Atlas Energy Solutions Inc

We currently operate our Kermit and Monahans facilities in Winkler and Ward Counties, Texas. For the years ended December 31, 2023, 2022 and 2021, our facilities produced, in aggregate, approximately 11.0, 10.2 and 8.3 million tons of proppant, respectively. The following map shows the location of these facilities:

Kermit, Texas

As of December 31, 2023, our two Kermit mines had a combined annual production capacity of 11 million tons and are located on 5,826 gross acres of land (of which 5,341 net acres are controlled by us either through lease or fee ownership) in Winkler County, Texas, with onsite processing and truck loading facilities. We commenced construction of our first Kermit mine in October of 2017, and commenced operations in June 2018. We commenced construction of our second Kermit mine in July of 2022, which we completed in December 2023. Our Kermit facilities have a net book value of $386.1 million. Geographically, our Kermit facilities are located at approximately 31° 58’ 6.29” N latitude and 103° O’ 39.46” W longitude, are situated approximately seven miles northeast of Kermit, Texas, and are accessible via Texas State Highway 18. The Midland International Air and Space Port is located approximately 45 miles southeast of the facilities. The facilities’ primary utilities include three phase power, natural gas from an interstate transmission line and groundwater from onsite wells, all of which are present in sufficient quantities to sustainably support facilities producing 11 million tons annually. The facilities were designed with redundancies to provide enhanced reliability and minimize the potential for bottlenecks throughout the processing and loadout operation. Our plants were designed modularly to accommodate efficient expansion—maximizing the increase in production capacity while minimally increasing the facilities’ footprints.

The Kermit facilities have 300.7 million tons of associated proven reserves as of December 31, 2023. The sand deposits generally range from 60 to over 100 feet thick and consist of 40/70-mesh and 100-mesh sand, with an anticipated production mix of approximately 51% 40/70-mesh and approximately 49% 100-mesh. The crush strength of the sand mined at these facilities is between 7,000 to 8,000 pounds-per-square-inch (“PSI”) for 40/70-mesh and between 10,000 to 11,000 PSI for 100-mesh. Given the open-dune reserves and natural aquifer, sand is generally extracted from the mine through surface excavation through mining by electric dredge. The Kermit facilities have onsite transportation infrastructure capable of loading more than 35 trucks per hour.

In December 2017, we entered into a royalty agreement with Sealy Smith. The royalty agreement associated with the Kermit location terminated on the date of our IPO, pursuant to the terms of the agreement. We have received the material permits required to operate our Kermit facilities from the Air Permits Division of the TCEQ, Winkler County, the MSHA and TxDOT. Please see “—Our Permits” for more information.

Monahans, Texas

As of December 31, 2023, our Monahans mine had annual production capacity of 5.5 million tons and is located on approximately 32,224 gross acres of land in Ward County, Texas, with onsite processing and truck loading facilities. We commenced construction of our Monahans mine in February of 2018 and commenced operations in October 2018. Our Monahans facility has a net book value of $228.8 million. Geographically, our Monahans facility is located at approximately 31° 39’ 32.53” N latitude and 102° 52’ 55.46” W longitude, is situated approximately three miles northeast of Monahans, Texas, and is accessible via Texas State Highway 115 and Interstate 20. The Midland International Air and Space Port is located approximated 40 miles east of the facility. The facility’s primary utilities include three phase power from natural gas from an interstate transmission line and groundwater from onsite wells, all of which are present in sufficient quantities to sustainably support a facility producing in excess of 5.5 million tons annually. The facility was designed with redundancies to provide enhanced reliability and minimize the potential for bottlenecks throughout the processing and loadout operation.

The Monahans facility has 148.3 million tons of associated proven reserves as of December 31, 2023. The sand deposits generally range from 60 to over 100 feet thick and consist of 40/70-mesh and 100-mesh sand, with an anticipated production mix of approximately 61% 40/70-mesh and approximately 39% 100-mesh. The crush strength of the sand mined at the facility is 7,000 to 8,000 PSI for 40/70-mesh and between 10,000 to 11,000 PSI for 100-mesh. Given the open-dune reserves and natural aquifer, sand is generally extracted from the mine through surface excavation through mining by electric dredge. Like the Kermit facilities, the Monahans facility was constructed with a modular design that facilitates future expansion opportunities. The Monahans facility has onsite transportation infrastructure capable of loading more than 35 trucks per hour.

