Asset Impairment

Three and Six Months Ended June 30, 2016

The Company's mining and exploration assets and mining-related investments may be adversely affected by numerous uncertain factors that may cause the Company to be unable to recover all or a portion of the carrying value of those assets. As a result of various unfavorable conditions, including but not limited to sustained trends of weakness in U.S. and international seaborne coal pricing and certain asset-specific factors, the Company recognized aggregate impairment charges of $1,277.8 million, $154.4 million and $528.3 million during the years ended December 31, 2015, 2014 and 2013, respectively. For additional information surrounding those charges, refer to Note 2. "Asset Impairment" to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2015.

The Company generally does not view short-term declines subsequent to previous impairment assessments in thermal and metallurgical coal prices in the regions in which it sells its products as an indicator of impairment. However, the Company generally views a sustained trend (for example, over periods exceeding one year) of adverse coal pricing or unfavorable changes thereto as a potential indicator of impairment. Because of the volatile and cyclical nature of U.S. and international seaborne coal demand, it is reasonably possible that prices in those segments may decrease and/or fail to improve in the near term, which, absent sufficient mitigation such as an offsetting reduction in the Company's operating costs, may result in the need for future adjustments to the carrying value of the Company's long-lived mining assets and mining-related investments.

The Company's assets whose recoverability and values are most sensitive to near-term pricing and other market factors include certain Australian metallurgical and thermal assets for which impairment charges were recorded in 2015 and certain U.S. coal properties being leased to unrelated mining companies under agreements that require royalties to be paid as the coal is mined. Such assets had an aggregate carrying value of $576.0 million as of June 30, 2016. The Company conducted a review of those assets for recoverability as of June 30, 2016 and determined that no impairment charge was necessary as of that date.

The Company also reviewed its portfolio of mining tenements and surface lands that were classified as held-for-sale. As a result of that review, the Company recognized an aggregate impairment charge of $17.2 million during the six months ended June 30, 2016 to write down certain targeted divestiture assets from their carrying value to their estimated fair value.

Three and Six Months Ended June 30, 2015

The following costs are reflected in "Asset impairment" in the unaudited condensed consolidated statement of operations for the three and six months ended June 30, 2015:



	Reportable Segment
	Australian Metallurgical Mining		Australian Thermal Mining		Corporate and Other		Consolidated
	(Dollars in millions)
Asset impairment charges:
Long-lived assets	$	527.0	$	8.2	$	182.2	$	717.4
Equity method investments	—		—		183.4		183.4
Total	$	527.0	$	8.2	$	365.6	$	900.8

Australian Metallurgical and Thermal Mining

Due to the severity of the decline in seaborne metallurgical and thermal coal pricing observed during the six months ended June 30, 2015 and other adverse conditions noted during that period that drove an unfavorable change in the expected timing of eventual seaborne supply and demand rebalancing, the Company concluded that indicators of impairment existed surrounding its Australian mining platform as of June 30, 2015. Accordingly, the Company reviewed its Australian mining assets for recoverability as of June 30, 2015. Based on that review, the Company determined that the carrying values of the assets at three of its active mines that produce metallurgical coal were not recoverable and correspondingly recognized an aggregate impairment charge of $230.5 million to write those assets down from their carrying value to their estimated fair value.

Also during the three months ended June 30, 2015, the Company reviewed its portfolio of mining tenements and surface lands to identify non-strategic assets that could be monetized. In connection with that review, certain of such assets were deemed to meet held-for-sale accounting criteria as of June 30, 2015 or are now otherwise considered more likely to generate cash flows through divestiture rather than development, with the long-term plans for certain adjacent assets also consequently affected. Accordingly, the Company recognized an aggregate impairment charge of $304.7 million to write down the targeted divestiture assets and abandoned assets from their carrying value to their estimated fair value.

Corporate and Other

Long-lived Assets. In connection with a similar review of the Company's asset portfolio conducted during the three months ended June 30, 2015 to identify non-strategic domestic assets that could be monetized, the Company identified non-strategic, non-coal-supplying assets as held-for-sale rather than held-for-use as of June 30, 2015. Accordingly, the Company recognized an impairment charge of $182.2 million to write the assets down from their carrying value to estimated fair value.

Equity Method Investments. Due to the impairment indicators noted above surrounding the Company's Australian platform, the Company reviewed its total investment in Middlemount Coal Pty Ltd. (Middlemount), which owns the Middlemount Mine in Queensland, Australia. As a result of that review, the Company determined that the carrying value of its equity investment in Middlemount was other-than-temporarily impaired and recorded a charge of $46.6 million to write-off the investment.

The Company, along with the other equity interest holder, also periodically makes loans to Middlemount pursuant to the related shareholders’ agreement for purposes of funding capital expenditures and working capital requirements. Prior to an impairment adjustment, the aggregate carrying value of such loans totaled $299.3 million. Of that amount, a total of $65.5 million (the Priority Loans) have seniority over the remainder (the Subordinated Loans). The Subordinated Loans are provided on an equal and shared basis with the other equity interest holder, and the Company's and the other equity interest holder's claims under the Subordinated Loans are on equal footing. The Company also reviewed the loans for impairment and recorded a charge of $136.8 million to write down the carrying value of the Subordinated Loans.

The fair value estimates made during the Company's impairment assessments were determined in accordance with the methods outlined in Note 1. "Summary of Significant Accounting Policies" to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2015, except in certain instances where indicative bids were received related to non-strategic assets being marketed for divestiture. In those instances, the indicative bids were also considered in estimating fair value.