operations; the Resource Conservation and Recovery Act and its state counterparts with respect to solid and hazardous waste generation, treatment, storage and disposal, as well as the regulation of underground storage tanks; the 13 Comprehensive Environmental Response, Compensation and Liability Act and its state counterparts with respect to releases, threatened releases and remediation of hazardous substances; the Endangered Species Act with respect to protection of threatened and endangered species; the National Environmental Policy Act with respect to the impacts of federal actions such as the issuance of permits and licenses; and the Surface Mining Control and Reclamation Act of 1977 and its state counterparts with respect to environmental protection and reclamation standards for mining activities.
In addition, certain of our subsidiaries are responsible for medical and disability benefits for black lung disease under the Federal Coal Mine Health and Safety Act of 1969, the Mine Act and the Black Lung Benefits Revenue Act of 1977 and the Black Lung Benefits Reform Act of 1977 (together, the “Black Lung Benefits Act”), each as amended, and are insured under a guaranteed cost insurance policy beginning on April 1, 2016 through May 31, 2018 for black lung claims of any of our employees.
In addition, certain of our subsidiaries are responsible for medical and disability benefits for black lung disease under the Federal Coal Mine Health and Safety Act of 1969, the Mine Act and the Black Lung Benefits Revenue Act of 1977 and the Black Lung Benefits Reform Act of 1977, each as amended (together, the “Black Lung Benefits Act”), and are insured under a guaranteed cost insurance policy beginning on April 1, 2016 through May 31, 2018 for black lung claims of any of our employees.
Item 1. Business Overview Warrior Met Coal, Inc. (together with its subsidiaries, the "Company" or "Warrior") is a U.S.-based, environmentally and socially minded supplier to the global steel industry headquartered in Brookwood, Alabama. We are dedicated entirely to mining non-thermal met coal used as a critical component of steel production by metal manufacturers in Europe, South America and Asia.
Item 1. Business Overview Warrior Met Coal, Inc. (together with its subsidiaries, the "Company" or "Warrior") is a U.S.-based, environmentally and socially minded supplier to the global steel industry headquartered in Brookwood, Alabama. We are dedicated entirely to mining non-thermal steelmaking coal used as a critical component of steel production by metal manufacturers in Europe, South America and Asia.
The text of the Paris Agreement calls for nations to undertake “ambitious efforts” to hold the increase in the global average temperature to well below 2º C above pre-industrial levels and pursue efforts to limit the temperature increase to 1.5º C above pre-industrial levels; reach global peaking of GHG 17 emissions as soon as possible; and take action to conserve and enhance sinks and reservoirs of GHGs, among other requirements.
The text of the Paris Agreement calls for nations to undertake “ambitious efforts” to hold the increase in the global average temperature to well below 2º C above pre-industrial levels and pursue efforts to limit the temperature increase to 1.5º C above pre-industrial levels; reach global peaking of GHG emissions as soon as possible; and take action to conserve and enhance sinks and reservoirs of GHGs, among other requirements.
Our natural gas operations remove and sell natural gas from the coal seams owned or leased by reducing natural gas levels in our mines. We operate as a single reportable segment. See the financial statements beginning on page F-1 of this Annual Report for our consolidated revenues, profit/loss and total assets.
Our natural gas operations remove and sell natural gas from our owned and leased coal seams by reducing natural gas levels in our mines. We operate as a single reportable segment. See the financial statements beginning on page F-1 of this Annual Report for our consolidated revenues, profit/loss and total assets.
On July 12, 2022, we received a decision on our appeal from the DOL lowering the amount of collateral required to be posted from $39.8 million to $28 million. We appealed this decision. In addition, on January 19, 2023, the DOL proposed revisions to regulations under the Black Lung Benefits Act governing authorization of self-insurers.
On July 12, 2022, we received a decision on our appeal from the DOL lowering the amount of collateral required to be posted from $39.8 million to $28.0 million. We appealed this decision. In addition, on January 19, 2023, the DOL proposed revisions to regulations under the Black Lung Benefits Act governing authorization of self-insurers.
The findings by the EPA allowed the agency to proceed with the adoption and implementation of regulations to restrict emissions of GHGs under existing provisions of the federal Clean Air Act, including rules that regulate emissions of GHGs from motor vehicles and certain large stationary sources of emissions such as power plants or industrial facilities.
The findings by the EPA allowed the agency to proceed with the adoption and implementation of regulations to restrict emissions of GHGs under existing provisions of the Clean Air Act, including rules that regulate emissions of GHGs from motor vehicles and certain large stationary sources of emissions such as power plants or industrial facilities.
Recent regulatory actions and court decisions have created some uncertainty over the scope of CWA jurisdiction. On June 29, 2015, the EPA and the USACE jointly promulgated final rules expanding the scope of waters protected under the CWA, revising regulations that had been in place for more than 25 years.
Recent regulatory actions and court decisions created some uncertainty over the scope of CWA jurisdiction. On June 29, 2015, the EPA and the USACE jointly promulgated final rules expanding the scope of waters protected under the CWA, revising regulations that had been in place for more than 25 years.
Also, the designation of previously unidentified 19 threatened, endangered or special status species in areas where we operate could cause us to incur additional costs or become subject to operating delays, restrictions or bans. Seasonality Our primary business is not materially impacted by seasonal fluctuations.
Also, the designation of previously unidentified threatened, endangered or special status species in areas where we operate could cause us to incur additional costs or become subject to operating delays, restrictions or bans. Seasonality Our primary business is not materially impacted by seasonal fluctuations.
Additionally, all four Board Committees (Nominating and Corporate Governance, Audit, Compensation, and Sustainability, Environmental Health and Safety) play specific and important roles in setting the tone by providing oversight for and fostering a culture of strong corporate governance, ethics, and compliance as described in the charters on our website.
Additionally, all four Board Committees (Nominating and Corporate Governance, Audit, Compensation, and Sustainability, Environmental Health and Safety) play specific and important roles in setting the tone for the Company by providing oversight for and fostering a culture of strong corporate governance, ethics, and compliance as described in the charters on our website.
The amount of security required to be obtained can change as the result of new federal or state laws, as well as changes to the factors used to calculate the bonding or security amounts. Surety bond rates have increased in recent years and the market terms of such bonds have generally become less favorable.
The amount of security required to be obtained can change as the result of changes to federal or state laws, as well as changes to the factors used to calculate the bonding or security amounts. Surety bond rates have increased in recent years and the market terms of such bonds have generally become less favorable.
Biodiversity We recognize the importance of our natural surroundings and aim to be the best stewards of the delicate and diverse natural ecosystem located on our properties and within the surrounding areas. In 2021, we earned the Land Stewardship Award from the Alabama Mining Association for a wetland development project.
Biodiversity We recognize the importance of our natural surroundings and aim to be the best stewards of the delicate and diverse natural ecosystem located on our properties and within the surrounding areas. In 2021 and 2022, we earned the Land Stewardship Award from the Alabama Mining Association for a wetland development project.
Based on our management’s operational experience, we are confident in our ability to continue to produce at or close to capacity in a safe and efficient manner, and with a comparable cost profile to our current costs, should market conditions warrant. Maximize organic growth.
Based on our management’s operational experience, we are confident in our ability to continue to produce at or close to capacity in a safe and efficient manner, and with a comparable cost profile to our current costs, should market conditions warrant. Maximize organic growth and profitability.
We also make available on our website (http://www.warriormetcoal.com) all of the documents (including any amendments thereto) that we file or furnish with the SEC, free of charge, as soon as reasonably practicable after we electronically file such material with the SEC.
We also make available on our website (http://www.warriormetcoal.com) all of the documents (including any amendments thereto) that we file or furnish with the SEC, free of charge, as soon as reasonably practicable after we 19 electronically file such material with the SEC.
Our Code of Business Conduct and Ethics, Corporate Governance Guidelines and the charters of our audit committee, compensation committee, nominating and corporate governance committee and environmental, health & safety committee are also available on our website and in print free of charge to any stockholder who requests them.
Our Code of Business Conduct and Ethics, Corporate Governance Guidelines and the charters of our audit committee, compensation committee, nominating and corporate governance committee and sustainability, environmental, health & safety committee are also available on our website and in print free of charge to any stockholder who requests them.
These qualities make our coal ideally suited as a coking coal for the manufacture of steel. As a result of our high quality coal, our realized price has historically approximated the Platts Premium Low Volatility (“LV”) FOB Australian Index price (the “S&P Platts Index”).
These qualities make our coal ideally suited as a coking coal for the manufacture of steel. As a result of our high-quality coal, our realized price has historically approximated the Platts Premium Low Volatility FOB Australian Index price (the “S&P Platts Index”).
In December 2009, the EPA published findings that GHG emissions present an endangerment to public health and welfare because, according to the EPA, emissions of such gases contribute to warming of the earth’s atmosphere and other climatic changes.
In particular, in December 2009, the EPA published findings that GHG emissions present an endangerment to public health and welfare because, according to the EPA, emissions of such gases contribute to warming of the earth's atmosphere and other climatic changes.
We are in material compliance with our current permits; however, there can be no guarantee that we will be able to meet new or future standards with respect to our permit applications. 18 • Dredge and Fill Permits .
We are in material compliance with our current permits; however, there can be no guarantee that we will be able to meet new or future standards with respect to our permit applications. • Dredge and Fill Permits .
Waste Management We have a strong environmental compliance record (99.89%) with the EPA's NPDES program, which addresses water pollution by regulating point sources that discharge pollutants into U.S. waters. According to the World Resources Institute, we do not have any mines operating within or near regions identified with high or extremely high baseline water stress.
Waste Management We have a strong environmental compliance record (99.93%) with the EPA's NPDES program, which addresses water pollution by regulating point sources that discharge pollutants into U.S. waters. According to the World Resources Institute, we do not have any mines operating within or near regions identified with high or extremely high baseline water stress.
Furthermore, following the acquisition of certain assets of Walter Energy, we hired several key personnel with extensive direct operational experience in met coal longwall mining, including our Chief Operating Officer, Jack Richardson, and a member of our Board of Directors, Stephen D. Williams. We have a strong record of operating safe mines and are committed to environmental excellence.
Furthermore, following the acquisition of certain assets of Walter Energy, we hired several key personnel with extensive direct operational experience in steelmaking coal longwall mining, including our Chief Operating Officer, Jack Richardson, and a member of our board of directors (the "Board"), Stephen D. Williams. We have a strong record of operating safe mines and are committed to environmental excellence.
The proposed rules requires, among other requirements, all self-insured operators to post security of at least 120 percent of their projected black lung liabilities. The changes in the estimated claims to be paid or changes in the amount of collateral required by the DOL may have a greater impact on our profitability and cash flows in the future.
The proposed rules require, among other requirements, all self-insured operators to post security of at least 120 percent of their projected black lung liabilities. The changes in the estimated claims to be paid or changes in the amount of collateral required by the DOL may have a greater impact on our profitability and cash flows in the future.
Environmental We work to safely and efficiently produce some of the highest quality HCC met coal for our global customers while prioritizing the safety of our environmental footprint. This includes accounting for and working to reduce our GHG emissions, water usage and impact on biodiversity. GHG Emissions We are proud of our environmental performance, including our award-winning reclamation activities.
Environmental We work to safely and efficiently produce some of the highest quality HCC steelmaking coal for our global customers while prioritizing the safety of our environmental footprint. This includes accounting for and working to reduce our GHG emissions, water usage and impact on biodiversity. GHG Emissions We are proud of our environmental performance, including our award-winning reclamation activities.
It is possible that the Paris Agreement and subsequent domestic and international regulations will have adverse effects on the market for met coal, natural gas, and other fossil fuel products. Methane must be expelled from our underground coal mines for mining safety reasons. Our gas operations extract methane from our underground met coal mines prior to mining.
It is possible that the Paris Agreement and subsequent domestic and international regulations will have adverse effects on the market for steelmaking coal, natural gas, and other fossil fuel products. Methane must be expelled from our underground coal mines for mining safety reasons. Our gas operations extract methane from our underground steelmaking coal mines prior to mining.
Both mines also have access to our barge load-out facility on the Black Warrior River. Service via both rail and barge culminates in delivery to the Port of Mobile in Alabama, where shipments are exported to our international customers via ocean vessels. Substantially all of our met coal sales consist of sales to international customers.
Both mines also have access to our barge load-out facility on the Black Warrior River. Service via both rail and barge culminates in delivery to the Port of Mobile in Alabama, where shipments are exported to our international customers via ocean vessels. Substantially all of our steelmaking coal sales consist of sales to international customers.
We have the ability to acquire adjacent reserves that would increase total reserves to 144 million metric tons at Blue Creek. According to our third-party reserve report, the met coal reserve base of Blue Creek is a high-quality High Vol A coal that is characterized by low-sulfur and high CSR.
We have the ability to acquire adjacent reserves that would increase total reserves to 144 million metric tons at Blue Creek. According to our third-party reserve report, the steelmaking coal reserve base of Blue Creek is a high-quality High Vol A coal that is characterized by low-sulfur and high CSR.
Marketing, Sales and Customers Met coal prices can differ substantially by region and are impacted by many factors, including the overall economy, demand for steel, location, market, quality and type of met coal, mine operation costs and the cost of customer alternatives. The major factors influencing our business are the global economy and demand for steel.
Marketing, Sales and Customers Steelmaking coal prices can differ substantially by region and are impacted by many factors, including the overall economy, demand for steel, location, market, quality and type of steelmaking coal, mine operation costs and the cost of customer alternatives. The major factors influencing our business are the global economy and demand for steel.
We do not believe that we have any operational or financial risk associated with our dependence on any individual service providers.
We do not believe that we have any material operational or financial risk associated with our dependence on any individual service providers.
Demand for met coal and natural gas also may be impacted by international efforts to reduce GHG emissions. In December 2015, the United States joined the international community at the 21st Conference of the Parties of the United Nations Framework Convention on Climate Change in Paris, France.
Demand for steelmaking coal and natural gas also may be impacted by international efforts to reduce GHG emissions. In December 2015, the United States joined the international community at the 21st Conference of the Parties of the United Nations Framework Convention on Climate Change in Paris, France.
The Company recently released its annual ESG sustainability report that was prepared in accordance with the Global Reporting Initiative Standards (Core Option) and the Sustainability Accounting Standards Board standards for Coal Operations and highlights our goals of becoming an industry leader in environmental stewardship, maintaining a strong environmental compliance record and safety statistics that are better than the industry average, and forming collaborative partnerships focused on workforce development and our communities.
The Company recently released its annual Environmental, Social and Corporate Governance ("ESG") sustainability report that was prepared in accordance with the Global Reporting Initiative Standards (Core Option) and the Sustainability Accounting Standards Board standards for Coal Operations and highlights our goals of becoming an industry leader in environmental stewardship, maintaining a strong environmental compliance record and safety statistics that are better than the industry average, and forming collaborative partnerships focused on workforce development and our communities.
Our Competitive Strengths We believe that we have the following competitive strengths: Leading pure play met coal producer focused on premium met coal products . Unlike other publicly-listed U.S. coal companies, substantially all of our revenue is derived from the sale of premium met coal in the global seaborne markets.
Our Competitive Strengths We believe that we have the following competitive strengths: Leading pure play steelmaking coal producer focused on premium steelmaking coal products . Unlike other publicly listed U.S. coal companies, substantially all of our revenue is derived from the sale of premium steelmaking coal in the global seaborne markets.
Demand for met coal is generally more heavily influenced by other factors such as the global economy, demand for steel, interest rates and commodity prices. Available Information We are required to file annual, quarterly and current reports, proxy statements and other information with the SEC.
Demand for steelmaking coal is generally more heavily influenced by other factors such as the global economy, demand for steel, interest rates and commodity prices. Available Information We are required to file annual, quarterly and current reports, proxy statements and other information with the SEC.
Our two operating mines and Blue Creek are located approximately 300 miles from our export terminal at the Port of Mobile in Alabama, which we believe to be the shortest mine-to-port distance of any U.S.-based met coal producer.
Our two operating mines and Blue Creek are located approximately 300 miles from our export terminal at the Port of Mobile in Alabama, which we believe to be the shortest mine-to-port distance of any U.S.-based steelmaking coal producer.
We believe maintaining financial discipline will provide us with the ability to manage the volatility in our business resulting from changes in met coal prices. We intend to preserve a strong and conservative balance sheet, with sufficient liquidity and financial flexibility to support our operations.
We believe maintaining financial discipline will provide us with the ability to manage the volatility in our business resulting from changes in steelmaking coal prices. We intend to preserve a strong and conservative balance sheet, with sufficient liquidity and financial flexibility to support our operations.
As a result of our premium met coal, we are able to achieve higher realized prices and operating margins relative to other U.S. met coal producers. World-class Blue Creek provides us with a high-return growth project.
As a result of our premium steelmaking coal, we are able to achieve higher realized prices and operating margins relative to other U.S. steelmaking coal producers. World-class Blue Creek provides us with a high-return growth project.
The new single longwall mine at Blue Creek is expected to have the capacity to produce an average of 4.4 million metric tons per annum of premium High Vol A met coal over the first ten years of production.
The new single longwall mine at Blue Creek is expected to have the capacity to produce an average of 4.4 million metric tons per annum of premium High Vol A steelmaking coal over the first ten years of production.
Under the Black Lung Benefits Act, as amended, each coal mine operator must make payments to a trust fund for the payment of benefits and medical expenses to claimants who last worked in the coal industry prior to January 1, 1970.
Under the Black Lung Benefits Act, each coal mine operator must make payments to a trust fund for the payment of benefits and medical expenses to claimants who last worked in the coal industry prior to January 1, 1970.
Our highly flexible cost structure provides us with a key competitive advantage relative to our competitors and which we expect should allow us to remain profitable in all coal market conditions. Significant logistical cost advantage to the seaborne market .
Our highly flexible cost structure provides us with a key competitive advantage relative to our competitors and which we expect should allow us to remain profitable in all coal market conditions. Robust logistics and significant logistical cost advantage to the seaborne market .
The met coal preparation and blending facilities receive, blend, process and ship met coal that is produced from the mines. Using these facilities, we are able to ensure a consistent quality and efficiently blend our met coal to meet our customers’ specifications.
The steelmaking coal preparation and blending facilities receive, blend, process and ship steelmaking coal that is produced from the mines. Using these facilities, we are able to ensure a consistent quality and efficiently blend our steelmaking coal to meet our customers’ specifications.
We also work with universities to attract top candidates in key fields, while seeking to develop its in-house talent and providing opportunities for employees to increase their level of responsibility within the organization.
We also work with universities to attract top candidates in key fields, while seeking to develop our in-house talent and providing opportunities for employees to increase their level of responsibility within the organization.
We enjoy a shipping time and distance advantage serving our customers throughout the Atlantic Basin relative to competitors located in Australia and Western Canada. Our HCC, mined from the Southern Appalachian region of the United States, is characterized by low-to-medium volatile matter (“VM”) and high coke strength after reaction (“CSR”).
We have a shipping time and distance advantage serving our customers throughout the Atlantic Basin relative to competitors located in Australia and Western Canada. Our HCC, mined from the Southern Appalachian region of the United States, is characterized by low-to-high volatile matter (“VM”) and high coke strength after reaction (“CSR”).
While the above power plant rules do not affect our marketing of met coal, the continued regulatory focus could lead to future GHG regulations for the mining industry and its steelmaking customers, which ultimately could make it more difficult or costly for us to conduct our operations or adversely affect demand for our products.
While the proposed power plant rules do not affect our marketing of our steelmaking coal, the continued regulatory focus could lead to future GHG regulations for the mining industry and its steelmaking customers, which ultimately could make it more difficult or costly for us to conduct our operations or adversely affect demand for our products.
Water Management We continuously work to evaluate and test emerging technologies that can optimize our water usage. Freshwater is primarily used for processing coal or sent underground for use in mining operations. This optimizes the performance of our mining machinery and helps create a safer environment for our workforce.
Water Management We continuously work to evaluate and test emerging technologies that can optimize our water usage. Freshwater is primarily used for processing coal or sent underground for use in mining operations. This optimizes the performance of our mining machinery and helps create and maintain a safe environment for our workforce.
The Environmental, Health & Safety Committee of the Board is tasked with assessing the effectiveness of the Company’s environmental, health and safety policies, programs and initiatives, as well as reviewing and monitoring the Company’s compliance with applicable environmental, health and safety laws, rules and regulations.
The Sustainability, Environmental, Health & Safety Committee of the Board (the "EHS Committee") is tasked with assessing the effectiveness of the Company’s sustainability, environmental, health and safety policies, programs and initiatives, as well as reviewing and monitoring the Company’s compliance with applicable sustainability, environmental, health and safety laws, rules and regulations.
In 2023, we are launching a volunteer PTO program through which employees will receive PTO to volunteer with organizations or causes that are important to them. Talent Attraction: We acknowledge the importance of developing and growing a strong and diverse workforce. Our policies and practices support diversity and equality.
In 2023, we launched a volunteer PTO program through which employees receive PTO to volunteer with organizations or causes that are important to them. Talent Attraction: We acknowledge the importance of developing and growing a strong and diverse workforce. Our policies and practices support diversity and equality.
We are self-insured for these black lung liabilities and have posted $18.6 million in surety bonds and $8.6 million of collateral recognized as short term investments in addition to maintaining a black lung trust of $2.1 million that was acquired from Walter Energy.
We are self-insured for these black lung liabilities and have posted $18.6 million in surety bonds and $9.0 million of collateral recognized as short term investments in addition to maintaining a black lung trust of $1.8 million that was acquired from Walter Energy.
Many mining activities, such as the development of refuse impoundments, fresh water impoundments, refuse fills, and other similar structures, may result in impacts to waters of the United States, including wetlands, streams and, in certain instances, man-made conveyances that have a hydrologic connection to such streams or wetlands.
Many mining activities, such as the development of refuse impoundments, freshwater impoundments, refuse fills, and other similar structures, may result in impacts to waters of the United States, including wetlands, streams and, in certain instances, man-made conveyances that have a hydrologic connection to such streams or wetlands.
We received a letter from the Department of Labor ("DOL") on February 21, 2020 under its new process for self-insurance renewals that would require us to increase the amount of collateral posted to $39.8 million, but we have appealed such increase.
We received a letter from the Department of Labor ("DOL") on February 21, 2020, under its new process for self-insurance renewals, which would require us to increase the amount of collateral posted to $39.8 million, but we appealed such increase.
With the exception of some methane that is vented into the atmosphere when the met coal is mined, much of the methane is captured and sold into the natural gas market and used as fuel.
With the exception of some methane that is vented into the atmosphere when the steelmaking coal is mined, much of the methane is captured and sold into the natural gas market and used as fuel.
