EX-96.2 15 arch-20231231xex96d2.htm EX-96.2

Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia, USA

February 2024

Prepared for:

Arch Land, LLC and
Arch Resources, Inc. (together “Arch”)

1 City Place Drive, Suite 300

Creve Coeur, MO 63141

Prepared by:

Marshall Miller and Associates, Inc.

582 Industrial Park Road

Bluefield, Virginia 24605

www.mma1.com


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

Statement of Use and Preparation

This Technical Report Summary (TRS) was prepared for the sole use of Arch Land, LLC and Arch Resources, Inc. (together “Arch”) and its affiliated and subsidiary companies and advisors.  Copies of or references to information in this report may not be used without the written permission of Arch.

The report provides a statement of coal resources and coal reserves for Arch, as defined under the United States Securities and Exchange Commission (SEC).  

The statement is based on information provided by Arch and reviewed by various professionals within Marshall Miller & Associates, Inc. (MM&A).  

MM&A professionals who contributed to the drafting of this report meet the definition of Qualified Persons (QPs), consistent with the requirements of the SEC.

The information in this TRS related to coal resources and reserves is based on, and fairly represents, information compiled by the QPs.  At the time of reporting, MM&A’s QPs have sufficient experience relevant to the style of mineralization and type of deposit under consideration and to the activity they are undertaking to qualify as a QP as defined by the SEC.  

Marshall Miller & Associates, Inc. (MM&A) hereby consents (i) to the use of the information contained in this report dated December 31, 2023, relating to estimates of coal resources and coal reserves controlled by Arch, (ii) to the use of MM&A’s name, any quotation from or summarization of this TRS in Arch’s SEC filings, and (iii) to the filing of this TRS as an exhibit to Arch’s SEC filings.

This report was prepared by:

Marshall Miller & Associates, Inc.

Marshall Miller and Associates, Inc. 1


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

Table of Contents

Title Page

Statement of Use and Preparation

Table of Contents

1Executive Summary8

1.1Property Description8

1.2Ownership10

1.3Geology10

1.4Exploration Status10

1.5Operations and Development10

1.6Mineral Resource10

1.7Mineral Reserve11

1.8Capital Summary13

1.9Operating Costs13

1.10Economic Evaluation14

1.10.1Sensitivity Analysis16

1.11Permitting16

1.12Conclusion and Recommendations17

2Introduction17

2.1Registrant and Terms of Reference17

2.2Information Sources17

2.3Personal Inspections18

2.4Updates to Previous TRS18

3Property Description19

3.1Location19

3.2Titles, Claims or Leases20

3.3Mineral Rights21

3.4Encumbrances21

3.5Other Risks21

4Accessibility, Climate, Local Resources, Infrastructure and Physiography22

4.1Topography, Elevation, and Vegetation22

4.2Access and Transport22

4.3Climate and Length of Operating Season23

4.4Infrastructure23

Marshall Miller and Associates, Inc. 2


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

5History23

5.1Previous Operation23

5.2Previous Exploration24

6Geological Setting, Mineralization and Deposit26

6.1Regional, Local and Property Geology26

6.1.1Lower Kittanning Seam Distribution26

6.2Deposits27

6.2.1Lower Kittanning Seam28

7Exploration28

7.1Nature and Extent of Exploration28

7.2Non-Drilling Procedures and Parameters32

7.3Drilling Procedures32

7.4Hydrogeology32

7.5Geotechnical Data33

7.5.1Occurrence of Hard Roof and Floor Conditions33

8Sample Preparation Analyses and Security34

8.1Prior to Sending to the Lab34

8.2Lab Procedures35

8.3Opinion of Qualified Person36

9Data Verification36

9.1Procedures of Qualified Person36

9.2Limitations37

9.3Opinion of Qualified Person37

10Mineral Processing and Metallurgical Testing37

10.1Testing Procedures37

10.1.1Lower Kittanning Product Compositing38

10.2Relationship of Tests to the Whole39

10.3Lab Information39

10.4Relevant Results40

10.5Opinion of the Qualified Person40

11Mineral Resource Estimates41

11.1Assumptions, Parameters and Methodology41

11.1.1Geostatistical Analysis for Classification42

11.2Qualified Person’s Estimates46

11.3Qualified Person’s Opinion46

Marshall Miller and Associates, Inc. 3


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

12Mineral Reserve Estimates47

12.1Assumptions, Parameters and Methodology47

12.2Qualified Person’s Estimates48

12.3Qualified Person’s Opinion49

13Mining Methods50

13.1Geotech and Hydrogeology50

13.2Production Rates50

13.3Mining Related Requirements51

13.4Required Equipment and Personnel52

13.5Life of Mine Plan Maps52

14Processing and Recovery Methods53

14.1Description or Flowsheet53

14.2Requirements for Energy, Water, Material and Personnel54

15Infrastructure55

16Market Studies55

16.1Market Description55

16.2Price Forecasts56

16.3Contract Requirements57

17Environmental Studies, Permitting and Plans, Negotiations or Agreements with Local Individuals57

17.1Results of Studies57

17.2Requirements and Plans for Waste Disposal57

17.3Permit Requirements and Status59

17.4Local Plans, Negotiations or Agreements60

17.5Mine Closure Plans60

17.6Qualified Person’s Opinion61

18Capital and Operating Costs61

18.1Capital Cost Estimate61

18.2Operating Cost Estimate62

19Economic Analysis63

19.1Assumptions, Parameters and Methods63

19.2Results65

19.3Sensitivity67

20Adjacent Properties68

20.1Information Used68

Marshall Miller and Associates, Inc. 4


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

21Other Relevant Data and Information68

22Interpretation and Conclusions69

22.1Conclusion69

22.2Risk Factors69

22.2.1Governing Assumptions70

22.2.2Limitations70

22.2.3Methodology70

22.2.4Development of the Risk Matrix71

22.2.4.1Probability Level Table71

22.2.4.2Consequence Level Table72

22.2.5Categorization of Risk Levels and Color Code Convention74

22.2.6Description of the Coal Property74

22.2.7Summary of Residual Risk Ratings75

22.2.8Risk Factors75

22.2.8.1Geological and Coal Resource75

22.2.8.2Environmental76

22.2.8.3Regulatory Requirements77

22.2.8.4Market and Transportation77

22.2.8.5Mining Plan78

22.2.8.5.1Methane Management78

22.2.8.5.2Mine Fires79

22.2.8.5.3Availability of Supplies and Equipment79

22.2.8.5.4Labor80

23Recommendations81

24References81

25Reliance on Information Provided by Registrant81

Figures (in Report)

Figure 11: Leer South Complex Property Location Map9

Figure 12: CAPEX13

Figure 13: OPEX14

Figure 14: Sensitivity of NPV16

Figure 31: Leer South Complex Property Location Map20

Figure 61: Generalized Stratigraphic Column for the Northern Appalachian Basin (not to scale)27

Figure 71: Drill Hole Location Map30

Figure 72: Generalized Leer South Cross-Section31

Marshall Miller and Associates, Inc. 5


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

Figure 111: Histogram of the Total Coal Thickness for the Lower Kittanning Seam Present in the Leer South Complex43

Figure 112: Scatter plot of the Total Coal Thickness for the Lower Kittanning Seam Present in the Leer South Complex43

Figure 113: Variogram of the Total Coal Thickness for the Lower Kittanning Seam Present in the Leer South Complex44

Figure 114: Result of DHSA for the Lower Kittanning Seam Present in the Leer South Complex45

Figure 131: Lower Kittanning LOM Map53

Figure 141: Leer South Preparation Plant as Viewed from Coarse Refuse Conveyor54

Figure 151: Leer South Surface Facilities55

Figure 171: Downslope Coarse Refuse Placement on Leer South Impoundment (Photograph provided by Arch)58

Figure 172: Coarse Refuse Stacker and Stockpile Area at Leer South (Photograph provided by Arch)59

Figure 181: CAPEX62

Figure 182: OPEX63

Figure 191: Sensitivity of NPV68

Tables (in Report)

Table 11: Coal Resources Summary as of December 31, 202311

Table 12: Coal Reserves Summary (Dry Basis) as of December 31, 202312

Table 13: Summary of Quality (dry basis)12

Table 14: Key Mine Statistics15

Table 51: Summary of Previous Exploration25

Table 101: Comparison of Core Hole and Shipped Quality (Metallurgical Market)39

Table 102: Summary of Wash Recovery Assumptions40

Table 111: General Reserve and Resource Criteria42

Table 112: DHSA Results Summary for Radius from a Central Point45

Table 113: Coal Resources Summary as of December 31, 202346

Table 121: Coal Reserves Summary (Dry Basis) as of December 31, 202349

Table 122: Summary of Quality (dry basis)49

Table 131: Leer South Summary of Production by Year (Moist Tons x 1,000)51

Table 161: Average Product Quality56

Table 171: Course and Fine Refuse Facility Capacities at Leer South58

Table 172: Leer South Mining Permit60

Table 181: Estimated Coal Production Taxes and Sales Costs63

Table 191: Life-of-Mine Tonnage, P&L before Tax, and EBITDA66

Table 192: Leer South After-tax Cash Flow Summary ($000)*66

Table 221: Probability Level Table72

Table 222: Consequence Level Table73

Table 223: Risk Matrix74

Table 224: Risk Assessment Matrix75

Marshall Miller and Associates, Inc. 6


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

Table 225: Geological and Coal Resource Risk Assessment (Risks 1 and 2)76

Table 226: Environmental (Risks 3 and 4)76

Table 227: Regulatory Requirements (Risk 5)77

Table 228: Market and Transportation (Risk 6 & 7)77

Table 229: Market and Transportation (Risk 8)78

Table 2210: Methane Management (Risk 9)79

Table 2211: Mine Fires (Risk 10)79

Table 2212: Availability of Supplies and Equipment (Risk 11)80

Table 2213: Labor – Work Stoppage (Risk 12)80

Table 2214: Labor – Retirement (Risk 13)80

Appendix

ASummary Reserve Table

Marshall Miller and Associates, Inc. 7


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

1Executive Summary
1.1Property Description

Arch Land, LLC and Arch Resources, Inc. (together “Arch”) authorized Marshall Miller & Associates, Inc. (MM&A) to prepare this Technical Report Summary (TRS) of its controlled coal reserves and resources located at the Leer South Operation (Leer South) in Barbour, Harrison, and Taylor Counties, West Virginia (the Property).  The report provides a statement of coal resources and coal reserves for Arch, as defined under the United States Securities and Exchange Commission (SEC) S-K1300 standards.  

Coal resources and coal reserves are herein reported in the U.S. system of measurement and are rounded to millions of short tons (Mt).

The Leer South Complex is located in Barbour, Harrison, and Taylor Counties in West Virginia.  The Leer South mine office is located north of the town of Philippi, the county seat of Barbour County, West Virginia.  The nearest cities are Clarksburg and Bridgeport, approximately 17 miles to the northwest.  The city of Buckhannon is located 26 miles to the south of the mine.  Charleston, the state capital of West Virginia, is located approximately 136 miles southwest of the Property.

For the Lower Kittanning seam, the Property is composed of approximately 24,200 total acres controlled by Arch, of which approximately 84-percent is owned and 16 percent is leased.  

Marshall Miller and Associates, Inc.8


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

Figure 1-1: Leer South Complex Property Location Map

Graphic

Marshall Miller and Associates, Inc.9


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

1.2Ownership

Since 1974, the Property has been controlled by various mining companies including (in chronological order: Republic Steel Corporation, Old Ben Coal Company, Black Diamond Energy Inc., Anker Mining Company (Anker), International Coal Group (ICG), and Arch Coal Inc. (Arch) in 2011, prior to the current owner, Arch Resources, Inc. (name changed in 2020).  Mine development in the Clarion seam was started by ICG in 2006, and expansion into the Lower Kittanning seam was begun by Arch in 2018.

1.3Geology

Operations at the Leer South Complex extract coal from the Lower Kittanning seam by continuous miner and longwall mining methods.  Strata of economic interest for this TRS belong to the Pennsylvanian-age Allegheny Formation.  Due to the high value of these coals, the Lower Kittanning seam has been extensively mined in the region.  The seam is situated below drainage throughout the Property and is accessed by existing mine slopes/shafts.

1.4Exploration Status

The Property has been extensively explored, largely by drilling using continuous coring methods and rotary drilling, as well as obtaining coal measurements at mine exposures, ongoing drilling associated with degas activities, and by downhole geophysical methods.  The majority of the data was acquired or generated by previous owners of the Property.  These sources comprise the primary data used in the evaluation of the coal resources and coal reserves on the Property.  MM&A examined the available data and incorporated all pertinent information into this TRS.  

Ongoing exploration has been carried out by Arch since acquiring the Property, and Arch-acquired exploration data has been consistent with past drilling activities.

1.5Operations and Development

Due to its coal reserve and seam characteristics, Leer South operates using longwall mining methods.  Resource and reserve models were therefore generated with longwall mining constraints in mind for Leer South’s underground resources.  The mine produces coal that is suitable for the high-volatile metallurgical coal markets and also produces a middlings product for consumption in thermal markets.

Leer South underground infrastructure and its associated preparation plant are upgraded as needed to accommodate the production from the longwall.  Processes are typical of those used in the coal industry and are in use at adjacent coal processing plants.

1.6Mineral Resource

Mineral resources, representing in-situ coal in which a portion of reserves are derived, are presented below.  A coal resource estimate, summarized in Table 1-1, was prepared as of December 31, 2023, for

Marshall Miller and Associates, Inc.10


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

property controlled by Arch.  As reflected in the table below, no resources exclusive of reserves have been considered or analyzed in this TRS.

Table 1-1: Coal Resources Summary as of December 31, 2023

 

Coal Resource (Dry Tons, In Situ, Mt)

Seam

Measured

Indicated

Inferred

Total

Lower Kittanning Rider

 

 

 

 

Inclusive of Reserve

2.34

0.15

0.00

2.49

Exclusive of Reserve

0.00

0.00

0.00

0.00

Total

2.34

0.15

0.00

2.49

Lower Kittanning

 

 

 

 

Inclusive of Reserve

73.08

30.89

0.00

103.96

Exclusive of Reserve

0.00

0.00

0.00

0.00

Total

73.08

30.89

0.00

103.96

Grand Total

 

 

 

 

Total

75.41

31.04

0.00

106.45

Note 1: Coal resources are reported on a dry basis. Surface moisture and inherent moisture are excluded.

1.7Mineral Reserve

Reserve tonnage estimates provided herein report coal reserves derived from the in-situ resource tons presented in Table 1-1 which are classified as “Inclusive of Reserve”.  Proven and probable coal reserves were derived from the defined coal resource considering relevant mining, processing, infrastructure, economic (including estimates of capital, revenue, and cost), marketing, legal, environmental, socio-economic and regulatory factors.  The Resource estimate has been used as the basis for this Reserve calculation, which utilizes a reasonable Preliminary Feasibility Study, a Life-of Mine (LOM) Mine Plan and practical recovery factors.  Production modeling was completed with an effective start date of October 1, 2023.  It is important to note that the LOM plan is based on information provided by the company and does not contemplate development of contiguous reserves the company currently controls or could acquire in the future (neither of which have been assessed as part of this TRS), nor does it assume any improvements in productivity, technological innovations, or operating efficiencies that the company has achieved historically.

