(2) <1% or >1% refers to sulfur content as a percentage in coal by weight.
(3) Compliance coal is any coal that emits less than 1.2 pounds of sulfur dioxide per MMBtu when burned. Compliance coal meets sulfur emission standards
imposed by Title IV of the Clean Air Act.
(4) Reserve holdings include metallurgical and PCI coal reserves. Although these metallurgical and PCI coal reserves receive the highest selling price in the current
market when marketed to steel-making customers, they can also be marketed as an ultra-high Btu, low-sulfur utility coal for electricity generation.
HVM High Vol Metallurgical
PCI Pulverized Coal Injection
LSU Low-Sulfur Utility
V
Various
IS
Industrial Stoker
Market Allocation of Reserves
The table below shows the allocation of TECO Coal reserves by market category (metallurgical, PCI, and steam coal), which
was prepared by TECO Coal at its four operating subsidiaries. As shown below, a substantial portion of the Clintwood Elkhorn
Mining coal reserves has been allocated to the metallurgical category (with the remainder to the steam coal category), a substantial
portion of the Premier Elkhorn Coal reserves has been allocated to the PCI and metallurgical categories (with the remainder to the
steam coal category), a substantial portion of the Perry County coal reserves has been allocated to the PCI category (with the
remainder to the steam coal category); and all of the Gatliff Coal reserves have been allocated to the steam coal category.
At TECO Coal's request, MM&A completed an audit of the methodology used by TECO Coal to conduct such allocation of
its coal tonnage estimates. MM&A reviewed information provided by TECO Coal and TECO Coal's methodology of processing,
which included examination by certified professional geologists of all supplied coal deposit maps and supporting coal quality data
using industry-accepted standards. The audit performed by MM&A concluded that TECO Coal's methodology of allocating its
demonstrated reserves by market category is reasonably and responsibly prepared in accordance with industry-accepted standards
and in general conformance with SEC Industry Guide 7.
Market conditions may not always permit sales of coal into the particular market as identified, however the objective of this
reserve allocation is to recognize the market potential for planning and investment purposes.
The following table (Table 6) shows the recoverable reserves by market category per mining complex and in total. The total
reserve mix is approximately 35% metallurgical, 49% PCI and 16% steam.
RESERVES BY MARKET CATEGORY
Table 6
Metallurgical
Reserves
PCI
Reserves
Steam
Reserves
Grand
Totals
Proven
Probable
Total
Proven
Probable
Total
Proven
Probable
Total
Gatliff Coal Co. . . . . . . . . . . . . . . . . . . . . . .
0.0
0.0
0.0
0.0
0.0
0.0
2.8
0.6
3.4
3.4
Clintwood Elkhorn Mining . . . . . . . . . . . . .
40.9
0.8
41.7
0.0
0.0
0.0
2.6
0.3
2.9
44.6
Premier Elkhorn Coal Co. . . . . . . . . . . . . . .
27.8
44.2
72.0
34.9
15.2
50.1
8.8
5.1
13.9
136.0
Perry County Coal Co. . . . . . . . . . . . . . . . .
0.0
0.0
0.0
63.5
45.0
108.5
21.4
11.3
32.7
141.2
Totals: . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
68.7
45.0
113.7
98.4
60.2
158.6
35.6
17.3
52.9
325.2
% of Total . . . . . . . . . . . . . . . . . . . . . . . . . .
34.9%
48.8%
16.3%
Reserve Estimation Procedure
TECO Coal's reserves are based on over 3,100 data points, including drill holes, prospect measurements and mine
measurements. Reserve estimates also include information obtained from on-going exploration drilling and in-mine channel
sampling programs. Reserve classification is determined by the evaluation of engineering and geologic information along with
economic analysis. These reserves are adjusted periodically to reflect market fluctuations and/or changes in engineering parameters
and/or geologic conditions. Additionally, the information is constantly updated to reflect new data for existing property as well as
new acquisitions and depleted reserves.
This data may include elevation, thickness, and, where samples are available, the quality of the coal from individual drill holes
and channel samples. The information is assembled by geologists and engineers at TECO Coal, and is computer-modeled from
which preliminary reserve estimations are generated. The information derived from the geological database is then combined with
data on ownership or control of the mineral and surface interests to determine the extent of the reserves in a given area.
Determinations of reserves are made after in-house geologists have reviewed the computer-generated models and enhanced the
grid models to better reflect regional trends.
30