Operating at approximately 2,000 feet below the surface, the Mines No. 4 and No. 7 are two of the deepest underground coal mines in North America. The met coal is mined using longwall extraction technology with development support from continuous miners.
Operating at approximately 2,000 feet below the surface, Mines No. 4 and No. 7 are two of the deepest underground coal mines in North 8 America. The steelmaking coal is mined using longwall extraction technology with development support from continuous miners.
Once fully developed, we expect Blue Creek to be a transformational investment that will increase annual production capacity by 60% and expand our product portfolio to our global customers, offering three premium HCCs that are expected to achieve the highest premium met coal prices in the seaborne markets.
Once fully developed, we expect Blue Creek to be a transformational investment that will increase annual production capacity by 60% and expand our product portfolio to our global customers, offering two premium HCCs that are expected to achieve the highest premium steelmaking coal prices in the seaborne markets.
We continually invest in new technologies to lessen our environmental impact and to improve our efficiencies and productivity. Our executive leadership team, from our Board down, is fully committed to being a responsible corporate citizen 10 to our employees, customers, communities, and other stakeholders. Highlights of our comprehensive ESG strategies are detailed below.
We continually invest in new technologies to lessen our environmental impact and to improve our efficiencies and productivity. Our executive leadership team, from our Board down, is fully committed to being a responsible corporate citizen to our employees, customers, communities, and other stakeholders. Highlights of our sustainability strategies are detailed below.
This committee receives quarterly reports from Company management, during which the committee reviews and discusses the Company’s various environmental, health and safety initiatives and any issues related to these areas.
The EHS Committee receives quarterly reports from Company management, during which the EHS Committee reviews and discusses the Company’s various sustainability, environmental, health and safety initiatives and any issues related to these areas.
In contrast, coal produced in the Central Appalachian region of the United States is typically characterized by medium-to-high VM and a CSR that is below the requirements of the Australian Index price. The met coal from our Mines No. 4 and No. 7 is sold as a high-quality LV and MV met coal.
In contrast, coal produced in the Central Appalachian region of the United States is typically characterized by medium-to-high VM and a CSR that is below the requirements of the Australian Index price. The steelmaking coal from our Mines No. 4 and No. 7 is sold as high-quality Low Vol and High Vol A steelmaking coal.
We are a large-scale, low-cost producer and exporter of premium quality met coal, also known as hard coking coal (“HCC”), operating highly-efficient longwall operations in our underground mines based in Alabama, Mine No. 4 and Mine No. 7. Our met coal production totaled 5.7 million metric tons in 2022.
We are a large-scale, low-cost producer and exporter of premium quality met or steelmaking coal, also known as hard coking coal (“HCC”), operating highly efficient longwall operations in our underground mines based in Alabama, Mine No. 4 and Mine No. 7. Our steelmaking coal production totaled 6.9 million metric tons in 2023.
All of our resources are primarily allocated to the mining, transportation and marketing of met coal. The premium nature of our HCC makes it ideally suited as a base feed coal for steel makers and results in price realizations near or above the S&P Global Platts Index (as defined below).
Our resources are primarily allocated to the mining, transportation and marketing of steelmaking coal. The premium nature of our steelmaking coal makes it ideally suited as a base feed coal for steel makers and our Mine No. 7 steelmaking coal results in price realizations near or above the S&P Global Platts Index (as defined below).
On August 30, 2021, a federal court struck down the replacement rule and, on December 30, 2022, the EPA and the USACE published a final rule that would restore water protections that were in place prior to 2015.
On August 30, 2021, a federal court struck down the replacement rule and, on January 18, 2023, the EPA and the USACE published a final rule that would restore water protections that were in place prior to 2015.
We refocused on our long-term environmental goals and successfully set aggressive, yet achievable targets for decreasing our carbon footprint. In connection with this strategy, we established targets which include, among others, a 50% reduction in GHG emissions by 2030 and 25% water usage reduction by 2030.
In 2022, we refocused on our long-term environmental goals and successfully set aggressive, yet achievable targets for decreasing our carbon footprint. In connection with this strategy, we established targets which include a 50% reduction in GHG emissions by 2030 and a 25% water usage reduction by 2030 from our 2021 baseline year.
We strive to conduct all mining-related activities and environmental studies with the intent to minimize ecosystem impacts. Our ADEM-authorized National Pollutant Discharge System discharge permits include quarterly toxicity tests that detect potential water quality issues that could impact local aquatic life. If any evidence of potential impact is discovered, alternative operational plans are activated.
We strive to conduct all mining-related activities and environmental studies with the intent to minimize ecosystem impacts. Our Alabama Department of Environmental Management-authorized NPDES discharge permits include quarterly toxicity tests that detect potential water 11 quality issues that could impact local aquatic life. If any evidence of potential impact is discovered, alternative operational plans are activated.
The combination of low sulfur, low-to-medium ash, LV to MV, and other characteristics of our coal, as well as our ability to blend them, makes our HCC product an important component within our customers’ overall coking coal requirements.
The combination of low sulfur, low-to-medium ash, high CSR, low volatility ("Low Vol") to high volatility ("High Vol"), and other characteristics of our coal, as well as our ability to blend them, makes our HCC product an important component within our customers’ overall coking coal requirements.
As such, we will seek to maintain a conservative financial leverage target of 1.50 - 2.00x based on normalized EBITDA and seek to maintain minimum liquidity of $100 million. We plan to continually evaluate our liquidity needs based on our estimated capital needs.
As such, we will seek to maintain a conservative financial leverage target of 1.50 - 2.00x based on normalized EBITDA and seek to maintain minimum liquidity of $250 million during the development of Blue Creek. We plan to continually evaluate our liquidity needs based on our estimated capital needs.
Our key strategies to achieve this objective are described below: Maximize profitable production . In the year ended December 31, 2022, we produced 5.7 million metric tons of met coal from Mine No. 7 and Mine No. 4.
Our key strategies to achieve this objective are described below: Maximize profitable production . In the year ended December 31, 2023, we produced 6.9 million metric tons of steelmaking coal from Mine No. 7 and Mine No. 4.
We also have 68.2 million metric tons of recoverable reserves and 39.2 million metric tons of coal resources exclusive of reserves, which total 107.4 million metric tons, at Blue Creek located to the northwest of Mine No. 4, based on a reserve report prepared by Marshall Miller.
We also have 67.6 million metric tons of recoverable reserves and 39.7 million metric tons of coal resources exclusive of reserves, which total 107.3 million metric tons, at Blue Creek located to the northwest of Mine No. 4, based on a reserve report prepared by Marshall Miller and Associates, Inc.
As of December 31, 2022, we had outstanding surety bonds with parties for post-mining reclamation at all of our mining operations totaling $41.2 million, $18.6 million for black lung liabilities and $4.2 million for miscellaneous purposes.
As of December 31, 2023, we had outstanding surety bonds with parties for post-mining reclamation at all of our mining operations totaling $44.3 million, $18.6 million for black lung liabilities and $5.2 million for miscellaneous purposes.
We remain committed to taking steps to decrease our carbon footprint by reducing GHG emissions and decreasing our consumption of natural resources. 7 Our Business Strategies Our objective is to increase stockholder value through our continued focus on asset optimization and cost management to drive profitability and cash flow generation.
We remain committed to taking steps to decrease our carbon footprint by reducing GHG emissions and minimizing our impact on the environment. Our Business Strategies Our objective is to increase stockholder value through our continued focus on asset optimization and cost management to drive profitability and cash flow generation.
In 2023, we plan to implement a system to optimize and monitor our water usage and recycling. In addition to improving how we track and measure water consumption, we will strategically draw water from local rivers and springs to store in reservoirs which can be utilized during periods of low flow to prevent possible stress to the local hydrologic balance.
In addition to improving how we track and measure water consumption, we will strategically draw water from local rivers and springs to store in reservoirs which can be utilized during periods of low flow to prevent possible stress to the local hydrologic balance.
Comprehensive Environmental Response, Compensation and Liability Act The Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) and similar state laws affect our met coal mining operations by, among other things, imposing investigation and cleanup requirements for threatened or actual releases of hazardous substances.
Any change or reclassification of this exemption could significantly increase our coal mining costs. Comprehensive Environmental Response, Compensation and Liability Act The Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) and similar state laws affect our steelmaking coal mining operations by, among other things, imposing investigation and cleanup requirements for threatened or actual releases of hazardous substances.
We have implemented a strategy to improve both our sales and marketing focus, with a goal of achieving better pricing relative to the S&P Platts Index, which includes: (i) opportunistic selling into the spot met coal market and (ii) selected instances of entering into fixed price contracts.
We have implemented a strategy to improve both our sales and marketing focus, with a goal of achieving better pricing relative to the S&P Platts Index for our Mine No. 7 coal and the East Coast High Vol A indices for our Mine No. 4 coal, which includes: (i) opportunistic selling into the spot steelmaking coal market and (ii) to a lesser extent selected instances of entering into fixed price contracts.
We typically sell our met coal under fixed supply contracts primarily with indexed pricing terms and volume terms of one to three years. Some of our sales of met coal can, however, occur in the spot market as dictated by available supply and market demand.
We focus on long-term customer relationships where we have a competitive advantage. We typically sell our steelmaking coal under fixed supply contracts primarily with indexed pricing terms and volume terms of one to three years. Some of our sales of steelmaking coal can, however, occur in the spot market as dictated by available supply and market demand.
The IRA contains billions of dollars in incentives for the development of renewable energy, clean hydrogen, clean fuels, electric vehicles, investments in advanced biofuels and supporting infrastructure and carbon capture and sequestration, amongst other provisions.
Also, in August 2022, President Biden signed the Inflation Reduction Act of 2022 ("IRA") into law. The IRA contains billions of dollars in incentives for the development of renewable energy, clean hydrogen, clean fuels, electric vehicles, investments in advanced biofuels and supporting infrastructure and carbon capture and sequestration, amongst other provisions.
Laws and regulations governing emissions of GHGs have been adopted by foreign governments (including the European Union and member countries), U.S. Congress and regulatory agencies, individual states in the U.S. and regional governmental 16 authorities. In particular, in August 2022, President Biden signed the Inflation Reduction Act of 2022 ("IRA") into law.
Laws and regulations governing emissions of GHGs have been adopted by foreign governments (including the European Union and member countries), U.S. Congress and regulatory agencies, individual states in the U.S. and regional governmental 16 authorities.
Our continued emphasis on enhancing our safety performance has resulted in zero fatal incidents as compared to the national fatal incidence rate for underground coal mines in the United States of 0.025 for the nine months ended September 30, 2022, as well as total reportable incidence rates of 2.05 at Mine No. 4 and 1.61 at Mine No. 7 for the year ended December 31, 2022, which is 63% lower than the national total reportable incidence rate for all underground coal mines in the United States of 4.68 for the nine months ended September 30, 2022, which represents the latest data available.
Our continued emphasis on enhancing our safety performance has resulted in total reportable incidence rates of 2.02 at Mine No. 4 and 1.82 at Mine No. 7 for the year ended December 31, 2023, which is 57% lower than the national total reportable incidence rate for all underground coal mines in the United States of 4.39 for the nine months ended September 30, 2023, which represents the latest data available.
In 2022, we partnered with a third-party consultant to develop a comprehensive Environmental, Social and Corporate Governance ("ESG") strategy that was focused on the following objectives, among others, materiality and risk assessment, creating and tracking measurable goals, GHG reduction, water usage reduction, enhancing governance standards and performing a community impact assessment.
We are committed to providing our products in a responsible manner. In 2022, we partnered with a third-party consultant to develop a sustainability strategy that is focused on the following objectives, among others: materiality and risk assessment, creating and tracking measurable goals, GHG reduction, water usage reduction, enhancing governance standards and performing a community impact assessment.
Governance Our Board oversees our policies, creating strategies and initiatives that embrace ESG matters. The Board's Nominating and Corporate Governance Committee has responsibility for developing our Corporate Governance Guidelines, recommending qualified Board candidates and overseeing evaluation of the Board and our management team.
The Board's Nominating and Corporate Governance Committee has responsibility for developing our Corporate Governance Guidelines, recommending qualified Board candidates and overseeing evaluation of the Board and our management team.
Occasionally, demand for such equipment by mining companies can be high and some types of equipment may be in short supply. We continually seek to develop relationships with suppliers that focus on reducing our costs while improving quality and service. We also purchase services at our mine sites, including services related to maintenance for mining equipment, construction and temporary labor.
We continually seek to develop relationships with suppliers that focus on reducing our costs while improving quality and service. We also purchase services at our mine sites, including services related to maintenance for mining equipment, construction and temporary labor.
The Company’s management and board of directors (the "Board") are increasingly focused on these and other opportunities for technical innovation. 8 Description of Our Business Our underground mining operations are headquartered in Brookwood, Alabama and as of December 31, 2022, based on a reserve report prepared by Marshall Miller, were estimated to have approximately 89.0 million metric tons of recoverable reserves located in west central Alabama between the cities of Birmingham and Tuscaloosa.
Description of Our Business Our underground mining operations are headquartered in Brookwood, Alabama and as of December 31, 2023, based on a reserve report prepared by Marshall Miller & Associates, Inc., were estimated to have approximately 82.9 million metric tons of recoverable reserves located in west central Alabama between the cities of Birmingham and Tuscaloosa.
Training We strive to recruit, hire and retain a talented and diverse team of people. Our employees are supported with training and development opportunities to pursue their career paths and to ensure compliance with our policies. We incorporate training best practices, provide continuing education and constantly reinforce individual skills. We are committed to developing and retaining our workforce.
Our employees are supported with training and development opportunities to pursue their career paths and to ensure compliance with our policies. We incorporate training best practices, provide continuing education and constantly reinforce individual skills.
If regulation of GHG emissions does not exempt the release of methane, we may have to curtail met coal production, pay certain taxes or fees for our emissions or incur costs to purchase credits that allow us to continue operations as they now exist at our underground met coal mines.
If regulation of GHG emissions does not exempt the release of methane, we may have to curtail steelmaking coal production, pay certain taxes or fees for our emissions or incur costs to purchase credits that allow us to continue operations as they now exist at our underground steelmaking coal mines. 17 The existing laws and regulations or other current and future efforts to stabilize or reduce GHG emissions could adversely impact the demand for, price of and value of our products and reserves.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

211 edited+43 added−18 removed236 unchanged
Biggest changeIf the Board determines that a Prohibited Transfer (as defined in our certificate of incorporation) has occurred, such Prohibited Transfer shall, to the fullest extent permitted by law, be void ab initio and have no legal effect, and upon written demand by us, the Purported Transferee (as defined in the certificate of incorporation) shall disgorge or cause to be disgorged our securities, together with any dividends or distributions received, with respect to such securities.
Biggest changeThe Board has established procedures to consider requests and if the Board determines that a Prohibited Transfer (as defined in our certificate of incorporation) has occurred, such Prohibited Transfer shall, to the fullest extent permitted by law, be void ab initio and have no legal effect, and upon written demand by us, the Purported Transferee (as defined in the certificate of incorporation) shall disgorge or cause to be disgorged our securities, together with any dividends or distributions received, with respect to such securities. 51 On February 14, 2020, we adopted the Rights Agreement, which was amended on March 4, 2022 to extend the expiration date to April 19, 2026 and increase the exercise price to $56.00 and on December 8, 2023 to increase the exercise price to $159.00, to supplement the 382 Transfer Restrictions.
These laws and regulations, particularly new legislative or administrative proposals (or judicial interpretations of existing laws and regulations), could result in substantially increased capital, operating and compliance costs and could have a material adverse effect on our operations and/or, along with analogous foreign laws and regulations, our customers’ ability to use our products.
These laws and regulations, particularly new legislative or administrative proposals (or judicial interpretations of existing laws and regulations), along with analogous foreign laws and regulations, could result in substantially increased capital, operating and compliance costs and could have a material adverse effect on our operations and/or our customers’ ability to use our products.
Certain factors could change or circumstances could arise that could further limit or eliminate the amount of the available NOLs to the Company, such as an ownership change, an adjustment by a tax authority or changes in state and federal tax legislation.
Certain factors could change or circumstances could arise that could further limit or eliminate the amount of the available federal and state NOLs to the Company, such as an ownership change, an adjustment by a tax authority or changes in state and federal tax legislation.
Subject to the limitations of applicable law, our certificate of incorporation, among other things: • permits us to enter into contracts and transactions in which one or more of our officers or directors may be a party to or may be financially or otherwise interested in so long as such contract or transaction is approved by the Board in accordance with the DGCL; • permits any of our stockholders or non-employee directors and their affiliates to engage in a corporate opportunity in the same or similar business activities or lines of business in which we engage or propose to engage, compete with us and to make investments in any kind of property in which we may make investments and will not be deemed to have 51 (i) acted in a manner inconsistent with his or her fiduciary or other duties to us regarding the opportunity, (ii) acted in bad faith or in a manner inconsistent with our best interests or (iii) be liable to us or our stockholders for breach of any fiduciary duty by reason of the fact that they have engaged in such activities; and • provides that if any of our stockholders, non-employee directors or their affiliates acquire knowledge of a potential business opportunity, transaction or other matter (other than one expressly offered to any non-employee director in writing solely in his or her capacity as our director ), such stockholder, non-employee director or affiliate will have no duty to communicate or offer that opportunity to us, and will be permitted to pursue or acquire such opportunity or offer that opportunity to another person and will not be deemed to have (i) acted in a manner inconsistent with his or her fiduciary or other duties to us regarding the opportunity, (ii) acted in bad faith or in a manner inconsistent with our best interests or (iii) be liable to us or our stockholders for breach of any fiduciary duty by reason of the fact that they have pursued or acquired such opportunity or offered the opportunity to another person.
Subject to the limitations of applicable law, our certificate of incorporation, among other things: • permits us to enter into contracts and transactions in which one or more of our officers or directors may be a party to or may be financially or otherwise interested in so long as such contract or transaction is approved by the Board in accordance with the DGCL; • permits any of our stockholders or non-employee directors and their affiliates to engage in a corporate opportunity in the same or similar business activities or lines of business in which we engage or propose to engage, compete with us and to make investments in any kind of property in which we may make investments and will not be deemed to have (i) acted in a manner inconsistent with his or her fiduciary or other duties to us regarding the opportunity, (ii) acted in bad faith or in a manner inconsistent with our best interests or (iii) be liable to us or our stockholders for breach of any fiduciary duty by reason of the fact that they have engaged in such activities; and • provides that if any of our stockholders, non-employee directors or their affiliates acquire knowledge of a potential business opportunity, transaction or other matter (other than one expressly offered to any non-employee director in writing solely in his or her capacity as our director ), such stockholder, non-employee director or affiliate will have no duty to communicate or offer that opportunity to us, and will be permitted to pursue or acquire such opportunity or offer that opportunity to another person and will not be deemed to have (i) acted in a manner inconsistent with his or her fiduciary or other duties to us regarding the opportunity, (ii) acted in bad faith or in a manner inconsistent with our best interests or (iii) be liable to us or our stockholders for breach of any fiduciary duty by reason of the fact that they have pursued or acquired such opportunity or offered the opportunity to another person.
These may have adverse consequences including, but not limited to: • restricting our ability to access capital and financial markets in the future; • excluding our securities from the portfolios of certain investment funds and investors; • reducing the demand and price for our equity securities; • increasing the cost of borrowing; • causing a decline in our credit ratings; • reducing the availability, and/or increasing the cost of, third-party insurance; • increasing our retention of risk through self-insurance; • making it more difficult to obtain surety bonds, letters of credit, bank guarantees or other financing; and • limiting our flexibility in business development activities such as the development of Blue Creek, mergers, acquisitions or divestitures.
These may have adverse consequences including, but not limited to: • restricting our ability to access capital and financial markets in the future; • excluding our securities from the portfolios of certain investment funds and investors; • reducing the demand and price for our equity securities; • increasing the cost of borrowing; • causing a decline in our credit ratings; • reducing the availability, and/or increasing the cost of, third-party insurance; • increasing our retention of risk through self-insurance; 35 • making it more difficult to obtain surety bonds, letters of credit, bank guarantees or other financing; and • limiting our flexibility in business development activities such as the development of Blue Creek, mergers, acquisitions or divestitures.
Our planned development of Blue Creek involves numerous risks, including, but not limited to, the following: • uncertainties in the national and worldwide economy and the price of met coal; • our ability to obtain additional debt and/or equity financing to fund the development, permitting, construction and mining activities of Blue Creek on terms that are acceptable to us, or at all; • difficulties or delays in securing federally owned mineral leases within the mine plan; • the diversion of management’s attention from our existing mining operations; • our ability to obtain favorable tax or other incentives; • potential opposition from non-governmental organizations, local groups, or local residents; • the fact that our development, construction, ramp-up and operating costs may be higher than our estimates and further increase our planned capital expenditure and liquidity requirements; • shortages of construction materials and equipment or delays in the delivery of such materials and equipment; • unanticipated facility or equipment malfunctions or breakdowns; • delays from unexpected adverse geological and/or weather conditions, accidents, and other factors beyond our control, including the COVID-19 pandemic; • failure to obtain, or delays in obtaining, all necessary governmental and third-party rights-of-way, easements, permits, licenses and approvals; • local infrastructure conditions and other logistical challenges; 26 • the possibility that we may have insufficient expertise to engage in such development activity profitably or without incurring inappropriate amounts of risks; • the fact that the coal reserves at Blue Creek may not be as economically recoverable as planned; • difficulties in integrating Blue Creek with our existing mining operations and failure to achieve any estimated economies of scale; and • our ability to hire qualified construction and other personnel.
Our planned development of Blue Creek involves numerous risks, including, but not limited to, the following: • uncertainties in the national and worldwide economy and the price of steelmaking coal; • our ability to obtain additional debt and/or equity financing to fund the development, permitting, construction and mining activities of Blue Creek on terms that are acceptable to us, or at all; • difficulties or delays in securing federally owned mineral leases within the mine plan; • the diversion of management’s attention from our existing mining operations; • our ability to obtain favorable tax or other incentives; • potential opposition from non-governmental organizations, local groups, or local residents; • the fact that our development, construction, ramp-up and operating costs may be higher than our estimates and further increase our planned capital expenditure and liquidity requirements; • shortages of construction materials and equipment or delays in the delivery of such materials and equipment; • unanticipated facility or equipment malfunctions or breakdowns; • delays from unexpected adverse geological and/or weather conditions, accidents, and other factors beyond our control, including the COVID-19 pandemic; • failure to obtain, or delays in obtaining, all necessary governmental and third-party rights-of-way, easements, permits, licenses and approvals; • local infrastructure conditions and other logistical challenges; • the possibility that we may have insufficient expertise to engage in such development activity profitably or without incurring inappropriate amounts of risks; 26 • the fact that the steelmaking coal reserves at Blue Creek may not be as economically recoverable as planned; • difficulties in integrating Blue Creek with our existing mining operations and failure to achieve any estimated economies of scale; and • our ability to hire qualified construction and other personnel.
