Financial Instruments and Other Guarantees

9 Months Ended

Sep. 30, 2021

Financial Instruments And Guarantees [Abstract]

Financial Instruments and Other Guarantees

Financial Instruments and Other Guarantees The Company is a party to various guarantees and financial instruments that carry off-balance-sheet risk and are not reflected in the accompanying condensed consolidated balance sheets. At September 30, 2021, such instruments included $1,462.4 million of surety bonds and $443.2 million of letters of credit. Such financial instruments provide support for the Company’s reclamation bonding requirements, lease obligations, insurance policies and various other performance guarantees. Reclamation bonding requirements are typically established by statute or under mining permits. At September 30, 2021, the Company’s asset retirement obligations of $710.2 million were supported by surety bonds of $1,293.4 million, as well as letters of credit issued under the Company’s receivables securitization program and the Company LC Agreement. Letters of credit issued at September 30, 2021 which served as collateral for surety bonds in support of asset retirement obligations amounted to $316.1 million.

In November 2020, the Company entered into a Surety Agreement with the providers of 99% of its surety bond portfolio (Participating Sureties) to resolve previous collateral demands made by the Participating Sureties. In accordance with the Surety Agreement, the Company initially provided $75.0 million of collateral, in the form of letters of credit.

Upon completion of the Refinancing Transactions described in Note 11. “Long-term Debt,” other provisions of the Surety Agreement became effective. In particular, the Company granted second liens on $200.0 million of certain mining equipment and will post an additional $25.0 million of collateral per year from 2021 through 2024 for the benefit of the Participating Sureties. The collateral postings may also further increase to the extent the Company generates more than $100.0 million of free cash flow (as defined in the Surety Agreement) in any twelve-month period or has cumulative asset sales in excess of $10.0 million, as of the last quarter end during the term of the agreement. Further, the Participating Sureties have agreed to a standstill through the earlier of December 31, 2025, or the maturity of the Credit Agreement (currently March 31, 2025), during which time, the Participating Sureties will not demand any additional collateral, draw on letters of credit posted for the benefit of themselves or cancel any existing surety bond. The Company will not pay dividends or make share repurchases during the standstill period, unless otherwise agreed between parties. In connection with the Refinancing Transactions, at the Settlement Date, all letters of credit issued under the Company’s former revolving credit facility were deemed issued under the Company LC Agreement in support of the same obligations.

The Company periodically evaluates the instruments for on-balance sheet treatment based on the amount of exposure under the instrument and the likelihood of required performance. The Company does not expect any material losses to result from these guarantees or off-balance-sheet instruments in excess of liabilities provided for in the accompanying condensed consolidated balance sheets.

Accounts Receivable Securitization

The Company is party to an accounts receivable securitization agreement (Securitization Program) which expires in April 2022 and provides up to $250.0 million in funding, limited to the availability of eligible receivables, and may be secured by a combination of collateral and the trade receivables underlying the program, from time to time. Funding capacity under the Securitization Program may also be utilized for letters of credit in support of other obligations. The borrowings under the Securitization Program bear interest at LIBOR plus 1.5% per annum and remain outstanding throughout the term of the agreement, subject to the Company maintaining sufficient eligible receivables, by continuing to contribute trade receivables, unless an event of default occurs. The Securitization Program is subject to customary events of default.

Under the terms of the Securitization Program, the Company contributes the trade receivables of its participating subsidiaries on a revolving basis to a wholly-owned, bankruptcy-remote subsidiary, which then sells the receivables to unaffiliated banks. The Securitization Program does not receive off-balance sheet accounting treatment due to the Company’s ability to repurchase the receivables in certain circumstances.

At September 30, 2021, the Company had no outstanding borrowings and $133.6 million of letters of credit issued under the Securitization Program. The letters of credit were primarily in support of reclamation obligations. Availability under the Securitization Program, which is adjusted for certain ineligible receivables, was $12.6 million at September 30, 2021. The Company was not required to post cash collateral under the Securitization Program at either September 30, 2021 or December 31, 2020.

The Company incurred interest and fees associated with the Securitization Program of $1.0 million and $0.8 million during the three months ended September 30, 2021 and 2020, respectively, and $3.0 million and $2.9 million during the nine months ended September 30, 2021 and 2020, respectively, which have been recorded as “Interest expense” in the accompanying unaudited condensed consolidated statements of operations.

Other

Substantially all of the Company’s U.S. subsidiaries provide financial guarantees under long-term debt agreements entered into by the Company. The maximum amounts payable under the Company’s debt agreements are equal to the respective principal and interest payments.