NACCO Industries (NC) 10-K2021 FY Annual report

* FIGURES ARE LOCATED IN THE SUPPLEMENTAL FIGURES ATTACHMENT

Joseph A. Spiekermeier

The Coteau Properties Company

Kendra R. Braun

The Coteau Properties Company

The effective date of this Technical Report Summary is December 31, 2021.

This Technical Report Summary (TRS) was prepared for The Coteau Properties Company (Coteau) to report Mineral Resources and Mineral Reserves for the Freedom Mine in Mercer County, North Dakota.

NACCO Industries (NACCO), through a portfolio of mining and natural resources businesses, operates under three business segments: Coal Mining, North American Mining and Minerals Management. The Coal Mining segment operates surface coal mines under long-term contracts with power generation companies and an activated carbon producer pursuant to a service-based business model. Coal is surface-mined in North Dakota, Texas, Mississippi and Louisiana. Each mine is fully integrated with its customer's operations.

The Coteau Properties Company (Coteau), a subsidiary of The North American Coal Corporation (NACoal) is the owner and operator of the Freedom Mine, an active lignite surface mining operation in production status. NACoal is a wholly-owned subsidiary of NACCO. All production from the Freedom Mine is delivered to Dakota Coal Company (DCC), a wholly owned subsidiary of Basin Electric Power Cooperative (BEPC) under a long-term lignite sales agreement (LSA). Although the term of the existing lignite sales agreement terminates in 2027, the term may be extended for two additional periods of five years, or until 2037, at the option of Coteau. DCC then sells the coal to the Dakota Gasification Company’s Great Plains Synfuels Plant (DGC), Antelope Valley Station (AVS) and Leland Olds Station (LOS), all of which are operated by affiliates of BEPC. DGC is a coal gasification plant that manufactures synthetic natural gas and produces fertilizers, solvents, phenol, carbon dioxide, and other chemical products for sale. AVS and LOS are mine-mouth coal-fired power generation facilities.

Coteau provides mining services to DCC. DCC is Coteau’s only customer under an all-requirements cost-plus management fee LSA.

There have been no previous owners or operators of the Freedom Mine.

Under the LSA, Coteau receives a contractually-agreed fee based on the amount of lignite delivered. While Coteau is responsible for all mine operations, DCC is responsible for funding all mine operating costs and provides all the capital required to build and operate the mine. This contract structure eliminates exposure to spot coal market price fluctuations.

Coteau holds 380 leases granting the right to mine approximately 34,016 acres of coal interests and the right to utilize approximately 23,455 acres of surface interests. In addition, Coteau owns in fee 33,805 acres of surface interests and 4,107 acres of coal interests.

The Freedom Mine is located approximately 7 miles north and 3 miles west of Beulah, North Dakota (ND), in Mercer County, which is approximately 90 miles northwest of Bismarck, ND.

The Freedom Mine is located in the Sentinel Butte Formation of the Fort Union Group which is one of the most prolific lignite-bearing stratum in the state. The most prominent characteristics of the Fort Union Group formations are the cyclical deposition and lateral persistence of the lithologic units, especially the lignite seams. The regional structural geology is fairly consistent. No evidence of any significant faulting has been observed in the region. The lignite seams are gently undulating due to differential compaction of the underlying sediments.

Substantial information has been gathered during exploration drilling programs within the region since the 1960s. These data sets are the foundation for the characterization of the substrate composition, geometry, and structure of the Freedom Mine lignite deposit prior to mining.

Over 7,800 drill holes including lignite exploratory pilot holes and core holes, overburden continuous cores, geotechnical, and hydrological test holes have been drilled by NACoal, Coteau, Consolidation Coal Company (CONSOL), and Basin Cooperative Services (BCS) in and surrounding the Freedom Mine.

The Freedom Mine has been a producing mine since 1983. The lignite at the Freedom Mine surface mining operation is recovered using dragline and conventional truck and shovel mining. Mining operations includes; suitable plant growth material (SPGM) removal, replacement and storage, overburden removal, lignite production, and spoil backfill and grading, and reclamation. In the development phase, drainage and water control were established (see Water Management under Section 17.0), and then the required infrastructure consisting of power, mine office and maintenance facilities, lignite stockpile facilities, and roadways were established.

The Mineral Resources in this TRS have been estimated by applying a series of geologic and physical limits as well as high-level mining and economic constraints. The mining and economic constraints were limited to a level sufficient to support reasonable prospect for economic extraction of the estimated Mineral Resources. Resource pit shells were projected to meet the total tonnage requirements to provide lignite fuel to DCC through 2045 which are the current estimated lives of DGC and AVS. The field was analyzed, and the lowest cost portions of the model needed to match the required tonnage were included in the life-of-mine (LOM) plans. The existing lignite sales agreement between Coteau and DCC is in effect through 2037, therefore any tons within the LOM plan through 2037 are considered a reserve. Coal remaining outside of the existing contract end date is considered a resource.

The QP based the Mineral Resource estimates for the Freedom Mine on a stratigraphic geologic model generated from the verified drilling exploration data.

Mineral Resources classification distances from point of measurement for each class are as follows: Measured – less than 660 feet, Indicated - from 660 feet to 1,320 feet, and Inferred - greater than 1,320 feet. A cut-off grade of $1.70/mmBTU has been applied to the Mineral Resource Estimation. Results of the Mineral Resource Estimation calculations are shown in Table 1.1

The effective date of Mineral Resource estimates is December, 31, 2021.

The Mineral Reserves in this TRS were determined to be the economically mineable portion of the Measured and Indicated Mineral Resources after the consideration of modifying factors related to the mining process, which convert Measured Resources to Proven Mineral Reserves and Indicated Resources to Probable Mineral Reserves. Inferred Mineral Resources were not considered for Mineral Reserves. A cut-off grade of $1.55/mmBTU has been applied to the Measured and Indicated Resources to upgrade these resources into Proven and Probable Reserves. Mineral Reserves Estimates have been calculated and are shown in Table 1.2.

The effective date of Mineral Reserve estimates is December, 31, 2021.

Annual production costs were estimated to satisfy the contractual terms of the LSA. All costs were estimated based on the most recent LOM tonnage requirement provided by DCC in 2009.

The model used to estimate the operating costs is based on historical costs and performance measures that have been maintained by Coteau since its inception. These costs are reviewed and verified on an annual basis to account for changes in site conditions or the operating plan. This information is then used to estimate the projected costs for the LOM plan until the end of the current LSA in 2037.

Capital costs include equipment expenditures, land acquisition, and additional mine area development costs. All capital costs incurred by Coteau are reimbursed by DCC as required under the terms of the LSA. Should the LSA be extended beyond 2037, additional capital costs would be required and funded by DCC.

Coteau currently has all permits in place for the Freedom Mine to operate through 2031. Permit expansions required to extend the life of the mine through 2045, which is the current estimated lives of DGC and AVS, will be acquired as needed. Absent of any regulatory changes out of Coteau’s control, the Qualified Persons (QPs) do not anticipate hurdles for approval of future renewal applications. The QPs base this opinion on the mine’s demonstrated success meeting regulatory requirements. Furthermore, appropriate bonding and closure plans are in place with regulatory entities.

In the QP’s opinion, the geological data, sampling, modeling, and estimate are carried out in a manner that both represents the data well and mitigates the likelihood of material misrepresentations for the statements of Mineral Resources.

In the QP’s opinion, the operational and mine planning data, LOM Plan, and estimation are carried out in a manner that both represents the data and operational experience and methodology well and mitigates the likelihood of material misrepresentations for the statements of Mineral Reserves.

The regulatory environment is favorable in North Dakota for continued operation of the Freedom Mine. All permits have been acquired for continued operation through 2031. No permitting obstacles are anticipated for the permit renewal cycles.

Recommendations:

This technical report was prepared for Coteau which operates the Freedom Mine.

The purpose for which this technical report summary was prepared is to report Mineral Resources and Mineral Reserves for the Freedom Mine located in Mercer County, North Dakota.

Qualified persons (QPs) are employed by Coteau. As such, inspections are conducted on a regular basis and no individual date of inspection has been identified. Kendra R. Braun is a licensed Professional Engineer, who has direct oversight of the drilling exploration programs, and is directly involved in mine development projects and daily production operations at the Freedom Mine. Joseph A. Spiekermeier is a licensed Professional Engineer who has direct engagement with daily production operations and oversight and management of technical projects as the Engineering Manager, and is directly involved in the development of the LOM finances at the Freedom Mine.

