Financial Instruments and Other Guarantees

3 Months Ended

Mar. 31, 2023

Financial Instruments And Guarantees [Abstract]

Financial Instruments and Other Guarantees

Financial Instruments and Other Guarantees In the normal course of business, 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. Such financial instruments provide support for the Company’s reclamation bonding requirements, lease obligations, insurance policies and various other performance guarantees. 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.

The following table summarizes the Company’s financial instruments that carry off-balance-sheet risk.

	March 31, 2023						December 31, 2022
	Reclamation Support		Other Support (1)		Total		Reclamation Support		Other Support (1)		Total
	(Dollars in millions)
Surety bonds	$	1,236.4	$	152.1	$	1,388.5	$	1,250.1	$	126.7	$	1,376.8
Letters of credit (2)	22.4		67.0		89.4		437.8		131.8		569.6
	1,258.8		219.1		1,477.9		1,687.9		258.5		1,946.4
Less: Letters of credit in support of surety bonds (3)	(22.4)		(5.4)		(27.8)		(431.7)		(37.2)		(468.9)
Obligations supported, net	$	1,236.4	$	213.7	$	1,450.1	$	1,256.2	$	221.3	$	1,477.5

(1)    Instruments support obligations related to pension and health care plans, workers’ compensation, property and casualty insurance, customer and vendor contracts, and certain restoration ancillary to prior mining activities.

(2)    March 31, 2023 balances exclude $223.8 million of letters of credit outstanding under the LC Facility and $101.3 million of letters of credit outstanding under the Company’s accounts receivable securitization program that were cancelled by April 14, 2023. The collateral obligations related to such letters of credit were met by the March 31, 2023 funding of collateral trust accounts in connection with the surety agreement amendment described below. Amounts do not include cash collateralized letters of credit.

(3)    Certain letters of credit serve as collateral for surety bonds at the request of surety bond providers.

Surety Agreement Amendment and Collateral Requirements

In April 2023, the Company amended its existing agreement with the providers of its surety bond portfolio, dated November 6, 2020. Under the agreement, the Company was required to post collateral on a periodic basis through December 31, 2025. Prior to the April 2023 amendment, the Company had posted cumulative collateral of $557.8 million, primarily in the form of letters of credit.

Under the April 2023 amendment, the Company and surety providers agreed to a maximum aggregate collateral amount of $721.8 million based upon bonding levels at the effective date of the amendment. This maximum collateral amount represents a negotiated increase from the uncapped cumulative collateral amount prior to the amendment and may vary prospectively as future bonding levels increase or decrease. The amendment also removes restrictions on the payment of dividends and share repurchases, and extends the agreement through December 31, 2026. In order to maintain the new maximum collateral standstill, the Company must remain compliant with a minimum liquidity test and a maximum net leverage ratio, as measured each quarter. The minimum liquidity test requires the Company to maintain liquidity at the greater of $400 million or the difference between the penal sum of all surety bonds and the amount of collateral posted in favor of surety providers. The Company must also maintain a maximum net leverage ratio of 1.5 to 1.0, where the numerator consists of its funded debt, net of cash, and the denominator consists of its Adjusted EBITDA for the trailing twelve months. For purposes of calculating the ratio, only 50% of the outstanding principal amount of the Company’s 2028 Convertible Notes is deemed to be funded debt. The Company’s ability to pay dividends and make share repurchases is also subject to the quarterly minimum liquidity test. Such compliance requirements will commence for the second quarter of 2023. The Company granted second liens on $200.0 million of mining equipment under the original agreement, which remain in force under the April 2023 amendment.

To fund the maximum collateral amount, the Company deposited $566.3 million into trust accounts for the benefit of certain surety providers on March 31, 2023. The remainder was comprised of $140.5 million of existing cash-collateralized letters of credit and $15.0 million already held on behalf of a surety provider. The amendment became effective on April 14, 2023, when the Company terminated a credit agreement which, as amended, provided for $237.2 million of capacity for irrevocable standby letters of credit (LC Facility). The $223.8 million of letters of credit that were outstanding under the LC Facility at March 31, 2023 were subsequently cancelled and, in certain cases, replaced by cash-collateralized letters of credit or letters of credit issued under the Company’s accounts receivable securitization program.