The Leer South property is unique in that it produces both a metallurgical coking coal product and a middling thermal blend product.  As such, reserve tabulations include a breakdown of each respective product.  It is of important note that qualities presented in Table 1-3 which correspond which each respective market placement (metallurgical and thermal) are based upon exploration information at prescribed density cut points.  These quality estimates should be viewed as predictive—actual produced quality will vary based upon a multitude of factors, including, but not limited to plant operating practices and associated efficiency; plant equipment circuitry; plant feed quality and size distribution; and contractual product specifications.  Over the past 2 years, produced thermal based tonnages have had lower ash percentages than those projected in thermal reserve classifications herein.  Further, the relative ratio of thermal tons to metallurgical tons produced at the operation has been lower than projected in this TRS.  One can reasonably expect this ratio and quality parameters to vary in accordance with market demands.  Thermal reserve tons make up a relatively small portion of the projected revenue stream expressed in this TRS and for the operation.  

Marshall Miller and Associates, Inc.11


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

Factors that would typically preclude conversion of a coal resource to coal reserve, include the following:  inferred resource classification; absence of coal quality; poor mine recovery; lack of access; geological encumbrances associated with overlying and underlying strata; seam thinning; structural complication; and insufficient exploration have all been considered.  Reserve consideration excludes those portions of the resource area which exhibit the aforementioned-geological and operational encumbrances.

Proven and probable coal reserve were derived from the defined in-situ coal resource considering relevant processing, economic (including technical estimates of capital, revenue, and cost), marketing, legal, environmental, socioeconomic, and regulatory factors.  The proven and probable coal reserves on the Property are summarized below in Table 1-2.

Table 1-2: Coal Reserves Summary (Dry Basis) as of December 31, 2023

 

Demonstrated Coal Reserves (Dry Tons, Washed or Direct Shipped, Mt)

LOM Wash Recovery (%)

 

By Reliability Category

By Product

By Control Type

Seam

Proven

Probable

Total

Met

~1.50 Float SG**

Thermal

~1.50 x 1.70 SG**

Owned

Leased

Partially Owned

Partially Leased

Lower Kittanning Rider

1.43

0.01

1.44

1.27

0.17

0.05

1.11

0.00

0.28

Lower Kittanning

43.23

17.97

61.19

52.69

8.51

51.66

7.01

1.59

0.94

Total

44.66

17.98

62.63

53.95

8.68

51.70

8.12

1.59

1.22

44%

Uncontrolled*

2.53

0.37

2.90

2.51

0.38

*Uncontrolled tons are reported for informational purposes only and are not part of the reserves.  Uncontrolled tonnages are contained within small mineral tracts which must be acquired for execution of the life-of-mine plan.  As such, uncontrolled tonnages are included in the LOM financial model.  See appendix for maps which show details of mineral control. Mine plan includes a total of 2.9 Mt of adverse tons and was adjusted for approximately 0.26 Mt of depletion.

**Metallurgical tonnages and thermal tonnages (and associated quality) are respectively based upon an approximate 1.50 float and 1.50 x 1.70 specific gravity, as this represented the most consistent coal quality data. In reality, Arch’s actual plant operating gravities vary depending upon required product specifications. See “Mineral Processing and Metallurgical Testing” chapter of report for more detailed explanation on derivation of product yields. Exploration coal quality commonly varies from saleable product quality. Over the past 2 years, thermal ash and the ratio of thermal to met tons have been lower than projected in this TRS.

*** Coal Reserves are based upon sales assumptions provided to MM&A by Arch and were relied upon by MM&A. Financial modeling assumes sales prices of approximately $162.32 per ton (FOB-mine) in 2024, stabilizing to a long-term price of approximately $150.56/ton. See Chapter 16 for further details on marketing assumptions.

Table 1-3: Summary of Quality (dry basis)

 

Met

Thermal

Seam

Ash

Sulfur

Vol

Btu/lb.

Ash

Sulfur

Btu/lb.

Lower Kittanning Rider

8.3

1.3

35

14,240

31.9

4.3

10,184

Lower Kittanning

8.8

1.3

34

14,180

34.5

2.6

9,587

Total

8.8

1.3

34

14,181

34.5

2.6

9,599

*Metallurgical tonnages and thermal quality (and associated tonnages) are respectively based upon an approximate 1.50 float and 1.50 x 1.70 specific gravity, as this represented the most consistent coal quality data. See “Mineral Processing and Metallurgical Testing” chapter of report for more detailed explanation on derivation of product yields.

**Qualities presented which correspond with each respective market placement (metallurgical and thermal) are based upon exploration information at prescribed density cutpoints. These quality estimates should be viewed as predictive—actual produced quality will vary based upon a multitude of factors, including, but not limited to plant operating practices and associated efficiency; plant equipment circuitry; plant feed quality and size distribution; and contractual product specifications. Over the past 2 years, produced thermal ash percentages have been lower than projected in Table 1-3.

Marshall Miller and Associates, Inc.12


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

In summary, Arch controls a total of 62.6 Mt (dry basis) of marketable coal reserves, at Leer South, as of January 1, 2024.  Of that total, 71 percent are proven, and 29 percent are probable.  There are 51.7 Mt of owned coal reserves and 8.1 Mt of leased coal and 2.8 Mt of partial control reserves.  Of the 62.6 Mt of marketable reserves, approximately 86-percent are associated with metallurgical coal markets, and all of the Leer South reserves are assigned to existing infrastructure.

1.8Capital Summary

Arch provided MM&A with a detailed 5-year capital expenditure projection.  MM&A reviewed this schedule and deemed it to be appropriate for financial modeling.  MM&A extrapolated the provided capital schedule through end of mining operations.  Capital forecasting by MM&A assumes that major equipment rebuilds occur over the course of each machine’s remaining assumed operating life.  Replacement equipment was scheduled based on MM&A’s experience and knowledge of mining equipment and industry standards with respect to the useful life of such equipment.  A summary of the estimated capital for the Property is provided in Figure 1-2 below.

Figure 1-2: CAPEX

Graphic

1.9Operating Costs

Arch provided historical and projections of operating costs for Leer South for MM&A’s review.  MM&A used the historical and/or budget cost information as a reference and developed personnel schedules for the mine and support facilities.  Hourly labor rates and salaries were based upon information contained in Arch’s financial summaries and MM&A’s knowledge of regional labor rates.  Fringe-benefit

Marshall Miller and Associates, Inc.13


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

costs were developed for vacation and holidays, federal and state unemployment insurance, retirement, workers’ compensation and pneumoconiosis, casualty and life insurance, healthcare, and bonuses.  A cost factor for mine supplies was developed that relates expenditures to mine advance rates for roof-control costs and other mine-supply costs at underground mines.  Other factors were developed for maintenance and repair costs, rentals, mine power, outside services and other direct mining costs.  

Operating costs factors were also developed for the coal preparation plant processing, refuse handling, coal loading, property taxes, and insurance and bonding.  Appropriate royalty rates were assigned for production from leased coal lands, and sales taxes were calculated for state severance taxes, the federal black lung excise tax, and federal and state reclamation fees.

A summary of the projected operating costs for the Property is provided in Figure 1-3.

Figure 1-3: OPEX

Graphic

1.10Economic Evaluation

The pre-feasibility financial model prepared for this TRS was developed to test the economic viability of the coal resource area.  The results of this financial model are not intended to represent a bankable feasibility study, required for financing of any current or future mining operations contemplated for the Arch properties, but are intended to establish the economic viability of the estimated coal reserves.  Cash flows are simulated on an annual basis based on projected production from the coal reserves.  The

Marshall Miller and Associates, Inc.14


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

discounted cash flow analysis presented herein is based on an effective date of December 31, 2023.  On an un-levered basis, the NPV of the project cash flow after taxes represents the Enterprise Value of the project.  The project cash flow, excluding debt service, is calculated by subtracting direct and indirect operating expenses and capital expenditures from revenue.    

Cash flow after tax, but before debt service, generated over the life of the project was discounted to NPV at a 10% discount rate, which represents MM&A’s estimate of the constant dollar, risk adjusted WACC for likely market participants if the subject reserves were offered for sale.  On an un-levered basis, the NPV of the project cash flows represents the Enterprise Value of the project and amounts to $1.870 billion.  The pre-feasibility financial model prepared for the TRS was developed to test the economic viability of each coal resource area.  The NPV estimate was made for the purpose of confirming the economics for classification of coal reserves and not for purposes of valuing Arch or its Leer South assets.  Mine plans were not optimized, and actual results of the operations may be different, but in all cases, the mine production plan assumes the properties are under competent management.  

Table 1-4 shows LOM tonnage, P&L, and EBITDA for Leer South.

Table 1-4: Key Mine Statistics

 

LOM Plan

ROM Tons Produced (x 1,000)

155,805

Clean Tons Produced, Moist Basis (x 1,000)4

72,803

Preparation Plant Yield (%)

47%

Coal Sales Realization ($/ton)2

$150.30

Direct Cash Costs ($/ton)

$65.07

Other Cash Costs ($/ton)

$10.92

Non-Cash Costs ($/ton)

$5.27

Total Costs of Sales ($/ton)

$81.26

Profit/(Loss)

$69.04

EBITDA

$74.31

CAPEX ($/ton)

$5.42

Note 1: The LOM Economic Model was developed based upon mine faces as of October 1, 2023, whereas reserves were calculated as of December 31, 2023. As such, the economic model includes a small portion of tonnages not included in the reserve estimate. Additionally, the LOM model includes tonnages contained within uncontrolled tracts which are not included in reserve estimates.

Note 2: Realized coal prices are based upon a combination of thermal (middlings) and high-volatile A coking coal products. Realized coal prices incorporate HCC indices, adjustments from metric tons to short tons, adjustments for transportation costs and assumed prices for thermal products.

Note 3: The LOM model and associated economic analysis is intended to prove the economic viability of the subject coal tonnage, allowing controlled tons to be classified as “reserve”. The exercise should not be construed to represent a valuation of Arch’s holdings. Long-term cash flows incorporate forward-looking market projections which are expected to vary over time based upon historic volatility of coal markets.

Note 4:

LOM plan includes variances from reserves based on the LOM plan tons being 1) moist basis; 2) inclusion of non-reserve adverse tracts and 3) slight variances between production faces effective 12/31/23.

Marshall Miller and Associates, Inc.15


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

As shown in Table 1-4, the Leer South Mine shows a positive EBITDA.  Overall, the Arch consolidated operations show positive P&L and EBITDA of $69.04 per ton and $74.31 per ton, respectively.  A sensitivity analysis was completed by MM&A to determine the influence of changes to various assumptions in the financial model.  Based on the results, the project is most sensitive to assumed sales price, followed by operating costs, and then capital estimates.

1.10.1Sensitivity Analysis

Sensitivity of the NPV results to changes in the key drivers is presented in Figure 1-4.  The sensitivity study shows the NPV at the 10% discount rate when Base Case sales prices, operating costs, production, plant yield and capital costs are increased and decreased +/- 10%.  A critical case combining Sales price and operating cost was also done reflecting the combined effect of plus 10% operating cost with -10% sales price to -10% operating cost and +10% sales price.

Figure 1-4: Sensitivity of NPV

Graphic

1.11Permitting

Arch has obtained all mining and discharge permits to operate its mine and processing, loadout, and related support facilities; expansion of the underground mining boundary has been submitted and is currently being reviewed by the appropriate regulatory agencies.  MM&A is unaware of any obvious or current Arch permitting issues that are expected to prevent the issuance of future permits.  Leer South, along with all coal producers, is subject to a level of uncertainty regarding permits due to the United States Environmental Protection Agency (EPA) involvement with state programs.

Marshall Miller and Associates, Inc.16


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

1.12Conclusion and Recommendations

Sufficient data have been obtained through various exploration and sampling programs and mining operations to support the geological interpretations of seam structure and thickness for coal horizons situated on the Leer South Property.  The data are of sufficient quantity and reliability to reasonably support the coal resource and coal reserve estimates in this TRS.

The geological data and preliminary feasibility study, which consider mining plans, revenue, and operating and capital cost estimates are sufficient to support the classification of coal reserves provided herein.

This geologic evaluation conducted in conjunction with the preliminary feasibility study concludes that the 62.6 Mt of marketable underground coal reserves identified on the Property are economically mineable under reasonable expectations of market prices for metallurgical coal products, estimated operation costs, and capital expenditures.  In order to successfully recover the aforementioned controlled reserves, additional properties must be acquired by Arch.  Such properties contain an estimated additional 2.9 Mt of recoverable coal.

2Introduction
2.1Registrant and Terms of Reference

This report was prepared for the sole use of Arch Land, LLC and Arch Resources, Inc. (together “Arch”) and its affiliated and subsidiary companies and advisors.  The report provides a statement of coal resources and coal reserves for Arch, as defined under the United States Securities and Exchange Commission (SEC) SK-1300 standards.  

The report provides a statement of coal reserves for Arch.  Exploration results and Resource calculations were used as the basis for the mine planning and the preliminary feasibility study completed to determine the extent and viability of the reserve.

Coal resources and coal reserves are herein reported in the U.S. system of measurement and are rounded to millions of short tons.

2.2Information Sources

The technical report is based on information provided by Arch and reviewed by professionals employed by Marshall Miller and Associates.

Arch engaged MM&A to conduct a coal reserve evaluation of the Arch coal properties as of December 31, 2023.  For the evaluation, the following tasks were to be completed:

Marshall Miller and Associates, Inc.17


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

>Conduct site visits of the mines and mine infrastructure facilities, most recently in October 2020;
>Process the information supporting the estimation of coal resources and reserves into geological models;
>Develop LOM plans and financial models;
>Hold discussions with Arch company management; and
>Prepare and issue a TRS providing a statement of coal reserves which would include:
-A description of the mine and facilities.
-A description of the evaluation process.
-An estimation of coal reserves with compliance elements as stated under the SEC S-K 1300 standards.

MM&A reviewed pertinent exploration information provided by Arch, including a robust exploration and quality database. Additionally, mine plans and life-of-mine economic models were provided by Arch and reviewed by MM&A. Arch provided various property maps, permit maps, and additional ancillary data to MM&A for the engagement.

2.3Personal Inspections

MM&A is very familiar with Leer South, having provided a variety of services in recent years, and the MM&A employees involved in the development this TRS have conducted site inspections, to both surface and underground facilities, in 2020.

Moreover, between 1998 and 2023, MM&A has had a presence on the Property through its geophysical logging division, GLS, having e-logged nearly 145 exploration holes for Arch and its predecessors.   MM&A has also conducted numerous hydrogeological and geotechnical investigations at the subject property.

2.4Updates to Previous TRS

This TRS serves as an update to a previously submitted TRS which had an effective December 31, 2021.  Significant updates and revisions considered in the development of this TRS include:

1.Exclusion of the Clarion Seam from Resource & Reserve Tabulations as Arch is no longer producing coal form the Clarion horizon and does not have plans to re-engage Clarion operations.
2.Updates to Property Control including newly acquired leases and reconciliation of former leases.
3.Updates to Geological Thickness and Quality Models in accordance with newly acquired exploration data.
4.Revisions to Life-of-Mine Plans reflective of new mineability findings and various expansion areas.

Marshall Miller and Associates, Inc.18


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

5.Updates to Cost Models to reflect updated cost profiles and updated projections of revenue streams.
3Property Description
3.1Location

The Leer South Mine Complex is located in Barbour, Harrison, and Taylor Counties, West Virginia (see Figure 1-1) approximately 3 miles northwest of Philippi, which is the county seat of Barbour County.  Surface facilities for the mine are located adjacent to US Highway 119.  The Leer South mine transports coal to the CSX railroad via the Appalachian and Ohio Railroad (A&O), and from there to Grafton, West Virginia.  