The rights and access to the mineral reserves associated with our Monahans operations are secured under a lease agreement (the “Monahans Lease”) with Sealy Smith. Under the Monahans Lease, we are committed to pay royalties on product sold from that facility and are required to pay a minimum royalty of $1.0 million for any lease year following our IPO. We have received the material permits required to operate our Monahans facility from the TCEQ Air Permits Division, Ward County, MSHA and TxDOT. Please see “—Our Permits” for more information.

Our Reserves

Information concerning our material mining properties in this Annual Report has been prepared in accordance with the requirements of Subpart 1300 of Regulation S-K, which first became applicable to us for the fiscal year ended December 31, 2023. As used in this Annual Report, the terms “mineral resource,” “mineral reserve,” “proven mineral reserve” and “probable mineral reserve” are defined and used in accordance with Subpart 1300 of Regulation S-K.

We categorize our mineral reserves as proven or probable based on the standards set by our independent mining engineers and geologists, John T. Boyd Company. We estimate that we had a total of approximately 488.0 million tons of proven and probable mineral reserves as of December 31, 2023. As of December 31, 2023, we had approximately 300.7 million tons of proven mineral reserves and 36.9 million tons of probable recoverable mineral reserves associated with our Kermit facilities and approximately 148.3 million tons of proven mineral reserves and 2.2 million tons of probable recoverable mineral reserves associated with our Monahans facility. The quantity and nature of the mineral reserves at each of our properties are estimated by our internal geology department. We use drone surveys and three-dimensional models to regularly update our reserve estimates, making necessary adjustments for operations and mine plans at each location during the year.

Our internal reserve estimates are provided to John T. Boyd Company for review annually so that third-party approved additions or reductions can be made to our mineral reserves and mineral resource calculations due to ore extraction, additional drilling and delineation, property acquisitions and dispositions or quality adjustments. Before acquiring new mineral reserves, we perform surveying, drill core analysis and other tests to confirm the quantity and quality of the acquired mineral reserves. John T. Boyd Company reviewed our mineral reserves and mineral resources as of December 31, 2023. John T. Boyd is not affiliated with the Company nor any other entity that has an ownership, royalty, or other interest in the properties that are the subject of the technical report summaries.

We lease a portion of the mineral reserves associated with our Kermit facilities and all of the mineral reserves associated with our Monahans facilities. As of December 31, 2023, we owned approximately 44% of our mineral reserves and leased approximately 56% of our mineral reserves from third-party landowners at our Kermit facilities. To opine as to the economic viability of our mineral reserves, John T. Boyd Company reviewed our operating cost and revenue per ton data at the time of the proven reserve determination. The sand deposits at our facilities do not require crushing or extensive processing to eliminate clays or other contaminants, enabling us to cost-effectively produce high-quality proppant meeting API specifications.

Summary of Reserves

The following tables provide the tonnage and mesh size characteristics of the proven and probable mineral reserves associated with our Kermit and Monahans facilities as of December 31, 2023, based on $30.00 per ton. Since the commissioning of our wet plants in 2018 through the end of 2023, the actual process yield for both plants is approximately 90%. In general, for every 100 tons of run-of-mine (“ROM”) material fed into the plant, 90 tons of saleable product is produced. It should be noted that these achieved process yields are slightly different than the overall process yields used to estimate the frac sand resources and reserves, which are based on the results of drill hole sample testing at each property.

Combined Kermit and Monahans Facilities

The following table provides the tonnage and mesh size characteristics of the proven and probable mineral reserves associated with our Kermit and Monahans operations as of December 31, 2023, based on $30.00 per ton, presented on a combined basis.

Drilling density utilized by us to determine proven versus probable mineral reserves is based upon the relative characteristics of the mineral resource field evaluated, including the consistency and density of the mineral resource within the drilling core sample. The target drill-hole spacing utilized by John T. Boyd Company to estimate our proven and probable mineral reserves are as follows:

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Proven—less than or equal to 1,500 feet

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Probable—less than or equal to 2,500 feet

Material Assumptions

Estimates of frac sand reserves for our Kermit and Monahans operations were derived contemporaneously with estimates of frac sand resources for each property. To derive an estimate of saleable product tons (proven and probable frac sand reserves), the following modifying factors were applied to the in-place measured and indicated frac sand resources underlying the respective mine plan areas of each operation:

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A 95% mining recovery factor which assumes that 5% of the mineable (in-place) frac sand resource will not be recovered for various reasons. Applying this recovery factor to the in-place resource results in the estimated ROM sand tonnage that will be delivered to the wet process plant.