This is the first TRS filed with the United States Securities and Exchange Commission (SEC) in accordance with S-K Subpart 1300 regulations, therefore no preexisting TRS exists with the SEC. Mineral Resource and Reserve estimations prior to December 31, 2021 were reported in accordance with guidance of Industry Guide 7.

This terms of reference for this TRS include

Key Acronyms and definitions for this TRS include:

The Freedom Mine is located approximately 7 miles north and 3 miles west of Beulah, North Dakota (ND), in Mercer County, which is approximately 90 miles northwest of Bismarck, ND. The entrance to the mine is by means of a paved road north of the intersection of State Highway 49 and United States Highway 200. The general location of the Freedom Mine is shown in Figure 3.1 (Location of the Freedom Mine). AVS and DGC are located adjacent to the Freedom Mine.

Coteau, a subsidiary of NACoal, is the owner and operator of the Freedom Mine, an active lignite surface mining operation in production status. NACoal is a wholly-owned subsidiary of NACCO Industries. All production from the mine is delivered to DCC, a wholly owned subsidiary of BEPC. DCC then sells the coal to DGC, AVS, and LOS, all of which are operated by affiliates of BEPC. There have been no previous owners or operators of the Freedom Mine.

The Freedom Mine is broken out into different mine areas, namely Mine Area 1 (MA1), Mine Area 2 (MA2)/East Mine Area (EMA), Mine Area 3 (MA3), Mine Area 4 (MA4), Far East Area, Renner’s Cove, and Dakota Star.

The Freedom Mine currently has no significant encumbrances to the property. No Notice of Violations (NOVs) have been issued at the Freedom Mine in over ten years. Permitting requirements are discussed in Section 17.0.

Coteau has not identified any significant risks that may affect the right or ability to perform work on the property. Each lease and special obligations for each lease are reviewed on an annual basis to ensure there is no lapse in lease continuation or payments. If a lease expires or a payment lapses, the landowner may choose not to release this property for mining.

The Freedom Mine, located in Mercer County, North Dakota (ND), is part of the glaciated subsection of the Missouri Plateau, which is part of the Great Plains Physiographic Province.

The region is currently characterized by glacially modified bedrock and glacial trenches. The mantle of drift generally follows the preexisting topography, modifying it only slightly, although in some areas there is some glacial constructional relief. The general effect of the drift has been to lessen the local relief. The major drainages and their main tributaries are pre-glacial bedrock valleys. The Knife River and Square Butte Creek are adjusting their profiles to the Missouri River base level, so they are currently aggrading streams. Relief in the area is due largely to erosion in contrast to the depositional landscape of the Missouri Coteau. Relatively softer siltstone and claystone layers locally have been dissected to produce badland topography, but more commonly, smooth rounded slopes are formed between benches. The maximum relief of the Freedom Mine is approximately 437 feet (msl), with the elevation ranging from 1,848 feet (msl) in the Zap Branch of the Beulah Trench to nearly 2,285 feet (msl) in the Tertiary upland ridge tops.

Predominant land use within Mercer County is agricultural in the form of cropland or native grassland. Additional land uses include tame pasture, wetlands, shelterbelts, roads, occupied farmsteads, and stock ponds.

Travel to the Freedom Mine by air is possible by means of the Bismarck Municipal Airport, Bismarck, ND, which is approximately 90 miles southeast of the mine. From the airport, the mine is accessed by means of ground transportation by traveling west approximately 50 miles via Interstate 94, taking exit 110 and traveling north approximately 28 miles on ND Highway 49 to Beulah, ND, and so on as explained in the previous paragraph.

Travel to the Freedom Mine by rail is possible using the Amtrak Network, which runs through northern North Dakota mostly along the US Highway 2 corridor, and passes through the larger cities of Williston, Minot, Grand Forks, and Fargo, and smaller cities of Stanley, Rugby, and Devils Lake. From these locations, the mine can be accesses via ground transportation on Interstate 29 or Interstate 94 and various highways. The main highways are US Highway 2, US Highway 83, US Highway 85, US Highway 200, and US Highway 281.

North Dakota’s freight rail service is largely provided by Burlington Northern Santa Fe Railway and Canadian Pacific Railway.

The towns of Beulah, Hazen, and Stanton along with other smaller communities are within a 40-mile radius of the Freedom Mine and provide a vast supply of the employment base. Employees also come from the cities of Bismarck, Minot, and Dickinson, all of which are less than 100 miles away from the mine.

The Freedom Mine sources power for mine office facilities and operations from Roughrider Electric Cooperative, a cooperative of BEPC, and water for the mine office facilities from the Southwest Water Authority. Fuel for equipment is supplied by multiple local vendors. The Freedom Mine has, or is currently constructing, all supporting infrastructure for mining operations. See Section 15.0 for further detail pertaining to the mine specific infrastructure.

There were no previous operators of the Freedom Mine.

NACoal began exploring the area in the1970’s, more specifically in MA1, MA2, MA3, and MA4, known as the Beulah-Hazen Areas. The first surface mining permit for Coteau was approved in 1981, and initial boxcuts were opened in 1983. In later years due to the need to expand the mine’s capacity, the Renner’s Cove and Dakota Star areas were acquired. The Renner’s Cove area was originally explored by Consolidation Coal Company (CONSOL) beginning in the 1960’s. Coteau purchased the surface and coal leases for the Renner’s Cove Area from CONSOL in 1993. The Dakota Star area was also originally explored by CONSOL beginning in the 1970’s. Basin Cooperative Services (BCS) purchased the surface and coal leases in the Dakota Star Area from CONSOL. BCS continued the exploration of the Dakota Star area. Coteau purchased the Dakota Star Reserves from BCS in 1990.

The Freedom Mine is located within the glaciated subsection of the Missouri Plateau, part of the Great Plains Province. The formations of sedimentary origin were deposited in the Williston Basin, the dominant structural feature of western North Dakota. The center of this essentially symmetrical basin is located near the town of Williston, North Dakota, approximately 100 miles northwest of the mine site. The basin consists of approximately 15,000 feet of sedimentary rock overlying a basement complex of gneisses, schists, and granites. This sequence records a geologic time interval spanning late Precambrian (1 to 2 billion years ago) to Holocene (last 10,000 years).

The structural influence of the Williston Basin is reflected in the dip of the formations underlying the Freedom Mine area. Drill hole data indicates that the Sentinel Butte Formation, the uppermost bedrock unit of the sedimentary series within the Freedom Mine area (Figure 6.1), dips westward toward the center of the Williston Basin at 50 to 75 feet per mile (about ½ to 1 degree). The dip of the bedrock strata increases with depth due to the physical characteristics of the Williston Basin. The subsidence of the Williston Basin began early in the Paleozoic Era (425 to 542 million years ago). Subsidence has not been continuous, nor has sedimentation occurred at a constant rate. These irregularities are evidenced by the presence of several unconformities in the stratigraphic column of North Dakota.

From the Cambrian Period (488 to 542 million years ago) through the early Paleocene Epoch (55.8 to 65.5 million years ago), numerous shallow, inland seas advanced and retreated across the area now known as west-central North Dakota, depositing a wide range of marine and lagoonal sediments, mainly shales, limestones, and evaporites. Since the early Paleocene Epoch, only stream and lake sediments have been deposited in western North Dakota. Deposition of these sediments was interrupted during the late Tertiary Period (13 to 36 million years ago) by episodes of regional uplift, faulting, warping, and erosion.

During the Pleistocene Epoch (10,000 to 2.6 million years ago), continental glaciers advanced and retreated, modifying the existing topography by depositing varying thicknesses of glacial materials in the uplands area, and eroding and filling the diversion trenches. Following this period of aggradation, there was a gradual dissection of the present topography, which consists of rolling prairie, isolated buttes, mesas and badlands. Southwest of the Missouri River, glacial deposits are thin or absent, and the boundary of the Glaciated Missouri Plateau is poorly defined with the maximum extent of glaciation marked by glacial erratics.

The regional structural geology is fairly consistent. No evidence of any significant faulting has been observed in the region. The lignite seams are gently undulating due to differential compaction of the underlying sediments.

The most prolific lignite-bearing stratum in the state is the Sentinel Butte Formation of the Fort Union Group. The most prominent characteristics of the Fort Union Group formations are the cyclical deposition and lateral persistence of the lithologic units, especially the lignite seams. The Sentinel Butte Formation is a continental deposit comprising interbedded calcareous clays, sandy clays, and lignite beds, with isolated lenses of fine-grained sands, silts, and rare limestones, ranging in color from light gray to dark brown and black. Except for the limestones and an upper sandstone unit, the sediments are essentially nonindurated. The claystone and sandstones are generally thinly bedded and not jointed. These sediments were deposited mainly in swamps or in the floodplains of very slow, meandering rivers. The Sentinel Butte Formation conformably overlies the Tongue River Formation (also known as Bullion Creek Formation). The Golden Valley Formation, which is stratigraphically above the Sentinel Butte Formation elsewhere, is absent in the Freedom Mine area, due to postdepositional erosion; therefore, the younger glacial deposits of the Coleharbor Group unconformably overlie the Sentinel Butte Formation in the study area. Outcrops of the Sentinel Butte Formation are sporadic; bedrock is largely masked by residual soils, slopewash, and/or glacial drift.