The Property is located on portions of the following United States Geological Survey (USGS) 7.5-Minute Quadrangles: Brownton, Grafton, Philippi, and Rosemont, West Virginia.  Current mining projections fall within the Brownton, Philippi, and Rosemont quadrangles (see Figure 3-1).  

The coordinate system and datum used for the model of Leer South and subsequent maps were produced in the West Virginia State Plane North system, NAD 27.

Marshall Miller and Associates, Inc.19


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

Figure 3-1: Leer South Complex Property Location Map

Graphic

3.2Titles, Claims or Leases

For the Lower Kittanning seam, the Property is composed of approximately 24,200 total acres controlled by Arch, of which approximately 84 percent is partially (or fully) owned, and 16 percent is partially (or fully) leased.  

Subject to Arch’s exercising its renewal rights thereunder, all the leases expire upon exhaustion of the relevant coal reserves, which is expected to occur in 2042.  MM&A has not carried out a separate title verification for the coal property and has not verified leases, deeds, surveys, or other property control

Marshall Miller and Associates, Inc.20


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

instruments pertinent to the subject resources.  Arch has represented to MM&A that it controls the mining rights to the reserves as shown on its property maps, and MM&A has accepted these as being a true and accurate depiction of the mineral rights controlled by Arch.  The TRS assumes the Property is developed under responsible and experienced management.

3.3Mineral Rights

Arch supplied property control maps to MM&A related to properties for which mineral and/or surface property are controlled by Arch.  While MM&A accepted these representations as being true and accurate, MM&A has no knowledge of past property boundary disputes or other concerns, through past knowledge of the Property, that would signal concern over future mining operations or development potential.

Property control in Appalachia is often intricate.  Coal mining properties are typically composed of numerous property tracts which are owned and/or leased from both land-holding companies and private individuals or companies.  It is common to encounter severed ownership, with different entities or individuals controlling the surface and mineral rights.  Mineral control in the region is typically characterized by leases or ownership of larger tracts of land, interspersed with surface control generally comprised of smaller tracts, particularly in developed areas.

Legal mining rights may reflect a combination of fee or mineral ownership and fee or mineral leases of coal lands through various surface and mineral lease agreements.  There is also a relatively small amount of area where the coal is partially owned and/or partially leased on a limited number of individual tracts.  

Control of the surface property is necessary to conduct surface mining but is not necessary to conduct underground mining.  Given that the Property has had active mining operations dating back to the 1970’s, Arch, and its predecessors, have a successful history of obtaining any necessary rights and the associated permits to mine.

3.4Encumbrances

No Title Encumbrances are known.  By assignment, MM&A did not complete a query related to Title Encumbrances.  

3.5Other Risks

There is always risk involved in property control.  Arch’s land division and legal teams continually examine critical properties and associated deeds and title control in order to minimize the risk.  MM&A is not aware of any historical property control challenges related to Leer South’s operations.  

Marshall Miller and Associates, Inc.21


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

4Accessibility, Climate, Local Resources, Infrastructure and Physiography
4.1Topography, Elevation, and Vegetation

The Leer South mine is located on the Appalachian plateau of northern West Virginia.  The topography of the Property consists of rolling terrain with slopes rising from the Tygart River and associated tributaries.  The Tygart River Valley extends from Pocahontas County, West Virginia, north through Randolph, Barbour, Taylor and Marion Counties.  The Leer South mine is located to the west of the Tygart River northwest of the town of Philippi, West Virginia.  The upper elevations consist of sinuous ridgelines of elevations rising up to 1,900 feet.  

The terrain drops off from the higher elevations with steep slopes down to Foxgrape Run, Little Hackers Creek, Hackers Creek and Shooks Run to the south.  The drainages of Stewart Run, Spaw Lick and Brushy Fork are found to the southwest.  Pleasant Creek, Simpson Creek, Camp Run, Stillhouse Run, Bartlett Run and Beards Run are located to the north.  There are scattered areas of relatively flat lying pastureland on the river and stream floodplain terraces.  Maximum relief of the Property is approximately 900 feet.  Elevation ranges from 1,000 feet on Simpson Creek to the north and up to 1,905 feet on a knob located between Stewart Run and the head of Simpson Creek.

The surface of the Leer South mine property consists mostly of unmanaged forestland and pastureland.  The forestland consists of typical West Virginia Forest species with Oak/Hickory as the dominant forest-type group with a lesser percentage of Maple/Beech/ and Birch Forest.  

4.2Access and Transport

The Leer South mine office is located off of US Route 119, near the town of Philippi in Barbour County, West Virginia.  The nearest cities are Clarksburg and Bridgeport, West Virginia, approximately 17 miles to the northwest.  The city of Buckhannon, West Virginia is located 26 miles to the south of the mine.  The property can be accessed from Clarksburg/Bridgeport via West Virginia Route 76 and US Route 50.  The property can be accessed from Buckhannon via US Route 119 to Philippi.  

The nearest airport to the mine is the North Central West Virginia Airport (CKB) which is located in Bridgeport, West Virginia.  The North Central West Virginia Airport is 17 miles from the mine office.  The Morgantown Municipal Airport (MGW) is located 43 miles to the north in Morgantown, West Virginia.

The Leer South mine transports coal to the CSX Railroad (CSX) via the Appalachian and Ohio Railroad (A&O).  A&O operates 158 miles of shortline from Cowen, West Virginia to Grafton, West Virginia.  CSX operates the Mountain Subdivision from Cumberland, Maryland through Grafton, West Virginia.  CSX operates a rail yard at Grafton, West Virginia.

Marshall Miller and Associates, Inc.22


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

4.3Climate and Length of Operating Season

The climate of the Leer South mine property is classified as a humid continental climate.  This entails hot, humid summers and moderately cold winters.  Climate conditions vary greatly in the state of West Virginia due to the influence of rugged topography.  Average high temperatures range from 82 to 87 degrees Fahrenheit in the summer with average ranges from 15 to 25 degrees Fahrenheit for the lows in winter.  Average yearly rainfall measured in Philippi, West Virginia is 52 inches per year.  The Leer South mine operates year-round.

4.4Infrastructure
The Leer South Complex has sources of water, power, personnel, and supplies readily available for use.  Personnel have historically been sourced from the surrounding communities in Barbour, Harrison, and Taylor counties, and have proven to be adequate in numbers to operate the mine.  As mining is common in the surrounding areas, the workforce is generally familiar with mining practices, and many are experienced miners.  Water is sourced locally from local streams overlying and proximal to Arch’s property.  The mine also utilizes ground water from an old, abandoned mine.  Electricity is sourced from MonPower, a First Energy Company.  Additionally, water is sourced from the toe of the refuse impoundment for various uses in the mine and plant.  The service industry in the areas surrounding the mine complex has historically provided supplies, equipment repairs and fabrication, etc.  The Arch-owned Leer South Preparation Plant services the mine via a slope conveyor system which transports extracted coal from an underground bunker to the surface facility.  The Appalachian and Ohio rail line serves as the main means of transport from the mine.
5History
5.1Previous Operation

The area north of Philippi, West Virginia along the Tygart River has had mining in the Lower Kittanning seam since the early 1900’s.  The West Virginia Geologic and Economic Survey (WVGES) and the West Virginia Department of Environmental Protection (WVDEP) show the following companies and mines operating in the area along the Tygart River near the Leer South property:

>Midland Coal and Coke No. 1 Mine (1905)
>Bar-Jay Coal Company, Morral No. 1 and No. 2 Mines (1957)
>Ketchum Coal Company, Mine No. 1 (1964)
>Johnson Coal Company (1974)
>Pittston Coal Group / Badger Coal Company, Mines No. 13 and 14 (1974, 1984)

Marshall Miller and Associates, Inc.23


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

The Leer South mine property has had mining occur under a number of companies and mine names as listed below:

>Republic Steel Corporation / Kitt Energy Company, Kitt mine (1974 Initial development)
>Republic Steel Corporation / Kitt Energy Company, Kitt mine (1975 – 1982 production)
>Old Ben Coal Company, Kitt mine (1982 – 1987)
>Black Diamond Energy Inc., name changed to Diamond No. 1 Mine (1987 - 1990)
>Anker Group subsidiary Philippi Mining Company / Philippi Development, Inc., name changed to Sentinel Mine (1990)
>Philippi Development, Inc. changed name to Anker West Virginia Mining Company, Sentinel Mine (1998)
>Anker Mining Company, Sentinel Mine production transferred to Upper Kittanning seam (2000)
>Anker Mining Company / Wolf Run Mining Company, Sentinel Mine (2005)
>International Coal Group / Wolf Run Mining Company, Sentinel Mine (Lower Kittanning mining ended 2006)
>International Coal Group / Wolf Run Mining Company, Sentinel Mine (Clarion seam mining begins 2006)
>Arch Coal Inc. / Wolf Run Mining Company, Sentinel Mine (Clarion seam mining, 2011)
>Arch Coal Inc. / Wolf Run Mining Company, Sentinel Mine (Expansion into Lower Kittanning seam 2018)
>Arch Resources, Inc. /Sentinel Mine name changed to Leer South mine in 2020 mining both the Lower Kittanning, but operations in the Clarion seam since ceased operations as of the end of 2022.

A large number of deep and contour strip surface mines occurred in the area in the Pittsburgh and Redstone seams.  This mining occurs approximately 800 feet above the Lower Kittanning seam.

5.2Previous Exploration

Exploration work carried out by previous companies consists of continuous core drilling and e-logging of rotary drill holes.  Previous to Arch Coal Inc./Arch Resources Inc. control of the Property there were 289 drill holes drilled within the area of the Leer South Lower Kittanning mine plans.  

The following lists companies, number of drill holes drilled, laboratories used and dates of drilling.

Marshall Miller and Associates, Inc.24


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

Table 5-1: Summary of Previous Exploration

Company

No. of Drill Holes

Quality Lab

Years Drilled

Simpson Creek Collieries

1

None

1955

Badger Coal Company

4

None

1965

Island Creek Coal Company

1

Island Creek Co. Lab

1967

Badger Coal Company

3

Badger Coal Co. Lab

1968

Mountaineer Coal Company

3

None

1968

Badger Coal Company

3

Badger Coal Co. Lab

1969

Hillman Coal and Coke Company

4

None

1970

Badger Coal Company

8

Badger Coal Co. Lab

1970

Badger Coal Company

9

Badger Coal Co. Lab

1971

Hillman Coal and Coke Company

2

Unknown lab

1972

Hillman Coal and Coke Company

18

Unknown lab

1973

Republic Steel Corporation

1

None

1973

Tygart West Inc./Hillman Coal Co.

2

Unknown lab

1973

Tygart West Inc. /Hillman Coal Co.

4

Unknown lab

1974

Badger Coal Company

14

Pittston Coal Group Lab

1975

Bethlehem Mines Corporation

1

Bethlehem Mines Corp. Chemical Lab

1975

Badger Coal Company

23

Pittston Coal Group Lab

1976

Badger Coal Company

1

Pittston Coal Group Lab

1977

Consol Energy, Inc.

1

None

1977

Badger Coal Company

6

None

1978

Consol Energy, Inc.

1

None

1978

Republic Steel Corporation

32

Republic Steel Chemical Lab

1978

Petroleum Development Corp.

1

None

1979

Republic Steel Corporation

31

Republic Steel Chemical Lab

1979

Hillman Coal Company

10

Unknown Lab

1980

Republic Steel Corporation

3

Commercial Testing and Engineering Co.

1980

Hillman Coal Company

3

Unknown Lab

1981

Republic Steel Corporation

11

Commercial Testing and Engineering Co.

1981

Republic Steel Corporation

3

None

1982

Kitt Energy Corporation

9

None

1983

Kitt Energy Corporation

1

None

1983

Hillman Coal Company

3

None

1987

Anker Energy Corporation

2

None

1990

Anker Energy Corporation

3

Coal Operators Analytical Lab

1998

Anker Energy Corporation

2

None

1999

Anker Energy Corporation

1

None

2001

Anker Energy Corporation

2

None

2002

Ryanstone Coal Company

3

Standard Laboratories, Inc.

2002

CDX Gas, LLC

5

Unknown Lab

2004

Anker Energy Corporation

1

None

2005

CDX Gas, LLC

6

Unknown Lab

2005

CDX Gas, LLC

10

Unknown Lab

2006

International Coal Group, LLC

21

Coal Operators Analytical Lab

2006

CDX Gas, LLC

6

None

2007

CDX Gas, LLC

8

None

2008

International Coal Group, LLC

2

None

2009

Arch has continued ongoing exploration efforts on the Property with approximately 125 core holes drilled between 2011 and 2023; the most recent analytical testing has been conducted by Standard Laboratories, Inc. located in Belington, West Virginia.

Marshall Miller and Associates, Inc.25


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

6Geological Setting, Mineralization and Deposit
6.1Regional, Local and Property Geology

The strata of the Tygart Valley in Taylor and Barbour Counties, West Virginia consists of Pennsylvanian age sedimentary strata of the Monongahela Group, the Conemaugh Group, and the Allegheny Formation.   The gently dipping layered strata consists of shale, sandstone, claystone, fireclay, and coal seams.  At present, economic sedimentary deposits are limited to coal.

The Monongahela Group includes the Sewickley, Redstone, and Pittsburgh coal seams.  The Pittsburgh seam has been heavily surface-mined and deep-mined at higher elevations in the Tygart region.  

The Conemaugh group coal seams include the Elk Lick, Harlem, Bakerstown and Brush Creek coal seams.  These seams are generally thin and discontinuous on the Leer South property.  No known mining has taken place in the Conemaugh group coal seams in the Leer South mine area.  

The Allegheny Formation includes the Upper and Lower Freeport coal seams, Johnstown Limestone, Upper and Lower Kittanning coal seams, the Clarion and Brookville coal seams.  The Upper Kittanning, Lower Kittanning and Clarion seams have been deep mined in the Leer South area.  All other coal seams of the Allegheny Formation in the area occur in limited areal extent and are of insufficient thickness for mining.  The Upper Kittanning coal seam has had limited mining in the area, often hampered by soft floor strata and high sulfur content.  Leer South is currently mining the Lower Kittanning seam.  It should be noted that WVGES applies the name “Middle Kittanning”, rather than “Lower Kittanning” to this coal bed within this area.

6.1.1Lower Kittanning Seam Distribution

The Lower Kittanning seam has been extensively mined in the region, with mine operators and mine names changing over time.  The Leer South Lower Kittanning reserve is situated near Philippi, West Virginia, in the south and extends north to Rosemont, West Virginia.  The reserve extends from US Route 119 on the east side to Glade Run on the west side of the Property.  The reserve is approximately 9.5 miles in length (northwest to southeast) and approximately 5.9 miles wide, (northeast to southwest).  

The Lower Kittanning seam consists primarily of a dual-bench horizon (tagged as 4600) with a thin boney coal or carbonaceous shale parting between the two benches, (typically less than 1 foot in thickness).  An overlying Rider seam (tagged as 4650) is present primarily within the southern portion of the mine plan that can add an additional 2.7 feet of coal to the Lower Kittanning seam.  Drill holes show the seam thickness within the reserve boundary ranging from 0.0 to 6.6 feet, (10.9 feet including the rider).  The Lower Kittanning seam thins to less than 3.0 feet to the west of the Leer South mine plan.