These risks, hazards and conditions include, but are not limited to: • variations in geological conditions, such as the thickness of the met coal seam and amount of rock embedded in the met coal deposit and variations in rock and other natural materials overlying the met coal deposit, that could affect the stability of the roof and the side walls of the mine; • mining, process and equipment or mechanical failures, unexpected maintenance problems and delays in moving longwall equipment; • the unavailability of raw materials, equipment (including heavy mobile equipment) or other critical supplies such as tires, explosives, fuel, lubricants and other consumables of the type, quantity and/or size needed to meet production expectations; • adverse weather and natural disasters, such as heavy rains or snow, forest fires, flooding and other natural events, including seismic activities, ground failures, rock bursts or structural cave-ins or slides, affecting our operations or transportation to our customers; • railroad delays or derailments; • environmental hazards, such as subsidence and excess water ingress; • delays and difficulties in acquiring, maintaining or renewing necessary permits or mining rights; • availability of adequate skilled employees and other labor relations matters; • security breaches or terroristic acts; • unexpected mine accidents, including rock-falls and explosions caused by the ignition of met coal dust, natural gas or other explosive sources at our mine sites or fires caused by the spontaneous combustion of met coal or similar mining accidents; • competition and/or conflicts with other natural resource extraction activities and production within our operating areas, such as natural gas extraction or oil and gas development; and • other hazards that could also result in personal injury and loss of life, pollution and suspension of operations.
These risks, hazards and conditions include, but are not limited to: • variations in geological conditions, such as the thickness of the steelmaking coal seam and amount of rock embedded in the steelmaking coal deposit and variations in rock and other natural materials overlying the steelmaking coal deposit, that could affect the stability of the roof and the side walls of the mine; • mining, process and equipment or mechanical failures, unexpected maintenance problems and delays in moving longwall equipment; • the unavailability of raw materials, equipment (including heavy mobile equipment) or other critical supplies such as tires, explosives, fuel, lubricants and other consumables of the type, quantity and/or size needed to meet production expectations; • adverse weather and natural disasters, such as heavy rains or snow, forest fires, flooding and other natural events, including seismic activities, ground failures, rock bursts or structural cave-ins or slides, affecting our operations or transportation to our customers; 33 • railroad delays or derailments; • environmental hazards, such as subsidence and excess water ingress; • delays and difficulties in acquiring, maintaining or renewing necessary permits or mining rights; • availability of adequate skilled employees and other labor relations matters; • security breaches or terroristic acts; • unexpected mine accidents, including rock-falls and explosions caused by the ignition of met coal dust, natural gas or other explosive sources at our mine sites or fires caused by the spontaneous combustion of steelmaking coal or similar mining accidents; • competition and/or conflicts with other natural resource extraction activities and production within our operating areas, such as natural gas extraction or oil and gas development; and • other hazards that could also result in personal injury and loss of life, pollution and suspension of operations.
If cash flow generated by our operations or available borrowings under our bank financing arrangements are insufficient to meet our capital requirements and we are unable to access the capital markets on acceptable terms or at all, we could be forced to curtail the expansion of our existing mines and the development of our properties, which, in turn, could lead to a decline in our production and could materially and adversely affect our business, financial condition and results of operations.. 28 Work stoppages, such as the strike initiated by the UMWA in April 2021, labor shortages and other labor relations matters may harm our business.
If cash flow generated by our operations or available borrowings under our bank financing arrangements are insufficient to meet our capital requirements and we are unable to access the capital markets on acceptable terms or at all, we could be forced to curtail the expansion of our existing mines and the development of our properties, which, in turn, could lead to a decline in our production and could materially and adversely affect our business, financial condition and results of operations.. 28 Work stoppages, such as the strike initiated by the UMWA in April 2021, and other labor relations matters may harm our business.
Management’s Discussion and Analysis of Financial Condition and Results of Operations-Designation of Series A Junior Participating Preferred Stock.” Our common stock is subject to the 382 Transfer Restrictions under our certificate of incorporation and the Amended Rights Agreement which are intended to prevent a Section 382 “ownership change,” which if not complied with, could result in the 49 forfeiture of such stock and related dividends or substantial dilution of the stock ownership, respectively.
Management’s Discussion and Analysis of Financial Condition and Results of Operations-Designation of Series A Junior Participating Preferred Stock.” Our common stock is subject to the 382 Transfer Restrictions under our certificate of incorporation and the Amended Rights Agreement which are intended to prevent a Section 382 “ownership change,” which if not complied with, could result in the forfeiture of such stock and related dividends or substantial dilution of the stock ownership, respectively.
However, there can be no assurances we will be able to mitigate such conditions as they arise. Met coal has been an extremely volatile commodity over the past ten years and prices may become volatile again in the future given the rapid increase of the last few years and the sharp decline in the second half of 2019.
However, there can be no assurances that we will be able to mitigate such conditions as they arise. Met coal has been an extremely volatile commodity over the past ten years and prices may become volatile again in the future given the rapid increase of the last few years and the sharp decline in the second half of 2019.
As a result of market conditions, premiums and deductibles for certain insurance policies can increase substantially, and in some instances certain insurance may become unavailable or available only for reduced amounts of coverage. As a result, we may not be able to renew our existing insurance policies or procure other desirable insurance on commercially reasonable terms, if at all.
As a result of market conditions, premiums and deductibles for certain insurance policies can increase substantially, and in some instances certain insurance may become unavailable or available only for reduced amounts of coverage. As a result, we may not be able to renew our existing insurance policies or procure other desirable insurance on commercially 34 reasonable terms, if at all.
The public, including non-governmental organizations, anti-mining groups and individuals, have certain statutory rights to comment upon and submit objections to requested permits and environmental impact statements prepared in connection with applicable regulatory processes, and otherwise engage in the permitting process, including bringing citizens’ lawsuits to challenge the issuance of permits, the validity of environmental impact statements or performance of mining activities.
The public, including non-governmental organizations, anti-mining groups and individuals, have certain statutory rights to comment upon and submit objections to requested permits and environmental impact statements prepared in connection with applicable regulatory processes, and otherwise engage in the permitting process, including bringing citizens’ lawsuits to 38 challenge the issuance of permits, the validity of environmental impact statements or performance of mining activities.
The resulting Glasgow 40 Climate Pact calls upon the parties to “accelerate efforts towards the phase-down of unabated coal power and phase-out inefficient fossil fuel subsidies.” The existing laws and regulations or other current and future efforts to stabilize or reduce GHG emissions could adversely impact the demand for, price of and value of our products and reserves.
The resulting Glasgow Climate Pact calls upon the parties to “accelerate efforts towards the phase-down of unabated coal power and phase-out inefficient fossil fuel subsidies.” The existing laws and regulations or other current and future efforts to stabilize or reduce GHG emissions could adversely impact the demand for, price of and value of our products and reserves.
The federal Clean Air Act and comparable state laws that regulate air emissions affect coal mining operations both directly and indirectly. Direct impacts on coal mining may occur through permitting requirements and/or emission control requirements relating to particulate matter, such as fugitive dust, or fine particulate matter measuring 2.5 micrometers in diameter or smaller.
The Clean Air Act and comparable state laws that regulate air emissions affect coal mining operations both directly and indirectly. Direct impacts on coal mining may occur through permitting requirements and/or emission control requirements relating to particulate matter, such as fugitive dust, or fine particulate matter measuring 2.5 micrometers in diameter or smaller.
Additionally, climate change continues to attract public and scientific attention, and increasing attention by government as well as private businesses is being paid to reducing GHG emissions. There are three primary sources of GHGs associated with the met coal industry. First, the end use of our met coal by our customers in steelmaking is a source of GHGs.
Additionally, climate change continues to attract public and scientific attention, and increasing attention by government as well as private businesses is being paid to reducing GHG emissions. There are three primary sources of GHGs associated with the steelmaking coal industry. First, the end use of our steelmaking coal by our customers in steelmaking is a source of GHGs.
The IRA contains billions of dollars in incentives for the development of renewable energy, clean hydrogen, clean fuels, electric vehicles, investments in advanced biofuels and supporting infrastructure and carbon capture and sequestration, amongst other provisions. These incentives could accelerate the transition of the economy away from the use of fossil fuels towards lower- or zero-carbon emissions alternatives.
The IRA contains billions of dollars in incentives for the development of renewable energy, clean hydrogen, clean fuels, electric vehicles, investments in advanced biofuels and supporting infrastructure and carbon capture and sequestration, amongst other provisions. These incentives could accelerate the transition of the economy 41 away from the use of fossil fuels towards lower- or zero-carbon emissions alternatives.
We accrue for the costs of current mine disturbance and of final mine closure and reclamation, including the cost of treating mine water discharge where necessary. The amounts recorded are dependent upon a number of variables, including the estimated future closure costs, estimated proven reserves, assumptions involving profit margins, inflation rates and the assumed credit-adjusted risk-free interest rates.
We accrue for the costs of current mine disturbance and of final mine closure and reclamation, including the cost of treating mine water discharge where necessary. The amounts recorded are dependent upon a number of variables, including the estimated future closure costs, estimated proven reserves, assumptions involving profit margins, 43 inflation rates and the assumed credit-adjusted risk-free interest rates.
Subsequently, on July 19, 2016, the D.C. Circuit affirmed the district court’s further ruling that the EPA’s decision to withdraw approval for disposal sites satisfied administrative requirements. The D.C. Circuit held that the EPA’s ex post withdrawal was a product of its broad veto authority under the CWA, not a procedural defect.
Subsequently, on July 19, 2016, the D.C. Circuit affirmed the district 40 court’s further ruling that the EPA’s decision to withdraw approval for disposal sites satisfied administrative requirements. The D.C. Circuit held that the EPA’s ex post withdrawal was a product of its broad veto authority under the CWA, not a procedural defect.
While our operations are not directly impacted by this ruling, it could be an indication that other surface mining water permits could be subject to more substantial review in the future. Recent regulatory actions and court decisions have created some uncertainty over the scope of CWA jurisdiction.
While our operations are not directly impacted by this ruling, it could be an indication that other surface mining water permits could be subject to more substantial review in the future. Recent regulatory actions and court decisions created some uncertainty over the scope of CWA jurisdiction.
However, such actions could materially increase our costs or impair our ability to explore and develop other mining projects, which could materially harm our business, financial condition and results of operations. 41 Our operations may impact the environment or cause exposure to hazardous substances and our properties may have environmental contamination, which could result in material liabilities to us.
However, such actions could materially increase our costs or impair our ability to explore and develop other mining projects, which could materially harm our business, financial condition and results of operations. Our operations may impact the environment or cause exposure to hazardous substances and our properties may have environmental contamination, which could result in material liabilities to us.
A company’s ability to deduct its NOLs and utilize certain other available tax attributes can be substantially constrained under the general annual limitation rules of Section 382 of the Code if it undergoes an “ownership change” as defined in Section 382 or if similar provisions of state law apply.
A company’s ability to deduct its federal and state NOLs and utilize certain other available tax attributes can be substantially constrained under the general annual limitation rules of Section 382 of the Code if it undergoes an “ownership change” as defined in Section 382 or if similar provisions of state law apply.
The ABL Facility and the Indenture contain, and any other existing or future indebtedness of ours would likely contain, a number of covenants that will impose significant operating and financial restrictions on us, including restrictions on our and our subsidiaries ability to, among other things: • incur additional debt, guarantee indebtedness or issue certain preferred shares; • pay dividends on or make distributions in respect of, or repurchase or redeem, our capital stock or make other restricted payments; 44 • prepay, redeem or repurchase subordinated debt; • make loans or certain investments; • sell certain assets; • grant or assume liens; • consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; • enter into certain transactions with our affiliates; • alter the businesses we conduct; • enter into agreements restricting our subsidiaries’ ability to pay dividends; and • designate our subsidiaries as unrestricted subsidiaries.
The ABL Facility and the Indenture contain, and any other existing or future indebtedness of ours would likely contain, a number of covenants that will impose significant operating and financial restrictions on us, including restrictions on our and our subsidiaries' ability to, among other things: • incur additional debt, guarantee indebtedness or issue certain preferred shares; 45 • pay dividends on or make distributions in respect of, or repurchase or redeem, our capital stock or make other restricted payments; • prepay, redeem or repurchase subordinated debt; • make loans or certain investments; • sell certain assets; • grant or assume liens; • consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; • enter into certain transactions with our affiliates; • alter the businesses we conduct; • enter into agreements restricting our subsidiaries’ ability to pay dividends; and • designate our subsidiaries as unrestricted subsidiaries.
These calculations are complex and reflect certain necessary assumptions. Accordingly, it is possible that we could approve or engage in a transaction involving our common stock that causes an ownership change and impairs the use of our NOLs and other federal income tax attributes.
These calculations are complex and reflect certain necessary assumptions. Accordingly, it is possible that we could approve or engage in a transaction involving our common stock that causes an ownership change and impairs the use of our federal and state NOLs and other federal and state income tax attributes.
Any sustained failure to be able to market our coal during such periods would have a material adverse effect on our business, results of operations, cash flows and ability to pay dividends to our stockholders. The failure of our customers to honor or renew contracts could adversely affect our business.
Any sustained failure to be able to market our 24 coal during such periods would have a material adverse effect on our business, results of operations, cash flows and ability to pay dividends to our stockholders. The failure of our customers to honor or renew contracts could adversely affect our business.
In addition, reductions in the demand for met coal caused by reduced steel production by our customers, increases in the use of substitutes for steel (such as aluminum, composites or plastics) or less expensive substitutes for met coal and the use of steelmaking technologies that use less or no met coal can significantly adversely affect our financial results and impede growth.
In addition, reductions in the demand for steelmaking coal caused by reduced steel production by our customers, increases in the use of substitutes for steel (such as aluminum, composites or plastics) or less expensive substitutes for steelmaking coal and the use of steelmaking technologies that use less or no steelmaking coal can significantly adversely affect our financial results and impede growth.
As a result, if economic conditions in the global steelmaking industry deteriorate as they have in past years, the demand for met coal may decrease. In addition, the global financial markets have been experiencing volatility and disruption over the last several years including, due to the COVID-19 pandemic.
As a result, if economic conditions in the global steelmaking industry deteriorate as they have in past years, the demand for steelmaking coal may decrease. In addition, the global financial markets have been experiencing volatility and disruption over the last several years including, due to the COVID-19 pandemic.
These entities also have been pressuring lenders to limit financing available to such companies. Companies in the energy industry, and in particular those focused on coal, natural gas or petroleum extraction and 34 refining, often perform worse under ESG assessments compared to companies in other industries.
These entities also have been pressuring lenders to limit financing available to such companies. Companies in the energy industry, and in particular those focused on coal, natural gas or petroleum extraction and refining, often perform worse under ESG assessments compared to companies in other industries.
If securities or industry analysts adversely change their recommendations regarding our stock or if our operating results do not meet their expectations, our stock price could decline. 48 The trading market for our common stock could be influenced by the research and reports that industry or securities analysts may publish about us or our business.
If securities or industry analysts adversely change their recommendations regarding our stock or if our operating results do not meet their expectations, our stock price could decline. The trading market for our common stock could be influenced by the research and reports that industry or securities analysts may publish about us or our business.
These aspects of our strategy are subject to numerous risks and uncertainties, including: • an inability to retain or hire experienced crews and other personnel and other labor relations matters; • a lack of customer demand for our mined met coal; • an inability to secure necessary equipment, raw materials or engineering in a timely manner to successfully execute our expansion plans; • unanticipated delays that could limit or defer the production or expansion of our mining activities and jeopardize our long term relationships with our existing customers and adversely affect our ability to obtain new customers for our mined met coal; and • a lack of available cash or access to sufficient debt or equity financing for investment in our expansion .
These aspects of our strategy are subject to numerous risks and uncertainties, including: • an inability to retain or hire experienced crews and other personnel and other labor relations matters; • a lack of customer demand for our mined steelmaking coal; • an inability to secure necessary equipment, raw materials or engineering in a timely manner to successfully execute our expansion plans; • unanticipated delays that could limit or defer the production or expansion of our mining activities and jeopardize our long-term relationships with our existing customers and adversely affect our ability to obtain new customers for our mined steelmaking coal; and • a lack of available cash or access to sufficient debt or equity financing for investment in our expansion .
We own and operate some of these systems and applications 30 while others are owned and operated by our third-party service providers. In the ordinary course of our business, we and our service providers collect, process, transmit and store data, such as proprietary business information and personally identifiable information.
We own and operate some of these systems and applications while others are owned and operated by our third-party service providers. In the ordinary course of our business, we and our service providers collect, process, transmit and store data, such as proprietary business information and personally identifiable information.
However, on October 22, 2019, the agencies published a final rule to repeal the 2015 rules and then on April 21, 2020, the EPA and the USACE published a replacement rule that would have significantly reduced the scope 39 of waters subject to federal regulation under the CWA.
However, on October 22, 2019, the agencies published a final rule to repeal the 2015 rules and then on April 21, 2020, the EPA and the USACE published a replacement rule that would have significantly reduced the scope of waters subject to federal regulation under the CWA.
If these accruals are insufficient or our liability in a particular year is greater than currently anticipated, our future operating results could be materially affected. 42 Risks Related to our Financial Results and Finances We have a substantial amount of indebtedness.
If these accruals are insufficient or our liability in a particular year is greater than currently anticipated, our future operating results could be materially affected. Risks Related to our Financial Results and Finances We have a substantial amount of indebtedness.
In doing so, we expect to first perform the calculations necessary to confirm that our ability to use our NOLs and other federal income tax attributes will not be affected or otherwise determine that such transactions or waivers are in our best interests.
In doing so, we expect to first perform the calculations necessary to confirm that our ability to use our federal and state NOLs and other federal and state income tax attributes will not be affected or otherwise determine that such transactions or waivers are in our best interests.
The market price of our common stock could fluctuate significantly due to a number of factors, including: • our quarterly or annual earnings, or those of other companies in our industry; • actual or anticipated fluctuations in our operating and financial results, including reserve estimates; • changes in accounting standards, policies, guidance, interpretations or principles; • the public reaction to our press releases, our other public announcements and our filings with the SEC; • announcements by us or our competitors of significant acquisitions, dispositions or innovations; • changes in financial estimates and recommendations by securities analysts following our stock, or the failure of securities analysts to cover our common stock; • changes in earnings estimates by securities analysts or our ability to meet those estimates; • the operating and stock price performance of other comparable companies; • declaration of bankruptcy by any of our customers or competitors; • general economic conditions, overall market fluctuations, and changes in the price of met coal, steel or other commodities, including the impact of the COVID-19 pandemic on any of the foregoing; • additions or departures of key management personnel; • actions by our stockholders; • the trading volume of our common stock; • sales of our common stock by us or the perception that such sales may occur; and • changes in business, legal or regulatory conditions, or other developments (including the COVID-19 pandemic) affecting participants in, and publicity regarding, the met coal mining business, the domestic steel industry or any of our significant customers.
The market price of our common stock could fluctuate significantly due to a number of factors, including: • our quarterly or annual earnings, or those of other companies in our industry; • actual or anticipated fluctuations in our operating and financial results, including reserve estimates; • changes in accounting standards, policies, guidance, interpretations or principles; • the public reaction to our press releases, our other public announcements and our filings with the SEC; 48 • announcements by us or our competitors of significant acquisitions, dispositions or innovations; • changes in financial estimates and recommendations by securities analysts following our stock, or the failure of securities analysts to cover our common stock; • changes in earnings estimates by securities analysts or our ability to meet those estimates; • the operating and stock price performance of other comparable companies; • declaration of bankruptcy by any of our customers or competitors; • general economic conditions, overall market fluctuations, and changes in the price of steelmaking coal, steel or other commodities, including the impact of the COVID-19 pandemic on any of the foregoing; • additions or departures of key management personnel; • actions by our stockholders; • the trading volume of our common stock; • sales of our common stock by us or the perception that such sales may occur; and • changes in business, legal or regulatory conditions, or other developments (including the COVID-19 pandemic) affecting participants in, and publicity regarding, the steelmaking coal mining business, the domestic steel industry or any of our significant customers.
Union-represented labor creates an increased risk of work stoppages and higher labor costs; • Significant competition, as well as changes in foreign markets or economies, could harm our sales, profitability and cash flows; • Our sales in foreign jurisdictions are subject to risks and uncertainties, such as new tariffs and other trade measures, which could adversely affect our results of operations, financial position and cash flows; Risks Related to Our Industry • Substantially all of our revenues are derived from the sale of met coal and our business may suffer from a substantial or extended decline in met coal pricing and demand or other factors beyond our control.
Union-represented labor creates an increased risk of work stoppages and higher labor costs; • Significant competition, as well as changes in foreign markets or economies, could harm our sales, profitability and cash flows; • Our sales in foreign jurisdictions are subject to risks and uncertainties, such as new tariffs and other trade measures, which could adversely affect our results of operations, financial position and cash flows; Risks Related to Our Industry • Substantially all of our revenues are derived from the sale of steelmaking coal and our business may suffer from a substantial or extended decline in steelmaking coal pricing and demand or other factors beyond our control.
Deterioration in global economic conditions as they relate to the steelmaking industry, as well as generally unfavorable global economic, financial and business conditions, may adversely affect our business, results of operations and cash flows. Demand for met coal depends on domestic and foreign steel demand.
Deterioration in global economic conditions as they relate to the steelmaking industry, as well as generally unfavorable global economic, financial and business conditions, may adversely affect our business, results of operations and cash flows. Demand for steelmaking coal depends on domestic and foreign steel demand.
We received a letter from the DOL on February 21, 2020 under its new process for self-insurance renewals that would require us to increase the amount of collateral posted to $39.8 million, but we have appealed such increase.
We received a letter from the DOL on February 21, 2020 under its new process for self-insurance renewals that would require us to increase the amount of collateral posted to $39.8 million, but we appealed such increase.
Our certificate of incorporation and bylaws contain provisions that may make acquiring control of our company difficult, including: • the Board's ability to issue, from time to time, one or more series of preferred stock and, with respect to each such series, to fix the terms thereof by resolution; • provisions relating to the appointment of directors upon an increase in the number of directors or vacancy on the Board; • provisions requiring stockholders to hold at least a majority of our outstanding common stock in the aggregate to request special meetings; • provisions that restrict transfers of our stock (including any other instruments treated as stock for purposes of Section 382) that could limit our ability to utilize NOLs; • provisions that provide that the doctrine of “corporate opportunity” will not apply with respect to the Company, to any of our stockholders or directors, other than any stockholder or director that is an employee, consultant or officer of ours; and • provisions that set forth advance notice procedures for stockholders’ nominations of directors and proposals for consideration at meetings of stockholders.
