The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in our Annual Report, as well as the financial statements and related notes appearing elsewhere in this Quarterly Report. The following discussion contains forward-looking statements that reflect our future plans, estimates, beliefs and expected performance. The forward-looking statements are dependent upon events, risks and uncertainties that may be outside our control. We caution you that our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences are discussed elsewhere in this Quarterly Report, particularly in the "Cautionary Note Regarding Forward-Looking Statements" and in our Annual Report under the heading "Item 1A. Risk Factors," all of which are difficult to predict. In light of these risks, uncertainties and assumptions, the forward-looking events discussed may not occur. We do not undertake any obligation to publicly update any forward-looking statements except as otherwise required by applicable law.

Overview

Our primary source of revenue is the sale of metallurgical coal. As of December 31, 2019, we had a 265-million-ton reserve base of high-quality metallurgical coal and a development portfolio including four primary properties. We are currently mining in four underground mines, one surface mine and with one highwall miner at our two complexes. Our plan is to complete development of our existing properties and grow production to more than 4-4.5 million clean tons of metallurgical coal, subject to market conditions, permitting and additional capital deployment. We may make acquisitions of reserves or infrastructure that continue our focus on advantaged geology and lower costs.

The overall outlook of the metallurgical coal business is dependent on a variety of factors such as pricing, regulatory uncertainties and global economic conditions. Coal consumption and production in the U.S. have been driven in recent periods by several market dynamics and trends, such as the global economy, a strong U.S. dollar and accelerating production cuts.

Our results for the second quarter of 2020 were impacted by the severe global economic slowdown stemming from the novel coronavirus disease 2019 ("COVID-19") outbreak. The global spread of COVID-19 has created significant volatility, uncertainty and economic disruption during the first six months of 2020. In response to the COVID-19 pandemic, governments worldwide have placed significant restrictions on both domestic and international travel and have taken action to restrict the movement of people and suspend some business operations, ranging from targeted restrictions to full national lockdowns. These lockdown and stay-at-home measures, coupled with the spread and impact of the COVID-19 pandemic, resulted in an increase in the U.S. unemployment rate in May of this year to 13%. Recently, states that had begun taking steps to reopen their economies experienced a subsequent surge in cases of COVID-19, causing these states to cease such reopening measures in some cases and reinstitute restrictions in others.

The Company has been adversely affected by the deterioration and increased uncertainty in the macroeconomic outlook as a result of the impact of COVID-19. Two customers have notified us that their contractual obligations for the purchase of metallurgical coal from us will be delayed or curtailed because of COVID-19. These delays or curtailments are expected to reduce our total contracted sales volumes for 2020 by up to 12%.

We are not able to estimate the impact of customer delays or curtailments of their contractual obligations or our ability to secure additional sales in spot markets. We have observed a declining demand for and reductions in the spot price of metallurgical coal as business and consumer activity decelerates across the globe. This weakness limited our ability to complete spot sales in the first and second quarters of 2020, leading to an increase in our inventories.

In response, we have taken certain actions to limit our production and reduce capital expenditures. These actions have included:

? a two week operational furlough of 203 employees at the Elk Creek mining

complex in West Virginia in April 2020;




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temporary reductions in the salaries of certain executives, including our named

? executive officers, by 30% beginning April 1, 2020, and deferral of the payment

of cash bonuses for 2019 performance for these individuals;

? the partial closure of our Berwind low volatile development mine complex

affecting approximately 44 jobs in July 2020; and

? a reduction or deferral of non-essential capital expenditures to adapt to the

current market conditions.

To date we have not had significant issues with any of our critical suppliers, but we continue to communicate with them and closely monitor their developments to ensure we have access to the goods and services required to maintain our operations.

The Company borrowed an additional $13.2 million under two promissory notes to further improve our liquidity. Securing this funding was key to limiting the employee furlough period in April 2020, retaining a greater number of employees and maintaining payroll.

We continue to actively monitor the situation and may take further actions altering our business operations that we determine are in the best interests of our employees, customers, suppliers, and stakeholders, or as required by federal, state, or local authorities. Additional measures we may take could include extensions of operational furloughs and temporary salary reductions for certain executives, staffing reductions and idling or realignment of additional mines as conditions might dictate. It is not clear what the potential effects any such alterations or modifications may have on our business. The impact on our results in future periods could be much more significant and cannot currently be quantified.

As of June 30, 2020, we had outstanding performance obligations for the remainder of 2020 of approximately 0.8 million tons for contracts with fixed sales prices averaging $93/ton and 0.1 million tons for contracts with index-based pricing mechanisms. Of the 0.8 million tons, 0.2 million at $91/ton may not ship in 2020 due to the material adverse change and force majeure notices we have received to date. We intend to work with our customers in order to preserve the value of these contracts, while taking into account the challenges of both sides of operating in the middle of a global pandemic.



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