Marshall Miller and Associates, Inc.26


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

Figure 6-1: Generalized Stratigraphic Column for the Northern Appalachian Basin (not to scale)

Graphic

6.2Deposits

The coal produced at Leer South is typically High Volatile (>31% volatile matter) bituminous coal.  Due to the historical value of the Lower Kittanning seams as high-volatile bituminous coal, it has been extensively mined in the region.  Owing to relatively high sulfur and ash middling material, Leer South and its neighboring producers (including Arch’s Leer property) produce two products: (1) a low-ash coking coal and (2) a high-ash, high-sulfur thermal blend product.

Marshall Miller and Associates, Inc.27


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

6.2.1Lower Kittanning Seam

The 4650 (Rider) and 4600 (Main seam) benches are splits of the Lower Kittanning horizon present on the Property and within the projected mining areas.  Due to variations in the splitting and merging characteristics of these coal beds, two mining configurations are present within the Lower Kittanning horizon.

1.Main seam only (4600 bench), ranging from 0.00 feet to a maximum of 9.00 feet, typically from 4.50 to 5.00 feet within the longwall panel areas.  The Lower Kittanning seam consists primarily of a dual-bench horizon (tagged as 4600) with a thin boney coal or carbonaceous shale parting between the two benches, (typically less than 1 foot in thickness).  Main seam only mining occurs where the Rider is either not present or is located above the assumed 7.00-foot average cutting height of the longwall shearer.
2.Main seam with overlying Rider seam (4600 + 4650), or Full seam.  Mining of the two benches occurs where the Rider is located within the 7.00-foot average cutting height of the longwall shearer.  Under this scenario, the parting between the two benches ranges typically from 1.00 to 2.00 feet, and the resulting maximum mining height (assuming that the full extent of the Rider seam is excavated) approaches 10.90 feet.

The Lower Kittanning seam is situated below drainage throughout the Property and is accessible by existing slopes and shafts.  Within the current longwall mine plan area, overburden thicknesses range from approximately 425 feet to more than 1,300 feet.

Composition of the mine floor varies across the projected mine area, consisting primarily of shale, sandy shale, and occasionally shaley fireclay.  The lithologic composition of the immediate roof strata exhibits greater variability due to the presence (or absence) of the Rider seam but consists primarily of dark gray to black shale which coarsens upward to sandy shale.  As noted above, the Rider seam can locally occur within 1-foot of the top of the Main seam where it is included within the mineable section however, it may occur more than 15 feet above the Main bench elsewhere.

7Exploration
7.1Nature and Extent of Exploration

All Arch Resources exploration pertaining to long-range planning and reserve definition-based work consists of core drilling.  No other forms of exploration have been carried out on the Leer South mine property, with the exception of channel sampling which is utilized for short term planning and quality projections.

Since 2011 Arch Coal Inc./Arch Resources Inc. has drilled approximately 130 core holes for the Lower Kittanning seam in the Leer South mine reserve.  All drill holes are cored; coal samples typically are sent

Marshall Miller and Associates, Inc.28


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

to Standard Laboratory Inc. (Standard) for quality analyses; and roof and floor samples sent to Appalachian Mining and Engineering, Inc. (AME) for rock strength testing.  

Extensive exploration in the form of subsurface drill efforts has been carried out on the Property by numerous entities, most of which were completed prior to the acquisition by Arch.  Diamond core, and CBM drilling are the primary types of exploration on the Property.  Data for correlation and mining conditions are derived from core descriptions and geophysical logging (e-logging).  Coal quality analyses were also employed during the core exploration process.  The Arch exploration database consists of a total of 1,823 data points of observation (drill holes and mine measurements), from which Lower Kittanning coal resources and reserves have been delineated.  The location of the drilling is shown on the map shown below in Figure 7-1.

Marshall Miller and Associates, Inc.29


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

Figure 7-1: Drill Hole Location Map

Graphic

The concentration of exploration varies slightly across the Property, with the proposed underground mining areas having the highest concentration of drill holes.  Drilling on the Property is typically sufficient for delineation of potential underground mineable benches.  Core logging is carried out by professional geologists for all drillholes.  Geophysical logging (e-logging) techniques, by contrast, document specific details useful for geologic interpretation and mining conditions.  Given the variability of data-gathering methods, definitive mapping of future mining conditions may not be possible, but projections and assumptions can be made within a reasonable degree of certainty and are supported by successful ongoing operations in the same horizons by Arch.

Marshall Miller and Associates, Inc.30


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

A significant effort was put into verifying the integrity of the database.  After this was established, stratigraphic columnar sections were generated using cross-sectional analysis to establish or confirm coal seam correlations.  MM&A encountered no correlation issues or concerns in the Arch-provided lithologic database.  A generalized cross-section of the stratigraphy from the Pittsburgh seam through the Clarion seam is shown below in Figure 7-2.

Figure 7-2: Generalized Leer South Cross-Section

Graphic

Due to the long history of exploration by various parties on the Property, a wide variety of survey techniques exist for documentation of data point locations.  Older exploration drill holes may have been located by survey and more recently completed drill holes are often located by high-resolution Global Positioning System (GPS) units.  

However, some older holes were evidently located using USGS topography maps or other methods which are less accurate.  Therefore, discretion had to be used regarding the accuracy for the location and ground surface elevation of some of these older drill holes.  In instances where a drill hole location (or associated coal seam elevations) appeared to be inconsistent with the overall structural trend (or

Marshall Miller and Associates, Inc.31


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

surface topography for surface-mineable areas), the data point was not honored for geological modeling.  Others with apparently minor variances were adjusted and then utilized by MM&A.

Surveying of the underground and surface mined areas has been performed by the mine operators and/or their consulting surveyors.  By assignment, MM&A did not verify the accuracy or completeness of supplied mine maps but accepted this information as being the work of responsible engineers and surveyors.

MM&A compiled comprehensive topographic map files by selecting the best available aerial mapping for each area and filling any gaps with digital USGS topographic mapping.

7.2Non-Drilling Procedures and Parameters

Exploration work associated with long term mine planning predominantly consists of core drilling.  Additionally, short term mine planning and quality projections utilize channel sampling obtained from existing mine workings.  No other forms of exploration have been carried out on the Leer South mine property.

7.3Drilling Procedures

Arch Land exploration consists of continuous core drilling using contract drilling companies.  HQ core (3.76-inch diameter drill hole yielding 2.5-inch core samples) is normally used in the Leer South Mine property.  Exploration drilling provides core samples of roof strata, the coal seam and floor strata.  Roof and floor strata samples are typically sent for geotechnical strength testing.  Coal seam cores are sent to certified laboratories for quality analyses; and some coal cores are placed in sealed canisters to determine gas content and gas composition.  Upon completion of each site, the drill holes are geophysically logged where caliper, density, gamma, resistivity, and sonic logs are run.  In accordance with Arch Land’s procedures and standards for exploration, each drill site location is surveyed.

Geologic logs were provided to MM&A as part of a geological database.  MM&A geologists were not involved in the production of original core logs but did perform a basic check of information within the provided database.  Where geophysical logs for such holes are available, they were used by MM&A geologists to verify the coal thickness and core recovery of seams.  

7.4Hydrogeology

Mining in Leer South in the Lower Kittanning coal seam is below surface drainage.  In general, the hydrogeologic system for Leer South is similar to that of longwall mining in the Leer Mine to the north (see Figure 6-1 above).  As such, longwall mining in the Lower Kittanning seam in Leer South is expected to involve stream undermining, undermining of aquifers, and mining through coalbed methane wells.  In addition, longwall mining in Leer South will occur beneath previous above-drainage mining in the Pittsburgh coal seam; however, with an average interburden thickness of approximately 800 feet

Marshall Miller and Associates, Inc.32


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

between the Lower Kittanning and the Pittsburgh seams, the potential for adverse interaction is not expected.  

MM&A has provided predictive longwall subsidence modeling for Leer South to facilitate planning of post-mining hydrogeologic conditions.  Based upon the successful history of the operation at Leer Mine, and the generally similar nature of hydrogeologic conditions at Leer Mine and Leer South, MM&A assumes that the Leer South engineering personnel have the knowledge and experience to minimize and mitigate any potential hydrogeologic issues.

7.5Geotechnical Data

Mining plans for potential underground mines were developed by Arch and reviewed by MM&A for applicability to the resource.  Pillar stability for longwall operations in the Lower Kittanning seam was checked by MM&A using the Analysis of Coal Pillar Stability (ACPS) program.  ACPS integrates the older Analysis of Retreat Mining Pillar Stability (ARMPS), Analysis of Longwall Pillar Stability (ALPS), and Analysis of Multiple Seam Stability (AMSS) software packages (originally developed by the National Institute for Occupational Safety and Health [NIOSH]) into a single pillar design framework.  MM&A reviewed the results from the ACPS analysis and considered them in the development of the LOM plan.

MM&A has conducted a mine visit in October 2020 to observe mine conditions.  During the visit, MM&A observed conditions and in the main entries in the Lower Kittanning seam.  Evidence of horizontal stress was noted in the mains and in the right rib of three working faces in the Lower Kittanning seam.  The ground control system included steel wire mesh with eight-foot fully grouted bolts, cable bolts, truss bolts and rib bolts.  MM&A verified appropriate orientations of the Leer South mine plans using Analysis of Horizontal Stress in Mining (AHSM).  

7.5.1Occurrence of Hard Roof and Floor Conditions

During the course of mine development, the mine has encountered roof and/or floor conditions that have adversely impacted longwall advance within areas where the combined thickness of cuttable roof, coal, and floor are less than 7 feet (average longwall cutting height); these are also referred to as “pinch points”.  Where distribution of this condition has occurred more broadly, panels have been shortened or left undeveloped.

Arch’s engineering staff has addressed this issue through mapping the composition of the immediate roof and floor strata enclosing the Lower Kittanning seam.  Through analysis of recently acquired (2023) geological logs and mine measurements, two general categories of immediate roof strata have been identified within the mine plan area: cuttable roof strata, consisting of soft, dark gray to black shales with an average compressive strength (UCS) of 5,800 pounds per square inch (PSI); and uncuttable hard sandy shale (10,900 PSI) to sandstone (16,600 PSI) strata.

Floor strata have been similarly categorized into two classes: cuttable soft fireclays (2,800 PSI); and uncuttable hard shales (4,200 PSI) or sandy fireclays (9,700 PSI).

Marshall Miller and Associates, Inc.33


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

The mapped distribution of pinch points (less than 6 to 6.5 feet of cuttable strata including the Lower Kittanning seam) is utilized by Arch’s engineering staff as a tool for mine planning purposes, as noted, through shortening panels or not developing them.  Where longwall panels are planned by Arch to mine through more localized pinch points, MM&A has applied a 50 percent reduction in mine recovery within those areas to account for potentially reduced coal recovery.

8Sample Preparation Analyses and Security
8.1Prior to Sending to the Lab

Prior to Arch’s acquisition of the Property, the protocol for preparing and testing samples varied over time and has not been fully documented for the older holes drilled.  Typical core-drilling sampling methods for coal in the United States involves drilling through the seam, removing the core from the barrel, describing the lithology, wrapping the sample in a sealed plastic sleeve and placing it lengthwise into a covered core box, and carefully marking hole ID and depth intervals on each box and lid, allowing the core to be delivered to a laboratory in correct stratigraphic order, and with original moisture content.  This process has been the norm for both historical and ongoing exploration activities at the Leer South Property.

This work is typically performed by the supervising driller, geologist, or company personnel.  Samples are most often delivered to the company by the driller after each shift or acquired by company personnel or representatives.  MM&A did not participate in the collection, sampling, or analysis of the core samples.  However, it is reasonable to assume, given the consistency of quality from previous operators, that these samples were generally collected and processed under industry best practices.  This assumption is based on MM&A’s familiarity with the operating companies and the companies used to perform the analyses.

Subsequent to acquisition of the Property by Arch, routine exploration procedures have included the placement of target coal seams from the core barrel into a plastic lined wooden core box.  The coal seam is then measured and described by the geologist.  The coal sample is then covered in plastic with the wooden box sealed.  Cardboard dividers and foam tubing are used to tightly pack and cushion the coal sample within the wooden box.  The coal core boxes are transported to the Arch Land core storage shed at Tucker Run where they are locked in a secure building.  

The Arch geologist’s seam thickness measurements are checked against the geophysical logs for thickness accuracy and to confirm core recovery.  Within two weeks of completion of the core hole, the coal samples are removed from the wooden core boxes and placed in sealed plastic bags.  The samples are coded and labelled with sample identification numbers based on drill hole id (DT2001), sample sequence (A, B, C, etc..), and sample number, (1, 2, 3 etc..).  (Example DT2001A1 = first sample of first seam in drill hole DT2001.)

Marshall Miller and Associates, Inc.34


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

8.2Lab Procedures

Coal-quality testing has been performed over many years by operating companies using different laboratories and testing regimens.  Some of the samples have raw analyses and washabilities on the full seam (with coal and rock parting layers co-mingled) and are mainly useful for characterizing the coal quality for projected production from underground mining.  Other samples have coal and rock analyzed separately, the results of which can be manipulated to forecast underground mining quality.  Care has been taken to use only those analyses that are representative of the coal quality parameters for the appropriate mining type for each sample.  Unlike many Appalachian properties, Leer South has interest in only a single seam, the Lower Kittanning seam.

Standard procedure upon receipt of core samples by the testing laboratory is to: 1) log the depth and thickness of the sample; then 2) perform testing as specified by a representative of the operating company.  Each sample is then analyzed in accordance with procedures defined under American Society for Testing and Materials (ASTM) standards including, but not limited to washability (ASTM D4371); ash (ASTM D3174); sulfur (ASTM D4239); Btu/lb. (ASTM D5865); volatile matter (ASTM D3175); Free Swell Index (FSI) (ASTM D720).

Subsequent to acquisition of the Property by Arch, quality samples were bagged and labelled, and samples were initially delivered to Standard for quality analyses.  Quality samples go to Standard Lab in Bellington, West Virginia for sample preparation (crushing, splitting, and sizing), Proximate, Washability, Ash Fusion, Ultimate, Ash Mineral Analyses, Dilatometer and Plastometer (coking) analyses and Trace Elements analyses.  Standard then ships splits of the samples to the SGS North America Inc. (SGS) lab in Sophia, West Virginia for petrographic analyses.  

Standard and SGS are contracted for performing quality analyses for Arch Resources; each of these is a certified coal quality testing facility.  

According to Arch’s protocols, quality control procedures are followed by its geologists to protect sample integrity and to ensure core samples are always under their control.  Once core samples have been analyzed, field geologists scrutinize the resulting quality data for accuracy; when satisfied that the data reports are accurate, the quality analyses are entered into a CoalAccess database.  Upon data entry completion, Arch’s modelling geologist exports the data and inspects the data for variance from expected norms.  If any data shows outside the norm for the Property, the data is checked against lab results to ensure proper data entry.  Quality data is gridded by Arch’s in-house staff and mapped; and anomalous data (or “bullseyes”) in the data mapping is investigated.  If the anomalous data is accurate, those items are brought to the attention of the mine engineers and sales staff.

Arch Land procedures for quality analyses provide a full range of coal quality analyses so that engineers and sales staff working with the data have a complete listing of the coal seam quality for each drill hole completed by Arch Land.

Marshall Miller and Associates, Inc.35


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

Companies engaged in coal mining typically have their own parameters for coal core quality analyses.  Many of these tailor their quality analyses procedures for specific coal seams, properties, and preparation plants.  Arch Land’s analytical testing is designed to provide its engineers and sales staff with an extensive catalog of coal quality analyses.