Our certificate of incorporation and bylaws contain provisions that may make acquiring control of our company difficult, including: • the Board's ability to issue, from time to time, one or more series of preferred stock and, with respect to each such series, to fix the terms thereof by resolution; • provisions relating to the appointment of directors upon an increase in the number of directors or vacancy on the Board; • provisions requiring stockholders to hold at least a majority of our outstanding common stock in the aggregate to request special meetings; 52 • provisions that restrict transfers of our stock (including any other instruments treated as stock for purposes of Section 382) that could limit our ability to utilize federal and state NOLs; • provisions that provide that the doctrine of “corporate opportunity” will not apply with respect to the Company, to any of our stockholders or directors, other than any stockholder or director that is an employee, consultant or officer of ours; and • provisions that set forth advance notice procedures for stockholders’ nominations of directors and proposals for consideration at meetings of stockholders.
See “-Risks Related to Our Business-All of our mining operations are located in Alabama, making us vulnerable to risks associated with having our production concentrated in one geographic area”, “-Met coal mining involves many hazards and operating risks, and is dependent upon many factors and conditions beyond our control, which may cause our profitability and financial position to decline”, “-If transportation for our met coal is disrupted, unavailable or more expensive for our customers, our ability to sell met coal could suffer”, “-Our business is subject to inherent risks, some for which we maintain third party insurance.
See “-Risks Related to Our Business-All of our mining operations are located in Alabama, making us vulnerable to risks associated with having our production concentrated in one geographic area”, “-Steelmaking coal mining involves many hazards and operating risks, and is dependent upon many factors and conditions beyond our control, which may cause our profitability and financial position to decline”, “-If transportation for our steelmaking coal is disrupted, unavailable or more expensive for our customers, our ability to sell steelmaking coal could suffer”, “-Our business is subject to inherent risks, some for which we maintain third party insurance.
The various requirements 38 mandated by law or regulation can place restrictions on our methods of operations, and potentially lead to fees and civil penalties for the violation of such requirements, creating a significant effect on operating costs and productivity.
The various requirements mandated by law or regulation can place restrictions on our methods of operations, and potentially lead to fees and civil penalties for the violation of such requirements, creating a significant effect on operating costs and productivity.
We received another letter from the DOL on December 8, 2021 requesting additional information to support our appeal of the collateral requested by the DOL. On February 9, 2022, the DOL held a conference with representatives from the Company related to our appeal.
We received another letter from the DOL on December 8, 2021 requesting additional information to support our appeal of the collateral requested by the DOL. On February 9, 2022, the DOL held a conference call with representatives from the Company related to our appeal.
Changes in the estimated claims to be paid or changes in the amount of collateral required may affect our operating results and cash flows; • Extensive federal and state environmental, health and safety laws and regulations impose significant costs on our operations and future regulations could increase these costs, limit our ability to produce or adversely affect our ability to meet our customers' demands; • Failure to obtain or renew surety bonds on acceptable terms could affect our ability to secure reclamation and coal lease obligations and, therefore, our ability to mine or lease met coal; • We have reclamation and mine closing obligations.
Changes in the estimated claims to be paid or changes in the amount of collateral required may affect our operating results and cash flows; • Extensive federal and state environmental, health and safety laws and regulations impose significant costs on our operations and future regulations could increase these costs, limit our ability to produce or adversely affect our ability to meet our customers' demands; • Failure to obtain or renew surety bonds on acceptable terms could affect our ability to secure reclamation and coal lease obligations and, therefore, our ability to mine or lease steelmaking coal; • We have reclamation and mine closing obligations.
Also, in August 2022, he signed into law the IRA, which provides billions of dollars in incentives for the development of renewable energy. However, he has also called for heavy investment in infrastructure projects, many of which require the use of steel.
Also, in August 2022, he signed into law the IRA, which provides billions of dollars in incentives for the development of renewable energy. However, he has also called for heavy investment in infrastructure projects, many of 42 which require the use of steel.
Our ability to pay principal and interest on the Notes and the ABL Facility and to satisfy our other debt obligations will depend upon, among other things: • our future financial and operating performance (including the realization of any cost savings described herein), which will be affected by prevailing economic, industry and competitive conditions and financial, business, legislative, regulatory and other factors, many of which are beyond our control; and 43 • our future ability to borrow under the ABL Facility, the availability of which depends on, among other things, our complying with the covenants in the ABL Facility.
Our ability to pay principal and interest on the Notes and the ABL Facility and to satisfy our other debt obligations will depend upon, among other things: 44 • our future financial and operating performance (including the realization of any cost savings described herein), which will be affected by prevailing economic, industry and competitive conditions and financial, business, legislative, regulatory and other factors, many of which are beyond our control; and • our future ability to borrow under the ABL Facility, the availability of which depends on, among other things, our complying with the covenants in the ABL Facility.
When steel prices are lower, the prices that we charge steelmaking customers for our met coal may decline, which could adversely affect our financial condition, results of operations and cash flows.
When steel prices are lower, the prices that we charge steelmaking customers for our steelmaking coal may decline, which could adversely affect our financial condition, results of operations and cash flows.
If any of these pieces of equipment or facilities suffer major damage or are destroyed by fire, abnormal wear, flooding, incorrect operation or otherwise, we may be unable to replace or repair them in a timely manner or at a reasonable cost, which would impact our ability to produce and transport met coal and materially and adversely affect our business, results of operations, financial condition and cash flows.
If any of these pieces of equipment or facilities suffer major damage or are destroyed by fire, abnormal wear, flooding, incorrect operation or otherwise, we may be unable to replace or repair them in a timely manner or at a reasonable cost, which would impact our ability to produce and transport steelmaking coal and materially and adversely affect our business, results of operations, financial condition and cash flows.
Demand for, and therefore the price of, met coal is driven by a variety of factors, including, but not limited to, the following: • the domestic and foreign supply and demand for met coal; • the quantity and quality of met coal available from competitors; • the demand for and price of steel; • adverse weather, climatic and other natural conditions, including natural disasters; • domestic and foreign economic conditions, including slowdowns in domestic and foreign economies and financial markets; • global and regional political events; • domestic and foreign legislative, regulatory and judicial developments, environmental regulatory changes and changes in energy policy and energy conservation measures that could adversely affect the met coal industry; 31 • capacity, reliability, availability and cost of transportation and port facilities, and the proximity of available met coal to such transportation and port facilities; and • other factors beyond our control, such as terrorism, war, and pandemics, including the COVID-19 pandemic.
Demand for, and therefore the price of, steelmaking coal is driven by a variety of factors, including, but not limited to, the following: • the domestic and foreign supply and demand for steelmaking coal; • the quantity and quality of steelmaking coal available from competitors; • the demand for and price of steel; • adverse weather, climatic and other natural conditions, including natural disasters; • domestic and foreign economic conditions, including slowdowns in domestic and foreign economies and financial markets; • global and regional political events; • domestic and foreign legislative, regulatory and judicial developments, environmental regulatory changes and changes in energy policy and energy conservation measures that could adversely affect the steelmaking coal industry; • capacity, reliability, availability and cost of transportation and port facilities, and the proximity of available steelmaking coal to such transportation and port facilities; and • other factors beyond our control, such as terrorism, war, and pandemics, including the COVID-19 pandemic.
We expect to renew, extend or enter into new supply agreements with these and other customers; however, we may be unsuccessful in obtaining such agreements with these customers and these customers may discontinue purchasing met coal from us, reduce the quantity of met coal that they have historically purchased from us or pressure us to reduce the prices that we charge for our met coal due to market, economic or competitive conditions, including effects from the COVID-19 pandemic.
We expect to renew, extend or enter into new supply agreements with these and other customers; however, we may be unsuccessful in obtaining such agreements with these customers and these customers may discontinue purchasing steelmaking coal from us, reduce the quantity of steelmaking coal that they have historically purchased from us or pressure us to reduce the prices that we charge for our steelmaking coal due to market, economic or competitive conditions, including effects from the COVID-19 pandemic.
There are numerous factors and assumptions inherent in estimating met coal quantities, qualities and costs to mine, including many factors beyond our control, such as the following: • geological and mining conditions, including faults in the met coal seam; • historical production from the area compared with production from other producing areas; 35 • the percentage of met coal ultimately recoverable; • the assumed effects of regulations and taxes and other payments to governmental agencies; • our ability to obtain, maintain and renew all required permits; • future improvements in mining technology; • assumptions concerning the timing of the development of the reserves; and • assumptions concerning equipment and operational productivity, future met coal prices, operating costs, including those for critical supplies such as fuel, tires and explosives, capital expenditures and development and reclamation costs.
There are numerous factors and assumptions inherent in estimating steelmaking coal quantities, qualities and costs to mine, including many factors beyond our control, such as the following: • geological and mining conditions, including faults in the steelmaking coal seam; • historical production from the area compared with production from other producing areas; • the percentage of steelmaking coal ultimately recoverable; • the assumed effects of regulations and taxes and other payments to governmental agencies; • our ability to obtain, maintain and renew all required permits; • future improvements in mining technology; • assumptions concerning the timing of the development of the reserves; and • assumptions concerning equipment and operational productivity, future steelmaking coal prices, operating costs, including those for critical supplies such as fuel, tires and explosives, capital expenditures and development and reclamation costs.
Negative developments in any of these factors in the foreign markets into which we sell our met coal could result in a reduction in demand for met coal, the cancellation or delay of orders already placed, difficulty in collecting receivables, higher costs of doing business and/or non-compliance with legal and regulatory requirements, each or any of which could materially adversely impact our cash flows, results of operations and profitability.
Negative developments in any of these factors in the foreign markets into which we sell our steelmaking coal could result in a reduction in demand for steelmaking coal, the cancellation or delay of orders already placed, difficulty in collecting receivables, higher costs of doing business and/or non-compliance with legal and regulatory requirements, each or any of which could materially adversely impact our cash flows, results of operations and profitability.
As a result, estimates of the quantities and qualities of economically recoverable met coal attributable to any particular group of properties, classifications of reserves based on risk of recovery, estimated cost of production, and estimates of future net cash flows expected from these properties as prepared by different engineers or by the same engineers at different times may vary materially due to changes in the above factors and assumptions.
As a result, estimates of the quantities and qualities of economically recoverable steelmaking coal attributable to any particular group of properties, classifications of reserves based on risk of recovery, estimated cost of production, and estimates of future net cash flows expected from these properties as prepared by different engineers or by the same engineers at different times may vary materially due to changes in the above factors and assumptions.
If the EPA were to make an endangerment finding in the future, we may have to further reduce our methane emissions, install additional air pollution controls, pay certain taxes or fees for our emissions, incur costs to purchase credits that permit us to continue operations as they now exist at our underground met coal mines or perhaps curtail met coal production.
If the EPA were to make an endangerment finding in the future, we may have to further reduce our methane emissions, install additional air pollution controls, pay certain taxes or fees for our emissions, incur costs to purchase credits that permit us to continue operations as they now exist at our underground steelmaking coal mines or perhaps curtail steelmaking coal production.
This could have a material adverse effect on our business, financial condition and results of operations, along with our operating costs, making it difficult to execute our planned capital expenditure program or the development of Blue Creek. Additionally, the geopolitical and macroeconomic consequences of the war and associated sanctions cannot be predicted, but could severely impact the world economy.
This could have a material adverse effect on our business, financial condition and results of operations, along with our operating costs, making it difficult to execute our planned capital expenditure program or the development of Blue Creek. Additionally, the geopolitical and macroeconomic consequences of the wars and associated sanctions cannot be predicted, but could severely impact the world economy.
The ban on Australian coal has significantly impacted the global met coal market in recent years. This unofficial ban was lifted in January 2023. During the past several years, the Chinese government has initiated a number of anti-smog measures aimed at reducing hazardous air emissions through temporary production capacity restrictions with the steel, coal and coal-fired power sectors.
The ban on Australian coal has significantly impacted the global steelmaking coal market in recent years. This unofficial ban was lifted in January 2023. During the past several years, the Chinese government has initiated a number of anti-smog measures aimed at reducing hazardous air emissions through temporary production capacity restrictions with the steel, coal and coal-fired power sectors.
New and existing tariffs as well as other trade measures that may be implemented by the U.S. or retaliatory trade measures or tariffs implemented by other countries could result in reduced economic activity, increased costs in operating our business, reduced demand and/or changes in purchasing behaviors for met coal, material changes in the pricing of met coal, limits on trade with the United States or other potentially adverse economic outcomes.
New and existing tariffs as well as other trade measures that may be implemented by the U.S. or retaliatory trade measures or tariffs implemented by other countries could result in reduced economic activity, increased costs in operating our business, reduced demand and/or changes in purchasing behaviors for steelmaking coal, material changes in the pricing of steelmaking coal, limits on trade with the United States or other potentially adverse economic outcomes.
Any of the foregoing events could materially and adversely impact our business, financial condition, results of operations and cash flows. We typically sell our met coal under fixed supply contracts primarily with indexed pricing terms that vary and volume terms of one to three years and are therefore exposed to commodity price risk on our sales.
Any of the foregoing events could materially and adversely impact our business, financial condition, results of operations and cash flows. We typically sell our steelmaking coal under fixed supply contracts primarily with indexed pricing terms that vary and volume terms of one to three years and are therefore exposed to commodity price risk on our sales.
When met coal producers compete for skilled miners, recruiting challenges can occur and employee turnover rates can increase, which negatively affect operating efficiency and costs. If a shortage of skilled workers exists and we are unable to train or retain the necessary number of miners, it could adversely affect our productivity, costs and ability to expand production.
When steelmaking coal producers compete for skilled miners, recruiting challenges can occur and employee turnover rates can increase, which negatively affect operating efficiency and costs. If a shortage of skilled workers exists and we are unable to train or retain the necessary number of miners, it could adversely affect our productivity, costs and ability to expand production.
Increased focus by regulatory authorities on the effects of coal mining on the environment and recent regulatory developments related to coal mining operations, including the federal leasing program, could increase our costs to receive new permits to mine met coal, make it more difficult to comply with our existing permits to mine coal or to obtain federal land and mineral leases, or otherwise adversely affect us.
Increased focus by regulatory authorities on the effects of coal mining on the environment and recent regulatory developments related to coal mining operations, including the federal leasing program, could increase our costs to receive new permits to mine steelmaking coal, make it more difficult to comply with our existing permits to mine coal or to obtain federal land and mineral leases, or otherwise adversely affect us.
Future terrorist attacks against U.S. targets, rumors or threats of war, actual conflicts involving the United States or its allies, or military or trade disruptions affecting our customers could cause delays or losses in transportation and deliveries of met coal to our customers, decreased sales of our met coal and extension of time for payment of accounts receivable from our customers.
Future terrorist attacks against U.S. targets, rumors or threats of war, actual conflicts involving the United States or its allies, or military or trade disruptions affecting our customers could cause delays or losses in transportation and deliveries of steelmaking coal to our customers, decreased sales of our steelmaking coal and extension of time for payment of accounts receivable from our customers.
If these challenges are successful, we may have to purchase met coal from third-party sources, if available, to fulfill these obligations or incur capital expenditures to re-open the mines and/or negotiate settlements with the customers, which may include price reductions, the reduction of commitments, and the extension of time for delivery or the termination of customers’ contracts.
If these challenges are successful, we may have to purchase steelmaking coal from third-party sources, if available, to fulfill these obligations or incur capital expenditures to re-open the mines and/or negotiate settlements with the customers, which may include price reductions, the reduction of commitments, and the extension of time for delivery or the termination of customers’ contracts.
Further, potential changes to international trade agreements, trade concessions, foreign currency fluctuations or other political and economic arrangements may benefit met coal producers operating in countries other than the United States. We may be adversely impacted on the basis of price or other factors with companies that in the future may benefit from favorable foreign trade policies or other arrangements.
Further, potential changes to international trade agreements, trade concessions, foreign currency fluctuations or other political and economic arrangements may benefit steelmaking coal producers operating in countries other than the United States. We may be adversely impacted on the basis of price or other factors with companies that in the future may benefit from favorable foreign trade policies or other arrangements.
Slurry impoundments have been known to fail, releasing large volumes of met coal slurry into the surrounding environment. Structural failure of an impoundment can result in extensive damage to the environment and natural resources, such as bodies of water that the met coal slurry reaches, as well as create liability for related personal injuries, property damages and injuries to wildlife.
Slurry impoundments have been known to fail, releasing large volumes of steelmaking coal slurry into the surrounding environment. Structural failure of an impoundment can result in extensive damage to the environment and natural resources, such as bodies of water that the steelmaking coal slurry reaches, as well as create liability for related personal injuries, property damages and injuries to wildlife.
Our liability for such claims may be joint and several, so that we may be held responsible for more than our share of the contamination or other damages, or even for the entire amount of damages assessed. We maintain extensive met coal refuse areas and slurry impoundments at our mining complexes. Such areas and impoundments are subject to comprehensive regulation.
Our liability for such claims may be joint and several, so that we may be held responsible for more than our share of the contamination or other damages, or even for the entire amount of damages assessed. We maintain extensive steelmaking coal refuse areas and slurry impoundments at our mining complexes. Such areas and impoundments are subject to comprehensive regulation.
If any of our major customers were to significantly reduce the quantities of met coal they purchase from us and we are unable to replace these customers with new customers (or we fail to obtain new, additional customers), or if we are otherwise unable to sell met coal to those customers on terms as favorable to us as the terms under our current agreements, our profitability could suffer significantly.
If any of our major customers were to significantly reduce the quantities of steelmaking coal they purchase from us and we are unable to replace these customers with new customers (or we fail to obtain new, additional customers), or if we are otherwise unable to sell steelmaking coal to those customers on terms as favorable to us as the terms under our current agreements, our profitability could suffer significantly.
As a result, disruption at the docks, port congestion and delayed met coal shipments may result in demurrage fees to us. If this disruption were to persist over an extended period of time, demurrage costs could significantly impact our profits. In addition, there are limited cost effective alternatives to the port.
As a result, disruption at the docks, port congestion and delayed steelmaking coal shipments may result in demurrage fees to us. If this disruption were to persist over an extended period of time, demurrage costs could significantly impact our profits. In addition, there are limited cost-effective alternatives to the port.
The general economic conditions in foreign markets and changes in currency exchange rates are factors outside of our control that may affect international met coal prices. If our competitors’ currencies decline against the U.S. dollar or against our customers’ currencies, those competitors may be able to offer lower prices to our customers.
The general economic conditions in foreign markets and changes in currency exchange rates are factors outside of our control that may affect international steelmaking coal prices. If our competitors’ currencies decline against the U.S. dollar or against our customers’ currencies, those competitors may be able to offer lower prices to our customers.
In addition, the ability of our suppliers' and customers' employees to work may be significantly impacted by individuals contracting or being exposed to COVID-19, or as a result of control measures taken by us, other businesses and the government to curtail the spread of the virus, which may significantly affect the demand for met coal.
In addition, the ability of our suppliers' and customers' employees to work may be significantly impacted by individuals contracting or being exposed to COVID-19, or as a result of control measures taken by us, other businesses and the government to curtail the spread of the virus, which may significantly affect the demand for steelmaking coal.
While we are focused on cost control and operational efficiencies, there can be no assurance that these actions, or any others we may take, will be sufficient in response to challenging economic and financial conditions. In addition, the current level of met coal prices may not be sustainable.
While we are focused on cost control and operational efficiencies, there can be no assurance that these actions, or any others we may take, will be sufficient in response to challenging economic and financial conditions. In addition, the current level of steelmaking coal prices may not be sustainable.
Further, competition with other met coal suppliers could cause us to extend credit to customers on terms that could increase the risk of payment default. Our inability to collect payment from counterparties to our sales contracts may materially adversely affect our business, financial condition, results of operations and cash flows.
Further, competition with other steelmaking coal suppliers could cause us to extend credit to customers on terms that could increase the risk of payment default. Our inability to collect payment from counterparties to our sales contracts may materially adversely affect our business, financial condition, results of operations and cash flows.
Increased competition within the domestic met coal industry for international sales could result in us not being able to obtain throughput capacity at port facilities, as well as transport capacity, could cause the rates for such services to increase to a point where it is not economically feasible to export our met coal.
Increased competition within the domestic steelmaking coal industry for international sales could result in us not being able to obtain throughput capacity at port facilities, as well as transport capacity, could cause the rates for such services to increase to a point where it is not economically feasible to export our steelmaking coal.
Section 404 of the Clean Water Act (“CWA”) requires mining companies to obtain USACE permits to place material in streams for the purpose of creating slurry ponds, water impoundments, refuse areas, valley fills or other mining activities. As is the case with other met coal mining companies, our construction and mining activities require Section 404 permits.
Section 404 of the Clean Water Act (“CWA”) requires mining companies to obtain USACE permits to place material in streams for the purpose of creating slurry ponds, water impoundments, refuse areas, valley fills or other mining activities. As is the case with other steelmaking coal mining companies, our construction and mining activities require Section 404 permits.
Because we are required by state and federal law to have these bonds or other acceptable security in place before mining can commence or continue, our failure to maintain surety bonds, letters of credit or other guarantees or security arrangements would materially and adversely affect our ability to mine or lease met coal.
Because we are required by state and federal law to have these bonds or other acceptable security in place before mining can commence or continue, our failure to maintain surety bonds, letters of credit or other guarantees or security arrangements would materially and adversely affect our ability to mine or lease steelmaking coal.
Were the IRS to challenge the size or availability of our NOLs and prevail in such challenge, all or a portion of our NOLs, or our ability to utilize our NOLs to offset any future taxable income, may be impaired, which could have a significant negative impact on our financial condition, results of operations and cash flows.
Were the IRS to challenge the size or availability of our federal and state NOLs and prevail in such challenge, all or a portion of our federal and state NOLs, or our ability to utilize our federal and state NOLs to offset any future taxable income, may be impaired, which could have a significant negative impact on our financial condition, results of operations and cash flows.
Our business is subject to the risk of increases or fluctuations in the cost, and delay in the delivery, of raw materials, mining equipment and purchased components. Met coal mining consumes large quantities of commodities including steel, copper, rubber products, diesel and other liquid fuels, and requires the use of capital equipment.
Our business is subject to the risk of increases or fluctuations in the cost, including increases due to inflation, and delay in the delivery, of raw materials, mining equipment and purchased components. Met coal mining consumes large quantities of commodities including steel, copper, rubber products, diesel and other liquid fuels, and requires the use of capital equipment.