The Sentinel Butte Formation incorporates a varying number of lignite coal beds (Figure 6.2 Stratigraphic Column of the Freedom Mine). The major lignite bed within the mine area is the Beulah-Zap (Beulah) bed, the only economical lignite deposit. This lignite horizon has a thickness of generally 15 to 22 feet, except near the edges of the glacial diversion channels, where some of the lignite bed has been removed by erosion. Also, along the glacial diversion channels are areas of soft lignite (leonardite). Soft lignite is a result of areas of the bed being exposed to oxidizing conditions via erosion caused by glacial meltwaters. The soft or weathered lignite is of very poor quality and not economically recoverable.

At the Freedom Mine, the Beulah bed can split into four components, an upper split (Upper Beulah), and a lower split (Lower Beulah). In some locations, the Upper Beulah splits into the Upper Beulah 1 and Upper Beulah 2. Also, in some locations, the Lower Beulah splits into the Lower Beulah 3 and Lower Beulah 4. The splits hold a combined thickness of approximately 15 to 20 feet and then they start to thin to a combined thickness of approximately 10 to 11 feet.

Located above the Beulah bed are several thin beds of lignite (Figure 6.2). These include, in the order that they occur, the Twin Buttes and Schoolhouse beds. These beds typically average 2 feet thick, although they range from 1 foot to 6 feet within short distances. Interburden between the Schoolhouse and Beulah beds ranges from 5 to 50 feet, and interburden between the Twin Buttes and Schoolhouse beds averages 65 feet.

Located below the Beulah bed are several other beds of lignite (Figure 6.2). The major beds, in the order below the Beulah bed that they occur, are the Spaer and Stanton beds. These range from 65 to 130 feet below the Beulah bed. The Spaer bed has an average thickness of 5 feet, and lies an average of 80 feet below the Beulah bed. The Stanton bed averages 5 feet thick, and lies an average of 35 feet below the Spaer bed. Other thin beds and splits of the two beds, typically less than 2 feet thick, are occasionally found above and below the Spaer and Stanton beds. Below the Stanton bed can be found the Hagel lignite zone, generally made up of two to three beds, and then below that the Tavis Creek bed. Below the Tavis Creek bed is generally a long sequence of sands and clays before the next lignite (150-300 feet). The Jim Creek bed is a localized lignite bed that appears between the Beulah and Spaer beds.

Geologic cross section B-B’ from the NACT-0401 permit area is included for reference as Figure 6.3 in the Supplemental Figures Attachment. The cross-section was constructed primarily based on the drill hole geophysical logs supplemented with lithology descriptions from the drill cuttings, as well as the data from the core holes.

Workings of inactive or abandoned surface and underground mines have been identified prior to mining. Since mining began, no unique or especially significant geological features, formations, or paleontological resources have been identified at the Freedom Mine. Additionally, no fatal flaws related to geological conditions have been identified.

No exploration work other than drilling and associated geophysical logging has been conducted at the Freedom Mine. Geophysical logging is discussed with drilling in Section 7.2.

Data collected during drilling exploration programs at the Freedom Mine is the sole information available for modeling the lignite deposit for the determination of Mineral Resources and Reserves. The sampling method used by the Freedom Mine for modeling quality of the lignite deposit is exclusively core drilling. The Freedom Mine lignite deposit is evaluated on a seam by seam basis. Drilling exploration data including geologic lithologies, qualities, and hole locations have been compiled electronically in Excel files.

Drilling exploration programs conducted at the Freedom Mine have comprised largely of rotary air/mist/mud drilling methods. For the purpose of this discussion, senior geologist and field geologist refer to qualified representatives of Coteau and/or NACoal. Historically, Coteau has contracted independent drilling services and geophysical logging services. Drill holes completed at the Freedom Mine are vertical in orientation and have been broken into four categories which are described below. A drill hole location map for the Freedom Mine is presented in Figure 7.1 in the Supplemental Figures Attachment.

Exploratory drill holes, also referred to as pilot holes, are typically 5-inches outer hole diameter (od) and terminate at a minimum of 12-feet below the lowest targeted lignite seam as specified by the senior geologist to allow for proper geophysical logging. Drill hole cuttings are recovered by the contracted driller on a 5-foot interval and are described by the field or senior geologist. All pilot holes are geophyscially logged by a third-party geophysical logging contractor for natural gamma, density, caliper, and resistivity responses. There are instances where a geophysical log cannot be obtained due to poor, collapsing hole conditions, however, footage information is obtained from the driller and the cuttings descriptions.

Coal core holes to collect samples for quality assessment are advanced next to pilot holes at specified locations in accordance to protocols described below. Core holes are typically 5.6-inches (outer diameter, od) to core point, then 4.6-inches (od) during coring, with a respective sample diameter of approximately 3-inches (od). Samples are collected with either a 10-foot or a 15-foot split inner tube core barrel. Coring intervals are determined by the field geologist and reviewed by the senior geologist based on the pilot hole’s geophysical log and cuttings descriptions. 90-percent coal core recovery is required (see Section 8.0 for discussion on sample preparation).

Overburden core holes are drilled in accordance to protocol similar to the pilot holes and coal cores as described above. During the drilling of the core hole, overburden, interburden, and underburden samples are collected from the drill cuttings in 5-foot increments, and are shipped to a separate soil lab for geochemical analysis. The targeted lignite seams are cored as normal. 90-percent recovery of coal core intervals is still required within core runs that contain lignite, such that parameters outlined for coal core collection are maintained. Data specific to the coal cores collected during these overburden sampling programs are included in the geological model.

The fourth, and final, category of drill holes are comprised of geotechnical holes and monitoring wells which have been geophysically logged and extend through multiple coal seams. These drill holes follow the parameters outlined for pilot holes and available data has been reviewed by the QP.

Details may vary with each exploration program, however general procedures for drilling at Freedom Mine include:

To continue with a coal core hole:

Additional drilling tasks include:

Numerous drilling exploration programs have been conducted at and around the Freedom Mine. The Freedom Mine’s drill hole database contains 7,855 drill holes that are used to model the Freedom Mine's coal field (Figure 7.1 Location of Drill Holes). Out of the total number of drill holes in the database, 3,904 of those drill holes are cored holes that were sampled for coal quality assessment.

The data for 7,245 of the 7,855 drill holes were collected by NACoal/Coteau beginning in 1974, through present. For the majority of these drill holes, Mohl Drilling, Inc. was the main drilling contractor, Century GLS performed much of the geophysical logging, and Minnesota Valley Testing Laboratories, Inc. (MVTL) performed much of the quality analyses.

NACoal/Coteau obtained drilling information on 610 of the drill holes in the Coteau database from outside entities which includes CONSOL and BEC.

Coteau’s drill hole database includes data for 423 drill holes obtained from CONSOL. Out of the 423 drill holes, 114 drill holes are from exploration conducted by CONSOL from 1964 to 1980 for the Renner’s Cove Area. The drilling was performed by CONSOL, and Nuclear Logging Services performed the geophysical logging. Also

included in Coteau’s database is drilling information for 309 drill holes from exploration conducted by CONSOL from 1973 to 1980 for the Dakota Star Area. There were various independent drilling and logging contractors that included CONSOL and Nuclear Logging Services. The method used to survey the drill holes obtained from CONSOL is unknown.

Coteau’s database also includes drilling information for 187 drill holes from exploration conducted by BEC from 1989 to 1992 for the Dakota Star Area. There were various independent drilling and logging contractors that included Mohl Drilling and Century GLS.

The majority of the drill holes collected by CONSOL and BEC were geophysically logged, and field logs were maintained to describe the geology. The majority of the coal cores collected during these drilling campaigns were analyzed by CONSOL’s lab or MVTL.