8.3Opinion of Qualified Person

Based upon the consistency of quality information derived from multiple historical and ongoing exploration campaigns, MM&A finds the security protocols of past an ongoing exploration to be sufficient for resource and reserve documentation.  Arch’s geology staff reports that it currently manages all exploration-based logistics, including core/channel sampling logging, transportation of material to the requisite laboratories, and the population/security of samples and appropriate laboratory forms.  Currently, Standard Lab and SGS North America Inc. handle the majority of coal analytical procedures related to exploration.  

Procedures utilized by Arch are aligned with typical protocols used in the coal industry.

9Data Verification
9.1Procedures of Qualified Person

All data generating procedures undertaken by Arch Land geologists have redundant data processing steps designed to ensure all data generated and used is checked and cross checked for accuracy.

Drill hole locations are surveyed to ensure accurate locations.  Drill holes are e-logged to ensure seam thickness and interburden thickness recorded by drillers and geologists are accurate.  All original drill hole, survey, geologic, geophysical, and quality data are scanned and stored on Arch’s server so it can be accessed and checked by any Arch engineering or Sales personnel against the database, modeling and mapping.

MM&A reviewed the Arch supplied digital geologic databases.  The database consists of data records, which include drill hole information for holes that lie within and adjacent to the Property and records for numerous supplemental coal seam thickness measurements.  Upon completion of the database verification, copies of a subset of records were printed on a test-case basis, and cross referenced to the original document for verification.  Once the initial integrity of the database was established, stratigraphic columnar sections were generated using cross-sectional analysis to establish or confirm coal-seam correlations.  Geophysical logs were used wherever available to assist in confirming the seam correlation and to verify proper seam thickness measurements and recovery of coal samples.

After establishing and/or verifying proper seam correlation, seam data-control maps and geological cross-sections were generated and again used to verify seam correlations and data integrity.  Once the

Marshall Miller and Associates, Inc.36


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

database was fully vetted, seam thickness, base-of-seam elevation, roof and floor lithologic information, and overburden maps were independently generated for use in the mine planning process.

9.2Limitations

As with any exploration program, localized anomalies cannot always be discovered.  The greater the density of the samples taken, the less the risk.  Once an area is identified as being of interest for inclusion in the mine plan, additional samples are taken to reduce the risk in those specific areas.  In general, provision is made in the mine planning portion of the study to allow for localized anomalies that are typically classed more as a nuisance than a hinderance.

9.3Opinion of Qualified Person

Sufficient data have been obtained through various exploration and sampling programs and mining operations to support the geological interpretations of seam structure and thickness for coal horizons situated on the Leer South Property.  The data are of sufficient quantity and reliability to reasonably support the coal resource and coal reserve estimates in this TRS.

10Mineral Processing and Metallurgical Testing
10.1Testing Procedures

Coal core samples generated by Arch Land drilling and channel samples taken within the Leer South mine are subjected to metallurgical testing at Standard and SGS.  Metallurgical testing consists of ultimate, sulfur forms, ash mineral analyses, trace element analyses, Gieseler and Arnu (coking analyses) and petrographic analyses.

Arch Land procedures for metallurgical quality analyses include a wide range of coal quality analyses.  This provides Leer South mine engineers and Arch sales staff working with the mine a complete listing of the coal quality for each drill hole and channel samples taken by Arch Land.

Separate tabulations have been compiled for basic chemical analyses (both raw and washed quality), petrographic data, rheological data and chlorine, ash, ultimate and sulfur analysis are maintained in MM&A’s files to the extent that such data has been provided.

Available coal-quality data were tabulated by resource area in Microsoft® EXCEL workbooks provided by Arch, and the details of that work are maintained on file at the offices of Arch and MM&A.  These tables also provide basic statistical analyses of the coal quality data sets, including average value; maximum and minimum values, and the number of samples available to represent each quality parameter of the seam.  Coal samples that were deemed by MM&A geologists to be unrepresentative were not used for statistical analysis of coal quality, as documented in the tabulations.  

Marshall Miller and Associates, Inc.37


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

The projected mine plans presented for the Lower Kittanning seams were examined and quality borings were selected for examination in order to accurately characterize the coal resources.  Sampled interval information from the float sink analyses of each selected sample was correlated against MM&A developed geologic strip logs.  This process determined what geologic strata was sampled in each analysis.  Samples were individual analyzed, or as combinations of the Lower Kittanning Rider, the parting, and the Lower Kittanning seam.

Once the type of sampled material was determined for each float sink analysis, composites were calculated for the metallurgical and thermal products.  When the sample material was unsized, by zero, a cumulative float 1.50 specific gravity (SG) product was used to represent the metallurgical product.  When a sample contained multiple size classes, a cumulative float 1.50 SG product was used for the coarse and intermediate material.  Data for the fine material was generally reported at a cumulative float 1.30 or 1.35 SG product.  Appropriate weight percentages were applied to each size class in order to calculate the combined metallurgical product.  

A SG cut point of 1.70 was used for determining the thermal product, although the produced quality may vary depending upon specific contract specifications.  The incremental data was calculated between the cumulative 1.50 and 1.70 SG products and this information, along with proper weight percentages for each size class, was used to calculate the combined thermal product.  When multiple size classes were present, no fine material was included in the thermal product, as is the case for current production and processing at the operation.

10.1.1Lower Kittanning Product Compositing

A minimum cutting height of 7 feet is used when considering the product for the Lower Kittanning seam.  Generally, this resulted in only the metallurgical and thermal product characteristics for the Lower Kittanning seam being reported.  Although, in some select areas primarily in the South, the parting between the Lower Kittanning Rider and Lower Kittanning narrows, and a minimum cutting height of 7 feet would begin to intrude on the Lower Kittanning Rider.  In these instances, metallurgical and thermal product characteristics for the Lower Kittanning Rider have also been reported.

With few exceptions, coal samples are more often reported on a coal only basis; unsampled parting or rock material have not been added back into the calculations in order to modify the yield.

The amount and areal extent of coal sampling for geological data is generally sufficient to represent the quality characteristics of the coal horizons and allow for proper market placement of the subject coal seams.  For some portions of the Property there is an abundance of laboratory data from core samples that are representative of the full extent of the resource area; whereas, for others more limited data is available to represent the resource area.  For example, in the active mining area, there may be limited quality data from core holes; however, in those cases the core sampling data is supplemented with channel samples representative of the resource area.

Marshall Miller and Associates, Inc.38


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

10.2Relationship of Tests to the Whole

The extensive sampling and testing procedures followed by Arch typically result in a strong correlation between sample quality and marketable product.  Shipped analyses of the coal from Leer South mine were reviewed to verify that the coal quality and characteristics were as anticipated from core hole data.

Table 10-1 below compares the metallurgical quality characteristics from: (1) core samples within the central reserve area where longwall mining is currently being conducted, and: (2) Leer South coal shipments during the years 2022 and 2023.  Three quality parameters are compared: clean Ash, Sulfur, and Volatile Matter.  Variances between the theoretical (cores) and actual produced coal shipments may be attributable to contract specifications that target specific qualities, such as lower ash and lower sulfur content.

Table 10-1: Comparison of Core Hole and Shipped Quality (Metallurgical Market)

 

Ash %

Sulfur %

Volatile Matter %

Core Samples (~1.50 Float)

8.5

1.23

33.82

Variance from Core Sample Quality % Range

Shipments (2022)

9%

12%

6%

Shipments (2023)

20%

14%

3%

Note: Dry Basis

10.3Lab Information

Core and channel sample quality samples are bagged and labelled; the samples are delivered to Standard for quality analyses.  Quality samples go to Standard Labs in Bellington, West Virginia for sample preparation (crushing, splitting, and sizing), Proximate, Washability, Ash Fusion, Ultimate, Ash Mineral Analyses, Dilatometer and Plastometer (Gieseler and Arnu coking) analyses and Trace Elements analyses.  Standard Labs ships splits of the samples to the SGS lab in Sophia, West Virginia for petrographic analyses.  

Standard and SGS are contracted to perform quality analyses for Arch, both of which are certified analytical testing laboratories.  

Each sample is reportedly analyzed in accordance with procedures defined under ASTM standards including, but not limited to the following (Note:  not all analytical tests identified in this list have been run on each sample):

>ASTM D 4371 – Test Method for Determining Washability Characteristics of Coal
>ASTM D 3174 – Method for Ash in the Analysis Sample of Coal and Coke
>ASTM D 4239 – Test Methods for Sulphur in the Analysis Sample of Coal and Coke Using High-Temperature Tube Furnace Combustion Methods

Marshall Miller and Associates, Inc.39


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

>ASTM D 5865 – Test Method for Gross Calorific Value of Coal and Coke
>ASTM D 3175 – Test Method for Volatile Matter in the Analysis Sample of Coal and Coke
>ASTM D 3176 – Standard Practice for Ultimate Analysis of Coal and Coke
>ASTM D 3178 - Test Method for Carbon and Hydrogen in Coal and Coke
>ASTM D 3179 - Test Method for Nitrogen in Coal and Coke
>ASTM D 720 – Test Method for Free-Swelling Index (FSI) of Coal
>ASTM D 5515 - Test Method for Determination of the Swelling Properties of Bituminous Coal Using a Dilatometer (Arnu)
>ASTM D 2639 – Test Method for Plastic Properties of Coal (Gieseler)
>ASTM D 3683 – Trace Elements in Coal and Coke Ash by the Atomic Absorption Method
>ASTM D 1857 – Standard Test Method for Fusibility of Coal and Coke Ash
>ASTM D 2798 – Microscopical Determination of the Reflectance of Vitrinite in a Polished Specimen of Coal
10.4Relevant Results

Coal seam recovery estimates are based on washability analyses performed on coal cores and channel samples.  Ash, sulfur, volatile matter, and yield data from multiple washability fractions are modelled and mapped.  Grids and mapping from Arch’s in-house staff are provided to Leer South mine engineers for calculation of mine recovery.  Mine recovery takes into account washability yield, mining method and preparation plant performance.

10.5Opinion of the Qualified Person

Wash recovery factors estimates on a LOM basis are included, reflective of dilution material, are summarized in the table below.  

Table 10-2: Summary of Wash Recovery Assumptions

Seam

Wash Recovery

Lower Kittanning LOM

44%

The Qualified Persons finds that the metallurgical and mineral processing information derived from historical and ongoing exploration campaigns is adequate to document mineral resources and reserves presented herein.  The distribution of quality information has been considered in measured and indicated resource status, and subsequently in probable and proven reserve status.  Arch’s ongoing drilling campaigns are addressing short-term and long-term quality projections.

Marshall Miller and Associates, Inc.40


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

11Mineral Resource Estimates

MM&A independently created a geologic model to define the coal resources at Leer South.  Coal resources were estimated as of December 31, 2023.

11.1Assumptions, Parameters and Methodology

Geological data are imported into Carlson Mining® (formerly SurvCADD®) geological modelling software in the form of Microsoft® Excel files incorporating drill hole collars, seam and thickness picks, bottom seam elevations and raw and washed coal quality.  These data files were validated prior to importing into the software.  Once imported, a geologic model was created, reviewed and verified- with a key element being a gridded model of coal seam thickness.  Resource tons were estimated by using the MM&A seam thickness grid based on each valid point of observation and by defining resource confidence arcs around the points of observation.  Points of observation for Measured and Indicated confidence arcs were defined for all valid drill holes that intersected the seam using standards deemed acceptable by MM&A based on a detailed geologic evaluation and a statistical analysis of all drill holes within the projected reserve areas as described in Section 11.1.1.  The geological evaluation incorporated an analysis of seam thickness related to depositional environments, adjacent roof and floor lithologies, and structural influences.

After validating coal seam data and establishing correlations, the thickness and elevation for seams of economic interest were used to generate a geologic model.  Due to the relative structural simplicity of the deposits and the reasonable continuity of the tabular coal beds, the principal geological interpretation necessary to define the geometry of the coal deposits is the proper modeling of their thickness and elevation.  Both coal thickness and quality data are deemed by MM&A to be reasonably sufficient within the resource areas.  Therefore, there is a reasonable level of confidence in the geologic interpretations required for coal resource determination based on the available data and the techniques applied to the data.

Table 11-1 below provides the geological mapping and coal tonnage estimation criteria used for the coal resource and reserve evaluation.  These cut-off parameters have been developed by MM&A based on its experience with the Arch property and are typical of mining operations in the Central Appalachian coal basin.  This experience includes technical and economic evaluations of numerous properties in the region for the purposes of determining the economic viability of the subject coal reserves.

Marshall Miller and Associates, Inc.41


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

Table 11-1: General Reserve and Resource Criteria

Item

Parameters

Technical Notes and Exceptions*

• General Reserve Criteria

 

 

Reserve Classification

Reserve and Resource

Reliability Categories

Resource (Measured, Indicated, and Inferred)

Reserve (Proven and Probable)

To better reflect geological conditions of the coal deposits, distance between points of observation is standard USGS (in feet), respectively, for measured and indicated.

Effective Date of Resource Estimate

December 31, 2023

Effective Date of Reserve Estimate

December 31, 2023

Financial modeling was conducted based off of mine faces as of October 1, 2023

Seam Density

Variable, dependent upon seam characteristics (based on available drill hole quality).

• Underground-Mineable Criteria

Map Thickness

Total seam thickness

Minimum Seam Thickness (Resource)

3.0 feet or 50% Estimated Visual Recovery

Minimum Seam Thickness (Reserve)

3.0 feet for the Lower Kittanning Seam

Minimum Mining Thickness

7.0 feet for the Lower Kittanning Seam

Minimum In-Seam Wash Recovery

50 percent

Wash Recovery Applied to Coal Reserves

Based on average yield for drill holes within specified reserve areas.

Out-of-Seam Dilution Thickness for Run-of-Mine Tons Applied to Coal Reserves

Based upon the delta between seam height and minimum mining criteria.

2.3 SG used for dilution tonnage estimate

Mine Barrier

Not applicable

Adjustments Applied to Coal Reserves

No moisture addition for coal reserves—reserves reported as dry basis.

Note:  Exceptions for application of these criteria to reserve estimation are made as warranted and demonstrated by either actual mining experience or detailed data that allows for empirical evaluation of mining conditions.  Final classification of coal reserve is made based on the pre-feasibility evaluation.

1 – Face locations of 10/1/2023 used in production modeling.  Depletion for Q4 2023 was backed out of the production forecast for financial modeling and any difference between actual and forecasted production for this period is considered incidental.

11.1.1Geostatistical Analysis for Classification

In 2022, MM&A completed a geostatistical analysis on drill holes within the reserve boundaries to determine the applicability of the common United States classification system for measured and indicated coal resources.  As exploration data has not materially changed resource or reserve delineation, results of the 2022 geostatistical analysis are reported herein.  Historically, the United States has assumed that coal within ¼-mile of a point of observation represents a measured resource whereas coal between ¼-mile and ¾-mile from a point of observation is classified as indicated.  Inferred resources are commonly assumed to be located between ¾-mile and 3 miles from a point of observation.  Per SEC regulations, only measured and indicated resources may be considered for reserve classification, respectively as proven and probable reserves.

MM&A performed a geostatistical analysis test of the Leer South data set using the Drill Hole Spacing Analysis (DHSA) method.  This method attempts to quantify the uncertainty of applying a measurement from a central location to increasingly larger square blocks and provides recommendations for determining the distances between drill holes for measured, indicated, and inferred resources.