As a result, our sales are subject to fluctuations in market pricing and we are not protected from oversupply or market conditions where we cannot sell our coal at economic prices. To limit this exposure, to the extent we are 24 able, we have, and will continue to, incorporate economic hardship clauses in our sales contracts.
As a result, our sales are subject to fluctuations in market pricing and we are not protected from oversupply or market conditions where we cannot sell our coal at economic prices. To limit this exposure, to the extent we are able, we have incorporated, and will continue to incorporate, economic hardship clauses in our sales contracts.
Our inability to develop met coal reserves in an economically feasible manner or our inability to acquire additional met coal reserves that are economically recoverable may adversely affect our business. Our long-term profitability depends in part on our ability to cost-effectively mine and process met coal reserves that possess the quality characteristics desired by our customers.
Our inability to develop steelmaking coal reserves in an economically feasible manner or our inability to acquire additional steelmaking coal reserves that are economically recoverable may adversely affect our business. Our long-term profitability depends in part on our ability to cost-effectively mine and process steelmaking coal reserves that possess the quality characteristics desired by our customers.
Despite our current indebtedness, we may be able to incur substantial additional debt in the future, including secured indebtedness. As of December 31, 2022, the Company had no amounts drawn under the ABL Facility and there were $8.7 million of letters of credit issued and outstanding under the ABL Facility.
Despite our current indebtedness, we may be able to incur substantial additional debt in the future, including secured indebtedness. As of December 31, 2023, the Company had no amounts drawn under the ABL Facility and there were $8.7 million of letters of credit issued and outstanding under the ABL Facility.
For example, under certain circumstances, the Board may determine it is in our best interest to exempt certain transactions from the operation of the 382 Transfer Restrictions and the Amended Rights Agreement, if such transaction is determined not to be detrimental to the utilization of our NOLs or otherwise in our best interests.
For example, under certain circumstances, the Board may determine it is in our best interest to exempt certain transactions from the operation of the 382 Transfer Restrictions and the Amended Rights Agreement, if such transaction is determined not to be detrimental to the utilization of our federal and state NOLs or otherwise in our best interests.
Any challenge to our title or leasehold interests could delay the mining of the property, result in the loss of some or all of our interest in the property or met coal reserves and increase our costs. In order to conduct our mining operations on properties where these defects exist, we may incur unanticipated costs perfecting title.
Any challenge to our title or leasehold interests could delay the mining of the property, result in the loss of some or all of our interest in the property or steelmaking coal reserves and increase our costs. In order to conduct our mining operations on properties where these defects exist, we may incur unanticipated costs perfecting title.
Our certificate of incorporation contains certain transfer restrictions on our shares, which we refer to as the “382 Transfer Restrictions.” The 382 Transfer Restrictions are intended to prevent the likelihood that we will be deemed to have an “ownership change” within the meaning of Section 382 of the Code that could limit or eliminate our ability to utilize significant NOLs and other federal income tax attributes under and in accordance with the Code and regulations promulgated by the IRS.
Our certificate of incorporation contains certain transfer restrictions on our shares, which we refer to as the “382 Transfer Restrictions.” The 382 Transfer Restrictions are intended to prevent the likelihood that we will be deemed to have an “ownership change” within the meaning of Section 382 of the Code that could limit or eliminate our ability to utilize significant federal and state NOLs and other federal and state income tax attributes under and in accordance with the Code and regulations promulgated by the IRS and similar state rules.

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Item 2. Properties

Properties — owned and leased real estate

53 edited+12 added−3 removed53 unchanged
Biggest changeMine No. 4 preparation plant most recently completed a new fine coal recovery system in 2020, to further improve overall plant recovery. The net book value of property, plant and equipment associated with Mine No. 4 as of December 31, 2022, was $168.6 million.
Biggest changeThe net book value of property, plant and equipment associated with Mine No. 4 as of December 31, 2023, was $213.8 million. As of the filing of this annual report Mine No. 4 is currently active with three continuous mining sections and one longwall.
Among other differences, subpart 1300 of Regulation S-K requires us to disclose our mineral resources, in addition to our mineral reserves, as of the end of the our most recently completed fiscal year both in the aggregate and for each of our individually material mining properties.
Among other differences, subpart 1300 of Regulation S-K requires us to disclose our mineral resources, in addition to our mineral reserves, as of the end of the most recently completed fiscal year both in the aggregate and for each of our individually material mining properties.
Proven reserves are reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling and (b) the sites of inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well-established.
Proven reserves are reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling and (b) the sites of inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well-established.
Probable reserves are reserves for which quantity and grade and/or quality are computed from information similar to that used for proven reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than for proven reserves, is high enough to assume continuity between points of observation.
Probable reserves are reserves for which quantity and grade and/or quality are computed from information similar to that used for proven reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than for proven reserves, is high enough to assume continuity between points of observation.
Development for the longwall is conducted by the extraction of coal from the production faces using continuous miners and haulage using shuttle cars to a feeder-breaker located at the tail of the section conveyor belt. The feeder-breaker crushes large pieces of coal and rock and regulates coal feed onto the mine conveyor.
Development for the longwall is conducted by the extraction of coal from the production faces using continuous miners and haulage using shuttle cars to a feeder-breaker located at the tail of the section conveyor belt. The feeder-breaker crushes large pieces of coal and rock and regulates coal feed onto the mine conveyor.
Our controlled reserves are either through direct ownership of the property or through third-party leases. Third-party leases have initial terms extending up to 30 years and generally provide for terms or renewals through the anticipated life of the associated mine. These renewals are conditioned upon the payment of minimum royalties.
Our controlled reserves are either through direct ownership of the property or through third-party leases. Third-party leases have initial terms extending up to 30 years and generally provide for terms or renewals through the anticipated life of the associated mine. These renewals are conditioned upon the payment of minimum royalties.
Under current mining plans, assigned reserves reported will be mined out within the period of existing leases or within the time period of probable lease renewal periods. All recoverable reserves reported are either 100% owned or controlled through lease agreements. There are no significant title encumbrances to the property.
Under current mining plans, assigned reserves reported will be mined out within the period of existing leases or within the time period of probable lease renewal periods. All recoverable reserves reported are either 100% owned or controlled through lease agreements. There are no significant title encumbrances to the property.
Access to the Blue Creek property is by State Route 69, a well maintained, paved, two-lane road with interstate access in close proximity to both the 62 north and south. The current mine plan allows for three continuous mining sections and a longwall unit to mine simultaneously through the initial stages of mine development.
Access to the Blue Creek property is by State Route 69, a well maintained, paved, two-lane road with interstate access in close proximity to both the north and south. The current mine plan allows for three continuous mining sections and a longwall unit to mine simultaneously through the initial stages of mine development.
The property has been extensively explored as early 1916 by subsurface drilling efforts carried out by numerous entities, the majority of which were completed prior to our acquisition of the assets including: U.S. Steel, Tennessee Coal, Iron & Railroad Company and Walter Energy.
The property has been extensively explored as early as 1916 by subsurface drilling efforts carried out by numerous entities, the majority of which were completed prior to our acquisition of the assets including: U.S. Steel, Tennessee Coal, Iron & Railroad Company and Walter Energy, Inc.
(2) 1 metric ton is equivalent to 1.102311 short tons. (3) Reserves are further categorized as Proven and Probable as defined by subpart 1300 of Regulation S-K under the Modernization of Property Disclosures for Mining Registrants.
(2) 1 metric ton is equivalent to 1.102311 short tons. 58 (3) Reserves are further categorized as Proven and Probable as defined by subpart 1300 of Regulation S-K under the Modernization of Property Disclosures for Mining Registrants.
Portions of the following information are based on assumptions, qualifications and procedures that are not fully described herein. Reference should be made to the full text of the TRSs, incorporated herein by reference and made a part of this Annual Report on Form 10-K.
Portions of the 59 following information are based on assumptions, qualifications and procedures that are not fully described herein. Reference should be made to the full text of the TRSs, incorporated herein by reference and made a part of this Annual Report on Form 10-K.
In connection with the acquisition of certain assets of Walter Energy, we acquired the mineral rights for Blue Creek in April 2016. Since the acquisition, we have strategically purchased and leased mineral and surface rights to further assemble the project.
In connection with the acquisition of certain assets of Walter Energy, Inc., we acquired the mineral rights for Blue Creek in April 2016. Since the acquisition, we have strategically purchased and leased mineral and surface rights to further assemble the project.
Technical Report Summary The information that follows relating to our individually material properties: Mine No. 4, Mine No. 7 and Blue Creek, is derived, for the most part, from, and in some instances is an extract from, the technical report summaries ("TRS") relating to such properties prepared in compliance with Item 601(b)(96) and subpart 1300 of Regulation S-K by Marshall Miller.
Technical Report Summary The information that follows relating to our individually material properties: Mine No. 4, Mine No. 7 and Blue Creek, is derived, for the most part, from, and in some instances is an extract from, the technical report summaries ("TRS") relating to such properties prepared in compliance with Item 601(b)(96) and subpart 1300 of Regulation S-K by Marshall Miller & Associates, Inc..
We update our reserve estimates 63 annually to reflect past coal production, new drilling information and other geological or mining data, and acquisitions or sales of coal properties.
We update our reserve estimates annually to reflect past coal production, new drilling information and other geological or mining data, and acquisitions or sales of coal properties.
Material Mining Properties The information that follows relating to our individually material properties: Mine No. 4, Mine No. 7 and Blue Creek, is derived, for the most part, from, and in some instances is an extract from, the TRS relating to such properties prepared in compliance with Item 601(b)(96) and subpart 1300 of Regulation S-K by Marshall Miller.
Material Mining Properties The information that follows relating to our individually material properties: Mine No. 4, Mine No. 7 and Blue Creek, is derived, for the most part, from, and in some instances is an extract from, the TRS relating to such properties prepared in compliance with Item 601(b)(96) and subpart 1300 of Regulation S-K by Marshall Miller and Associates, Inc..
We believe that the combination of a low production cost and the high quality of the High Vol A met coal mined from Blue Creek, assuming we achieve our expected price realizations, will generate some of the highest met coal margins in the U.S., generate strong investment returns for us and achieve a rapid payback of our investment across a range of met coal price environments.
We believe that the combination of a low production cost and the high quality of the High Vol A steelmaking coal mined from Blue Creek, assuming we achieve our expected price realizations, will generate some of the highest steelmaking coal margins in the U.S., generate strong investment returns for us and achieve a rapid payback of our investment across a range of steelmaking coal price environments.
The range of met coal sales prices used to assess our Mine No. 4 reserves were based on 98 percent of the average of premium low-vol and mid-vol forecast through 2030 and was held constant beyond that date and varies between $152 to $187 per metric ton.
The range of steelmaking coal sales prices used to assess our Mine No. 4 reserves were based on 98 percent of the average of premium low-vol and mid-vol forecast through 2030 and was held constant beyond that date and varies between $152 to $187 per metric ton.
The range of met coal sales prices used to assess our Mine No. 7 reserves were based on 98 percent of the premium low-vol forecast through 2030 and was held constant beyond that date and varies between $156 to $191 per metric ton.
The range of steelmaking coal sales prices used to assess our Mine No. 7 reserves were based on 98 percent of the premium low-vol forecast through 2030 and was held constant beyond that date and varies between $156 to $191 per metric ton.
Mine No. 4, Mine No. 7 and Blue Creek were considered material properties. Our mining operations also consist of other surface met and thermal coal mines, two of which are currently under lease to third parties and four of which are not operating.
Mine No. 4, Mine No. 7 and Blue Creek were considered material properties. Our mining operations also consist of other surface steelmaking and thermal coal mines, two of which are currently under lease to third parties and four of which are not operating.
Our operations also are well serviced by major mining equipment manufacturers, 54 rebuild facilities, and mine supply vendors. Specialized mining service providers including slope, shaft, and preparation plant construction companies are located in the immediate area.
Our operations also are well serviced by major mining equipment manufacturers, 57 rebuild facilities, and mine supply vendors. Specialized mining service providers including slope, shaft, and preparation plant construction companies are located in the immediate area.
The majority of the drilling was accomplished by means of conventional core hole exploration and air rotary drilling with geophysical logging for coalbed methane wells. 60 The following shows the current property and facilities layout of Mine No 7.
The majority of the drilling was accomplished by means of conventional core hole exploration and air rotary drilling with geophysical logging for coalbed methane wells. 63 The following shows the current property and facilities layout of Mine No 7.
Blue Creek We believe that Blue Creek represents one of the few remaining untapped reserves of premium High Vol A met coal in the United States and that it has the potential to provide us with meaningful growth.
Blue Creek We believe that Blue Creek represents one of the few remaining untapped reserves of premium High Vol A steelmaking coal in the United States and that it has the potential to provide us with meaningful growth.
Mine No. 7 also uses the No. 5 preparation plant via an 61 overland conveyor. The Mine No. 7 preparation plant has a capacity to process 1,260 raw metric tons per hour and the Mine No. 5 preparation plant has the capacity to process 900 raw metric tons per hour.
Mine No. 7 also uses the No. 5 preparation plant via an 64 overland conveyor. The Mine No. 7 preparation plant has a capacity to process 1,260 raw metric tons per hour and the Mine No. 5 preparation plant has the capacity to process 900 raw metric tons per hour.
These leases convey mining rights to the Company in exchange for royalties to be paid to the land owner as either a fixed amount per ton or as a percentage of the sales price. Although coal leases have varying renewal terms and conditions, they generally last for the economic life of the reserves.
These leases convey mining rights to the Company in exchange for royalties to be paid to the landowner as either a fixed amount per ton or as a percentage of the sales price. Although coal leases have varying renewal terms and conditions, they generally last for the economic life of the reserves.
Based on the current schedule, we expect the first development tons from continuous miner units to occur in the third quarter of 2024 with the longwall scheduled to start in the second quarter of 2026. We expect to invest approximately $650.0 to $700.0 million over the next five years to develop Blue Creek.
Based on the current schedule, we expect the first development tons from continuous miner units to occur in the third quarter of 2024 with the longwall scheduled to start in the second quarter of 2026. We initially expected to invest approximately $650.0 to $700.0 million over five years to develop Blue Creek.
We currently control approximately 30,000 total acres of mining rights associated with the Blue Creek project, approximately 85% of which is leased from various entities and individuals. We have plans to continue to acquire additional leases, which are primarily from private entities and individuals as well as federally owned coal via the Bureau of Land Management.
We currently control approximately 28,200 total acres of mining rights associated with the Blue Creek project, approximately 85% of which is leased from various entities and individuals. We have plans to continue to acquire additional leases, which are primarily from private entities and individuals as well as federally owned coal via the Bureau of Land Management.
The proven and probable mineral reserves for these properties were prepared by McGehee Engineering Corporation. 56 The following table provides the location and quality of our measured, indicated and inferred mineral resources, exclusive of reserves, as of December 31, 2022.
The proven and probable mineral reserves for these properties were prepared by McGehee Engineering Corporation. The following table provides the location and quality of our measured, indicated and inferred mineral resources, exclusive of reserves, as of December 31, 2023.
Other 59 supplemental equipment is used in the production, development and maintenance of the mine such as roof-bolting machines, battery scoops, personnel carriers, supply vehicles, belts, high-voltage cables, transformers, etc. Mine No. 4 has had multiple improvements to the infrastructure by adding new portal facilities in 2019 and 2021.
Other 62 supplemental equipment is used in the production, development and maintenance of the mine such as roof-bolting machines, battery scoops, personnel carriers, supply vehicles, belts, high-voltage cables, transformers, etc. Mine No. 4 has had multiple improvements to the infrastructure by adding new portal facilities in 2019 and 2021. The Mine No. 4 North portal development was completed in 2023.
The following table provides the production (in thousands of metric tons) for our operating mines for each of the three years ended December 31, 2022, 2021 and 2020: Production Location/Mine 2022 2021 2020 Alabama: Warrior Met Coal Mining, LLC No. 4 1,415 736 1,956 No. 7 4,314 4,349 5,176 Total Alabama 5,729 5,085 7,132 All mining operations are subject to federal and state laws and must obtain permits to operate mines, coal preparation and related facilities, haul roads, and other incidental surface disturbances necessary for mining to occur.
The following table provides the production (in thousands of metric tons) for our operating mines for each of the three years ended December 31, 2023, 2022 and 2021: Production Location/Mine 2023 2022 2021 Alabama: Warrior Met Coal Mining, LLC No. 4 2,272 1,415 736 No. 7 4,664 4,314 4,349 Total Alabama 6,936 5,729 5,085 All mining operations are subject to federal and state laws and must obtain permits to operate mines, coal preparation and related facilities, haul roads, and other incidental surface disturbances necessary for mining to occur.
Coal royalty expense was $138.9 million, $65.4 million, and $49.5 million, for the years ended December 31, 2022, December 31, 2021, and December 31, 2020, respectively. 55 The following table provides the location and quality of our proven and probable mineral reserves as of December 31, 2022.
Coal royalty expense was $120.5 million, $138.9 million, and $65.4 million, for the years ended December 31, 2023, December 31, 2022, and December 31, 2021, respectively. The following table provides the location and quality of our proven and probable mineral reserves as of December 31, 2023.
As of December 31, 2022, we had outstanding surety bonds with parties for post-mining reclamation at all of our mining operations totaling $41.2 million and $4.2 million for miscellaneous purposes. A substantial amount of the coal that the Company mines is produced from mineral reserves leased from third-party landowners.
As of December 31, 2023, we had outstanding surety bonds with parties for post-mining reclamation at all of our mining operations totaling $44.3 million and $5.2 million for miscellaneous purposes. A substantial amount of the coal that the Company mines is produced from mineral reserves leased from third-party landowners.
The range of met coal sales prices used to assess our Blue Creek reserves were based on the IHS High Volatile A price forecast through 2030 and was held constant beyond that date and varies between $143 to $177 per metric ton.
The range of steelmaking coal sales prices used to assess our Blue Creek reserves were based on the IHS High Volatile A price forecast through 2030 and was held constant beyond that date and varies between $172 to $206 per metric ton.
The following table provides a comparison of our material mineral resources exclusive of reserves as of December 31, 2022 and December 31, 2021: Summary of Material Mineral Resources as of December 31, 2022 as compared to December 31, 2021 (in millions of metric tons) (1) As of December 31, Change Mine 2022 2021 Tons % Blue Creek Mineral Resources Measured — — — — % Indicated 39.2 44.9 (5.7) 100 % Measured + Indicated 39.2 44.9 (5.7) 100 % (1) 1 metric ton is equivalent to 1.102311 short tons.
The following table provides a comparison of our material mineral resources exclusive of reserves as of December 31, 2023 and December 31, 2022: 60 Summary of Material Mineral Resources as of December 31, 2023 as compared to December 31, 2022 (in millions of metric tons) (1) As of December 31, Change Mine 2023 2022 Tons % Blue Creek Mineral Resources Measured — — — — % Indicated 39.7 39.2 0.5 1 % Measured + Indicated 39.7 39.2 0.5 1 % (1) 1 metric ton is equivalent to 1.102311 short tons.
These renewals are conditioned upon the payment of minimum royalties. Under current mining plans, assigned reserves reported will be mined out within the period of existing leases or within the time period of probable lease renewal periods. All recoverable reserves reported are either 100% owned or controlled through lease agreements. There are no significant title encumbrances to the property.
Under current mining plans, assigned reserves reported will be mined out within the period of existing leases or within the time period of probable lease renewal periods. All recoverable reserves reported are either 100% owned or controlled through lease agreements. There are no significant title encumbrances to the property.
Overview and Highlights As of December 31, 2022, and under the SEC's new rules governing mineral reserves, specifically subpart 1300 of Regulation S-K under the Modernization of Property Disclosures for Mining Registrants, we had estimated reserves totaling 166.2 million metric tons and estimated mineral resources exclusive of reserves of 39.2 million metric tons.
Overview and Highlights As of December 31, 2023, and under the SEC's new rules governing mineral reserves, specifically subpart 1300 of Regulation S-K under the Modernization of Property Disclosures for Mining Registrants, we had estimated reserves totaling 159.1 million metric tons and estimated mineral resources exclusive of reserves of 39.7 million metric tons.
The net book value of property, plant and equipment associated with Mine No. 7 as of December 31, 2022, was $337.7 million. As of the filing of this annual report Mine No. 7 is currently active with two longwall sections and five continuous mining sections.
The net book value of property, plant and equipment associated with Mine No. 7 as of December 31, 2023, was $328.1 million. As of the filing of this annual report Mine No. 7 is currently active with two longwall sections and six continuous mining sections.
Summary of Mineral Resources Exclusive of Reserves as of December 31, 2022 (1) (in millions of metric tons) (2) Demonstrated Coal Resources Quality (Air-Dried Basis) Location/Mine Status of Operation (3) Measured Indicated Measured + Indicated Inferred % Ash % Sulfur % VM Alabama: Blue Creek Development — 39.2 39.2 — 19 1.5 31 Total Alabama — 39.2 39.2 — Total Warrior Met Coal — 39.2 39.2 — (1) The price used and the time frame and point of reference used is discussed in the description of Blue Creek below.
Summary of Mineral Resources Exclusive of Reserves as of December 31, 2023 (1) (in millions of metric tons) (2) Demonstrated Coal Resources (in-place) Quality (Dry Basis) Location/Mine Status of Operation (3) Measured Indicated Measured + Indicated Inferred % Ash % Sulfur % VM Alabama: Blue Creek Development — 39.7 39.7 — 18.8 1.4 31 Total Alabama — 39.7 39.7 — Total Warrior Met Coal — 39.7 39.7 — (1) The price used and the time frame and point of reference used is discussed in the description of Blue Creek below.
The mine plan was generated based on previous mine plans, anticipated lease acquisitions, and operational criteria with modifications where necessary due to geologic mapping or other factors. Carlson Mining software was utilized to generate the life of mine plan.
The mine plan was generated based on previous mine plans, anticipated lease acquisitions, and operational criteria with modifications where necessary due to geologic mapping or other factors.
The following table provides a comparison of our material proven and probable mineral reserves as of December 31, 2022 and December 31, 2021: Summary of Material Mineral Reserves as of December 31, 2022 as compared to December 31, 2021 (in millions of metric tons) (1) As of December 31, Change Mine 2022 2021 Tons % No. 4 Material Reserves (2) Proven (3) 38.7 38.4 0.3 1 % Probable (3) 0.5 1.0 (0.5) (50) % Reserves (2) 39.2 39.4 (0.2) (1) % No. 7 Material Reserves (2) Proven (3) 38.4 39.6 (1.2) (3) % Probable (3) 11.3 11.1 0.2 2 % Reserves (2) 49.7 50.7 (1.0) (2) % Blue Creek Material Reserves (2) Proven (3) 42.8 41.5 1.3 3 % Probable (3) 25.4 21.8 3.6 17 % Reserves (2) 68.2 63.3 4.9 8 % 57 (1) 1 metric ton is equivalent to 1.102311 short tons.