These data collected by CONSOL and BEC were the basis for the characterization of the lignite deposit to justify the expansion to the Renner’s Cove and Dakota Star Areas. Despite uncertainty in how these early drill holes were surveyed, and how the data was collected, the data collected by CONSOL and BEC has remained fairly consistent when compared to fill-in drilling and quality analyzed before and during active mining operations. The reliability of the drilling data obtained from CONSOL was proven in the Renner’s Cove Area, due to the consistency with fill-in drilling and the area being successfully mined out by Coteau. The data in the Dakota Star Area has proven to be reliable due to the consistency with fill-in drilling and successful mining in the area. The QP has evaluated the reliability of the drilling data provided by CONSOL and BEC to NACoal. Drill holes deemed reliable have been used to model the lignite structure, and core holes in which the quality data could be verified by laboratory reports were used to model lignite quality. Original drilling files acquired from CONSOL and BEC are securely stored at Coteau. A summary of records is provided in Table 7.1.

The QP has been involved in drilling exploration programs since 2009, and has served as the senior geologist who has overseen the drilling exploration programs conducted from 2012 through present at the Freedom Mine.

As a whole, Coteau plans exploration activities to attain an average 660-foot drilling density for the three-year projection ahead of active mining operations. Thus, the drilling patterns are drilled such that the hole spacing is progressively tightened as mining progresses. In initial exploration areas, drillhole spacing may be as much as one mile apart. Where mining is planned to be more than 10 years away, the hole spacing might be as much as one quarter mile. Within three years of mining, the drilling pattern is complete, and the interior spacing is approximately one hole per 20 acres (660-foot grid). The geology of the erosion and weathering of the coal is complex at the Freedom Mine, therefore dense cropline drilling takes place. Final subcrop definition is rows of holes 100 feet apart every 300 feet along the subcrop line. Physical constraints such as stream buffers, occupied dwellings, and rough terrain can affect the final drilling density. This spacing allows operations to optimize seam blending efforts to ship a steady fuel quality to the customer. It should be noted for the purpose of Mineral Resource estimations and Life of Mine (LOM) projections, the QP has determined a moderate to high level of confidence in a minimum drill hole spacing of 1,320-feet. This confidence comes from the continuity of the lignite seams including both lithologic and quality characteristics, as well as the ability to compare modeled seam projections to active and historical mining operations. The Freedom Mine has been a producing mine for over 38 years, and has successfully mined over 522 million tons of lignite based on the geologic model built off the drilling data in Coteau’s database. Further justification of the drill hole spacing specific to Mineral Resource Classifications is discussed in Section 11.0.

Physical constraints such as stream buffers and unnavigable terrain may affect the consistency in drill hole spacing. Additionally, drilling exploration for later years does not always land within fully permitted areas which may limit the extent of disturbance allowed.

During the drilling and sampling procedure, a variety of factors could materially affect the accuracy and reliability of the results. Some examples include improper surveying of the drill hole collar location and elevation, improper and un-level drill rig set up, improper zeroing out of the geophysical logging tool before commencing geophysical logging, not being able to obtain a geophysical log due to collapsing drill hole conditions, not obtaining 90% recovery of the coal seam cored, allowing the coal core to be exposed for too long before bagging causing a false reduction in moisture and increase in BTU value, and improper record keeping. Most of these negative factors can be avoided by utilizing skilled and experienced drilling and geophysical logging contractors, having proper QA/QC procedures to follow during sampling, and proper drill hole data verification.

Initial background surface water studies were conducted in 1978 through 1980 for Antelope Creek and its tributaries by the Coteau Properties Company. This study was in addition to two other more comprehensive studies conducted for the Antelope Valley Station Environmental Assessment (1977) and American Natural Gas (ANG) Coal Gasification Company Environmental Impact Statement (1978). Analyses of 17 trace metals were conducted for the Antelope Valley study.

The ANG Coal Gasification Company study includes an evaluation of the potential effects of drainage from the plant and mine site resulting in annual mean monthly runoff for several station at or near the mine site. Estimates of flood magnitudes are also included in this report.

A minimum of two years of baseline ground water data were collected and studied within each permit area at the Freedom Mine. The baseline data collection included water levels, water qualities (alkalinity, hardness, total dissolved solids (TDS), major cation/anions, and select metals), potentiometric head, flow direction, and hydraulic conductivity calculated from pumping tests or single well response (slug) tests. Also, as part of the permitting process, domestic wells and springs within and surrounding the permit areas are certified to determine the well or spring location, well construction details, source aquifer, water chemistry, and pumping or flow rate. Over 300 monitoring wells and other wells of various types were utilized to characterize the ground water hydrology in and around the Freedom Mine.

A wide range of hydraulic conductivity values was observed in the lignite beds. In some areas, the lignite beds exhibit very low hydraulic conductivity on the order of 0.1 feet per day or less. In some areas of more permeable lignite, the hydraulic conductivity values are greater than 100 feet per day. The wide range of hydraulic conductivity values is indicative of the very nature of the lignite beds in the Sentinel Butte Formation. Sedimentary processes formed the lignite beds. Over time, minor fractures developed along the plane of deposition. The extent and degree of these planar, or bedding, fractures are variable. When viewed along a highwall in an open pit at the Freedom Mine, the variable planar fractures are very evident. The nature of this fracturing in the strata affects the hydraulic conductivity.

The glacial sands of the Beulah Trench yield hydraulic conductivity values on the order of 10 to 1,000 feet per day. These values, determined from field slug tests, correlate well with published values of hydraulic conductivity.

Slug tests in other glacial and alluvial sediments yielded hydraulic conductivity values of 1.1 feet per day to 33.3 feet per day.

The lignites have TDS that generally ranges from 238 mg/l to 6,180 mg/l, averaging around 3,000 mg/l, and are mostly a sodium bicarbonate type of water. The ground water quality for the Antelope Creek Aquifer includes TDS

that ranges from 78 mg/l to 1,330 mg/l, with an average of 745 mg/l. The water is either a calcium or sodium bicarbonate type water. The ground water quality in the Renner Trench was variable. In the shallow till zones of the Renner Trench, the TDS ranged from 2,142 mg/l to 2,476 mg/l, with calcium and magnesium as the dominant cations, and sulfate as the dominant anion. Wells screened in the shallow sand zones of the Renner Trench yielded TDS values of 454 mg/l to 3,609 mg/l, with calcium and magnesium as the dominant cations, and sulfate as the dominant anion. In the deep sand zones of the Renner Trench, TDS values ranged from 1,450 to 2,164 mg/l, with sodium as the dominant cation and bicarbonate the dominant anion.

Locations of existing and destroyed ground water monitoring wells, along with certified domestic wells and springs are shown on Figure 7.2 Existing Monitoring Well Location Map, Figure 7.3 Destroyed Monitoring Well Location Map, and Figure 7.4 Certified Wells and Springs Location Map, found in the Supplemental Figures Attachment. These maps are excerpted from Coteau’s Consolidated Groundwater Monitoring Plan submitted October 2021. Many of the destroyed wells were once part of the monitoring program and part of the baseline aquifer testing, but were destroyed due to mining operations or due to being no longer needed.

No formal QA/QC document was available for the initial baseline data. However, use of duplicate samples and blanks were noted by the QP upon review of laboratory reports, chain of custody (COC) forms, and field notes related to the data collected.

Coteau’s Sampling Analysis Plan (SAP) thoroughly outlines the QA/QC protocols and procedures for field collection of groundwater and surface water samples in addition to the QA/QC methods implemented by the analytical laboratory. These QA/QC policies and procedures monitor the validity of the test results. Selected independent laboratories for water quality analyses follow the processes and meet the specifications published by national and international standard organizations including The NELAC Institute (TNI-NELAC) which administers the National Environmental Laboratory Accreditation Program (NELAP).

The hydrogeology of the Freedom Mine has been well studied. Coteau has continued to gain an understanding of the water bearing units during mining, established groundwater and surface water monitoring programs, fill-in drilling, and installation of new monitoring wells. The QP believes that these additional observations and collected data from the past 38 years of mining align with the results of the original surface water quantity measurements, aquifer tests, hydraulic conductivity tests, and water quality results.

Geotechnical soil drilling has been carried out at the property during several investigations. The most notable studies concerning baseline geotechnical properties are described below.