LC Facility

The now-terminated LC Facility had an original capacity of $324.0 million and was subsequently amended at various dates to reduce its capacity and effect certain other changes, including in February 2023 to reduce capacity by $65.0 million, accelerate the expiration date to December 31, 2023 from December 31, 2024, and eliminate the prepayment premium due upon any reduction of commitments thereunder prior to July 29, 2023. The Company recorded early debt extinguishment losses of $6.8 million during the three months ended March 31, 2023, primarily as a result of the February 2023 amendment.

Prior to its termination, undrawn letters of credit under the LC Facility bore interest at 6.00% per annum and unused commitments were subject to a 0.50% per annum commitment fee.

Accounts Receivable Securitization

In 2017, the Company entered into the Sixth Amended and Restated Receivables Purchase Agreement, as amended from time to time (the Receivables Purchase Agreement.) The receivables securitization program authorized under the agreement (Securitization Program) is subject to customary events of default. The Receivables Purchase Agreement was amended in February 2023 to increase the available funding capacity from $175.0 million to $225.0 million and adjust the relevant interest rate for borrowings to a secured overnight financing rate (SOFR). Such funding is accounted for as a secured borrowing, limited to the availability of eligible receivables, and may be secured by a combination of collateral and the trade receivables underlying the program. Funding capacity under the Securitization Program may also be utilized for letters of credit in support of other obligations, which has been the Company’s primary utilization.

Borrowings under the Securitization Program bear interest at SOFR plus 2.1% per annum and remain outstanding throughout the term of the agreement, subject to the Company maintaining sufficient eligible receivables.

At March 31, 2023, the Company had no outstanding borrowings and $190.7 million of letters of credit outstanding under the Securitization Program, primarily in support of reclamation obligations. Availability under the Securitization Program, which is adjusted for certain ineligible receivables, was $15.3 million at March 31, 2023. The Company was not required to post cash collateral under the Securitization Program at March 31, 2023. By April 14, 2023, $101.3 million of letters of credit outstanding under the Securitization Program were cancelled in connection with the surety agreement amendment and related trust accounts described above.

The Company incurred interest and fees associated with the Securitization Program of $1.0 million and $0.9 million during the three months ended March 31, 2023 and 2022, respectively, which have been recorded as “Interest expense” in the accompanying unaudited condensed consolidated statements of operations.

Collateralized Letter of Credit Agreement

In February 2022, the Company entered into an agreement which provides up to $250.0 million of capacity for irrevocable standby letters of credit, primarily to support reclamation bonding requirements. The agreement requires the Company to provide cash collateral at a level of 103% of the aggregate amount of letters of credit outstanding under the arrangement (limited to $5.0 million total excess collateralization.) Outstanding letters of credit bear a fixed fee in the amount of 0.75% per annum. The Company receives a variable deposit rate on the amount of cash collateral posted in support of letters of credit. The agreement has an initial expiration date of December 31, 2025. At March 31, 2023, letters of credit of $245.3 million were outstanding under the agreement, which were collateralized by cash of approximately $250.0 million.

Restricted Cash and Collateral

The following table summarizes the Company’s “Restricted cash and collateral” in the accompanying condensed consolidated balance sheets. Restricted cash balances are held in controlled accounts with minimum balance requirements; withdrawals are subject to the approval of account beneficiaries, such as the Company’s surety providers, who have perfected security interests in the funds. The Company’s other collateral generally includes deposits held by regulatory authorities or financial institutions over which the Company has no control or ability to access.

	March 31, 2023		December 31, 2022
	(Dollars in millions)
Restricted cash (1)
Surety trust accounts (2)	$	566.3	$	—
Collateralized letters of credit funding (2)	247.9		110.3
	814.2		110.3
Other collateral (1)
Deposits with regulatory authorities for reclamation and other obligations	78.4		33.6
LC Facility (3)	29.1		28.5
Deposit held on behalf of surety	15.0		15.0
	122.5		77.1
Restricted cash and collateral	$	936.7	$	187.4

(1)    Restricted cash balances are combined with unrestricted cash and cash equivalents in the accompanying unaudited condensed consolidated statements of cash flows; changes in restricted cash balances are thus not reflected in the operating, investing or financing activities therein. Changes in other collateral balances are reflected as operating activities therein.

(2)    Surety trust accounts and the funding for collateralized letters of credit are comprised of highly liquid investments with original maturities of three months or less; interest and other earnings on such funds accrue to the Company.

(3)    Balance relates to the Company’s mandatory repurchase of $30.0 million priority lien obligations under the LC Facility during 2022 at approximately 95%. The Company received $30.0 million upon termination of the LC Facility on April 14, 2023