The following table provides a comparison of our material proven and probable mineral reserves as of December 31, 2023 and December 31, 2022: Summary of Material Mineral Reserves as of December 31, 2023 as compared to December 31, 2022 (in millions of metric tons) (1) As of December 31, Change Mine 2023 2022 Tons % No. 4 Material Reserves (2) Proven (3) 36.0 38.7 (2.7) (7) % Probable (3) 0.5 0.5 — — % Reserves (2) 36.5 39.2 (2.7) (7) % No. 7 Material Reserves (2) Proven (3) 34.1 38.4 (4.3) (11) % Probable (3) 12.3 11.3 1.0 9 % Reserves (2) 46.4 49.7 (3.3) (7) % Blue Creek Material Reserves (2) Proven (3) 43.3 42.8 0.5 1 % Probable (3) 24.3 25.4 (1.1) (4) % Reserves (2) 67.6 68.2 (0.6) (1) % (1) 1 metric ton is equivalent to 1.102311 short tons.
The range of met coal sales prices used to assess our reserves were based on IHS High Volatile A price forecast through 2030 and was held constant beyond that date and varies between $143 to $177 per metric ton.
Carlson Mining software was utilized to generate the life of mine plan. 66 The range of steelmaking coal sales prices used to assess our reserves were based on IHS High Volatile A price forecast through 2030 and was held constant beyond that date and varies between $143 to $177 per metric ton.
The Mine No. 4 and Mine No. 7 change in proven and probable mineral reserves and quality is primarily attributable to production and incorporation of additional exploration drilling and associated coal quality data.
The Mine No. 4 and Mine No. 7 change in proven and probable mineral reserves and quality is primarily attributable to production and incorporation of additional exploration drilling and associated coal quality data. The Blue Creek change in proven and probable mineral reserves is primarily due to results from additional exploration and changes in property control.
The majority 58 of the drilling was accomplished by means of conventional core hole exploration and air rotary drilling with geophysical logging for coalbed methane wells. The following shows the current property and facilities layout of Mine No 4.
Steel, The Pittsburgh & Midway Coal Mining Company and Walter Energy, Inc. The majority 61 of the drilling was accomplished by means of conventional core hole exploration and air rotary drilling with geophysical logging for coalbed methane wells. The following shows the current property and facilities layout of Mine No 4.
Mine No. 4 and Mine No. 7, our two operating mines, had approximately 89.0 million metric tons of recoverable reserves and our undeveloped 53 Blue Creek mine contained 68.2 million metric tons of recoverable reserves and 39.2 million metric tons of in-place mineral resources exclusive of reserves, which total 107.4 million metric tons.
Mine No. 4 and Mine No. 7, our two operating mines, had approximately 82.9 million metric tons of recoverable reserves and our undeveloped 56 Blue Creek mine contained 67.6 million metric tons of recoverable reserves and 39.7 million metric tons of in-place mineral resources exclusive of reserves, which total 107.3 million metric tons.
Summary of Mineral Reserves as of December 31, 2022 (1) (in millions of metric tons) (2) Mineral Reserves (3)(5) Quality (Air-Dried Basis) Location/Mine Status of Operation (4) Proven (3) Probable (3) Reserves (3) Owned Leased % Ash % Sulfur % VM Alabama: No. 4 Production 38.7 0.5 39.2 — 39.2 10.2 0.8 27 No. 7 Production 38.4 11.3 49.7 0.26 49.5 10.2 0.7 22 Blue Creek Development 42.8 25.4 68.2 11.1 49.7 10.2 0.7 32 Other (6) Various 9.0 — 9.0 — — 3.2 - 23.5 .95 - 6.01 N/A Total 129.0 37.2 166.2 11.4 138.4 Total Warrior Met Coal 129.0 37.2 166.2 11.4 138.4 (1) The price used and the time frame and point of reference used is discussed in the description of each mine below.
Summary of Mineral Reserves as of December 31, 2023 (1) (in millions of metric tons) (2) Mineral Reserves (3)(5) Quality (Dry Basis) Location/Mine Status of Operation (4) Proven (3) Probable (3) Reserves (3) Owned Leased % Ash % Sulfur % VM Alabama: No. 4 Production 36.0 0.5 36.5 — 36.5 10.2 1 30 No. 7 Production 34.1 12.3 46.4 0.3 46.1 10.2 0.7 22 Blue Creek (6) Development 43.3 24.3 67.6 11.3 49.2 10.0 0.7 32 Other (7) Various 8.6 — 8.6 6.9 1.7 3.2 - 23.5 0.7 - 6.01 N/A Total 122.0 37.1 159.1 18.5 133.5 Total Warrior Met Coal 122.0 37.1 159.1 18.5 133.5 (1) The price used and the time frame and point of reference used is discussed in the description of each mine below.
The property has been extensively explored as early as 1916 by subsurface drilling efforts carried out by numerous entities, the majority of which were completed prior to our acquisition of the assets including: by Tennessee Coal, Iron & Railroad Company, U.S. Steel, The Pittsburgh & Midway Coal Mining Company and Walter Energy, Inc.
Upon our acquisition of Mine No. 4 in April 2016, the mine began production. The property has been extensively explored as early as 1916 by subsurface drilling efforts carried out by numerous entities, the majority of which were completed prior to our acquisition of the assets including: by Tennessee Coal, Iron & Railroad Company, U.S.
The net book value of property, plant and equipment associated with Blue Creek as of December 31, 2022, was $54.9 million. The mine property is located approximately 87°26’35” latitude and 33°35’21”N longitude.
The Blue Creek mine will be a similar operation to our currently active operations, Mine No. 4 and Mine No. 7. The net book value of property, plant and equipment associated with Blue Creek as of December 31, 2023, was $371.9 million. The mine property is located approximately 87°26’35” latitude and 33°35’21”N longitude.
Future mining areas include approximately 6,100 acres of leased mineral holdings and approximately 1,000 acres of uncontrolled mineral holdings. Our controlled reserves are either through direct ownership of the property or through third-party leases. Third-party leases have initial terms extending up to 30 years and generally provide for terms or renewals through the anticipated life of the associated mine.
Our controlled reserves are either through direct ownership of the property or through third-party leases. Third-party leases have initial terms extending up to 30 years and generally provide for terms or renewals through the anticipated life of the associated mine. These renewals are conditioned upon the payment of minimum royalties.
This preparation plant runs the most modern circuits, including an ultrafine coal recovery system. The preparation plant has had numerous upgrades since its original construction, which has helped it to continue to capture a higher percentage of coal with each upgrade.
The preparation plant has had numerous upgrades since its original construction, which has helped it to continue to capture a higher percentage of coal with each upgrade. Mine No. 4 preparation plant most recently completed a new fine coal recovery system in 2020, to further improve overall plant recovery.
As of the filing of this annual report Mine No. 4 is currently active with three continuous mining sections and one longwall. No. 4, inclusive of depleted mine works and future reserve areas, is composed of approximately 46,000 total acres. Of the 46,000 acres, approximately 7,200 are associated with future mining areas.
Mine No. 4, inclusive of depleted mine works and future reserve areas, is composed of approximately 46,000 total acres. Of the 46,000 acres, approximately 7,200 are associated with future mining areas. Future mining areas include approximately 6,100 acres of leased mineral holdings and approximately 1,000 acres of uncontrolled mineral holdings.
Mine No. 4 Mine No. 4 was opened by Jim Walter Resources in 1974 and has been in operation since. In 2015, in connection with the chapter 11 filing by Walter Energy, Mine No. 4 was idled. Upon our acquisition of Mine No. 4 in April 2016, the mine began production.
The Blue Creek change in coal resources exclusive of reserves is primarily due to results from additional exploration and labratory testing. Mine No. 4 Mine No. 4 was opened by Jim Walter Resources in 1974 and has been in operation since. In 2015, in connection with the chapter 11 filing by Walter Energy, Mine No. 4 was idled.
Currently the mine operates a single longwall with advanced features that improves horizon control, dust control, and the latest shield technology for partial automation. The mine routinely updates or rebuilds equipment and during this process, adds the latest safety or production features available. Mine No. 4 preparation plant has also routinely been upgraded with the latest technology.
The mine routinely updates or rebuilds equipment and during this process, adds the latest safety or production features available. Mine No. 4 preparation plant has also routinely been upgraded with the latest technology. This preparation plant runs the most modern circuits, including an ultrafine coal recovery system.
(6) Our other mines consist of other surface met and thermal coal mines, two of which are currently under lease to third parties and four of which are not operating.
(6) Total Blue Creek Mine reserve tonnage includes: 11.3 million owned, 49.2 million leased, and an additional 7.1 million with option to mine. (7) Our other mines consist of other surface steelmaking and thermal coal mines, two of which are currently under lease to third parties and four of which are not operating.
The Mine No. 4 North portal development is expected to be completed in 2023. These facilities have helped to decrease travel time to the active sections, as well as improving the safety of the miners by having shafts closer to the main work areas.
These facilities have helped to decrease travel time to the active sections, as well as improving the safety of the miners by having shafts closer to the main work areas. Currently the mine operates a single longwall with advanced features that improves horizon control, dust control, and the latest shield technology for partial automation.
Removed
The Blue Creek change in proven and probable mineral reserves is primarily due to tons previously classified as mineral resources, exclusive of reserves, now qualifying to be classified as a proven and probable reserve.
Added
With regard to Mine No. 7 and Mine No. 4, there have been no material changes in the mineral reserves or mineral resources from the TRSs filed for Mine No. 7 and Mine No. 4 as Exhibits 96.1 and 96.2, respectively, to the Amendment No. 1 on Form 19-K/A to the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “2023 Mine No. 7 and Mine No. 4 TRSs”).
Removed
The Blue Creek change in coal resources exclusive of reserves and quality is primarily due to the new rules governing mineral reserves under subpart 1300 of Regulation S-K combined with a significant portion of tons formerly categorized as reserves being reclassified as a resource exclusive of reserves due to variations in coal quality.
Added
The Company is therefore not filing new TRSs for Mine No. 7 and Mine No. 4 in connection with this Annual Report and is incorporating the 2023 Mine No. 7 and Mine No. 4 TRSs herein by reference.
Removed
These amounts could be higher now with the passage of time, inflation and labor shortages in the general economy. The Blue Creek mine will be a similar operation to our currently active operations, Mine No. 4 and Mine No. 7.
Added
More than a year after the relaunch of the Blue Creek mine development in May 2022, Warrior has initiated important and highly beneficial project scope changes that will require incremental capital expenditures over the life of the project while lowering operating costs, increasing flexibility to manage risks, and making better use of multi-channel transportation methods. 65 Most of these scope changes are transportation and logistics-related, with additional amounts related to inflation for these changes only.
Added
These scope changes are expected to increase total capital expenditures for the Blue Creek mine by approximately $120 - $130 million over the remainder of the project development period.
Added
While the Company originally planned on a single channel to transport coal from the Blue Creek mine via an overland belt to a third-party owned and operated barge loadout facility, it now plans to build a belt conveyor system to a railroad loadout to transport the majority of the coal.
Added
We expect this change to de-risk the single channel to market, lower operating cost and move volumes faster to the port. Warrior will also build and operate a barge loadout itself rather than utilizing a third-party provider.
Added
The Company believes that the potential economic benefits associated with these scope changes should provide Warrior with an inherently robust and cost competitive outbound logistics model that will provide additional flexibility to manage alternative transportation methods.
Added
The inclusion of the benefits and incremental capital expenditures relating to these specific scope changes did not have a material impact to the project economic metrics of net present value and internal rate of return.
Added
In addition, the Company has experienced inflationary cost increases ranging from 25 to 35 percent in both operating expenses and capital expenditures for its existing mining operations since late 2021.
Added
The Company is also experiencing inflationary pressures at Blue Creek, especially in relation to labor, construction materials and certain equipment, that is expected to continue during the remainder of the project development period.
Added
As a number of key material contracts are currently being negotiated, and due to uncertainty regarding future inflation rates, the Company is not providing an estimate of the impact of inflation at this time.
Added
However, as the Company negotiates and enters into contracts for the larger project components, the Company expects that more information will become available to allow it to provide revised guidance. While cost inflation has impacted the cost of the project, these inflationary pressures are expected to be offset by an inflationary increase in the long-term price assumption for steelmaking coal.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures The information concerning mine safety violations and other regulatory matters is filed as Exhibit 95 to this Annual Report pursuant to the requirements of Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104). 64 Part II
Biggest changeItem 4. Mine Safety Disclosures The information concerning mine safety violations and other regulatory matters is filed as Exhibit 95 to this Annual Report pursuant to the requirements of Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104). 67 Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeManagement’s Discussion and Analysis of Financial Conditions and Results of Operation—Liquidity and Capital Resources—ABL Facility” and “—Senior Secured Notes.” Holders As of January 17, 2023, we had approximately 368 holders of record of our common stock.
Biggest changeManagement’s Discussion and Analysis of Financial Conditions and Results of Operation—Liquidity and Capital Resources—ABL Facility” and “—Senior Secured Notes.” During the year ended December 31, 2023, we paid $61.1 million of regular quarterly and special cash dividends under the Capital Allocation Policy. Holders As of January 17, 2024, we had approximately 362 holders of record of our common stock.
On May 3, 2022, we provided an update on our capital allocation strategy. Our strategy continues to be focused on optimizing our capital structure to improve returns to stockholders, through special cash dividends, while allowing flexibility for us to develop our strategic growth project Blue Creek.
Our strategy continues to be focused on optimizing our capital structure to improve returns to stockholders, through special cash dividends, while allowing flexibility for us to develop our strategic growth project Blue Creek.
The following graph shows a comparison from April 13, 2017 (the date our common stock commenced trading on the NYSE) through December 31, 2022 of the cumulative total return for our common stock, the S&P Metals and Mining Index, the Russell 3000 Stock Index and a peer group comprised of Arch Resources, Inc. and Peabody Energy Corp ("Custom Composite Index").
The following graph shows a comparison from April 13, 2017 (the date our common stock commenced trading on the NYSE) through December 31, 2023 of the cumulative total return for our common stock, the S&P Metals and Mining Index and the Russell 3000 Stock Index.
The Custom Composite Index reflects publicly listed U.S. companies within the coal industry of similar size and product type. The graph assumes that $100 was invested on April 13, 2017 in our common stock and each index and that all dividends were reinvested. Note that historical stock price performance is not necessarily indicative of future stock price performance.
The graph assumes that $100 was invested on April 13, 2017 in our common stock and each index and that all dividends were reinvested. 68 Note that historical stock price performance is not necessarily indicative of future stock price performance.
Removed
Equity Compensation Plans The following table sets forth certain information relating to our equity compensation plans as of December 31, 2022: Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants, and Rights Weighted Average Exercise Price of Outstanding Options, Warrants, and Rights (1) Number of Securities Remaining Available for Future Issuance Equity compensation plans approved by security holders: 2017 Equity Incentive Plan 756,063 $ — 4,610,544 (1) The weighted-average exercise price does not take into account restricted stock units or phantom units, which do not have an exercise price. 65 Stock Repurchases There were no share repurchases of our common stock made during the quarter ended December 31, 2022.
Added
In February 2023, we announced that the Board approved an increase in the regular quarterly cash dividend by 17% from $0.06 per share to $0.07 per share.
Added
On February 9, 2024, we announced the Board approved an increase in the regular quarterly cash dividend by 14% from $0.07 per share to $0.08 per share and declared a special cash dividend of $0.50 per share.
Added
Stock Repurchases There were no share repurchases of our common stock made during the quarter ended December 31, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeResults of Operations Year Ended December 31, 2022 and 2021 The following table summarizes certain financial information relating to our operating results that have been derived from our audited financial statements for the year ended December 31, 2022 and 2021. 71 For the years ended December 31, (in thousands) 2022 % of Total Revenues 2021 % of Total Revenues Revenues: Sales $ 1,707,579 98.2 % $ 1,028,283 97.1 % Other revenues 31,159 1.8 % 30,933 2.9 % Total revenues 1,738,738 100.0 % 1,059,216 100.0 % Costs and expenses: Cost of sales (exclusive of items shown separately below) 710,605 40.9 % 554,282 52.3 % Cost of other revenues (exclusive of items shown separately below) 27,047 1.6 % 28,899 2.7 % Depreciation and depletion 115,279 6.6 % 141,418 13.4 % Selling, general and administrative 48,791 2.8 % 35,593 3.4 % Business interruption 23,455 1.3 % 21,372 2.0 % Idle mine 12,137 0.7 % 33,899 3.2 % Total costs and expenses 937,314 53.9 % 815,463 77.0 % Operating income 801,424 46.1 % 243,753 23.0 % Interest expense, net (18,995) (1.1) % (35,389) (3.3) % Loss on early extinguishment of debt — — % (9,678) (0.9) % Other income 675 — % 1,291 0.1 % Income before income tax expense 783,104 45.0 % 199,977 18.9 % Income tax expense 141,806 8.2 % 49,096 4.6 % Net income $ 641,298 36.9 % 150,881 14.2 % Sales, production and cost of sales components on a per unit basis for the year ended December 31, 2022 and 2021 were as follows: For the years ended December 31, 2022 2021 Met Coal (metric tons in thousands) Metric tons sold 5,099 5,699 Metric tons produced 5,729 5,084 Average net selling price per metric ton $ 334.89 $ 180.43 Cash cost of sales per metric ton $ 138.35 $ 96.43 The year ended December 31, 2022 was a record year in terms of financial performance.
Biggest changeResults of Operations Year Ended December 31, 2023 and 2022 The following table summarizes certain financial information relating to our operating results that have been derived from our audited financial statements for the years ended December 31, 2023 and 2022. 74 For the years ended December 31, (in thousands) 2023 % of Total Revenues 2022 % of Total Revenues Revenues: Sales $ 1,647,992 98.3 % $ 1,707,579 98.2 % Other revenues 28,633 1.7 % 31,159 1.8 % Total revenues 1,676,625 100.0 % 1,738,738 100.0 % Costs and expenses: Cost of sales (exclusive of items shown separately below) 910,269 54.3 % 710,605 40.9 % Cost of other revenues (exclusive of items shown separately below) 37,486 2.2 % 27,047 1.6 % Depreciation and depletion 127,356 7.6 % 115,279 6.6 % Selling, general and administrative 51,817 3.1 % 48,791 2.8 % Business interruption 8,291 0.5 % 23,455 1.3 % Idle mine — — % 12,137 0.7 % Total costs and expenses 1,135,219 67.7 % 937,314 53.9 % Operating income 541,406 32.3 % 801,424 46.1 % Interest expense (17,960) (1.1) % (31,433) (1.8) % Interest income 40,699 2.4 % 12,438 0.7 % Loss on early extinguishment of debt (11,699) (0.7) % — — % Other (expense) income (1,027) (0.1) % 675 — % Income before income tax expense 551,419 32.9 % 783,104 45.0 % Income tax expense $ 72,790 4.3 % 141,806 8.2 % Net income $ 478,629 28.5 % $ 641,298 36.9 % Sales, production and cost of sales components on a per unit basis for the years ended December 31, 2023 and 2022 were as follows: For the years ended December 31, 2023 2022 Steelmaking Coal (metric tons in thousands) Metric tons sold 6,820 5,099 Metric tons produced 6,936 5,729 Average net selling price per metric ton $ 241.64 $ 334.89 Cash cost of sales per metric ton $ 132.60 $ 138.35 Cost of production % 60 % 53 % Transportation and royalties % 40 % 47 % The following list highlights our key accomplishments for the year ended December 31, 2023: • we achieved strong net income of $478.6 million, or $9.20 per diluted share and adjusted EBITDA of $698.9 million; • we achieved annual sales volumes of 6.8 million metric tons, a 34% increase compared to the prior year, and production volume of 6.9 million metric tons, a 21% increase compared to the prior year, which represent run rates not seen since 2020; • we delivered positive cash flows from operations of $701.1 million and free cash flow of $176.3 million while continuing to invest a record high $524.8 million in property, plant and equipment and mine development and retired early approximately 50% of our senior secured notes; 75 • we maintained a strong balance sheet with total liquidity of $845.6 million, consisting of cash and cash equivalents of $738.2 million and $107.4 million available under our ABL Facility; • we made excellent progress in developing our world class Blue Creek growth project, which remains on schedule and invested $319.1 million for the year ended December 31, 2023; • we achieved a total reportable incidence rate of 1.90, which is 57% lower than the national total reportable incidence rate for all underground coal mines in the United States of 4.39 for the nine months ended September 30, 2023, which represents the latest data available; and • we demonstrated an ongoing commitment to returning capital to our stockholders paying a regular quarterly dividend of $0.07 per share, an increase of approximately 17% compared to the prior year and special dividends of $0.88 per share.
Adjusted EBITDA should not be considered an alternative to net income or loss or any other measure of financial performance or liquidity presented in accordance with GAAP. Adjustments exclude some, but not all, items that affect net income (loss) and our presentation of Adjusted EBITDA may vary from that presented by other companies.
Adjusted EBITDA should not be considered an alternative to net income or loss or any other measure of financial performance or liquidity presented in accordance with GAAP. Adjustments exclude some, but not all, items that affect net income and our presentation of Adjusted EBITDA may vary from that presented by other companies.
Investing Activities Net cash used in investing activities was $255.1 million for the year ended December 31, 2022, primarily comprised of $205.2 million of purchases of property, plant and equipment and $48.9 million of capitalized mine development costs associated with our Mine No. 4 and Blue Creek development.
Net cash used in investing activities was $255.1 million for the year ended December 31, 2022, primarily comprised of $205.2 million of purchases of property, plant and equipment and $48.9 million of capitalized mine development costs associated with our Mine No. 4 and Blue Creek development.
Financing Activities Net cash used in financing activities was $153.1 million for the year ended December 31, 2022, primarily due to the payment of quarterly and special dividends of $79.7 million, retirements of debt related to our Notes of $39.4 million and principal repayments of financing lease obligations of $30.3 million.
Net cash used in financing activities was $153.1 million for the year ended December 31, 2022, primarily due to the payment of quarterly and special dividends of $79.7 million, retirements of debt related to our Notes of $39.4 million and principal repayments of financing lease obligations of $30.3 million.