To perform DHSA the data set was processed to remove any erroneous data points, clustered data points, as well as directional trends.  This was achieved through the use of histograms, as seen in Figure

Marshall Miller and Associates, Inc.42


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

11-1, color coded scatter plots showing the geospatial positioning of the borings, Figure 11-2, and trend analysis.

Figure 11-1: Histogram of the Total Coal Thickness for the Lower Kittanning Seam Present in the Leer South Complex

Graphic

Figure 11-2: Scatter plot of the Total Coal Thickness for the Lower Kittanning Seam Present in the Leer South Complex

Graphic

Following the completion of data processing, a variogram of the data set was created, Figure 11-3.  The variogram plots average square difference against the separation distance between the data pairs.  The separation distance is broken up into separate bins defined by a uniform lag distance (e.g., for a lag distance of 500 feet the bins would be 0 – 500 feet, 501 – 1,000 feet, etc.).  Each pair of data points that are less than one lag distance apart are reported in the first bin.  If the data pair is further apart than one lag distance but less than two lag distances apart, then the variance is reported in the second bin.  The numerical average for differences reported for each bin is then plotted on the variogram.  Care was taken to define the lag distance in such a way as to not overestimate any nugget effect present in the data set.  Lastly, modeled equations, often spherical, gaussian, or exponential, are applied to the variogram in order to represent the data set across a continuous spectrum.

Marshall Miller and Associates, Inc.43


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

Figure 11-3: Variogram of the Total Coal Thickness for the Lower Kittanning Seam
Present in the Leer South Complex

Graphic

The estimation variance is then calculated using information from the modeled variogram as well as charts published by Journel and Huijbregts (1978).  This value estimates the variance from applying a single central measurement to increasingly larger square blocks.  Care was taken to ensure any nugget effect present was added back into the data.  This process was repeated for each test block size.

The final step of the process is to calculate the global estimation variance.  In this step the number square blocks that would fit inside the selected study area is determined for each block size that was investigated in the previous step.  The estimation variance is then divided by the number of blocks that would fit inside the study area for each test block size.  Following this determination, the data is then transformed back to represent the relative error in the 95th-percentile range.

Figure 11-4 shows the results of the DHSA performed on the Lower Kittanning seam data for the Leer South Complex.  DHSA provides hole to hole spacing values, these distances need to be converted to radius from a central point in order to compare to the historical standards.  A summary of the radius data is shown in Table 11-3.  DHSA prescribes measured, indicated, and inferred drill hole spacings be determined at the 10-percent, 20-percent, and 50-percent levels of relative error, respectively.

Marshall Miller and Associates, Inc.44


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

Figure 11-4: Result of DHSA for the Lower Kittanning Seam Present in the Leer South Complex

Graphic

Table 11-2: DHSA Results Summary for Radius from a Central Point

Model:

Measured Radial Distance (10% Relative Error)

Indicated Radial Distance (20% Relative Error)

Inferred Radial Distance (50% Relative Error)

(Miles)

(Miles)

(Miles)

Gaussian:

0.60

1.09

2.59

Spherical:

0.57

1.06

2.56

Exponential:

0.55

1.02

2.44

Comparing the results of the DHSA to the historical standards, it is evident that the historical standards are more conservative than even the most conservative DHSA model with regards to determining measured resources.  The Exponential model recommends using a radius of 0.55 miles for measured resources compared to the historical value of 0.25 miles.  

With respect to indicated resources, historical standards are once again more conservative than the DHSA recommendations.  The Exponential model recommends using a radius of 1.02 miles, while the Gaussian and Spherical models recommend a radius of 1.09 and 1.06 miles, respectively.  These values exceed the historical radius of 0.75 miles.  These results have led the QP’s to report the data following the historical classification standards, rather than use the results of the DHSA.

Marshall Miller and Associates, Inc.45


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

11.2Qualified Person’s Estimates

Mineral resources, representing in-situ coal in which a portion of reserves are derived, are presented below.  Based on the work described and detailed modelling of the areas considering all the parameters defined, a coal resource estimate, summarized in Table 11-3, was prepared as of December 31, 2023, for property controlled by Arch.

Pricing data as provided by Arch is described in Section 16.2.  The pricing data assumes a weighted average domestic and international FOB-mine price of approximately $162 per ton for calendar year 2024.  The weighted-average price stabilizes at approximately $151 per ton over the LOM.

Table 11-3: Coal Resources Summary as of December 31, 2023

 

Coal Resource (Dry Tons, In Situ, Mt)

Seam

Measured

Indicated

Inferred

Total

Lower Kittanning Rider

 

 

 

 

Inclusive of Reserve

2.34

0.15

0.00

2.49

Exclusive of Reserve

0.00

0.00

0.00

0.00

Total

2.34

0.15

0.00

2.49

Lower Kittanning

 

 

 

 

Inclusive of Reserve

73.08

30.89

0.00

103.96

Exclusive of Reserve

0.00

0.00

0.00

0.00

Total

73.08

30.89

0.00

103.96

Grand Total

 

 

 

 

Total

75.41

31.04

0.00

106.45

Note 1: Coal resources are reported on a dry basis. Surface moisture and inherent moisture are excluded.

11.3Qualified Person’s Opinion

While there is some level of stratigraphically controlled seam-thickness variability the Lower Kittanning coal seam at Leer South demonstrate reasonable thickness consistency according to the classification system of measured (0 – 0.25 miles), indicated (0.25 to 0.75 miles), and inferred (0.75 to 3.0 miles).  MM&A geologists and engineers modeled the deposit and delineated mineable regions to reflect the nature of the seam and the practicality of mining constraints.  Based on MM&A‘s geostatistical analysis, it would be possible to extend the measured arcs slightly beyond historically accepted practices due to consistent geological settings.  These results have led the QP’s to report the data following the historical classification standards, rather than use the results of the DHSA.

Based on the data review, the attendant work done to verify the data integrity and the creation of an independent geologic model, MM&A believes this is a fair and accurate representation of the Leer South coal resources.

Marshall Miller and Associates, Inc.46


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

12Mineral Reserve Estimates
12.1Assumptions, Parameters and Methodology

Coal Reserves are classified as proven or probable considering “modifying factors” including mining, metallurgical, economic, marketing, legal, environmental, social, and governmental factors.  

>Proven Coal Reserves are the economically mineable part of a measured coal resource, adjusted for diluting materials and allowances for losses when the material is mined. It is based on appropriate assessment and studies in consideration of and adjusted for reasonably assumed modifying factors. These assessments demonstrate that extraction could be reasonably justified at the time of reporting.
>Probable Coal Reserves are the economically mineable part of an indicated coal resource, and in some circumstances a measured coal resource, adjusted for diluting materials and allowances for losses when the material is mined. It is based on appropriate assessment and studies in consideration of and adjusted for reasonably assumed modifying factors. These assessments demonstrate that extraction could be reasonably justified at the time of reporting.

Upon completion of delineation and calculation of coal resources, MM&A confirmed the applicability of the LOM plan for Leer South.  The footprint of the LOM plan is shown on the resource map in Appendix C.  The Mine plan was generated based on the forecast mine plan and permit plan provided by Arch with modifications by MM&A where necessary due to current property control limits, modifications to geologic mapping, or other factors determined during the evaluation.

Carlson Mining software was used to generate the LOM plan for Leer South.  The mine plan was sequenced based on productivity schedules provided by Arch.  MM&A judged the productivity estimates and plans to be reasonable based on experience and current industry practice.

At the Leer South Mine, a minimum mining height of 7 feet was used due to the longwall mining method being employed.  For coal seams thinner than the assigned mining height, the difference between the coal seam height and assigned mining height is out-of-seam (OSD).  Mine recovery is generally 40 percent for continuous mining areas, and 100 percent for longwall.  Plant recovery is a function of in-seam recovery, OSD and plant efficiency factor, which is set at 95 percent.  

Raw, ROM production data outputs from LOM plan sequencing were processed into Microsoft® EXCEL spreadsheets and summarized on an annual basis for processing into the economic model.  Average seam densities were estimated to determine raw coal tons produced from the LOM plan.  Average mine recovery and wash recovery factors were applied to determine coal reserve tons.

Coal reserve tons in this evaluation are reported as a dry product, exclusive of inherent and surface moisture.

Marshall Miller and Associates, Inc.47


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

Pricing data as provided by Arch and is described in Section 16.2.  The pricing data assumes a thermal sales realization (FOB-mine) of approximately $51 to $54 per ton and a coking coal sales realization of approximately $146 to $162 per ton.  Realized coal prices are based upon a combination of thermal (middlings) and high-volatile A coking coal products.  Realized coal prices incorporate HCC indices, adjustments from metric tons to short tons, and adjustments for transportation costs and assumed prices for thermal products.  Based on projections provided by Arch, both coking and thermal products are expected to stabilize via a short-term decline.  

The coal resource mapping and estimation process, described in the report, was used as a basis for the coal reserve estimate.  Proven and probable coal reserves were derived from the defined coal resource considering relevant processing, economic (including technical estimates of capital, revenue, and cost), marketing, legal, environmental, socio-economic, and regulatory factors and are presented on a moist, recoverable basis.

As is customary in the US, the categories for proven and probable coal reserves are based on the distances from valid points of measurement as determined by the QP for the area under consideration.  For this evaluation, measured resource, which may convert to a proven reserve, is based on a 0.25-mile radius from a valid point of observation.

Points of observation include exploration drill holes, degas holes, and mine measurements which have been fully vetted and processed into a geologic model.  The geologic model is based on seam depositional modeling, the interrelationship of overlying and underlying strata on seam mineability, seam thickness trends, the impact of seam structure, intra-seam characteristics, etc.  Once the geologic model was completed, a statistical analysis, described in Section 11.1.1 was conducted and a 0.25-mileradius from a valid point of observation was selected to define Measured Resources.  

Likewise, the distance between 0.25 and 0.75 of a mile radius was selected to define Indicated Resources.  Indicated Resources may convert to Probable Reserves.  

There are negligible Inferred Resources (greater than a 0.75-mile radius from a valid point of observation) at Leer South.

12.2Qualified Person’s Estimates

The reserve tonnage estimates provided herein report coal reserves derived from the in-situ resource tons presented in Table 11-3, and not in addition to coal resources.  Proven and probable coal reserves were derived from the defined coal resource considering relevant mining, processing, infrastructure, economic (including estimates of capital, revenue, and cost), marketing, legal, environmental, socio-economic and regulatory factors.  The coal reserves, as shown in Table 12-1, are based on a technical evaluation of the geology and a preliminary feasibility study of the coal deposits.  The extent to which the coal reserves may be affected by any known environmental, permitting, legal, title, socio-economic, marketing, political, or other relevant issues has been reviewed rigorously.  Similarly, the extent to

Marshall Miller and Associates, Inc.48


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

which the estimates of coal reserves may be materially affected by mining, metallurgical, infrastructure and other relevant factors has also been considered.  

Table 12-1: Coal Reserves Summary (Dry Basis) as of December 31, 2023

 

Demonstrated Coal Reserves (Dry Tons, Washed or Direct Shipped, Mt)

LOM Wash Recovery (%)

 

By Reliability Category

By Product

By Control Type

Seam

Proven

Probable

Total

Met

~1.50 Float SG**

Thermal

~1.50 x 1.70 SG**

Owned

Leased

Partially Owned

Partially Leased

Lower Kittanning Rider

1.43

0.01

1.44

1.27

0.17

0.05

1.11

0.00

0.28

Lower Kittanning

43.23

17.97

61.19

52.69

8.51

51.66

7.01

1.59

0.94

Total

44.66

17.98

62.63

53.95

8.68

51.70

8.12

1.59

1.22

44%

Uncontrolled*

2.53

0.37

2.90

2.51

0.38

*Uncontrolled tons are reported for informational purposes only and are not part of the reserves.  Uncontrolled tonnages are contained within small mineral tracts which must be acquired for execution of the life-of-mine plan.  As such, uncontrolled tonnages are included in the LOM financial model.  See appendix for maps which show details of mineral control. Mine plan includes a total of 2.9 Mt of adverse tons and was adjusted for approximately 0.26 Mt of depletion.

**Metallurgical tonnages and thermal tonnages (and associated quality) are respectively based upon an approximate 1.50 float and 1.50 x 1.70 specific gravity, as this represented the most consistent coal quality data. In reality, Arch’s actual plant operating gravities vary depending upon required product specifications. See “Mineral Processing and Metallurgical Testing” chapter of report for more detailed explanation on derivation of product yields. Exploration coal quality commonly varies from saleable product quality. Over the past 2 years, thermal ash and the ratio of thermal to met tons have been lower than projected in this TRS.

*** Coal Reserves are based upon sales assumptions provided to MM&A by Arch and were relied upon by MM&A. Financial modeling assumes sales prices of approximately $162.32 per ton (FOB-mine) in 2024, stabilizing to a long-term price of approximately $150.56/ton. See Chapter 16 for further details on marketing assumptions.

Table 12-2: Summary of Quality (dry basis)

 

Met

Thermal

Seam

Ash

Sulfur

Vol

Btu/lb.

Ash

Sulfur

Btu/lb.

Lower Kittanning Rider

8.3

1.3

35

14,240

31.9

4.3

10,184

Lower Kittanning

8.8

1.3

34

14,180

34.5

2.6

9,587

Total

8.8

1.3

34

14,181

34.5

2.6

9,599

*Metallurgical tonnages and thermal quality (and associated tonnages) are respectively based upon an approximate 1.50 float and 1.50 x 1.70 specific gravity, as this represented the most consistent coal quality data. See “Mineral Processing and Metallurgical Testing” chapter of report for more detailed explanation on derivation of product yields.

**Qualities presented which correspond with each respective market placement (metallurgical and thermal) are based upon exploration information at prescribed density cutpoints. These quality estimates should be viewed as predictive—actual produced quality will vary based upon a multitude of factors, including, but not limited to plant operating practices and associated efficiency; plant equipment circuitry; plant feed quality and size distribution; and contractual product specifications. Over the past 2 years, produced thermal ash percentages have been lower than projected in Table 12-2.

The results of this TRS define an estimated total of 62.6 Mt (dry basis) of marketable coal reserves, at Leer South, as of January 1, 2024.  Of that total, 71 percent are proven, and 29 percent are probable.  There are 51.7 Mt of owned coal reserves and 8.1 Mt of leased coal and 2.8 Mt of partial control reserves.  Of the 62.6 Mt of marketable reserves, approximately 86-percent are associated with metallurgical coal markets, and all of the Leer South reserves are assigned to existing infrastructure.

12.3Qualified Person’s Opinion

The estimate of coal reserves was determined in accordance with the SEC S-K1300 standards.

Marshall Miller and Associates, Inc.49


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

The LOM mining plan for Leer South was prepared to the level of preliminary feasibility.  Mine projections were prepared with a timing schedule to match production with coal seam characteristics.  Production timing was carried out from current locations to depletion of the coal reserve area.  Coal reserve estimates could be materially affected by the risk factors described in Section 22.2.  

Based on the preliminary feasibility study and the attendant economic review, MM&A believes this is a fair and accurate calculation of the Leer South coal reserves.

13Mining Methods
13.1Geotech and Hydrogeology

The hydrogeologic conditions to be encountered by mining at Leer South are expected to be generally similar to those at other Leer operations.  The Leer South mine is located below drainage and involves the undermining of surface streams and groundwater aquifers.  The Leer South mine is also undermining previous above-drainage mine workings in the Pittsburgh coal seam; however, with the average interburden between the Lower Kittanning and the Pittsburgh seams being approximately 800 feet, the potential for interaction is considered minimal.  MM&A did not observe any adverse hydrogeologic conditions in the existing portion of Leer South during an October 2020 mine visit.  In addition, MM&A completed predictive longwall subsidence modeling for the Leer South mine in December 2023 to continue to assist Arch with planning for post-mining hydrogeologic conditions.  