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Processing recoveries, based on exploration sample gradation testing, are 85% for the Kermit mines, and 88% for the Monahans mine. These recovery factors account for removal of out-sized (i.e., larger than 40-mesh and smaller than 140-mesh) sand and losses in the wet processing plant, and minor dry processing plant inefficiencies.

Further information can be found in Section 6.3.1 of our technical report summary prepared by John T. Boyd Company, which is filed as Exhibit 96.3 to this Annual Report.

Our Resources

A “mineral resource” is defined by Subpart 1300 of Regulation S-K as a concentration or occurrence of material of economic interest in or on the Earth’s crust in such form, grade or quality, and quantity that there are reasonable prospects for economic extraction. Further, mineral resource is a reasonable estimate of mineralization, taking into account relevant factors such as cut-off grade, likely mining dimensions, location or continuity, that, with the assumed and justifiable technical and economic conditions, is likely to, in whole or in part, become economically extractable. Subpart 1300 of Regulation S-K divides resources between “measured mineral resources” and “indicated mineral resources” and “inferred mineral resources,” which are defined as follows:

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Measured mineral resources. Resources for which quantity and grade or quality are estimated on the basis of conclusive geological evidence and sampling. The level of geological certainty associated with a measured mineral resource is sufficient to allow a qualified person to apply modifying factors, as defined in this section, in sufficient detail to support detailed mine planning and final evaluation of the economic viability of the deposit. Because a measured mineral resource has a higher level of confidence than the level of confidence of either an indicated mineral resource or an inferred mineral resource, a measured mineral resource may be converted to a proven mineral reserve or to a probable mineral reserve.

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Indicated mineral resources. Resources for which quantity and grade or quality are estimated on the basis of adequate geological evidence and sampling. The level of geological certainty associated with an indicated mineral resource is sufficient to allow a qualified person to apply modifying factors in sufficient detail to support mine planning and evaluation of the economic viability of the deposit. Because an indicated mineral resource has a lower level of confidence than the level of confidence of a measured mineral resource, an indicated mineral resource may only be converted to a probable mineral reserve.

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Inferred mineral resources. Resources for which quantity and grade or quality are estimated on the basis of limited geological evidence and sampling. The level of geological uncertainty associated with an inferred mineral resource is too high to apply relevant technical and economic factors likely to influence the prospects of economic extraction in a manner useful for evaluation of economic viability. Because an inferred mineral resource has the lowest level of geological confidence of all mineral resources, which prevents the application of the modifying factors in a manner useful for evaluation of economic viability, an inferred mineral resource may not be considered when assessing the economic viability of a mining project, and may not be converted to a mineral reserve.

The target drill-hole spacing utilized by John T. Boyd Company to estimate our measured, indicated and inferred resources are as follows:

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Measured – less than or equal to 1,500 feet

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Indicated – greater than 1,500 feet, but less than or equal to 2,500 feet

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Inferred – greater than 2,500 feet, but less than or equal to 5,000 feet

The following tables set forth the mineral resource estimates, exclusive of mineral reserves, associated with our Kermit and Monahans facilities as of December 31, 2023, based on $30.00 per ton. Since the commissioning of our wet plants in 2018 through the end of 2023, the actual process yield for both plants is approximately 90%. In general, for every 100 tons of ROM material fed into the plant, 90 tons of saleable product is produced. It should be noted that these achieved process yields are slightly different than the overall process yields used to estimate the frac sand resources and reserves, which are based on the results of drill hole sample testing at each property.

As of December 31, 2023, our mineral resources are estimated at 1.439 billion tons (170.5 million tons at the Kermit facilities and 1.269 billion tons at the Monahans facility). As of December 31, 2023, we leased a portion of the resources associated with our Kermit facilities and all of the resources associated with our Monahans facility.

Material Assumptions

Estimates of in-place frac sand resources for the Kermit and Monahans operations were prepared by performing the following tasks:

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Available drilling logs and laboratory testing results were compiled and reviewed to check for accuracy and to support development of each operation’s geologic model. The geologic databases utilized for modeling and estimation consist of results from 87 drill holes completed on the Kermit property, and 80 drill holes completed on the Monahans property, as is discussed in Chapter 5. The geologic data were imported into Carlson Software, a geologic modeling and mine planning software suite that is widely used and accepted by the mining industry.