Net cash provided by operating activities was $841.9 million for the year ended December 31, 2022, and was primarily attributed to net income of $641.3 million adjusted for depreciation and depletion expense of $115.3 million, deferred income tax expense of $141.8 million, stock-based compensation expense of $17.6 million, mark-to-market loss on gas hedges of 4.0 million, amortization of debt issuance costs and debt discount of $3.2 million, accretion expense and valuation adjustment of asset retirement obligations of $1.9 million, an increase in other operating activities of $0.8 million and an increase in net working capital of $84.0 million.
Net cash provided by operating activities was $841.9 million for the year ended December 31, 2022, and was primarily attributed to net income of $641.3 million adjusted for depreciation and depletion expense of $115.3 million, deferred income tax expense of $141.8 million, stock-based compensation expense of $17.6 million, mark-to-market loss on gas hedges of $4.0 million, amortization of debt issuance costs and debt discount of $3.2 million, accretion expense and valuation adjustment of asset retirement obligations of $1.9 million, an increase in other operating activities of $0.8 million and an increase in net 79 working capital of $84.0 million.
Borrowings under the ABL Facility bear interest at a rate equal to either (i) SOFR, plus a credit adjustment spread, ranging currently from approximately 11 bps to 43 bps depending on the interest period selected by us, or (ii) an alternate base rate plus, in each case of the foregoing (i) and (ii), an applicable margin, which is determined based on the average availability of the commitments under the ABL Facility, ranging currently from 150 bps to 200 bps or 50 bps to 100 bps, respectively.
Borrowings under the ABL Facility bear interest at a rate equal to either (i) SOFR, plus a credit adjustment spread, ranging currently from approximately 11 bps to 43 bps depending on the interest period selected by us, or (ii) an alternate base 81 rate plus, in each case of the foregoing (i) and (ii), an applicable margin, which is determined based on the average availability of the commitments under the ABL Facility, ranging currently from 150 bps to 200 bps or 50 bps to 100 bps, respectively.
Cash cost of sales is used as a 69 supplemental financial measure by management and by external users of our financial statements, such as investors, industry analysts, lenders and ratings agencies, to assess: • our operating performance as compared to the operating performance of other companies in the coal industry, without regard to financing methods, historical cost basis or capital structure; and • the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities, such as Blue Creek.
Cash cost of sales is used as a supplemental financial measure by management and by external users of our financial statements, such as investors, industry analysts, lenders and ratings agencies, to assess: • our operating performance as compared to the operating performance of other companies in the coal industry, without regard to financing methods, historical cost basis or capital structure; and • the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities, such as Blue Creek.
In our evaluation of the need for a valuation allowance on our deferred tax assets, we consider, among other things, all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, the overall business environment, our historical financial results, our industry's historically cyclical financial results, our cumulative three-year income or loss position and potential current and future tax planning strategies.
In our evaluation of the need for a valuation allowance on our deferred tax assets, we consider, among other things, all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, the 87 overall business environment, our historical financial results, our industry's historically cyclical financial results, our cumulative three-year income or loss position and potential current and future tax planning strategies.
While the Amended Rights Agreement is in effect, any person or group that acquires beneficial ownership of 4.99% or more of the common stock or any existing stockholder who currently owns 5.00% or more of the common stock that acquires any additional shares of common stock (such person, group or existing stockholder, an "Acquiring Person") without approval from the Board would be subject to significant dilution in their ownership interest in the Company.
While the Amended Rights Agreement is in effect, any person or group that acquires beneficial ownership of 4.99% or more of the common stock or any existing stockholder who currently owns 5.00% or more of the common stock that acquires any additional shares of common stock (such person, group or existing stockholder, an "Acquiring Person") without approval 84 from the Board would be subject to significant dilution in their ownership interest in the Company.
A number of sources of information are used to determine accurate recoverable reserve and resource estimates including: • geological conditions; • historical production from the area compared with production from other producing areas; 83 • the assumed effects of regulations and taxes by governmental agencies; • previously completed geological and reserve studies; • assumptions governing future prices; and • future operating costs.
A number of sources of information are used to determine accurate recoverable reserve and resource estimates including: • geological conditions; • historical production from the area compared with production from other producing areas; • the assumed effects of regulations and taxes by governmental agencies; • previously completed geological and reserve studies; • assumptions governing future prices; and • future operating costs.
Therefore, demand for our coal will be highly correlated to conditions in the global steelmaking industry. The steelmaking industry’s demand for met coal is affected by a number of factors, including the cyclical nature of that industry’s business, technological developments in the steelmaking process and the availability of substitutes for steel such as aluminum, composites and plastics.
Therefore, demand for our coal will be highly correlated to conditions in the global steelmaking industry. The steelmaking industry’s demand for steelmaking coal is affected by a number of factors, including the cyclical nature of that industry’s business, technological developments in the steelmaking process and the availability of substitutes for steel such as aluminum, composites and plastics.
Cash cost of sales should not be considered an alternative to cost of sales or any other measure of financial performance or liquidity presented in accordance with GAAP. Cash cost of sales excludes some, but not all, items that affect cost of sales, and our presentation may vary from the presentations of other companies.
Cash cost of sales should not be considered an alternative to cost of sales or any other measure of financial performance or liquidity presented in accordance with GAAP. Cash cost of sales excludes some, but not all, items that 72 affect cost of sales, and our presentation may vary from the presentations of other companies.
Each of these factors may vary considerably from the assumptions used in estimating reserves and resources. For these reasons, estimates of economically recoverable quantities of coal attributable to a particular group of properties, and classifications of these reserves and resources based on risk of recovery and estimates of future net cash flows, may vary substantially.
Each of these factors may vary considerably from the assumptions used in estimating reserves and resources. For these reasons, estimates of economically recoverable quantities of coal attributable to a particular group of properties, and 86 classifications of these reserves and resources based on risk of recovery and estimates of future net cash flows, may vary substantially.
Our natural gas and royalty businesses do not meet the criteria in ASC 280, Segment Reporting , to be considered as operating or reportable segments. 68 Our management uses a variety of financial and operating metrics to analyze our performance.
Our natural gas and royalty businesses do not meet the criteria in ASC 280, Segment Reporting , to be considered as operating or reportable segments. Our management uses a variety of financial and operating metrics to analyze our performance.
We believe that the presentation of Adjusted EBITDA in this Annual Report provides information useful to investors in assessing our financial condition and results of operations. The GAAP measure most directly comparable to Adjusted EBITDA is net income (loss).
We believe that the presentation of Adjusted EBITDA in this Annual Report provides information useful to investors in assessing our financial condition and results of operations. The GAAP measure most directly comparable to Adjusted EBITDA is net income.
The Company will also seek to optimize its capital structure to improve returns to stockholders while allowing flexibility for the Company to pursue very selective strategic growth opportunities that can provide compelling stockholder returns.
The Company will also seek to optimize its capital structure to improve returns to stockholders while allowing flexibility for the Company to pursue selective strategic growth opportunities that can provide compelling stockholder returns.
Cash cost of sales is based on reported cost of sales and includes items such as freight, royalties, manpower, fuel and other similar production and sales cost items, and may be adjusted for other items that, pursuant to GAAP, are classified in the Statements of Operations as costs other than cost of sales, but relate directly to the costs incurred to produce met coal and sell it free-on-board at the Port of Mobile in Alabama.
Cash cost of sales is based on reported cost of sales and includes items such as freight, royalties, manpower, fuel and other similar production and sales cost items, and may be adjusted for other items that, pursuant to GAAP, are classified in the Statements of Operations as costs other than cost of sales, but relate directly to the costs incurred to produce steelmaking coal and sell it free-on-board at the Port of Mobile in Alabama.
If any of these facts, assumptions, representations, statements or undertakings are, or become, incorrect, inaccurate or incomplete, the private letter ruling may be invalid and the conclusions reached therein could be jeopardized. If we were to undergo a subsequent ownership change, our ability to utilize our NOLs and other tax attributes could be subject to severe limitations.
If any of these facts, assumptions, representations, statements or undertakings are, or become, incorrect, inaccurate or incomplete, the private letter ruling may be invalid and the conclusions reached therein could be jeopardized. If we were to undergo a subsequent ownership change, our ability to utilize our federal and state NOLs and other tax attributes could be subject to severe limitations.
Risk Factors—Risks Related to Our Business—We may be unable to generate sufficient taxable income from future operations, or other circumstances could arise, which may limit or eliminate our ability to utilize our significant tax NOLs or maintain our deferred tax assets.” On September 18, 2017, the IRS issued to us a private letter ruling, which favorably resolved certain questions about our ability to qualify for an exception to the annual limitations under Section 382 of the Code on the utilization of NOLs to reduce taxable income.
Risk Factors—Risks Related to Our Business—We may be unable to generate sufficient taxable income from future operations, or other circumstances could arise, which may limit or eliminate our ability to utilize our significant federal and state tax NOLs or maintain our deferred tax assets.” On September 18, 2017, the IRS issued to us a private letter ruling, which favorably resolved certain questions about our ability to qualify for an exception to the annual limitations under Section 382 of the Code on the utilization of NOLs to reduce taxable income.
The Company's principal contractual commitments include repayments of long-term debt and related interest, potential minimum throughput payments associated with our rail and port providers, asset retirement obligation payments, black lung obligation payments, payments on various coal and land leases, payments under financing lease obligations and payments 75 associated with our natural gas swap contracts.
The Company's principal contractual commitments include repayments of long-term debt and related interest, potential minimum throughput payments associated with our rail and port providers, asset retirement obligation payments, black lung obligation payments, payments on various coal and land leases, payments under financing lease obligations and payments 78 associated with our natural gas swap contracts.
Capital Expenditures Our mining operations require investments to maintain, expand, upgrade or enhance our operations and to comply with environmental regulations. Maintaining and expanding mines and related infrastructure is capital intensive. Specifically, the exploration, permitting and development of met coal reserves, mining costs, the maintenance of machinery and equipment and compliance with applicable laws and regulations require ongoing capital expenditures.
Capital Expenditures Our mining operations require investments to maintain, expand, upgrade or enhance our operations and to comply with environmental regulations. Maintaining and expanding mines and related infrastructure is capital intensive. Specifically, the exploration, permitting and development of steelmaking coal reserves, mining costs, the maintenance of machinery and equipment and compliance with applicable laws and regulations require ongoing capital expenditures.
Our repurchases may be executed using open market purchases or privately negotiated transactions in accordance with applicable securities laws and regulations, including Rule 10b-18 of the Exchange Act and repurchases may be executed pursuant to Rule 10b5-1 under the Exchange Act. Repurchases will be subject to limitations in the ABL Facility and the Indenture.
The Company’s repurchases may be executed using open market purchases or privately negotiated transactions in accordance with applicable securities laws and regulations, including Rule 10b-18 of the Exchange Act and repurchases may be executed pursuant to Rule 10b5-1 under the Exchange Act. Repurchases will be subject to limitations in the ABL Facility and the Indenture.
Please see “ Forward-Looking Statements. ” For a discussion and analysis of our results of operations and financial condition for the year ended December 31, 2020, please refer to Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Please see “ Forward-Looking Statements. ” For a discussion and analysis of our results of operations and financial condition for the year ended December 31, 2021, please refer to Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Overview We are a U.S.-based, environmentally and socially minded supplier to the global steel industry. We are dedicated entirely to mining non-thermal met coal used as a critical component of steel production by metal manufacturers in Europe, South America and Asia.
Overview We are a U.S.-based, environmentally and socially minded supplier to the global steel industry. We are dedicated entirely to mining non-thermal steelmaking coal used as a critical component of steel production by metal manufacturers in Europe, South America and Asia.
Met coal, which is converted to coke, is a critical input in the steel production process. Met coal is both consumed domestically in the countries where it is produced and exported by several of the largest producing countries, such as China, Australia, the United States, Canada and Russia.
Steelmaking coal, which is converted to coke, is a critical input in the steel production process. Steelmaking coal is both consumed domestically in the countries where it is produced and exported by several of the largest producing countries, such as China, Australia, the United States, Canada and Russia.
(2) Represents non-cash stock compensation expense associated with equity awards (see Note 12 to our consolidated financial statements). (3) Represents non-cash accretion expense and valuation adjustment associated with our black lung obligations (see Note 10 to our consolidated financial statements). (4) Represents non-cash mark-market losses recognized on our gas hedges (see Note 17 to our consolidated financial statements).
(2) Represents non-cash stock compensation expense associated with equity awards (see Note 12 to our consolidated financial statements). (3) Represents non-cash accretion expense and valuation adjustments associated with our black lung obligations (see Note 10 to our consolidated financial statements). (4) Represents non-cash mark-market losses recognized on our gas hedges (see Note 17 to our consolidated financial statements).
In addition, any decisions to increase production at our mines and the development of the high-quality met coal recoverable reserves at Blue Creek could also affect our capital needs or cause future capital expenditures to be higher than in the past and/or higher than our estimates.
In addition, any decisions to increase production at our mines and the development of the high-quality steelmaking coal recoverable reserves at Blue Creek could also affect our capital needs or cause future capital expenditures to be higher than in the past and/or higher than our estimates.
If the Rights become exercisable, each Right will initially entitle stockholders to buy one one-thousandth of a share of a newly created series of preferred stock designated as “Series A Junior Participating Preferred Stock” at an exercise price of $56.00 per Right.
If the Rights become exercisable, each Right will initially entitle stockholders to buy one one-thousandth of a share of a newly created series of preferred stock designated as “Series A Junior Participating Preferred Stock” at an exercise price of $159.00 per Right.
We are a large-scale, low-cost producer and exporter of premium met coal, also known as hard coking coal (“HCC”), operating highly-efficient longwall operations in our underground mines based in Alabama, Mine No. 4 and Mine No. 7.
We are a large-scale, low-cost producer and exporter of premium steelmaking coal, also known as hard coking coal (“HCC”), operating highly efficient longwall operations in our underground mines based in Alabama, Mine No. 4 and Mine No. 7.
We believe that cash costs of sales presents a useful measure of our controllable costs and our operational results by including all costs incurred to produce met coal and sell it free-on-board at the Port of Mobile in Alabama.
We believe that cash costs of sales presents a useful measure of our controllable costs and our operational results by including all costs incurred to produce steelmaking coal and sell it free-on-board at the Port of Mobile in Alabama.
Additionally, the ABL Facility contains a springing fixed charge coverage ratio of not less than 1.00 to 1.00, which ratio is tested if availability under the ABL Facility is less than a certain amount. As of December 31, 2022, we were not subject to this covenant.
Additionally, the ABL Facility contains a springing fixed charge coverage ratio of not less than 1.00 to 1.00, which ratio is tested if availability under the ABL Facility is less than a certain amount. As of December 31, 2023, we were not subject to this covenant.
We believe the utilization of these NOLs, subject to certain limitations, will significantly reduce the amount of federal and state income taxes payable by us as compared to what we would have had to pay at the statutory rates without these NOL benefits.
We believe the utilization of the state NOLs, subject to certain limitations, will significantly reduce the amount of state income taxes payable by us as compared to what we would have had to pay at the statutory rates without these NOL benefits.
We evaluate our spending on an ongoing basis in connection with our mining plans and the prices of met coal taking into consideration the funding available to maintain our operations at optimal production levels.
We evaluate our spending on an ongoing basis in connection with our mining plans and the prices of steelmaking coal taking into consideration the funding available to maintain our operations at optimal production levels.
The Amended Rights Agreement is intended to supplement the 382 Transfer Restrictions and is designed to serve the interests of all stockholders by preserving the availability of our NOLs and is similar to plans adopted by other companies with significant NOLs.
The Amended Rights Agreement is intended to supplement the 382 Transfer Restrictions and is designed to serve the interests of all stockholders by preserving the availability of our federal and state NOLs and is similar to plans adopted by other companies with significant federal and state NOLs.
Subject to customary grace periods and notice requirements, the ABL Facility also contains customary events of default. We were in compliance with all applicable covenants under the ABL Facility as of December 31, 2022.
Subject to customary grace periods and notice requirements, the ABL Facility also contains customary events of default. We were in compliance with all applicable covenants under the ABL Facility as of December 31, 2023.
Additional details about the Amended Rights Agreement are contained in our Current Reports on Form 8-K filed with the SEC on February 14, 2020 and March 4, 2022.
Additional details about the Amended Rights Agreement are contained in our Current Reports on Form 8-K filed with the SEC on February 14, 2020, March 4, 2022 and December 8, 2023.
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis provides a narrative of our results of operations and financial condition for the years ended December 31, 2022 and December 31, 2021.
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis provides a narrative of our results of operations and financial condition for the years ended December 31, 2023 and December 31, 2022.
We used the net proceeds of 79 the offering of the Notes, together with cash on hand, to fund the redemption of all of our outstanding 8.00% senior secured notes due 2024 (the “2017 Notes”), including payment of the redemption premium in connection with such redemption.
We used the net proceeds of the offering of the Notes, together with cash on hand, to fund the redemption of all of our outstanding 8.00% senior secured notes due 2024 (the “Existing Notes”), including payment of the redemption premium in connection with such redemption.
How We Evaluate Our Operations Our primary business, the mining and exporting of met coal for the steel industry, is conducted in one business segment: Mining.
How We Evaluate Our Operations Our primary business, the mining and exporting of steelmaking coal for the steel industry, is conducted in one business segment: Mining.
A significant reduction in the demand for steel products would reduce the demand for met coal, which would have a material adverse effect upon our business.
A significant reduction in the demand for steel products would reduce the demand for steelmaking coal, which would have a material adverse effect upon our business.
As a result of our high quality coal, our realized price has historically been in line with, or at a slight discount to, the S&P Platts Premium Low Volatility ("LV") Free-On-Board Australian Index (the "S&P Platts Index").
As a result of our high-quality coal, our Mine No. 7 steelmaking coal realized price has historically been in line with, or at a slight discount to, the Platts Premium Low Volatility ("LV") Free-On-Board Australian Index (the "S&P Platts Index").
Due to the reduced operations at Mine No. 4 and Mine No. 7, we incurred idle mine expenses of $12.1 million and $33.9 million for the years ended December 31, 2022 and 2021, respectively.
In the first quarter of 2022, we restarted operations at Mine No. 4. Due to the reduced operations at Mine No. 4 and Mine No. 7, we incurred idle mine expenses of $12.1 million and $33.9 million for the years ended December 31, 2022 and December 31, 2021, respectively.
There can be no assurance that we will have or continue to have access to the capital markets on terms acceptable to us or at all. Statements of Cash Flows Cash balances were $829.5 million, $395.8 million and $211.9 million at December 31, 2022, December 31, 2021, and December 31, 2020, respectively.
There can be no assurance that we will have or continue to have access to the capital markets on terms acceptable to us or at all. Statements of Cash Flows Cash balances were $738.2 million, $829.5 million and $395.8 million at December 31, 2023, December 31, 2022, and December 31, 2021, respectively.
Under Section 382 of the Code, these NOLs could be subject to annual limitations, further limitations, or elimination, 84 as described below, if we were to undergo a subsequent ownership change in the future.
Under state law provisions similar to Section 382 of the Code, these NOLs could be subject to annual limitations, further limitations, or elimination, as described below, if we were to undergo a subsequent ownership change in the future.
If our assumptions differ from actual experience, or if changes in the regulatory environment occur, our actual cash expenditures and costs that we incur could be materially different than currently estimated. At December 31, 2022, we had recorded asset retirement obligation liabilities of $68.5 million, including $3.9 million reported as a current liability.
If our assumptions differ from actual experience, or if changes in the regulatory environment occur, our actual cash expenditures and costs that we incur could be materially different than currently estimated. At December 31, 2023, we had recorded asset retirement obligation liabilities of $84.2 million, including $12.5 million reported as a current liability.
During the year ended December 31, 2022, we have paid $79.7 million of regular quarterly and special cash dividends under the Capital Allocation Policy . 77 Stock Repurchase Program On March 26, 2019, the Board approved the Company's second stock repurchase program (the “New Stock Repurchase Program”) that authorizes repurchases of up to an aggregate of $70.0 million of the Company's outstanding common stock.
During the year ended December 31, 2023, we have paid $61.1 million of regular quarterly and special cash dividends under the Capital Allocation Policy . 80 Stock Repurchase Program On March 26, 2019, the Board approved the Company's second stock repurchase program (the “New Stock Repurchase Program”) that authorizes repurchases of up to an aggregate of $70.0 million of the Company's outstanding common stock.
To the extent we have taxable income in the future and can utilize these NOL carryforwards, subject to certain limitations, to reduce taxable income, our cash taxes will be significantly reduced in those future years.
To the extent we have taxable income in the future and can utilize these NOL carryforwards, subject to certain limitations, to reduce taxable income, our cash taxes will be significantly reduced in those future years. See “Part I, Item 1A.
Our HCC, mined from the Southern Appalachian portion of the Blue Creek coal seam, is characterized by low sulfur, low-to-medium ash, and LV to MV. These qualities make our coal ideally suited as a coking coal for the manufacture of steel. We sell substantially all of our met coal production to steel producers.
Our steelmaking coal, mined from the Southern Appalachian portion of the Blue Creek coal seam, is characterized by low sulfur, low-to-medium ash, and Low Vol to High Vol. These qualities make our coal ideally suited as a coking coal for the manufacture of steel. We sell substantially all of our steelmaking coal production to steel producers.
The following table sets forth, a summary of the net cash provided by (used in) operating, investing and financing activities for the period (in thousands): For the years ended December 31, 2022 2021 2020 Net cash provided by operating activities $ 841,904 $ 351,543 $ 112,626 Net cash used in investing activities (255,144) (71,146) (108,189) Net cash (used in) provided by financing activities (153,119) (96,474) 14,096 Net increase in cash and cash equivalents and restricted cash $ 433,641 $ 183,923 $ 18,533 Operating Activities Net cash flows from operating activities consist of net income (loss) adjusted for noncash items, such as depreciation and depletion of property, plant and equipment and mineral interests, deferred income tax expense (benefit), stock-based compensation, amortization of debt issuance costs and debt discount, net, accretion expense and valuation adjustment associated with our asset retirement obligations, mark-to-market adjustments on gas hedges, loss on early extinguishment of debt and changes in net working capital.
The following table sets forth, a summary of the net cash provided by (used in) operating, investing and financing activities for the period (in thousands): For the years ended December 31, 2023 2022 2021 Net cash provided by operating activities $ 701,108 $ 841,904 $ 351,543 Net cash used in investing activities (527,207) (255,144) (71,146) Net cash (used in) provided by financing activities (265,184) (153,119) (96,474) Net (decrease) increase in cash and cash equivalents and restricted cash $ (91,283) $ 433,641 $ 183,923 Operating Activities Net cash flows from operating activities consist of net income adjusted for noncash items, such as depreciation and depletion of property, plant and equipment and mineral interests, deferred income tax expense, stock-based compensation, amortization of debt issuance costs and debt discount, accretion expense and valuation adjustment associated with our asset retirement obligations, mark-to-market adjustments on gas hedges, loss on early extinguishment of debt and changes in net working capital.
