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Fair Value of Financial Instruments and Fair Value Measurements

6 Months Ended

Jun. 30, 2020

Fair Value of Financial Instruments and Fair Value Measurements

The estimated fair values of financial instruments are determined based on relevant market information. These estimates involve uncertainty and cannot be determined with precision.

The carrying amounts for cash and cash equivalents, trade accounts receivable, net, prepaid expenses and other current assets, short-term and long-term restricted cash, short-term and long-term deposits, trade accounts payable, and accrued expenses and other current liabilities approximate fair value as of June 30, 2020 and December 31, 2019 due to the short maturity of these instruments.

The following tables set forth by level, within the fair value hierarchy, the Company’s long-term debt at fair value as of June 30, 2020 and December 31, 2019:


	June 30, 2020
	Carrying Amount ⁽¹⁾		Total Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Term Loan Credit Facility - due June 2024	$	539,594	$	366,524	$	366,524	$	—	$	—
ABL Facility - due April 2022	30,750		27,717		—		—		27,717
LCC Note Payable	40,214		34,021		—		—		34,021
LCC Water Treatment Obligation	7,073		5,281		—		—		5,281
Total long-term debt	$	617,631	$	433,543	$	366,524	$	—	$	67,019


	December 31, 2019
	Carrying Amount ⁽¹⁾		Total Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Term Loan Credit Facility - due June 2024	$	538,765	$	461,402	$	461,402	$	—	$	—
LCC Note Payable	37,695		33,884		—		—		33,884
LCC Water Treatment Obligation	7,211		6,280		—		—		6,280
Total long-term debt	$	583,671	$	501,566	$	461,402	$	—	$	40,164

⁽¹⁾Net of debt discounts and debt issuance costs.

The following tables set forth by level, within the fair value hierarchy, the Company’s acquisition-related obligations at fair value as of June 30, 2020 and December 31, 2019:


	June 30, 2020
	Carrying Amount ⁽¹⁾		Total Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
UMWA Funds Settlement Liability	$	3,367	$	2,867	$	—	$	—	$	2,867
Reclamation Funding Liability	11,852		11,708		—		—		11,708
Environmental Settlement Obligations	12,416		10,101		—		—		10,101
Total acquisition-related obligations	$	27,635	$	24,676	$	—	$	—	$	24,676


	December 31, 2019
	Carrying Amount ⁽¹⁾		Total Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
UMWA Funds Settlement Liability	$	3,069	$	2,929	$	—	$	—	$	2,929
Reclamation Funding Liability	10,808		10,658		—		—		10,658
Environmental Settlement Obligations	13,594		12,197		—		—		12,197
Total acquisition-related obligations	$	27,471	$	25,784	$	—	$	—	$	25,784

⁽¹⁾Net of discounts.

The following table sets forth by level, within the fair value hierarchy, the Company’s financial and non-financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2020 and December 31, 2019. Financial and non-financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the determination of fair value for assets and liabilities and their placement within the fair value hierarchy levels.


	June 30, 2020
	Total Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Contingent Revenue Obligation	$	20,668	$	—	$	—	$	20,668
Trading securities	$	27,413	$	20,973	$	6,440	$	—


	December 31, 2019
	Total Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Contingent Revenue Obligation	$	52,427	$	—	$	—	$	52,427
Trading securities	$	13,508	$	5,506	$	8,002	$	—

The following tables are a reconciliation of the financial and non-financial assets and liabilities that were accounted for at fair value on a recurring basis and that were categorized within Level 3 of the fair value hierarchy:


	December 31, 2019		Payments		Loss (Gain) Recognized in Earnings ⁽¹⁾		Transfer In (Out) of Level 3 Fair Value Hierarchy		June 30, 2020
Contingent Revenue Obligation	$	52,427	$	(14,710)	$	(17,049)	$	—	$	20,668

⁽¹⁾The gain recognized in earnings resulted primarily from a change in the forecasted future revenue associated with this obligation and an increase in annual volatility as of June 30, 2020.


	December 31, 2018		Payments		Measurement Period Adjustments	Loss (Gain) Recognized in Earnings		Transfer In (Out) of Level 3 Fair Value Hierarchy		June 30, 2019
Contingent Revenue Obligation	$	59,880	$	(9,627)	5,738	$	2,950	$	—	$	58,941

The following methods and assumptions were used to estimate the fair values of the assets and liabilities in the tables above:

Level 1 Fair Value Measurements

Term Loan Credit Facility - due June 2024 - The fair value is based on observable market data.

Trading Securities - Includes money market funds and other cash equivalents. The fair value is based on observable market data.

Level 2 Fair Value Measurements

Trading Securities - Includes certificates of deposit, mutual funds, corporate debt securities and U.S. treasury and agency securities. The fair values of the Company’s trading securities are obtained from a third-party pricing service provider. The fair values provided by the pricing service provider are based on observable market inputs including credit spreads and broker-dealer quotes, among other inputs. The Company classifies the prices obtained from the pricing services within Level 2 of the fair value hierarchy because the underlying inputs are directly observable from active markets. However, the pricing models used entail a certain amount of subjectivity and therefore differing judgments in how the underlying inputs are modeled could result in different estimates of fair value.

Level 3 Fair Value Measurements

ABL Facility - due April 2022 - Observable transactions are not available to aid in determining the fair value of this item. Therefore, the fair value was derived by using the expected present value approach in which estimated cash flows are discounted using a risk-free interest rate adjusted for credit risk (discount rate of approximately 10%) as of June 30, 2020.

LCC Note Payable, LCC Water Treatment Obligation, UMWA Funds Settlement Liability, Environmental Settlement Obligations and Reclamation Funding Liability - Observable transactions are not available to aid in determining the fair value of these items. Therefore, the fair value was derived by using the expected present value approach in which estimated cash flows are discounted using a risk-free interest rate adjusted for credit risk (discount rates of approximately 35% and 21% as of June 30, 2020 and December 31, 2019, respectively).

Contingent Revenue Obligation - The fair value of the contingent revenue obligation was estimated using a Black-Scholes pricing model and is marked to market at each reporting period with changes in value reflected in earnings. The inputs included in the Black-Scholes pricing model are the Company's forecasted future revenue, the stated royalty rate, the remaining periods in the obligation; annual risk-free interest rate based on the U.S. Constant Maturity Treasury Curve and annualized volatility. The annualized volatility was calculated by observing volatilities for comparable companies with adjustments for the Company's size and leverage. The range of significant unobservable inputs used to value the contingent revenue obligation as of June 30, 2020 and December 31, 2019, are set forth in the following table:


	June 30, 2020	December 31, 2019
Forecasted future revenue	$0.83 - $0.84 billion	$1.1 - $1.2 billion
Stated royalty rate	1.0% - 1.5%	1.0% - 1.5%
Annualized volatility	13.9% - 30.4% (25.0%)	9.4% - 28.1% (19.9%)

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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