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A geologic model of each deposit was created in Carlson Software using industry standard grid modeling methods well-suited for simple stratigraphic deposits. Each geologic model delineates the top and bottom of the mineable sand horizon and the distribution of the product size fractions across the deposits. The top and bottom of the mineable frac sand interval were established as follow:

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As there is minimal overburden material across the subject properties, the top of the mineable sand interval was defined as the current ground surface, as provided by a combination of originally flown aerial topographic surveys and recently surveyed active mining pits.

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The bottom of the mineable sand interval on both Atlas properties was determined by Westward geologists and geological technicians present during the various exploration and sampling campaigns. Westward defined the bottom

of the mineable sand interval as the depth at which a drilled interval no longer contained sand as either the first or second most abundant material present.

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After reviewing the continuity and variability of the deposit, suitable resource classification criteria were developed and applied.

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Estimation of the in-place frac sand resources for the Kermit and Monahans properties assumes mining operations will utilize a combination of standard surface excavation equipment for the near-surface initial operations (dry mining) and dredging equipment once initial excavation has reached into the water table. This sequence of operating is widely utilized for mining of similar deposit types. As such, the estimates were subject to the following setbacks and slope requirements:

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50 ft inside of property lines.

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100 ft from pipelines.

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50 ft around the wet and dry process plant areas and main access road/right of way.

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An overall pit wall slope of 3:1 (approximately 19 degrees).

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In-place volumes for each property were estimated from the geologic model within Carlson Software. A dry, in-place, bulk density of 100 pounds per cubic foot was used to calculate the in-place tonnage of frac sand.

Further information can be found in Section 6.2.1 of our technical report summary prepared by John T. Boyd Company, which is filed as Exhibit 96.3 to this Annual Report.

Comparisons

When comparing the Kermit mines’ estimated frac sand reserves as of December 31, 2023, with those reported as of December 31, 2022, we note a net increase. This increase is a direct result of converting a significant portion of the operations’ frac sand resources to frac sand reserves in order to support the expanded operational capacity of the Kermit mines. Depletion through ordinary mining operations and inventory sales was also considered and, when combined with the added reserves, resulted in a net increase of approximately 144.7 million tons of additional frac sand reserves at the Kermit mines.

When comparing the Monahans mine’s estimated frac sand reserves as of December 31, 2023, with those reported as of December 31, 2022, we note a net decrease. This decrease is the result of depletion through ordinary mining operations and inventory sales, as well as minor reserve boundary reassessments. Together, these changes resulted in a net decrease of approximately 14.1 million tons in the frac sand reserves of the Monahans mine.

Further information can be found in Section 6.3.5 of our technical report summary prepared by John T. Boyd Company, which is filed as Exhibit 96.3 to this Annual Report.

Our Lease and Royalty Arrangements

We lease a portion of the mineral reserves associated with our Kermit operations and all of the mineral reserves associated with our Monahans operations. In December 2017, we entered into a royalty agreement with Sealy Smith in connection with certain leased property at the Kermit facilities. The royalty agreement associated with the Kermit facilities terminated on the date of our IPO, pursuant to the terms of the agreement. The rights and access to the mineral reserves associated with our Monahans operations are secured under the Monahans Lease with the Sealy Smith. Under the Monahans Lease, we are committed to pay royalties on product sold from that facility and are required to pay a minimum royalty of $1.0 million for any lease year following our IPO. Our royalty payments are included in our cost of sales.

Subsequent to December 31, 2023, we entered into a pooling agreement with the General Land Office of Texas (“GLO”) that establishes a pooled unit consisting of land we own in fee own and land we lease at the Kermit property. The pooling agreement has a current effective blended royalty rate of 5.83%. This pooling agreement increases our operational flexibility by establishing a framework to efficiently mine across our fee owned lands and leased lands interchangeably.

Our Permits

We have obtained numerous federal, state and local permits required for operations at our Kermit and Monahans facilities. The Kermit and Monahans operations are predominantly regulated by the TCEQ with respect to environmental compliance. The predominant permitting requirement is an active NSR permit for air pollution control. Both of our operations have a current NSR permit which is renewable next in 2028. Other permits held by our operations include Stormwater, Above Ground Storage Tank, Aggregate Production Operation, and a septic permit. A Spill Prevention, Control, and Countermeasure plan is also active at both locations.

While resources invested in securing permits are significant, this cost has not had a material adverse effect on our results of operations or financial condition. We cannot be certain that existing environmental laws and regulations will not be reinterpreted or revised or that new environmental laws and regulations will not be adopted or become applicable to us. Revised or additional environmental requirements that result in increased compliance costs or additional operating restrictions could have a material adverse effect on our business.