Initiated in 1977, and finalized in 1981, The North American Coal Corporation conducted a study to establish ground conditions and geotechnical properties for Mine Areas 2 and 4 at Coteau. The program was divided into five principle tasks: 1) research of available and pertinent literature and reconnaissance of nearby surface mines, 2) performance of test borings to secure samples of soil and rock, geophysical logging of the test borings, and installation of piezometers, 3) laboratory testing of undisturbed samples to yield data concerning cut highwalls, 4) laboratory testing of re-molded samples to yield data concerning spoil piles, and 5) analytical evaluation of all obtained data and formulation of pit design guides. A total of 19 borings were drilled and sampled, of which eight were drilled in MA2 and eleven were drilled in MA4. Seven borings were intermittently sampled, with a sample

obtained within each five-foot increment of depth, and twelve borings were continuously sampled throughout their depths. All borings were drilled to levels below the lignite to be mined (Beulah bed). A total of 43 pneumatic piezometers were distributed in separate borings adjacent to ten of the sampled borings to determine the hydraulic pressures in the glacial till mantle, the rock above and below the lignite, and the lignite. Sample borings were advanced by combinations of hollow stem auger, rotary wash, and rotary core. Samples were obtained either intermittently by split-spoon, Shelby tube and Pitcher tube samplers, or continuously by Shelby tube samplers and PQ wireline core barrel. The split-spoon sampler obtained a 24” long cylinder with a 2” outer diameter. The Shelby tube samplers obtained a 30” long cylinder with a 3” outer diameter. The Pitcher tube sampler obtained samples similar to the Shelby tube but 36” long. The PQ wireline core barrel obtained 3.3” diameter cores. The borings were drilled by Test Drilling Service Company (TDSC) and geophysically logged by Century GLS. The samples were logged, described, sealed, and boxed by a geologist provided by TDSC. The samples were analyzed by the laboratory Goldberg, Zoino, Dunnicliff and Associates (GZD). Locations of the geotechnical borings are shown on Figure 7.5.

In 1984, Bauer, Calder, & Workman Inc., conducted a slope stability study in the active MA4 south area to provide direct information for use by engineering and operations to ensure stability throughout the range of normal operating conditions. The geology of the open pits was examined along with fractures and any failures that had occurred. Spoil heights and spoil angles of repose were measured and spoil samples were taken. Several vane shear tests were taken in the spoiled waste with a Geonor field testing unit. Some readings were located in freshly excavated material, while others were in waste that had been in place for two to three weeks. Vane penetrations were 8 to 23 inches. In most cases the vane was penetrated with its axis normal to the face of the slope. Skin friction readings were taken at all test locations and the vane dial readings were adjusted accordingly. Several hundred pounds of spoil samples were collected during the field tests, and cone tests were conducted on the samples. The cone test was developed by the contractor and were found to be very useful in determining bulk densities of spoiled materials, angle of repose, and swell factors. The test consists of pouring up to 200 pounds of material onto the laboratory floor forming a cone with dimensions governed by the material angle of repose. The sample was then tamped to simulate the action of draglines dumping. The cone height and diameter were measured and the sample was weighed. The desired parameters were then calculated. In addition, Bauer, Calder, & Workman utilized the results of the extensive soils testing done by North American Coal Corporation in the previously mentioned report in 1977-1981.

The typical geotechnical borehole log includes the following geotechnical descriptions and records of the sample collected during investigation:

Further detail concerning pit design and ground control parameters related to geotechnical studies are discussed in Section 13.0 Mining Methods.

Subsurface conditions and geologic units encountered have remained fairly consistent since mining commenced in 1983. Overburden core holes in which individual sections of burden were collected and tested for physical and

geochemical properties, as described previously under drilling exploration, have been evenly distributed throughout the permitted mine areas and continually serve as an indicator for soils to be encountered ahead of mining. Furthermore, the geologic structural data acquired from geophysical logs during drilling campaigns indicate consistent depths between burdens and lignite seams among other subsurface characteristics. Special situations have led to additional geotechnical studies specific to the issue encountered while mining. However, the general pit parameters defined by the above studies have not warranted a need for further studies from the continued information obtained from drilling exploration and active mining operations. The QP understands that additional geotechnical studies may be required on an as needed basis to address special conditions that may be encountered in future mining.

The Freedom Mine lignite deposit is evaluated on a seam by seam basis. As a standard in the coal industry, individual horizons of lignite are bagged and sent to a third-party coal testing laboratory. The procedures at the Freedom Mine for current and historical sample collection are summarized below.

Core runs are specified by the senior and/or field geologist by referencing the geophysical log of the pilot hole. Once a specified core run is brought to the surface, the field geologist observes the drillers extract the lignite sample from the split tube core barrel to ensure the integrity of the sample is maintained, and to verify the top and the bottom of the core run. The core sample is transferred from the core barrel to a core trough (i.e. aluminum core trough with a built-in measuring scale). The field geologist verifies the roof and floor of the lignite core is present and checks the expected coal seam thickness referenced from the pilot hole’s geophysical log to determine coal core recovery. If 90-percent recovery cannot be verified, the driller may attempt to retrieve the remainder of the lignite core run from the current hole. If no successful attempt is made to recover the remaining lignite, the driller must re-core the core run in a new adjacent core hole.

Upon verifying full recovery of the core run, the field geologist succinctly, but thoroughly logs the lignite run. A typical log describes:

Lignite cores may be split into multiple samples for the following reasons:

After samples are bagged, they are stored in a dry, shaded area, typically the field geologist’s truck, until the geologist returns to the mine office. Core samples are then securely stored at the mine warehouse to be shipped to the third-party laboratory. The Freedom Mine office and warehouse is secured with user specified fob access and camera surveillance.

Prior to shipping the samples, the senior geologist reviews each sample against the field records and the chain-of-custody (COC). The date, mine identifier, hole ID, seam ID, and “to” and “from” intervals are verified. A copy of the COC is emailed to the laboratory manager. Copies of the COC forms for coal cores shipped from 2012 through 2021 were available for the QP to review. Coal core samples are shipped to the third-party laboratory via insured freight with tracking information.

Minimum analyses of coal cores include short proximate (moisture, ash, BTU/lb, sulfur), sodium, calcium, and forms of sulfur. These parameters are the primary quality inputs used to model the Freedom Mine lignite deposit. Additional analyses of coal cores may include full proximate, ultimate, mineral analysis of ash, trace elements, and ash fusion, however, these parameters are not modeled or currently relevant for consideration of Mineral Resource estimations.

Minnesota Valley Testing Laboratories, Inc. (MVTL) in Bismarck, North Dakota is the main third-party laboratory the Freedom Mine uses for coal core analyses. MVTL has provided coal quality analysis in accordance ASTM standards for over 40 years. The ASTM standards that MVTL follows for coal analysis are listed below in Table 8.1.

The sample receiving and storage room is climate controlled (ventilated, AC, and heat). Samples are received through various couriers, directly from clients, or from the MVTL Field Service division. The samples are cross referenced with a chain of custody form or other client paperwork and then are logged into the Laboratory Information Management System (LIMS). Each sample is given a unique lab number used for tracking during analysis and throughout the reporting process.

Samples are stored until they are ready to be crushed in the prep room. There is a slight potential for moisture loss during this storage period. Coteau acknowledges this potential and, as such, double bags samples in the field to preserve as much in-situ moisture as possible.

Retained pulverized and air-dried 60-mesh samples are also stored in this room. These samples can be reanalyzed within 6 months for selective parameters. MVTL contacts and verifies with the client prior to disposal of retains.

The prep room is a temperature-controlled room (AC and Heat) accessible from the sample receiving and storage room. Within the prep room, samples are crushed to 8-mesh and are reduced in volume using a riffler. Two different sized crushers and rifflers are available depending on sample size. Compressed air is used to clean the crusher and riffler after each sample to mitigate contamination.

A riffled split of 8-mesh coal is placed on a sample tray and weighed. The weights are sent electronically to LIMS for use in the moisture calculation. The tray is placed in an air dry oven and dried overnight. The temperature of the air dry oven is monitored and recorded daily. The temperature monitoring devices are verified annually. Another riffled split is sealed in a Ziploc bag and retained. The client is notified prior to disposal of the coal core splits.

Once air-drying is complete, the samples are weighed and again the weights are sent electronically to LIMS. The samples are pulverized to 60-mesh and split using a riffler. Compressed air is used to clean the pulverizer and riffler after each sample. Samples are stored in glass jars for analysis and the splits are retained in whirl-pak bags.

All of the analyses in the laboratory are performed on the 60-mesh sample or ash prepared from it. The samples are mixed by tumbling prior to each analysis. The lab is climate controlled (AC and heat). Coal analysis results are reviewed prior to reporting. The review includes identification of outliers and comparison of results with historical information by site, if available. The analyses are re-analyzed as needed.

MVTL participates in round-robin testing programs specific to lignite with other laboratories to ensure result accuracy. MVTL participates in an Interlab Coal Round Robin Program monthly. In 2020, MVTL also participated in a lignite (coal) specific round robin program with NACoal including 8 commercial laboratories, one of which was MVTL, that were used by various NACoal mine locations. The round robin consisted of four samples labeled 2001, 2002, 2003, and 2004. The four samples were sourced from two NACoal mines. The two locations provided a range of samples with variability in moisture, ash, sulfur and sodium. The labs participating in the round robin were provided 8-mesh splits and dried, 60-mesh splits of all 4 samples. The general results are summarized in Figure 8.1. MVTL is labeled “Laboratory #5”.

