Overview of the Company

We are a leading operator and developer of high-quality, low-cost metallurgical coal in southern West Virginia and southwestern Virginia. Our primary source of revenue is the sale of metallurgical coal, which we sell to domestic and international customers. We have a portfolio of properties, including Elk Creek, Berwind, Knox Creek, and Maben, that we believe provide geological and logistical advantages to produce some of the lowest-cost metallurgical coal in the U.S.

In addition to our metallurgical coal operations, we also control mineral deposits in Wyoming that we are exploring for the potential recovery of rare earth elements and critical minerals. We are also working to advance new carbon product technologies that could commercialize the use of coal in an improved economic and environmental manner.

Our plan is to continue developing our existing properties and grow annual production over the next few years to approximately 7 million clean tons of metallurgical coal, subject to market conditions, permitting, and additional capital deployment. We may also pursue acquisitions of reserves or infrastructure that align with our focus on advantaged geology and lower costs.

The overall outlook for the metallurgical coal business is dependent on factors like pricing, regulatory uncertainties, and global economic conditions. Demand is driven by the U.S. and global economies, the strength of the U.S. dollar, and production cuts. Blast furnace steelmaking is more prevalent outside the U.S., creating demand for metallurgical coal exports.

Despite ongoing global conflicts and economic uncertainty, supply constraints continue to support the global metallurgical coal market, including in Asia. Bans on Russian coal imports have affected supply in some seaborne markets and contributed to price volatility.

Financial Performance

During the first three months of 2024, we sold 0.9 million tons of coal and recognized $172.7 million in revenue. This represents a 4% increase in revenue compared to the same period in 2023, driven by a 23% increase in tons sold, partially offset by a 15% decrease in revenue per ton sold.

The increase in tons sold occurred in both North American and export markets, aided by our increased production capacity achieved in late 2023. However, revenue per ton sold declined due to the variability in index-based pricing for our export sales, which were impacted by approximately 20% lower metallurgical coal prices in the first quarter of 2024.

Our cost of sales totaled $139.7 million for the first three months of 2024, a 26% increase compared to the same period in 2023. This was driven by the higher sales volume and a 3% increase in cost of sales per ton sold. The increase in per-ton costs was primarily due to challenging geology and labor constraints, which are expected to improve throughout the rest of 2024.

Depreciation, depletion, and amortization expenses increased year-over-year, reflecting the Company’s initiative to grow production. Selling, general, and administrative expenses also increased by 20%, mainly due to greater compensation-related expenses and professional services spending associated with the Company’s growth efforts.

As a result of the lower margins on coal sales, our net income and Adjusted EBITDA were significantly lower in the first three months of 2024 compared to the same period in 2023.

Liquidity and Capital Resources

As of March 31, 2024, we had $30.5 million in cash and cash equivalents and $65.3 million available under our Revolving Credit Facility for future borrowings. Our total current assets were $34.1 million higher than our total current liabilities, which included $17.0 million of revolver borrowings repaid in early April 2024.

During the first three months of 2024, our primary sources of cash were:

• $25.2 million in cash flows provided by operating activities, driven by net earnings and non-cash expenses.

Our primary uses of cash were:

• $18.7 million in capital expenditures, including for the preparation plant and expansion at our Maben complex.
• $18.0 million in financing activities, including $3.9 million in net debt repayments, $2.1 million in equipment finance lease payments, $1.8 million in insurance financing payments, and $8.3 million in dividend payments.

The Class B common stock dividend was calculated based on 20% of the fourth quarter 2023 CORE royalty and infrastructure fees, which totaled $10.5 million.

Looking ahead, we expect to fund our capital and liquidity requirements for the next 12 months and the foreseeable future using cash on hand, borrowings under our revolving credit facility, and projected cash flows from operations. However, factors like transportation delays, late customer payments, cost overruns, or adverse changes in the metallurgical coal markets could impact our future liquidity and capital requirements.

To provide additional flexibility, on May 3, 2024, the Company entered into an amendment to its Revolving Credit Facility, extending the maturity date to May 3, 2029 and increasing the size to an initial $200 million, with an accordion feature to increase it by an additional $75 million.

Critical Accounting Estimates and Off-Balance Sheet Arrangements

There were no material changes to the Company’s critical accounting policies or off-balance sheet arrangements during the first three months of 2024.

Non-GAAP Financial Measures

The Company uses several non-GAAP financial measures to provide additional information for evaluating its performance:

• Adjusted EBITDA, which adjusts net income for items like interest, taxes, depreciation, and stock-based compensation. Adjusted EBITDA was $24.2 million in Q1 2024, down from $48.3 million in Q1 2023.

• Non-GAAP revenue per ton sold (FOB mine), which excludes transportation revenues and demurrage. This metric decreased 17% year-over-year to $155 per ton.

• Non-GAAP cash cost per ton sold (FOB mine), which excludes transportation costs, alternative mineral development costs, and idle mine costs. This increased 8% to $118 per ton.

These non-GAAP measures provide useful information to investors by isolating the impact of factors outside the Company’s control, like transportation costs, and allowing for better comparisons to peers.

Outlook and Conclusion

The Company’s financial performance in the first quarter of 2024 was significantly impacted by lower margins on coal sales due to the negative impact of pricing. While sales volumes increased, the variability in index-based export pricing led to a 15% decline in revenue per ton sold.

Cost of sales also increased, driven by higher per-ton costs related to challenging geology and labor constraints, which are expected to improve in the coming quarters. The Company’s initiatives to grow production and expand its Maben complex also contributed to higher depreciation, depletion, and amortization, as well as selling, general, and administrative expenses.

Despite the near-term headwinds, the Company remains well-positioned with a strong liquidity position, access to capital through its amended credit facility, and a portfolio of high-quality, low-cost metallurgical coal assets. The Company’s focus on advantaged geology and lower costs should continue to serve it well as it navigates the volatile metallurgical coal market.

Additionally, the Company’s exploration of rare earth elements and critical minerals, as well as its work on new carbon product technologies, represent potential avenues for future growth and diversification beyond its core metallurgical coal business.

Overall, while the first quarter of 2024 presented challenges, the Company’s long-term strategy and financial flexibility position it to weather the current market conditions and continue executing on its plans to grow production and enhance shareholder value.