On December 6, 2021, we entered into the Second Amended and Restated Credit Agreement, by and among us and certain of its subsidiaries, as borrowers, the guarantors party thereto, the lenders from time to time party thereto and Citibank, as administrative agent (in such capacity, the "Agent"), which amends and restates in its entirety the existing Amended and Restated Credit Agreement (as amended, the “ABL Facility”).
ABL Facility On December 6, 2021, we entered into the Second Amended and Restated Asset-Based Revolving Credit Agreement (the “Second Amended and Restated Credit Agreement”), by and among us and certain of our subsidiaries, as borrowers, the guarantors party thereto, the lenders from time to time party thereto and Citibank, as administrative agent (in such capacity, the "Agent"), which amends and restates in its entirety the existing Amended and Restated Asset-Based Revolving Credit Agreement (as amended, the “ABL Facility”).
The Second Amended and Restated Credit Agreement, among other things, (i) extended the maturity date of the ABL Facility to December 6, 2026; (ii) changed the calculation of the interest rate payable on borrowings from being based on LIBOR to be based on SOFR, with corresponding changes to the applicable interest rate margins with respect to such borrowings, (iii) amended certain definitions related to the calculation of the borrowing base; (iv) increased the commitments that may be used to issue letters of credit to $65.0 million; and (v) amended certain baskets contained in the covenants to conform to the baskets contained in the Indenture.
The Second Amended and Restated Credit Agreement, among other things, (i) extended the maturity date of the ABL Facility to December 6, 2026; (ii) changed the calculation of the interest rate payable on borrowings from being based on a London Inter-Bank Offered Rate to be based on a Secured Overnight Financing Rate, with corresponding changes to the applicable interest rate margins with respect to such borrowings, (iii) amended certain definitions related to the calculation of the borrowing base; (iv) increased the commitments that may be used to issue letters of credit to $65.0 million; and (v) amended certain baskets contained in the covenants to conform to the baskets contained in the indenture governing the Notes (the "Indenture").
The increase in our working capital was primarily attributable to an increase in trade accounts receivable combined with a decrease in accounts payable and accrued expenses and other current liabilities offset partially by a decrease in inventories.
The decrease in our working capital was primarily attributable to a decrease in trade accounts receivable offset partially by an increase in inventories, an increase in accrued expenses and other current liabilities and an increase in income tax receivable.
Other revenues for the year ended December 31, 2022 were $31.2 million compared to $30.9 million for the year ended December 31, 2021. Other revenues are comprised of revenue derived from our natural gas operations, gains and losses on our natural gas hedges and earned royalty revenue.
Other revenues for the year ended December 31, 2023 were $28.6 million compared to $31.2 million for the year ended December 31, 2022. Other revenues are comprised of revenue derived from our natural gas operations, gains and losses on our natural gas hedges and earned royalty revenue.
As of December 31, 2022, we had outstanding surety bonds and letters of credit with parties for post-mining reclamation at all of our mining operations totaling $41.2 million, $18.6 million as collateral for self-insured black lung related claims and $4.2 million for miscellaneous purposes.
As of December 31, 2023, we had outstanding surety bonds and letters of credit with parties for post-mining reclamation at all of our mining operations totaling $44.3 million, $18.6 million as collateral for self-insured black lung related claims and $5.2 million for miscellaneous purposes.
Under the New Stock Repurchase Program, we may repurchase shares of our common stock from time to time, in amounts, at prices and at such times as we deem appropriate, subject to market and industry conditions, share price, regulatory requirements and other considerations as determined from time to time by us.
Under the New Stock Repurchase Program, the Company may repurchase shares of its common stock from time to time, in amounts, at prices and at such times as the Company deems appropriate, subject to market and industry conditions, share price, regulatory requirements and other considerations as determined from time to time by the Company.
Cost of sales (exclusive of items shown separately below) was $710.6 million, or 40.9% of total revenues for the year ended December 31, 2022, compared to $554.3 million, or 52.3% of total revenues for the year ended December 31, 2021.
Cost of sales (exclusive of items shown separately below) was $910.3 million, or 54.3% of total revenues for the year ended December 31, 2023, compared to $710.6 million, or 40.9% of total revenues for the year ended December 31, 2022.
The volume of coal we sell is also a function of the pricing environment in the international met coal markets and the amounts of LV and MV coal that we sell. We evaluate the price we receive for our coal based on our average net selling price per metric ton.
The volume of coal we sell is also a function of the pricing environment in the international steelmaking coal markets and the amounts of Low Vol and High Vol A coal that we sell. We evaluate the price we receive for our coal based on our average net selling price per metric ton.
For the years ended December 31, 2022 2021 2020 (in thousands) Segment Adjusted EBITDA $ 996,974 $ 474,001 $ 136,701 Metric tons sold 5,099 5,699 6,735 Metric tons produced 5,729 5,084 7,132 Average net selling price per metric ton $ 334.89 $ 180.43 $ 113.12 Cash cost of sales per metric ton $ 138.35 $ 96.43 $ 92.31 Adjusted EBITDA $ 994,221 $ 457,008 $ 108,276 Segment Adjusted EBITDA We define Segment Adjusted EBITDA as net income (loss) adjusted for other revenues, cost of other revenues, depreciation and depletion, selling, general and administrative expenses, business interruption expenses, idle mine expenses, loss on early extinguishment of debt, other income, net interest expense, income tax (expense) benefit and certain transactions or adjustments that the CEO, our Chief Operating Decision Maker does not consider for the purposes of making decisions to allocate resources among segments or assessing segment performance.
For the years ended December 31, 2023 2022 2021 (in thousands) Segment Adjusted EBITDA $ 737,723 $ 996,974 $ 474,001 Metric tons sold 6,820 5,099 5,699 Metric tons produced 6,936 5,729 5,084 Average net selling price per metric ton $ 241.64 $ 334.89 $ 180.43 Cash cost of sales per metric ton $ 132.60 $ 138.35 $ 96.43 Adjusted EBITDA $ 698,866 $ 994,221 $ 457,008 71 Segment Adjusted EBITDA We define Segment Adjusted EBITDA as net income adjusted for other revenues, cost of other revenues, depreciation and depletion, selling, general and administrative expenses, business interruption expenses, idle mine expenses, loss on early extinguishment of debt, other (expense) income, net interest (income) expense, income tax expense and certain transactions or adjustments that the CEO, our Chief Operating Decision Maker does not consider for the purposes of making decisions to allocate resources among segments or assessing segment performance.
Our deferred mine development costs were $48.9 million and $13.5 million for the years ended December 31, 2022 and December 31, 2021, respectively, and primarily relate to the development of Blue Creek and Mine No. 4.
Our deferred mine development costs were $33.1 million and $48.9 million for the years ended December 31, 2023 and December 31, 2022, respectively, and primarily relate to the development of Blue Creek and Mine No. 4.
For the years ended December 31, 2022 2021 2020 (in thousands) Cost of sales $ 710,605 $ 554,282 $ 625,170 Asset retirement obligation accretion and valuation adjustment (1,801) (2,802) (1,702) Stock compensation expense (3,379) (1,917) (1,789) Cash cost of sales $ 705,425 $ 549,563 $ 621,679 Adjusted EBITDA We define Adjusted EBITDA as net income (loss) before net interest expense, income tax expense (benefit), depreciation and depletion, non-cash asset retirement obligation accretion and valuation adjustments, non-cash stock compensation expense, other non-cash accretion and valuation adjustments, non-cash mark-to-market loss on gas hedges, loss on early extinguishment of debt, business interruption expenses, idle mine expenses and other income and expenses.
For the years ended December 31, 2023 2022 2021 (in thousands) Cost of sales $ 910,269 $ 710,605 $ 554,282 Asset retirement obligation accretion and valuation adjustment (2,109) (1,801) (2,802) Stock compensation expense (3,841) (3,379) (1,917) Cash cost of sales $ 904,319 $ 705,425 $ 549,563 Adjusted EBITDA We define Adjusted EBITDA as net income before net interest (income) expense, income tax expense, depreciation and depletion, non-cash asset retirement obligation accretion and valuation adjustments, non-cash stock compensation expense, other non-cash accretion and valuation adjustments, non-cash mark-to-market (gain) loss on gas hedges, loss on early extinguishment of debt, business interruption expenses, idle mine expenses and other income and expenses.
Our ability to fund our capital needs going forward will depend on our ongoing ability to generate cash from operations and borrowing availability under the ABL Facility, and, in the case of any future strategic investments, capital expenditures, or special dividends financed partially or wholly with debt financing, our ability to access the capital markets to raise additional capital. 74 Our ability to generate positive cash flow from operations in the future will be, at least in part, dependent on continued stable global economic conditions and a resolution of the CBA contract negotiations with the UMWA.
Our ability to fund our capital needs, including the development of Blue Creek, going forward will depend on our ongoing ability to generate cash from operations and borrowing availability under the ABL Facility, and, in the case of any future strategic investments, capital needs, the development of Blue Creek, or special dividends financed partially or wholly with debt financing and our ability to access the capital markets to raise additional capital. 77 Our ability to generate positive cash flow from operations in the future will be, at least in part, dependent on continued stable global economic conditions and a resolution of the CBA contract negotiations with the labor union representing certain of our hourly employees.
For the year ended December 31, 2022, we recognized income tax expense of $141.8 million or an effective tax rate of 18.1% primarily due to pre-tax income of $783.1 million offset partially by an income tax benefit due to $23.6 million of depletion.
For the year ended December 31, 2022, we recognized income tax expense of $141.8 million or an effective tax rate of 18.1% primarily due to pre-tax income of $783.1 million offset partially by an income tax benefit due to $23.6 million of depletion. At December 31, 2023, we had state NOLs of approximately $928.2 million.
We have posted $18.6 million in surety bonds and $8.6 million of collateral recognized as short term investments in addition to maintaining a black lung trust of $2.1 million that was acquired from Walter Energy.
We have posted $18.6 million in surety bonds and $9.0 million of collateral recognized as short term investments in addition to maintaining a black lung trust of $1.8 million that was acquired from Walter Energy. We received a letter from the U.S.
As of December 31, 2022, no loans were outstanding under the ABL Facility and there were $8.7 million of letters of credit issued and outstanding under the ABL Facility. At December 31, 2022, the Company had $123.3 million of availability under the ABL Facility.
As of December 31, 2023, no loans were outstanding under the ABL Facility and there were $8.7 million of letters of credit issued and outstanding under the ABL Facility. At December 31, 2023, the Company had $107.4 million of availability under the ABL Facility.
Depreciation and depletion was $115.3 million, or 6.6% of total revenues, for the year ended December 31, 2022, compared to $141.4 million, or 13.4% of total revenues for the year ended December 31, 2021.
Depreciation and depletion was $127.4 million, or 7.6% of total revenues, for the year ended December 31, 2023, compared to $115.3 million, or 6.6% of total revenues for the year ended December 31, 2022.
Our strong cash flow generation and current available liquidity, as well as the ability to finance $120.0 to $130.0 million of capital expenditures through equipment leases, allows us 82 to be opportunistic as we evaluate funding options for Blue Creek with the goal of maintaining an efficient and low-cost of capital.
The Company anticipates that its strong cash flow generation and current available liquidity, as well as ability to finance $120 to $130 million of capital expenditures 85 through equipment leases, will allow us to be opportunistic as we evaluate funding options for Blue Creek with the goal of maintaining an efficient and low-cost of capital.
Sales were $1.7 billion for the year ended December 31, 2022, compared to $1.0 billion for the year ended December 31, 2021.
Sales were $1.6 billion for the year ended December 31, 2023, compared to $1.7 billion for the year ended December 31, 2022.
On May 3, 2022, we provided an update on our capital allocation strategy. Our strategy continues to be focused on optimizing our capital structure to improve returns to stockholders, through special cash dividends, while allowing flexibility for us to develop our strategic growth project Blue Creek.
Our strategy continues to be focused on optimizing our capital structure to improve returns to stockholders, through special cash dividends, while allowing flexibility for us to develop our strategic growth project Blue Creek.
Selling, general and administrative expenses were $48.8 million, or 2.8% of total revenues for the year ended December 31, 2022 compared to $35.6 million, or 3.4% of total revenues for the year ended December 31, 2021.
Selling, general and administrative expenses were $51.8 million, or 3.1% of total revenues for the year ended December 31, 2023 compared to $48.8 million, or 2.8% of total revenues for the year ended December 31, 2022.
The following table presents a reconciliation of Adjusted EBITDA to net income (loss), the most directly comparable GAAP financial measure, on a historical basis for each of the periods indicated. 70 For the years ended December 31, 2022 2021 2020 (in thousands) Net income (loss) $ 641,298 $ 150,881 $ (35,761) Interest expense, net 18,995 35,389 32,310 Income tax expense (benefit) 141,806 49,096 (20,144) Depreciation and depletion 115,279 141,418 118,092 Asset retirement obligation accretion and valuation adjustment (1) 1,941 3,427 2,631 Stock compensation expense (2) 17,621 9,370 7,602 Other non-cash accretion and valuation adjustments (3) (5,344) 1,881 6,014 Non-cash mark-to-market loss on gas hedges (4) 27,708 1,595 — Loss on early extinguishment of debt (5) — 9,678 — Business interruption (6) 23,455 21,372 — Idle mine (7) 12,137 33,899 — Other income (8) (675) (998) (2,468) Adjusted EBITDA $ 994,221 $ 457,008 $ 108,276 (1) Represents non-cash accretion expense and valuation adjustment associated with our asset retirement obligations (see Note 8 to our consolidated financial statements).
The following table presents a reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP financial measure, on a historical basis for each of the periods indicated. 73 For the years ended December 31, 2023 2022 2021 (in thousands) Net income $ 478,629 $ 641,298 $ 150,881 Interest (income) expense, net (22,739) 18,995 $ 35,389 Income tax expense $ 72,790 141,806 49,096 Depreciation and depletion 127,356 115,279 141,418 Asset retirement obligation accretion and valuation adjustment (1) 4,535 1,941 3,427 Stock compensation expense (2) 18,300 17,621 9,370 Other non-cash accretion and valuation adjustments (3) 205 (5,344) 1,881 Non-cash mark-to-market loss on gas hedges (4) (1,227) 27,708 1,595 Loss on early extinguishment of debt (5) 11,699 — 9,678 Business interruption (6) 8,291 23,455 21,372 Idle mine (7) — 12,137 33,899 Other (expense) income (8) 1,027 (675) (998) Adjusted EBITDA $ 698,866 $ 994,221 $ 457,008 (1) Represents non-cash accretion expense and valuation adjustment associated with our asset retirement obligations (see Note 8 to our consolidated financial statements).
See Note 7 of the Notes to the Financial Statements for more information. Liquidity and Capital Resources Overview Our sources of cash have been coal and natural gas sales to customers, proceeds received from the Notes (as defined below) and access to our ABL Facility.
Liquidity and Capital Resources Overview Our sources of cash have been steelmaking coal and natural gas sales to customers, proceeds received from the Notes (as defined below) and access to our ABL Facility.
In addition, the Board has established procedures to consider requests to exempt certain acquisitions of the Company’s securities from the Amended Rights Agreement if the Board determines that doing so would not limit or impair the availability of the NOLs or is otherwise in the best interests of the Company.
In addition, the Board has established procedures to consider and approve requests to exempt certain acquisitions of the Company’s securities from the Amended Rights Agreement if the Board determines that doing so would not limit or impair the availability of the federal and state NOLs or is otherwise in the best interests of the Company and conditioned upon and subject to the satisfaction of certain continuing factual representations and covenants.
Cost of other revenues was $27.0 million for the year ended December 31, 2022, compared to $28.9 million for the year ended December 31, 2021.
Cost of other revenues was $37.5 million for the year ended December 31, 2023, compared to $27.0 million for the year ended December 31, 2022.
Going forward, we will use cash to fund debt service payments on our Notes, the ABL Facility and our other indebtedness, to fund operating activities, working capital, capital expenditures, and strategic investments, and, if declared, to pay our quarterly and/or special dividends.
Going forward, we will use cash to fund debt service payments on our Notes, the ABL Facility and our other indebtedness, to fund operating activities, working capital, capital expenditures, our reclamation obligations, professional fees and other non-recurring transaction expenses and strategic investments, the development of Blue Creek, and, if declared, to pay our quarterly and/or special dividends.
As of December 31, 2022, Mine No. 4 and Mine No. 7, our two operating mines, had approximately 89.0 million metric tons of recoverable reserves and our undeveloped Blue Creek mine contained 68.2 million metric tons of recoverable reserves and 39.2 million metric tons of coal resources exclusive of reserves, which total 107.4 million metric tons.
As of December 31, 2023, Mine No. 4 and Mine No. 7, our two operating mines, had approximately 82.9 million metric tons of recoverable reserves and our undeveloped Blue Creek mine contained 67.6 million metric tons of recoverable reserves and 39.7 million metric tons of coal resources exclusive of reserves, which total 107.3 million metric tons.
We received a letter from the Department of Labor ("DOL") on February 21, 2020 under its new process for self-insurance renewals that would require us to increase the amount of collateral posted to $39.8 million, but we have appealed such increase.
Department of Labor ("DOL") on February 21, 2020 under its new process for self-insurance renewals that would require us to increase the amount of collateral posted to $39.8 million, but we appealed such increase. We received another letter from the DOL on December 8, 2021 requesting additional information to support our appeal of the collateral requested by the DOL.
As of December 31, 2022, we had estimated reserves totaling 166.2 million metric tons and estimated mineral resources exclusive of reserves of 39.2 million metric tons.
As of December 31, 2023, we had estimated reserves totaling 159.1 million metric tons and estimated mineral resources exclusive of reserves of 39.7 million metric tons.
(8) Represents proceeds received upon settlement of a lawsuit, COVID-19 pandemic related expenses and settlement proceeds received for the Shared Services Claim and Hybrid Debt Claim associated with the Walter Canada CCAA and other Walter Claims (each discussed below).
(8) Represents non-recurring expenses incurred in connection with the ransomware attack discovered by the Company on July 29, 2023, proceeds received upon settlement of a lawsuit, COVID-19 pandemic related expenses and proceeds received upon settlement of a lawsuit and settlement proceeds received for the Shared Services Claim and Hybrid Debt Claim associated with the Walter Canada CCAA and other Walter Claims (each discussed below).
Other income for the year ended December 31, 2022, represents proceeds received from the Chapter 11 Cases (as defined below) from Walter Energy, Inc. ("Walter Energy") and other income for the year ended December 31, 2021 represents proceeds received in connection with the settlement of a lawsuit offset partially by COVID-19 pandemic related expenses.
Other income for the year ended December 31, 2022 represents proceeds received in connection with the settlement of a lawsuit offset partially by COVID-19 pandemic related expenses.
Net cash provided by operating activities was $351.5 million for the year ended December 31, 2021, and was primarily attributed to net income of $150.9 million adjusted for depreciation and depletion expense of $141.4 million, deferred income tax expense of $49.1 million, stock-based compensation expense of $9.4 million, loss on early extinguishment of debt of $9.7 million, accretion expense and valuation adjustment of asset retirement obligations of $3.4 million, amortization of debt issuance costs and debt discount of $1.7 million, mark-to-market loss on gas hedges of $1.6 million, an increase in other 76 operating activities of $5.7 million and an increase in net working capital of $21.4 million.
Net cash provided by operating activities was $701.1 million for the year ended December 31, 2023, and was primarily attributed to net income of $478.6 million adjusted for depreciation and depletion expense of $127.4 million, deferred income tax expense of $52.9 million, stock-based compensation expense of $18.2 million, loss on early extinguishment of debt of $11.7 million, accretion and valuation adjustment of asset retirement obligations of $4.5 million and amortization of debt issuance costs and debt discount of $2.1 million and a decrease in net working capital of $5.7 million.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs of December 31, 2022, assuming we had $132.0 million outstanding under our ABL Facility, a 100 basis point increase or decrease in interest rates would increase or decrease our annual interest expense under the ABL Facility by approximately $1.3 million.
Biggest changeAs of December 31, 2023, assuming we had $116.0 million outstanding under our ABL Facility, a 100 basis point increase or decrease in interest rates would increase or decrease our annual interest expense under the ABL Facility by approximately $1.1 million.
Our natural gas swap contracts economically hedge certain risk but are not designated as hedges for financial reporting purposes. All changes in the fair value of these derivative instruments are recorded as other revenues in the Statements of Operations. All of our derivative instruments were entered into for hedging purposes rather than speculative trading.
Our natural gas swap contracts economically hedge certain risk but are not designated as hedges for financial reporting purposes. All changes in the fair value of these derivative instruments are recorded as other revenues in the Statements of Operations. Historically, all of our derivative instruments were entered into for hedging purposes rather than speculative trading.
As of December 31, 2022, the Company had no natural gas swap contracts outstanding. We have exposure to price risk for supplies that are used directly or indirectly in the normal course of production, such as diesel fuel, steel, explosives and other items. We manage our risk for these items through strategic sourcing contracts in normal quantities with our suppliers.
As of December 31, 2023, the Company had no natural gas swap contracts outstanding. We have exposure to price risk for supplies that are used directly or indirectly in the normal course of production, such as diesel fuel, steel, explosives and other items. We manage our risk for these items through strategic sourcing contracts in normal quantities with our suppliers.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Commodity Price Risk We are exposed to commodity price risk on sales of coal. We typically sell our met coal under contracts primarily with pricing terms of three months and volume terms of one to three years.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Commodity Price Risk We are exposed to commodity price risk on sales of coal. We typically sell our steelmaking coal under contracts primarily with pricing terms of three months and volume terms of one to three years.
For the years ended December 31, 2022 and 2021 we did not have any allowances for credit losses associated with our trade accounts receivables. Interest Rate Risk We are exposed to market risk from changes in interest rates.
For the years ended December 31, 2023 and 2022 we did not have any allowances for credit losses associated with our trade accounts receivables. Interest Rate Risk We are exposed to market risk from changes in interest rates.
Sales commitments in the met coal market are typically not long-term in nature, and we are, therefore, subject to fluctuations in market pricing. We enter into natural gas swap contracts to hedge the exposure to variability in expected future cash flows associated with the fluctuations in the price of natural gas related to our forecasted sales.
Sales commitments in the steelmaking coal market are typically not long-term in nature, and we are, therefore, subject to fluctuations in market pricing. We occasionally enter into natural gas swap contracts to hedge the exposure to variability in expected future cash flows associated with the fluctuations in the price of natural gas related to our forecasted sales.

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