The mine plans for Leer South were developed by Arch and reviewed by MM&A. Pillar stability in the Lower Kittanning seam was checked by MM&A using the ACPS program, which integrates the original NIOSH-developed ARMPS, ALPS, and AMSS software packages into a single pillar design framework.  MM&A also utilized AHSM (developed by NIOSH) to check the orientation of the proposed mining in relation to available principal horizontal stress directions for the region.  Historical knowledge of mining in the area and observations from an October 2020 mine visit by MM&A indicate that horizontal stress conditions are likely to be present during mining in Leer South.  As observed by MM&A, current Leer South operations are taking steps to mitigate the horizontal stress, including enhanced ground control measures and strategic mine layout orientation.    

13.2Production Rates

The Leer South mine is active with six continuous mining sections and one longwall section currently operating in the Lower Kittanning Seam.  Longwall Mining began producing at Leer South in 2021.  The mine plan and productivity expectations reflect historical performance and efforts have been made to adjust the plan to reflect future conditions.  MM&A is confident that the mine plan is reasonably representative to provide an accurate estimation of coal reserves.  Mine development and operation have not been optimized within the TRS.

Marshall Miller and Associates, Inc.50


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

Longwall production is scheduled for approximately 343 to 363 days each year, which represents production on seven days per week with allowances for holidays and longwall moves.  On each day, the continuous mining sections and longwall produce coal on two shifts with an idle maintenance shift.  The sections are configured as regular sections with one continuous miner available for production on each section.  During mains development, two production units are brought together to work as a Super Section arrangement (two CM units operating on the same conveyor belt feeder).  Productivity is planned at the rate of 100 feet of advance per shift of operation for the single continuous miner sections, 180 feet of advance per shift of operation for the Super Section miner sections and 50 feet per day of longwall retreat.  Productivities are expected to increase moderately over time and reasonable ramp up expectations to increase productivity are included in the Arch model.

Carlson Mining software was used by Arch and reviewed by MM&A to generate mine plans for the underground mineable coal seam.  Mine plans were sequenced based on productivity schedules provided by Arch, which were based on historically achieved productivity levels.  All production forecasting ties assumed production rates to geological models as constructed by MM&A’s team of geologists and mining engineers.

As shown in Table 13-1, the areas planned for underground production continue until 2042.  Clean coal production varies directly with coal thickness and the number of continuous miner units operating during a calendar year.

Table 13-1: Leer South Summary of Production by Year (Moist Tons x 1,000)

Mine Name

2024

2025

2026

2027

2028

2029

2030

2031

Kittanning Deep Mine (LW)

3,625

4,518

3,978

3,672

3,965

4,057

3,848

3,862

 

 

 

 

 

 

 

 

 

Mine Name

2032

2033

2034

2035

2036

2037

2038

2039

Kittanning Deep Mine (LW)

3,550

3,978

4,169

4,015

4,270

3,395

3,426

3,823

 

 

 

 

 

 

 

 

 

Mine Name

2040

2041

2042

2043

2044

2045

2046

2047

Kittanning Deep Mine (LW)

3,857

3,914

2,882

0

0

0

0

0

13.3Mining Related Requirements

Although the Continuous Miner Sections are significantly more expensive to operate on a cost-per-ton basis, they are necessary to develop areas of the mine for longwall production.  At the time of this study Leer South had six (6) operating continuous miner stations that were used to develop main entries and gate roads in preparation for the longwall operations in the Lower Kittanning Seam.  As the mine develops, this number will reduce as CM development gains on the longwall move times.  

Marshall Miller and Associates, Inc.51


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

13.4Required Equipment and Personnel

The Leer South Mine is an operating longwall mine in the Lower Kittanning seam.  Equipment for the longwall mining unit has been acquired and the continuous miner units will provide longwall panels for the longwall unit to mine.

The longwall shearing machine is used for extraction of coal at the production face.  A chain conveyor is used to remove coal from the longwall face for discharge onto the conveyor belt which then ultimately delivers it to an underground storage bunker.  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.  Roof-bolting machines are used to support the roof on the development sections of the longwall mines.  Roof-bolting machines are used to install roof bolts, and battery scoops are available to clean the mine entries and assist in delivery of mine supplies to work areas.  Other supplemental equipment such as personnel carriers, supply vehicles, etc., are also used daily.

Mine conveyors typically range in width from 42 inches to 72 inches.  Multiple belt flights are arranged in series to deliver raw coal to the underground storage.  Along the main and sub-main entries and panels, a travel way is provided for personnel and materials by rubber-tired equipment or on rail.  Leer South utilizes a slope belt in order to transport ROM coal from the Lower Kittanning seam level underground storage bunker through a haulage slope to the underlying Clarion Seam workings and then through the Clarion Seam slope to the surface where the coal may be sampled, crushed and washed in the preparation plant and stockpiled to await shipment.  

Surface ventilation fans are installed as needed to provide a sufficient volume of air to ventilate production sections, coal haulage and transport entries, battery charging stations, and transformers in accordance with approved plans.  High-voltage cables deliver power throughout the mine where transformers reduce voltage for specific equipment requirements.  The Mine Improvement and New Emergency Response Act of 2006 (MINER Act) requires that carbon monoxide detection systems be installed along mine conveyor belts and that electronic two-way tracking and communications systems be installed throughout underground mines.  Water is required to control dust at production sections and along conveyor belts, and to cool electric motors.  Water is available from nearby sources and is distributed within the mine by pipelines as required.  A maximum total of 556 salary and hourly employees will be assigned to the Lower Kittanning Seam operation.    

13.5Life of Mine Plan Maps

Figure 13-1 below depicts the approximate LOM boundary utilized for mine planning in the Lower Kittanning seam.

Marshall Miller and Associates, Inc.52


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

Figure 13-1: Lower Kittanning LOM Map

Graphic

* Uncontrolled tonnages are contained within small mineral tracts which must be acquired for execution of the life-of-mine plan depicted in Figure 13-1. While the report authors anticipate that Arch will successfully acquire such mining rights, it is important to note their importance to the mining plan presented in this document. Such tons are labeled as “Uncontrolled” in summary tables provided with this document and are not included in reserve totals. More detailed mapping files are retained in Arch and MM&A’s files. Such information is available at the request of the SEC.

14Processing and Recovery Methods
14.1Description or Flowsheet

Arch currently operates a coal preparation plant at Leer South.  The Leer South Plant operates at a feed rate of approximately 1,600 raw tons per hour (tph).  Run of mine (ROM) coal is sent from the slope to

Marshall Miller and Associates, Inc.53


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

the Raw Coal #1 stacking tube.  From that point, it is reclaimed, and processing begins with the ROM material being screened at 3 inches.  Oversized material is run through a rotary breaker.  The rotary breaker rejects are discarded as refuse products.  Material passing the screen and rotary breaker is sent to the Raw Coal #2 stacking tube for further processing.

The material from the Raw Coal #2 stacking tube is reclaimed and sent to the processing plant where it is screened and washed based on relative sizes.  Cleaning circuitry includes a heavy media vessel (plus ½ inch material), heavy media cyclone (1/2 inch by 1-mm material), spirals (1-mm by 100-mesh), and column flotation (100-mesh by 325-mesh).  All vessel and cyclone materials are initially washed at a high gravity to initially discard high ash rock.  This material is then re-washed at a low gravity in a heavy media cyclone to make a metallurgical product and a secondary middlings thermal product.  

Figure 14-1: Leer South Preparation Plant as Viewed from Coarse Refuse Conveyor

Graphic

14.2Requirements for Energy, Water, Material and Personnel

Personnel have historically been sourced from the surrounding communities in Barbour, Upshur, Harrison and Marion Counties, and have proven to be adequate in numbers to operate the mine.  As mining is common in the surrounding areas, the workforce is generally familiar with mining practices, and many are experienced miners.

The Leer South Complex has sources of water, power, personnel, and supplies readily available for use.  Water is sourced locally from a nearby abandoned underground mine and proximal overlying streams.  Additionally, water is sourced from the toe of the refuse impoundment for various uses in the mine and

Marshall Miller and Associates, Inc.54


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

plant.  Electricity is sourced from MonPower.  The service industry in the areas surrounding the mine complex has historically provided supplies, equipment repairs and fabrication, etc.

15Infrastructure

The Arch-owned Leer South Preparation Plant services the mine via a slope conveyor system which transports extracted coal from an underground bunker to the surface facility.  The Appalachian and Ohio rail line serves as the main means of transport from the mine.

As an active operation, the necessary support infrastructure for Leer South is in place.  In addition to the plant and loadout, there are also portal facilities, including personnel access to the mine, ventilation fans and a haulage slope.  A photo of the existing facilities is Figure 15-1.

Figure 15-1: Leer South Surface Facilities

Graphic

16Market Studies
16.1Market Description

Arch markets its primary coal product from Leer South into high volatile A coking markets.  In order to meet sulfur specifications, Leer’s plant operates at relatively lower gravity cut points, allowing Arch to

Marshall Miller and Associates, Inc.55


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

make a secondary, high ash product for thermal market consumption.  Quality data from exploration supports assumed market placement.

High volatile coking coal is currently in high demand.  Favorable market conditions for coking coal are expected in the near and long term.  

Sales of high-ash, high-sulfur thermal blend coals represent a smaller portion of Leer South’s revenue stream.  Market influence from neighboring producers has the potential to oversupply markets for such a product.  High ash, high sulfur coals are generally not consumed on a stand-alone basis, and require premium quality, low-ash, low-sulfur coals for blending to meet market specifications.  Current typical met quality specifications for Leer South products are as shown in Table 16-1.  

Table 16-1: Average Product Quality

 

Leer South

Moisture (%)

7.26%

Ash (%, dry basis)

8.49%

Sulfur (%, dry basis)

1.17%

Volatile Matter (%, dry basis)

33.97%

16.2Price Forecasts

Arch provided MM&A with price forecasts for the Leer South operation.  Arch’s price outlook incorporates in-house knowledge of applicable rail transportation charges, ocean freight charges and port charges.  Concurrent with the active operation, Leer South’s production is assumed to enter coking and thermal coal markets.  Pricing provided by Arch assumes applicable quality adjustments.

Realized coal prices are based upon a combination of thermal (middlings) and high-volatile A coking coal products.  Realized coal prices incorporate HCC indices, adjustments from metric tons to short tons, adjustments for transportation costs and assumed prices for thermal products.

Short-term forecasts for thermal blend products assume FOB-mine prices of approximately $38 per ton, increasing to $54 per ton in the short term, and stabilizing around $51 per ton over the long term.  Short term forecasts for coking products assume prices of approximately $170 per ton, decreasing to $157 per ton over the long term.  Long-term blended (combined thermal and metallurgical) realizations are equivalent to approximately $151 per ton.  

Forecasts provided by Arch are largely aligned with typical coal industry expectations of coking coal markets.  In comparison to short term spot markets, Arch’s estimations of realizations are somewhat conservative.  Long term forecasting of metallurgical coal prices is difficult to predict.  Arch’s assumed long range metallurgical prices are largely aligned with typical historical averages.

Marshall Miller and Associates, Inc.56


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

16.3Contract Requirements

Some contracts are necessary for successful marketing of coal.  For Leer South, since all mining, preparation and marketing is done in-house, the remaining contracts required are:

>Transportation – The Mine contracts with the Appalachian and Ohio Railway and CSX Transportation to transport the coal to either the domestic customers or to the Curtis Bay or DTA export terminal for overseas shipment.
>Handling – Contracts for loading vessels for export sales are necessary. These are typically handled by annual negotiations based on projected shipments.
>Sales – Sales contracts are a mix of spot and contract sales. With the volatility of the market, long-term contracts are not typically written.
17Environmental Studies, Permitting and Plans, Negotiations or Agreements with Local Individuals
17.1Results of Studies

MM&A has not conducted environmental studies on the subject property.  Based upon our understanding of Arch’s practices, MM&A assumes that Leer South generally has a record consistent with industry standards regarding compliance with applicable mining, water quality, and environmental laws.  Estimated costs for mine closure, including water quality monitoring during site reclamation, are included in the financial models.

17.2Requirements and Plans for Waste Disposal

Leer South has developed a slurry impoundment south of the preparation plant.  Plans are in place to increase the dam crest elevation and work has been progressing on downslope areas.  Arch has purchased property and has completed permitting downstream for the construction of a slurry impoundment.  Based on projected recovery rates, Arch reports that the impoundment will be sufficient to contain life-of-mine capacity requirements.

A conveyor belt system has been constructed that brings coarse refuse material to the impoundment crest area.  The existing coarse refuse facility northwest of the preparation plant was described as being completed during the October 2020 mine visit.  Table 17-1 below shows the refuse facility capacities for the course refuse and fine refuse impoundment.

Marshall Miller and Associates, Inc.57


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

Table 17-1: Course and Fine Refuse Facility Capacities at Leer South

MCY

Coarse Refuse

Phase 1 (Side Hill Fill) Remaining

6.2

Phase 2 (Full Hollow Fill)

39.6

Optional (In-Hollow Fill Upstream)

0.6

Impoundment (Stage 15)

58.9

Abandonment (Final Config)

5.2

Total

110.5

Fine Refuse

Fines (through Stage 7) Remaining

12.1

Additional (Stage 7-15)

10.1

Total

22.2

*Arch currently has permitted on the impoundment through Stage 7.  They have received a conditional approval on the full hollow fill through WVDEP, however; they are still awaiting 404/401 permit and MSHA approval.  Anticipate the 404/401 permit approval 07/2025 through 01/2026 and MSHA in 06/2024.

Figure 17-1: Downslope Coarse Refuse Placement on
Leer South Impoundment (Photograph provided by Arch)

Graphic

Marshall Miller and Associates, Inc.58


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

Figure 17-2: Coarse Refuse Stacker and Stockpile Area at Leer South (Photograph provided by Arch)

Graphic

17.3Permit Requirements and Status

All mining operations are subject to federal and state laws and must obtain permits to operate mines, coal preparation and related facilities, haul roads, and other incidental surface disturbances necessary for mining to occur.  Permits generally require that the permittee post a performance bond in an amount established by the regulatory program to provide assurance that any disturbance or liability created during mining operations is properly restored to an approved post-mining land use and that all regulations and requirements of the permits are fully satisfied before the bond is returned to the permittee.  Significant penalties exist for any permittee who fails to meet the obligations of the permits including cessation of mining operations, which can lead to potential forfeiture of the bond.  Any company, and its directors, owners and officers, which are subject to bond forfeiture can be denied future permits under the program.1

New permits or permit revisions will occasionally be necessary to facilitate the expansion or addition of new mining areas on the properties, such as amendments to existing permits and new permits for mining of reserve areas.  Exploration permits are also required.  Property under lease includes provisions for exploration among the terms of the lease.  New or modified mining permits are subject to a public advertisement process and comment period, and the public is provided an opportunity to raise objections to any proposed mining operation.  MM&A is not aware of any specific prohibition of mining on the subject property and given sufficient time and planning, Arch should be able to secure

1 Monitored under the Applicant Violator System (AVS) by the Federal Office of Surface Mining.

Marshall Miller and Associates, Inc.59


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

new permits to maintain its planned mining operations within the context of current regulations.  Necessary permits are in place to support current production on the Property, but future permits are required to maintain and expand production.  Portions of the Property are located near local communities.  Regulations prohibit mining activities within 300 feet of a residential dwelling, school, church, or similar structure unless written consent is first obtained from the owner of the structure.  Where required, such consents have been obtained where mining is proposed beyond the regulatory limits.