The QP feels the methodologies used at MVTL are within industry standards for sample preparation, process of sample splitting and reduction, general quality control, and security of samples to ensure that validity and integrity of samples is upheld.

The consistency in core collection from one drilling program to the next at the Freedom Mine has been thoroughly documented. Through records review and personal observation of numerous drilling campaigns, it is the QP’s opinion that historic coal core collection has remained consistent. The process of double bagging and tagging the cores in addition to multiple checkpoints to log samples from field to shipment to the laboratory further ensures the integrity and security of each sample is maintained.

Additionally, in the QP’s opinion, the methodologies used by MVTL are within ASTM standards for sample preparation, process of sample splitting and reduction, general quality control, and security of samples to ensure that validity and integrity of samples is upheld.

The drilling database for the Freedom Mine was organized into three Excel files related to lithology intervals, collar survey, and quality. The files encompass the geologic modeling inputs including lithology intervals, collar survey, total depth of hole, hole coordinates, and coal core quality data.

The drilling files were saved on the Coteau network drive which contains the geologic model and has limited access.

Once the drilling database was compiled, a series of routine data integrity checks were performed by the QP on the database to check for common errors and omissions. The QP visually inspected the database after updates were made, then conducted a second data validation check using Carlson Software. The validation checks included, but were not limited to, the following:

For any errors or omissions reported, the QP reviewed the geophysical logs, field logs, and quality reports related to the specified holes to reconcile the differences.

After the initial checks and reconciliations were completed, the QP completed the modeling process which is detailed in Section 11.0. Drill hole locations were randomly selected to verify modeled values of each horizon were representative of the imported drill hole data. Additional visual inspection of the model included review of various consecutive cross sections as well as isopach maps of the modeled structure (roofs, floors, and seam thickness) and quality. Newly modeled grids were also compared to previous models. Changes in modeled values were minor and isolated to areas where new drilling data had been included from recent exploration programs. Anomalies, such as spikes in the data were reviewed against the original drill hole data, any errors in the drilling database were reconciled and the model was reconstructed.

It is the QP’s opinion that the analytical results from the coal cores collected during Coteau’s exploration programs are consistent with actual as-delivered quality from the active mining operations at the Freedom Mine. This opinion was based on comparison of historical quality projected from the Carlson model for the annual operating plans to actual as-delivered quality indicated by the customer’s DGC Chemistry Lab. It is also the QP’s opinion that the modeled structure of the lignite seams is consistent with active mining operations based on comparisons of modeled seam thickness and trends against actual surveyed seam thicknesses and trends.

The QP found the geologic model was a reasonable and reliable representation of the geologic structure and quality of the lignite seams (horizons) at the Freedom Mine.

The QP compared the Mineral Resource model supporting the Mineral Reserve for projected quality, volumes and lignite tons, and evaluated monthly and annual reconciliations and found the Mineral Resource model to be an accurate representation of the actual findings during mining operations.

Past and ongoing environmental studies, including ground water and surface water studies, discussed in Sections 7.0 and 17.0 have been reviewed and it is the QP’s opinion they are thorough, complete, and provide the necessary information for the start-up and ongoing operation of the Freedom Mine. Proper monitoring programs to meet mine permit requirements are in place.

The geotechnical studies discussed in Sections 7.0 and 13.0 have been reviewed and it is the opinion of the QP that the geotechnical data is adequate to support the pit angles used by the Freedom Mine.

The QP reviewed the dilution assumptions and found them to be reasonable and consistent with realized results from the active mining operation. Recovery rates are continually being compared to actual recoveries for verification.

The QP has reviewed annual historical values for all costs, pricing assumptions and economic analysis to be reasonable for future projections, which are refined and updated using the historical values, to continuously improve accuracy of the projections. These have been used to support parameters used during mine planning.

The QP considers that reconciliations of staffing and workforce requirements, actual equipment capacities and productivities have been appropriately considered while establishing reliable projections of executing the mine plan.

Representatives of Coteau or NACoal were not involved in the original drilling exploration programs conducted by CONSOL or BCS. Coteau obtained the collar surveys, geophysical logs, coal core analyses, and geologist field logs related to each hole from CONSOL and BCS, but was unable to observe the drilling, sampling, or sample preparation for these data. The largest uncertainty lies in the method of the collar survey of the early data drilled from 1964 to 1980. It is unknown to what degree these holes were surveyed.

Coteau, overall, has contracted Mohl Drilling, Inc. and Century GLS, contractors used by CONSOL and BCS for the early exploration, to perform in-fill drilling programs, such that Coteau has gained familiarity in these contractors’ drilling and downhole mapping methods. Furthermore, comparisons of new drilling data to the older CONSOL and BCS data have been completed as fill-in drilling progresses ahead of mining. These comparisons, and the level of documentation CONSOL and BCS provided upon acquisition of the coal assets translates to a level of confidence in these data to use in the geologic modeling for Mineral Resource estimation. Nonetheless, there is still some uncertainty which the QP has considered in the determination Mineral Resource estimations as discussed in Section 11.0 of this TRS.

It is the opinion of the QP that there are no limitations to data verification for Mineral Reserves.

Data disclosed in this TRS used for the preparation of geologic models for the purpose of Mineral Resource estimations at the Freedom Mine have been verified by the QP. The QP has been involved with the collection of these data during drilling exploration programs since 2009, and served as the senior geologist for drilling campaigns since 2012. These data include drill hole surveys, geophysical logs, coal core quality, and other relevant test data. Procedures discussed previously in this section follow coal industry standards and were used by the QP to reconcile any discrepancies upon review of the available data.

The QP has verified the data disclosed, including prior technical studies used in the development of the modifying factors, cut-off grade, geotechnical studies, ultimate pit configuration, mine design, schedule, workforce and staff requirements, equipment needs, environmental factors including ground water and surface water studies, cost assumptions and pricing assumptions and economic analysis. It is the QP’s opinion that the data provided for this TRS is sufficient for the determination of Mineral Reserves at the Freedom Mine.

It is the QP’s opinion that the data provided for this TRS is more than sufficient for the determination of Mineral Resources and Reserves at the Freedom Mine.

The QP developed the stratigraphic geologic model for Mineral Resource estimation using Carlson Mining software. All verified drilling data through 2020 was included in the model. The Freedom Mine lignite deposit was modeled using U.S. customary units projected to NAD 1927 North Dakota State Plane, South Zone coordinate system. Key assumptions, parameters and methods to estimate Mineral Resources are discussed herein.

The structure of the Freedom Mine deposit is determined by “to” and “from” depth intervals from geophysical logs and geologist’s field logs correlated to the drill hole collar survey. Depth picks represent the roof or floor of a lignite seam which define a horizon or domain.

Laboratory results for split cores are reviewed by the senior geologist prior to inclusion in the geologic database for modeling. Quality results for all split samples to identify composition concentrations are identified as a continuous seam in the geologic database. The weighted average is computed in the modeling process which allows for a single composite value for each lignite seam per drill hole.

Roofs, floors and partings that meet a mineable quality are identified as part of the associated seam, and are modeled in the same manner as the split samples described previously. Roofs, floors and partings that do not meet a mineable quality are included in the geologic database as a point of record, but are not modeled with a seam identifier, and thus the quality of those splits is not weighted with the associated seam.

Table 11.1 presents the Stratigraphic Horizons modeled for Mineral Resource estimation. Modeled horizons were required to have quality data in the drilling database to be considered.

After the QP verified the drilling data in accordance with procedures outlined in Section 9.1, the stored drill hole data encompassing geologic lithology intervals, quality data, and collar surveys was imported into the modeling software.

Coteau builds three different models. The main model consists of all of the drilling data over the whole Freedom Mine coal field. This model is built with 200-foot grid cells. The main model is broken out into a West Mining Model and an East Mining Model. These models are built with 100-foot grid cells.

A surface topography grid is created from a compilation of pre-mining topography contours, which have variable contour intervals, but the densest contour interval available for the area was compiled. Some of the topographic lines are digitized from geologic quad maps, and others are contours from flight survey data. The surface grid is created by triangulation at a 200-foot grid cell size for the main model, and at 100-foot grid cell size for the West and East Mining Models.

