On March 11, 2020 the World Health Organization declared the novel strain of coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide. COVID-19 has significantly impacted coal mines, resulting in shutdowns and fewer tons of coal being produced. The Trust cannot reasonably estimate the length or severity of this pandemic, and while COVID-19 has negatively impacted the Trust's financial results for 2020, the Trust currently cannot anticipate the impact on its financial results or results of operations for fiscal 2021.

Distributable income is the total amount of net royalty and overriding royalty payments received from the various mines increased by the amount of interest earned and any other amounts received by the Trust and decreased by the amount of trust expenses. During 2020, royalty income decreased by $136,818, or 11.6%, to $1,047,086 in 2020 from $1,183,904 in 2019, and distributable income also decreased by 14.5% to $857,268 in 2020 from $1,002,915 in 2019. These decreases were largely attributable to the lack of production at the Spring Creek Mine and decreased coal production at certain Decker Mines together with the recent bankruptcy filing of the owner of the Decker Mine in December 2020, which resulted in the Trust not receiving a royalty payment in the fourth quarter 2020.





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The following schedule reflects the royalty and overriding royalty payments received by the Trust in respect of leases at the following mines:





                       2020            2019
Decker Mine         $ 1,037,086     $ 1,173,904
Spring Creek Mine        10,000          10,000
Total               $ 1,047,086     $ 1,183,904

Decker Mine. The amount of royalties and overriding royalties received by the Trust with respect to the Decker Mine decreased to $1,037,086 in 2020 from $1,173,904 in 2019, a decrease of $136,818, or 11.6%. This change resulted from fewer tons of coal produced as well as fluctuations in coal price and from the delay of the fourth quarter royalty payment. There is only one lease at the Decker Mine that is actively producing at this time.

In December 2020, Lighthouse Resources, Inc., the owner of the Decker Mine, filed for Chapter 11 bankruptcy, in the United States Bankruptcy Court for the District of Delaware (Case No. 20-13056(JTD)). Lighthouse has reduced operations at the Decker Mine with plans for continued reductions. In March 2021, the Decker Mine ceased operations. The Trust is actively monitoring the bankruptcy filings, and is an unsecured creditor in the bankruptcy case. In light of the pending bankruptcy, the Trust is currently uncertain whether it will receive additional royalty payments from the Decker Mine or the status of its interest in the royalty leases.

Spring Creek Mine. The amount of royalties and overriding royalties received by the Trust with respect to the Spring Creek Mine remained consistent at $10,000 in 2020 and 2019. This Mine had no production for 2020 or 2019, and the $10,000 payment is a prepayment required under the applicable agreement. Historically, the prepayment amount was $50,000 each year; however, due to the financial struggles of the coal operator and the lack of mining activities, the parties reduced the prepayment amount in 2019 to $10,000. In addition, for the past several years, a general decrease in the amount of coal produced at the Spring Creek Mine has impacted the amount of royalties paid to the Trust. The Trust anticipates that the amount of coal will continue to decrease as the mine operator notified the Trust that this mine is being depleted, and that the operator is moving into other areas of the mine, which are not subject to the terms of the Trust's lease. Further, Cloud Peak sold its assets to Navajo Transitional Energy Company ("NTEC") in October 2019, after NTEC successfully bid to assume ownership of the mines through an auction conducted by the bankruptcy court. NTEC is wholly owned by the Navajo Nation. Since the transition to NTEC, the Mine shut down briefly and has continued to have operational issues which are unrelated to the COVID-19 pandemic. These operational issues, together with general economic issues impacting coal mines, are challenging and make it difficult for the Trust to predict the long-term status of the operations of this mine. The Trust intends to continue monitoring the new ownership by NTEC.

Interest Income. The Trust earns interest on the royalty payments prior to the distribution to the Unit Holders. During the years ended December 31, 2020 and 2019, the Trust earned a nominal amount of interest although the amount of interest has increased in recent years because of the timing of the distribution payments.

Trust Expenses. Trust expenses were flat at $190,322 in 2020 compared to $188,398 in 2019. Trust expenses included fees of the Trustee, accountants, attorneys, and other professionals that the Trustee employs in the administration of the Trust. The Trust pays a Trustee fee of $25,000 per quarter as long as the Trust has sufficient royalty income to make such payments. In fiscal years 2020 and 2019, the Trust paid an aggregate of $100,000 in Trustee fees per year. Pursuant to the terms of the Trust Indenture, the Trustee has the ability to increase its fees, in its sole discretion, after providing notice to the Unit Holders.





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Liquidity and Capital Resources.The Trust's primary source of capital is the royalty payments. In accordance with the provisions of the Trust Indenture, generally all income received by the Trust, net of Trust expenses and any amounts placed in reserves, are distributed to the Unit Holders on a biannual basis.

Trust Reserves. The Trust pays biannual distributions within ten days after June 30 and December 31 of each year to the extent funds are available. The Trust also established reserves in the first and third quarters of 2020 in the amount of $576,223 and $344,604, respectively, and distributed such amounts within 10 days of the second and fourth quarters of 2020. The Trust established reserves in the first and third quarters of 2019 in the amount of $634,327 and $415,666, respectively, and distributed such amounts within 10 days of the second and fourth quarters of 2019.

In February 2021, the Trust received a payment from the Decker mine in the amount of $97,261. The Trust intends to reserve this amount as well as any additional royalty payments received to cover future expenses.

Going Concern. The Trust may not have sufficient funding in order to continue to operate. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Trust's continuation as a going concern is dependent upon continued mining activities and receipt of timely royalty payments form the mines, especially the Decker Mine. Because of the Trust's limited source of revenues, the recent bankruptcy of the Decker Mine raises substantial doubt about the Trust's ability to continue as a going concern. The Trust's financial statements currently do not include any adjustments that might result from the outcome of any uncertainly as to the Trust's ability to continue as a going concern.

Off-Balance Sheet Arrangements.As required by the Trust Indenture, the Trust is intended to be passive in nature and the Trustee does not have any control over or any responsibility relating to the operation of the mines under which the Trust has any royalty interests and overriding royalty interests. The Trustee has powers to collect and distribute proceeds received by the Trust and pay Trust liabilities and expenses and its actions have been limited to those activities. As a result, the Trust has not engaged in any off-balance sheet arrangements.

Critical Accounting Policies and Estimates. The Trust's financial statements are prepared on a modified cash basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America, and as such there are no critical accounting policies or estimates.





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