Arch has obtained all mining and discharge permits to operate its mines and processing, loadout, or related facilities.  MM&A is unaware of any obvious or current Arch permitting issues that are expected to prevent the issuance of future permits.  Leer South, along with all coal producers, is subject to a level of uncertainty regarding future clean water permits due to United States Environmental Protection Agency (EPA) involvement with state programs.

The active Mining permits currently held by Leer South are shown in Table 17-1.

Table 17-2: Leer South Mining Permit

Type

Permit ID

Permit Name

$ Bond

Current Status

Issued Date

Expiration
Date

Acres

NPDES No.

Reclamation

U-15-83

Leer South

$368,880

Active

8/11/1983

1/24/2027

193.6

WV0043273

Reclamation

O-113-83

Leer South Refuse

$1,199,900

Active

8/11/1983

6/28/2028

461.73

WV0043273

17.4Local Plans, Negotiations or Agreements

MM&A found no indication of agreements beyond the scope of Federal or State Regulations.

17.5Mine Closure Plans

Applicable regulations require that mines be properly closed, and reclamation commenced immediately upon abandonment.  In general, site reclamation includes removal of structures, backfilling, regrading, and revegetation of disturbed areas.  Sediment control is required during the establishment of vegetation, and bond release generally requires a minimum five-year period of site maintenance, water sampling, and sediment control following mine completion.  This requirement is reduced to two years for certain operations involving re-mining.  Reclamation of underground mines includes closure and sealing of mine openings such as portals and shafts in addition to the items listed above.  

Estimated costs for mine closure, including water quality monitoring during site reclamation, are included in the financial model as provided by Arch.  MM&A found ARO estimations to be reasonable.  As with all mining companies, an accretion calculation is performed annually so the necessary Asset Retirement Obligations (ARO) can be shown as a Liability on the Balance Sheet.

Marshall Miller and Associates, Inc.60


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

17.6Qualified Person’s Opinion

The Leer South Mine is an operating facility; all necessary permits for current production have been obtained.  MM&A knows of no reason that any permits revisions that may be required cannot be obtained.  

Estimated expenditures for site closure and reclamation are included in the financial model for this site.

18Capital and Operating Costs
18.1Capital Cost Estimate

The production sequence selected for a property must consider the proximity of each reserve area to coal preparation plants, river docks and railroad loading points, along with suitability of production equipment to coal seam conditions.  The in-place infrastructure was evaluated, and any future needs were planned to a level suitable for a Preliminary Feasibility Study and included in the Capital Forecast.

Arch provided MM&A with a detailed 5-year capital expenditure projection.  MM&A reviewed this schedule and deemed it to be appropriate for financial modeling.  MM&A extrapolated the provided capital schedule through end of mining operations.  Capital forecasting by MM&A assumes that major equipment rebuilds occur over the course of each machine’s remaining assumed operating life.  Replacement equipment was scheduled based on MM&A’s experience and knowledge of mining equipment and industry standards with respect to the useful life of such equipment.  A summary of the estimated capital for the Property is provided in Figure 18-1 below.  

Marshall Miller and Associates, Inc.61


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

Figure 18-1: CAPEX

Graphic

18.2Operating Cost Estimate

Arch provided historical and projections of operating costs for MM&A’s review.  MM&A used the historical and/or budget cost information as a reference and developed a personnel schedule for the mine.  Hourly labor rates and salaries were based upon information contained in Arch’s financial summaries and MM&A’s knowledge of regional labor rates.  Fringe-benefit costs were developed for vacation and holidays, federal and state unemployment insurance, retirement, workers’ compensation and pneumoconiosis, casualty and life insurance, healthcare, and bonuses.  A cost factor for mine supplies was developed that relates expenditures to mine advance rates for roof-control costs and other mine-supply costs experienced at underground mines.  Other factors were developed for maintenance and repair costs, rentals, mine power, outside services and other direct mining costs.  

Other cost factors were developed for coal preparation plant processing, refuse handling, coal loading, property taxes, and insurance and bonding.  Appropriate royalty rates were assigned for production from leased coal lands, and sales taxes were calculated for state severance taxes, the federal black lung excise tax, and federal and state reclamation fees.

Mandated Sales Related Costs such as Black Lung Excise are summarized in Table 18-1.

Marshall Miller and Associates, Inc.62


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

Table 18-1: Estimated Coal Production Taxes and Sales Costs

Description of Tax or Sales Cost

Basis of Assessment

Cost

Federal Black Lung Excise Tax - Underground

Per Ton

$1.10

Federal Reclamation Fees – Underground

Per Ton

$0.12

West Virginia Reclamation Tax – Underground

Per Ton

$0.74

West Virginia Severance Tax

 Percentage of Revenue

5.0%

West Virginia Severance Tax

Per Sold Ton

$0.02

Royalties

Percentage of Revenue

3.5%

Projected operating costs are shown below in Figure 18-2.

Figure 18-2: OPEX

Graphic

As shown above, Leer South Mine’s average cash cost ranges between approximately $60 and $65 per ton for most of the operating period.

19Economic Analysis
19.1Assumptions, Parameters and Methods

A pre-feasibility LOM plan was prepared by MM&A for the Leer South operations.  MM&A prepared mine projections and production timing forecasts based on coal seam characteristics and incorporated Arch’s LOM projections with adjustments to reflect current property constraints and geological

Marshall Miller and Associates, Inc.63


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

interpretations.  Production timing was carried out from 2024 to depletion (exhaustion) of the coal reserve areas, which is projected for the year 2042.  All costs and prices are based on 2024 constant United States dollars.

The Mine plan, productivity expectations and cost estimates generally reflect historical performance by Arch and efforts have been made to adjust plans and costs to reflect future conditions.  MM&A is confident that the mine plan and financial model are reasonably representative to provide an accurate estimation of coal reserves.

Capital schedules were developed by MM&A for mine development, infrastructure, and on-going capital requirements for the life of the mine.  Staffing levels were prepared, and operating costs estimated by MM&A.  MM&A utilized historical cost data provided by Arch and its own knowledge and experience to estimate direct and indirect operating costs.  

The preliminary feasibility financial model, prepared for this TRS, was developed to test the economic viability of the coal reserve area.  The results of this financial model are not intended to represent a bankable feasibility study, required for financing of any current or future mining operations, but are intended to prove the economic viability of the estimated coal reserves.  All costs and prices are based on 2023 constant United States dollars.

On an unlevered basis, the NPV of the project cash flows after taxes was estimated for the purpose of classifying coal reserves.  The project cash flows, excluding debt service, are calculated by subtracting direct and indirect operating expenses and capital expenditures from revenue.  Direct costs include labor, drilling and blasting, operating supplies, maintenance and repairs, facilities costs for materials handling, coal preparation, refuse disposal, coal loading, sampling and analysis services, reclamation and general and administrative costs.  Indirect costs include statutory and legally agreed upon fees related to direct extraction of the mineral.  The indirect costs are the Federal black lung tax, Federal and State reclamation taxes, property taxes, local transportation prior to delivery at rail or barge loading sites, coal production royalties, sales and use taxes, income taxes and State severance taxes.  Arch’s historical costs provided a useful reference for MM&A’s cost estimates.

Sales revenue is based on the metallurgical coal price information provided to MM&A by Arch.

Projected debt service is excluded from the P&L and cash flow model in order to determine Enterprise Value.

The financial model expresses coal sales prices, operating costs, and capital expenditures in current day dollars without adjustment for inflation.  Capital expenditures and reclamation costs are included based on engineering estimates for each mine by year.  The Arch division’s existing allocations of administrative costs are continued in the future projections.

Marshall Miller and Associates, Inc.64


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

Arch will pay royalties for the various current and projected operations.  The royalty rates vary by mining method and location.  The royalty rates for Leer South are estimated to be 3.5% of the sales revenue.

The projection model also includes consolidated income tax calculations at the Arch level, incorporating statutory depletion calculations, as well as state income taxes, and a federal tax rate of 21%.  To the extent the mine generates net operating losses for tax purposes, the losses are carried over to offset future taxable income.  The terms “cash flows” and “project cash flows” used in this report refer to after tax cash flows.

Consolidated cash flows are driven by annual sales tonnage, which at steady-state level ranges from a peak of 4.5 million tons in 2025 to a low of 3.4 million in 2037.  Projected consolidated revenue ranges from $643 million to $511 million at a steady state.  Revenue totals $10.9 billion for the project’s life.

Consolidated cash flow from operations is positive throughout the projected operating period, with the exception of post-production years, due to end-of-mine reclamation spending.  Consolidated cash flow from operations peaks at $266 million in 2036 and totals $4.2 billion over the project life.  Capital expenditures total $395 million over the project’s life.  

Coal price forecasts for coal products were prepared by Arch for its active operations.  Such prices were used for the revenue input into the financial model.  Sales variable costs such as production royalties and severance taxes were based upon the revenue input.

19.2Results

The pre-feasibility financial model, prepared by MM&A for this TRS, was developed to test the economic viability of each coal resource area.  The results of this financial model are not intended to represent a bankable feasibility study, as may be required for financing of any current or future mining operations contemplated but are intended to prove the economic viability of the estimated coal reserves.  Optimization of the LOM plan was outside the scope of the engagement.

Table 19-1 shows LOM tonnage, P&L, and EBITDA for Leer South.

Marshall Miller and Associates, Inc.65


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

Table 19-1: Life-of-Mine Tonnage, P&L before Tax, and EBITDA

 (000s)

LOM
Tonnage

LOM
Pre-Tax P&L

P&L Per Ton

LOM
EBITDA

EBITDA Per Ton

Kittanning Deep Mine (LW)

72,803

$5,026,181

$69.04

$5,410,192

$74.31

Note 1: The LOM Economic Model was developed based upon mine faces as of October 1, 2023, whereas reserves were calculated as of December 31, 2023. As such, the economic model includes a small portion of tonnages not included in the reserve estimate. Additionally, the LOM model includes tonnages contained within uncontrolled tracts which are not included in reserve estimates.

Note 2: Realized coal prices are based upon a combination of thermal (middlings) and high-volatile A coking coal products. Realized coal prices incorporate HCC indices, adjustments from metric tons to short tons, adjustments for transportation costs and assumed prices for thermal products.

Note 3: The LOM model and associated economic analysis is intended to prove the economic viability of the subject coal tonnage, allowing controlled tons to be classified as “reserve”. The exercise should not be construed to represent a valuation of Arch’s holdings. Long-term cash flows incorporate forward-looking market projections which are expected to vary over time based upon historic volatility of coal markets.

Note 4:

LOM plan includes variances from reserves based on the LOM plan tons being 1) moist basis; 2) inclusion of non-reserve adverse tracts and 3) slight variances between production faces effective 12/31/23.

As shown in Table 19-2, the Leer South Mine shows a positive EBITDA.  Overall, the Arch consolidated operations show positive LOM P&L and EBITDA of $69.04 per ton and $74.31 per ton, respectively.  After Tax Cash Flows were developed in order to calculate the NPV for this Property.  The NPV is estimated to be $1,870 million at a discount rate of 10%.  A summary of the Leer South after-tax cash flow is shown in Table 19-2.

Table 19-2: Leer South After-tax Cash Flow Summary ($000)*

 

 

YE 12/31

YE 12/31

YE 12/31

YE 12/31

YE 12/31

YE 12/31

 

Total

2024

2025

2026

2027

2028

2029

Production & Sales tons

72,803

3,625

4,518

3,978

3,672

3,965

4,057

Total Revenue

$10,942,415

$588,484

$657,402

$602,368

$552,856

$597,065

$610,770

EBITDA

$5,410,192

$294,921

$339,904

$306,358

$252,062

$279,102

$300,212

Net Income

$3,937,222

$236,705

$255,547

$225,767

$181,064

$198,252

$212,045

Net Cash Provided by Operating Activities

$4,321,233

$244,538

$203,127

$251,778

$214,490

$221,125

$238,242

Purchases of Property, Plant, and Equipment

($394,952)

($41,296)

($47,058)

($38,007)

($30,260)

($25,069)

($12,197)

Net Cash Flow

$3,926,281

$203,243

$156,069

$213,771

$184,230

$196,056

$226,045

 

 

 

 

 

 

 

 

Marshall Miller and Associates, Inc.66


Arch Land, LLC and Arch Resources, Inc. (together “Arch”)
Statement of Coal Resources and Reserves for the
Leer South Complex in Accordance with
United States SEC S-K1300 Standards as of December 31, 2023
Barbour, Harrison, and Taylor Counties,

West Virginia (USA)

 

YE 12/31

YE 12/31

YE 12/31

YE 12/31

YE 12/31

YE 12/31

YE 12/31

 

2030

2031

2032

2033

2034

2035

2036

Production & Sales tons

3,848

3,862

3,550

3,978

4,169

4,015

4,270

Total Revenue

$579,415

$581,378

$534,505

$598,845

$627,668

$604,550

$642,848

EBITDA

$291,415

$284,127

$237,157

$301,139

$311,374

$301,408

$336,719

Net Income

$202,288

$200,159

$168,363

$219,048

$229,082

$222,245

$248,025

Net Cash Provided by Operating Activities

$236,520

$230,119

$200,950

$229,795

$246,594

$242,436

$261,149

Purchases of Property, Plant, and Equipment

($17,250)

($16,515)

($15,241)

($18,787)

($13,729)

($14,073)

($18,512)

Net Cash Flow

$219,270

$213,604

$185,710

$211,008

$232,866

$228,363

$242,637

 

 

 

 

 

 

 

 

 

YE 12/31

YE 12/31

YE 12/31

YE 12/31

YE 12/31

YE 12/31

YE 12/31

 

2037

2038

2039

2040

2041

2042

2043

Production & Sales tons

3,395

3,426

3,823

3,857

3,914

2,882

0

Total Revenue

$511,082

$515,848

$575,546

$580,674

$589,246

$391,866

$0

EBITDA

$215,045

$234,937

$299,801

$320,183

$328,041

$180,142

($1,994)

Net Income

$155,735

$170,322

$219,189

$234,422

$239,923

$126,754

($3,988)

Net Cash Provided by Operating Activities

$196,189

$186,434

$227,747

$250,878

$258,521

$207,914

($11,446)

Purchases of Property, Plant, and Equipment

($15,098)

($15,745)

($16,622)

($17,103)

($13,744)

($8,646)

$0

Net Cash Flow

$181,091

$170,689

$211,125

$233,775

$244,776

$199,268

($11,446)

 

 

 

 

 

 

 

 

 

YE 12/31

YE 12/31

YE 12/31

YE 12/31

YE 12/31

YE 12/31

YE 12/31

 

2044

2045

2046

2047

2048

2049

2050

Production & Sales tons

0

0

0

0

0

0

0

Total Revenue

$0

$0

$0

$0

$0

$0

$0

EBITDA

($1,191)

($264)

($199)

($126)

($55)

($27)

($0)

Net Income

($2,381)

($527)

($398)

($253)

($109)

($54)

($0)

Net Cash Provided by Operating Activities

($12,096)

($1,022)

($1,055)

($969)

($380)

($345)

$0

Purchases of Property, Plant, and Equipment

$0

$0

$0

$0

$0

$0

$0