The lithology and location tables were then referenced by the modeling program and the structural model was developed. The lignite horizons were correlated and modeled using 100-foot or 200-foot grid cells. The thickness structure grids are limited by lignite existence lines, which are the coal croplines that are tagged for the cutoff boundary for each seam. A combination of drill hole data and grid interpolations are used to draw croplines that define the lignite existence and weathering limits. During the modelling process, lithologic data were extrapolated

from a maximum of 20 surrounding drill holes using an inverse distance squared calculation to infill the grids where appropriate. The structural model was validated based on geological cross sections and isopach maps of the seam roofs and floors that were created and checked by the QP. Any errors identified in the lithologic descriptions were reconciled.

Lignite quality was then modeled for the entire deposit. As described above, quality data was first composited for each lignite seam by drill hole. As with the structural model, the quality model uses 100-foot or 200-foot grid cells to model quality of the deposit. Drill holes missing quality data employed an inverse distance squared calculation to assign averaged values from a maximum of 20 surrounding drill holes.

Generally, the only quality constraint on the mineability of the lignite at the Freedom Mine is weathering/oxidation, which causes a substantial decrease in the heat content of the coal. The lignite existence lines consider the weathering limits of the coal.

In-situ tonnages for the lignite seams were calculated within Carlson by applying a formula to each horizon by the area, thickness, density, and real/extrapolated quality values (i.e. modeled parameters).

Historically, geologic models at the Freedom Mine have been generated using inverse distance methods. These models were established and used in the development of detailed mine plans, financial projections, landowner tonnage estimates, daily operation plans, and month end reconciliations. The models have proved to be consistent with field conditions (structure and quality), which is likely attributed to the simplistic geology of the region as described in Section 6.0 of this TRS. Geologic units are laterally continuous with generally graded quality. Use of inverse distance methods has proven to be robust in continuous stratigraphic deposits. The QP did not see a need for Coteau to alter geologic modeling methods.

The Mineral Resources presented in Table 11.4 were estimated by applying a series of geologic and physical limits in addition to mining and economic constraints which meet the level of detail required for an initial assessment (IA). Key constraints used by the QP to determine Mineral Resource estimates are summarized below. Details pertaining to physical constraints are discussed further within sections 3.0 and 17.0 of this TRS. Mining and economic constraints specific to Mineral Resource estimates are discussed herein.

Geologic Constraints:

Physical Constraints:

Mining and Economic Constraints:

Resource pit shells were projected to meet the total tonnage requirements to provide lignite fuel to DCC through 2045 which is the current estimated lives of DGC and AVS. The field was analyzed, and the lowest cost portions of the model needed to match the required tonnage were included in the LOM plans. The existing lignite sales agreement between Coteau and DCC is in effect through 2037, therefore any tons within the LOM plan through 2037 are considered a reserve. Coal remaining outside of the existing contract end date is considered a resource.

All production included in the LOM plan will be delivered to DCC.

Under the LSA, Coteau receives a contractually-agreed fee based on the amount of lignite delivered. While Coteau is responsible for all mine operations, DCC is responsible for funding all mine operating costs and provides all of the capital required to build and operate the mine. This contract structure eliminates exposure to spot coal market price fluctuations.

Basic unit costs presented in Table 11.2 were used to determine the maximum reasonable effective stripping ratio of 13:1 for the Freedom Mine assuming an average lignite sales price of $1.70 mmBTU. The sales price has historically remained fairly steady due to the stripping ratio and delivered tons being fairly consistent. Unit costs were derived from general historic unit costs at the Freedom Mine.

The geologic model was used to create a strip ratio map of the deposit. Recovery of in-situ tonnage was assumed to be 90-percent. No dilution factors were applied. Preliminary pit shells were determined by the QP based on the strip ratios, then modified for any physical constraints. General tonnage for areas were calculated in Carlson mining software with a simple closed polyline assuming vertical walls. Lignite quality grids were then individually loaded into Carlson mining software for the QP’s consideration with tonnage estimates to determine a general mine sequence and direction.

The QP projected 150-foot pits for each preliminary pit shell in the Carlson mining software. Lignite tonnages and burden volumes for each block were calculated in Carlson mining software then exported to Excel to generate volume and tonnage reports. To optimize the pit shell extents, cumulative strip ratios and cumulative mining costs for each exported block was calculated in MS Excel then visually modeled in a conditionally formatted table. Boundary adjustments were made to the preliminary pit shells accordingly and re-projected. Several mine plan iterations may be performed to optimize mining in the most cost-effective way.

The basis of the Mineral Resource estimates for the Freedom Mine deposit and the methods in which they were prepared are summarized for this item. The S-K 1300 regulations (17 CFR 229.1300) define a Mineral Resource as:

“A concentration or occurrence of material of economic interest in or on the Earth’s crust in such form, grade or quality, and quantity that there are reasonable prospects for economic extraction. A Mineral Resource is a reasonable estimate of mineralization, considering relevant factors, such as cut-off grade, likely mining dimensions, location, or continuity, that, with the assumed and justifiable technical and economic conditions, is likely to, in whole or in part, become economically extractable. It is not merely an inventory of all mineralization drilled or sampled.”

In accordance with definitions presented in 17 CFR 229.1300 and guidance from the Committee for Mineral Reserves International Reporting Standards (CRIRSCO), Mineral Resources are divided into three categories as listed below and are ranked by increasing level of confidence. Mineral Resources are reported as in-situ tons such that no adjustments have been made to account for mining recovery or losses.

Inferred Mineral Resources are defined as a Mineral Resource for which quantity and quality are estimated on the basis of limited geological evidence and sampling. Geological evidence is sufficient to imply but not verify geological and quality continuity. Inferred Mineral Resources have the lowest level of confidence determined by the QP.

Indicated Mineral Resources are defined as a Mineral Resource for which quantity and quality are estimated on the basis of adequate geological evidence and sampling such that the QP can apply modifying factors in sufficient detail to support mine planning and evaluation of the economic viability of the deposit. These Mineral Resources may be converted to a Probable Mineral Reserve. Indicated Mineral Resources have a moderate level of confidence determined by the QP, and could be upgraded to a Measure Mineral Resource with further exploration.

Measured Mineral Resources are defined as a Mineral Resource for which quantity and quality are estimated on the basis of conclusive geological evidence and sampling such that the geologic certainty of the Mineral Resource is sufficient to allow the QP to apply modifying factors in detail to support detailed mine planning and final evaluation of the economic viability of the deposit. Measured Mineral Reserves have the greatest confidence defined by the QP, and may be converted to a Proven Mineral Reserve.

The QP based the Mineral Resource estimates presented in Table 11.4 for the Freedom Mine on a stratigraphic geologic model generated from the verified drilling exploration data presented in Section 7.0 of this TRS. The choice of stratigraphic modeling is due to the continuous spatial continuity of the lignite seams.

The categorized Mineral Resources are reported herein. The effective date of Mineral Resource estimates is December, 31, 2021.

Quality limits for the Mineral Resource estimates were discussed under Section 11.1.

Assumed cost and sales price to determine Mineral Resources was previously defined by the stripping ratio and discussed in subsection Generation of Pit Shells for Mineral Resource Estimates of Section 11.1.

The criteria used by the QP to classify Mineral Resources into measured, indicated, and inferred Mineral Resources was previously discussed in subsection Mineral Resource Classification and Uncertainty under Section 11.1.

Uncertainty in the Mineral Resource estimates was previously discussed in in subsection Mineral Resource Classification and Uncertainty under Section 11.1.

Due to the confines of the LSA, factors including contract term or likelihood of economic extraction, lignite sales price, and quality parameters/limits have far less risk of being affected than a mineral sold on the open market. Nonetheless some risks still need to be addressed. Additional exploration may positively or negatively affect Mineral Resource estimates. Furthermore, Mineral Resource estimates may be materially affected by a significant change in the assumptions including general mining costs and land control. New regulations may impose additional economic factors, delays to future permit renewals or applications, or restrictions to physical estimation boundaries. Although Coteau has a long-term LSA, numerous regulatory authorities, along with well-funded political and environmental activist groups, are devoting substantial resources to anti-coal activities to minimize or eliminate the use of coal as a source of electricity generation. As a result of such activities, BEPC could prematurely retire certain coal-fired generating units. Any premature facility closure could have a material adverse effect on the mineral resource estimates. The QP is not aware of any specific factors that would currently materially affect the prospect of economic extraction.

The following key assumptions, parameters, and methods describe how the QP converted the mineral resources to mineral reserves. All recoverable lignite required to fulfill the contractual obligations of the LSA are contained within the LOM Plan pit extents (Figure 12.1 Life of Mine Map, located in the Supplemental Figures Attachment). The criteria used to estimate the recoverable reserves contained within the LOM pits as estimated by Coteau include:

The price and other economic assumptions used to estimate the recoverable reserves are supported by the existing all-requirements LSA and LOM associated with that contract. Compensation from DCC includes reimbursement of all mine operating costs plus a contractually-agreed fee based on the amount of coal delivered. AVS, LOS and DGC are located directly next to the Freedom Mine (i.e. a mine-mouth operation) and 100% of the required coal to operate AVS, LOS and DGC is sourced from the Freedom Mine. DGC is a coal gasification plant that manufactures synthetic natural gas and produces fertilizers, solvents, phenol, carbon dioxide, and other chemical products for sale. AVS and LOS are mine-mouth coal-fired power generation facilities. Current projected plant lives are through 2045 for DGC and AVS. LOS Unit 1 is projected to run through 2030 and Unit 2 will cease operations in 2040. As stated in the LSA 100% of Coteau’s production is dedicated to DCC and 100% of DCC’s coal requirements for these plants will be from the Coteau.

Criteria for determination of Mineral Reserve estimate are justified in further details in the discussion of run-of-mine tonnages under Section 13.0 of this TRS.

A workplan forecast is developed to determine the schedule and estimated delivery requirements of DCC by year until the end of the LOM Plan.

To determine initial tonnages for consideration of Mineral Reserves, factors including the maximum economical strip ratios are applied to the geologic model used to define Mineral Resources. Coteau engineers then project mining pits in Carlson mining software following pit design parameters discussed under Section 13.0 of this TRS. Projections are directed to the topography from the lowest mineable lignite seam. Highwalls are projected at 53-degrees and endwalls are projected at 45-degrees. Volumes of burden and lignite tonnages with associated quality parameters are exported to yearly averages by mine area. The exported data is then brought into spreadsheets to summarize topsoil, subsoil, overburden, and coal tons.

The high-level summary then flows through a series of steps to distribute tonnages and volumes to individual equipment within each operational fleet in order to determine equipment hours (total hours). Consideration of allotted volumes include:

The total hours, allotted volumes, tonnages, staff levels and quality by period are the primary inputs for the Freedom Mine financial model.

After the meter hours for each applicable equipment are calculated to deliver the required tonnages by period, historical equipment costs/hr are applied to determine the total equipment costs for that period. The staff levels are calculated from the required equipment hours and current wages are applied to determine the total labor costs for that period.

Historical unit costs including actual machine operated costs and hours, materials and supplies, and fuel are the basis of the financial model. The historic unit costs are escalated using indices tables and forward-looking futures. The escalated units are then applied to the input hours, volumes, and tonnages previously sequenced to forecast operating costs. In addition to general operating costs, costs pertaining to stockpile inventory adjustments, reclamation, royalties, mine closure, and capital projects are projected and escalated accordingly.

The resulting lignite schedule from the financial model based on the specified delivery schedule determine the Mineral Resources that carry through to become Mineral Reserves.

Table 12.1 discloses the Mineral Reserve estimates for the Freedom Mine based on the QP’s detailed evaluation of the modifying factors as applied to indicated or measured mineral resources, which demonstrate economic viability of the Freedom Mine property. The estimated Mineral Reserves are in accordance with the definitions of “Mineral Reserve” as describe by the S-K 1300 regulations (17 CRF 229.1300) as:

“A coal reserve is the economically mineable part of a Measured or Indicated coal resource demonstrated by at least a Preliminary Feasibility Study, which includes information on mining, processing, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified.”

In accordance with definitions presented in 17 CFR 229.1300, and guidance from the Committee for Mineral Reserves International Reporting Standards (CRIRSCO), Mineral Reserves are divided into two categories as listed below and are ranked by increasing level of confidence.

Probable Mineral Reserve is the economically mineable part of an indicated and, in some cases, a measured mineral resource. The confidence in the Modifying Factors applying to a Probable Mineral Reserve is lower than that applying to a Proven Mineral Reserve.

Proven Mineral Reserve is the economically mineable part of a measured mineral resource and can only result from conversion of a measured mineral resource. A Proven Mineral Reserve implies a high degree of confidence in the Modifying Factors.

Modifying factors were applied to convert Mineral Resources into Mineral Reserves. These include, but are not restricted to, mining, processing, infrastructure, economic, marketing, legal, environmental, social and governmental factors.

The reference point at which Mineral Reserves are defined, is the point of sale to the DCC. This location is inside Coteau’s Coal Handling Facility where the certified conveyor belt scales weigh the number of tons of lignite delivered to either DGC or AVS.

This disclosure of Mineral Reserves is based upon the QP's preliminary feasibility study (pre-feasibility or PFS), as defined in 17 CFR Part 229.1300, which includes and supports the QP’s determination of Mineral Reserves.

The LOM plan included annual stripping and lignite production qualities and quantities. Annual production costs were estimated based on the mine plan quantities, surface mining methods, equipment fleets in use, and unit prices that have been proven by historical production at the Freedom Mine. The current mining methods, used at the Freedom Mine since inception, are planned to continue until enough lignite reserve is depleted to fulfill the contractual obligations of the LSA for fuel supply to DCC.

Cut-off quality and price were previously discussed in Section 12.1.

The effective date of Mineral Reserve estimates is December, 31, 2021.

The Freedom Mine is a single commodity Mineral Reserve.

Uncertainty in the Mineral Resource estimates was previously discussed in in subsection Mineral Resource Classification and Uncertainty under Section 11.1.

The lignite at the Freedom Mine surface mining operation is recovered using dragline and conventional truck and shovel mining methods due to the proximity of the lignite to the surface and the physical characteristics of the deposit. Mining operations includes; suitable plant growth material (SPGM) removal, replacement and storage, overburden removal, lignite production, and spoil backfill and grading. In the development phase, drainage and water control were established (see Water Management under Section 17.0), and then the required infrastructure consisting of power, mine office and maintenance facilities, lignite stockpile facilities, and roadways were established.

The Freedom Mine is designed to supply approximately 14 to 16 million tons of lignite per year but generally produces between 12.5 million and 13.5 million tons of lignite coal annually. All production from the mine is delivered to DCC, a wholly owned subsidiary of BEPC. DCC then sells the coal to DGC (planned through 2045), AVS (planned through 2045), and to LOS (planned through 2040), all of which are operated by affiliates of BEPC (Figure 12.1 Life of Mine Map, located in the Supplemental Figures Attachment).

The Freedom Mine is a surface mining operation, which currently encompasses approximately 45,000 acres within the permitted areas. The mineable coal seam is known as the Beulah-Zap bed, ranging from 15 to 22 feet thick, with a weighted average thickness of approximately 18 feet throughout the permit area. The overburden directly above the Beulah-Zap bed ranges in thickness from 25 feet along the cropline, to more than 250 feet in the larger strip ratio areas.

Coteau utilizes standard surface mining techniques to extract coal from the proposed permit area. Mining operations will typically occur in a sequence of seven events: SPGM removal, overburden removal, coal removal, overburden replacement, final grading, SPGM replacement, and revegetation.

The primary overburden removal units for a typical mining sequence at the Freedom Mine include:

SPGM will generally be removed by hydraulic excavators and front-end loaders loading trucks, as well as by tractor-scrapers and track dozers. The SPGM will either be stockpiled or directly respread onto regraded areas.

Overburden removal includes the removal of any material between the SPGM and the mineable coal seam. Overburden removal is accomplished with the use of draglines, electric and hydraulic truck-shovel fleets, tractor-scrapers, or other auxiliary equipment. The truck-shovel fleets will be used for pre-benching as well as for uncovering pits along the cropline where shallow cover and steep slopes prohibit the use of the draglines. The Freedom Mine currently uses two different dragline digging methods: single-pass method and spoil side method. In the single-pass method, the overburden can either be removed down to the dragline level as shown in Figure 13.1, or the dragline can remove all the overburden in low cover areas where a truck shovel fleet is not necessary as shown in Figure 13.2. In the spoil side method, the dragline removes the overburden by digging the pit in two passes. The first pass on the highwall side of the pit as shown in Figure 13.3. The dragline then crosses the pit and removes the remaining overburden above the coal from the spoil side as shown in Figure 13.4.

Once all overburden has been removed, the coal surface is then cleaned and drilled in preparation for blasting. The coal is blasted to a size that can be most effectively loaded into the haul trucks. Coal will be loaded by either excavator or front-end loader, and hauled by trucks.

After the coal is removed, overburden from the next pit is then spoiled into the empty pit, and the mining operation evolves into a reclamation operation. Spoils grading will then occur to return the land back to approximate pre-mining topography. After regrading has been completed, SPGM is then respread before the land is put back into productive use following state regulation requirements. The NDPSC requires that areas must be reclaimed within three years subsequent to coal removal.