NACCO Industries (NC) 16th Annual Midwest Ideas Conference summary

Strategic evolution and business model

• Transitioned from a legacy coal mining business to a diversified natural resources platform, leveraging over a century of operational expertise.

• Focused on long-term, integrated customer relationships, often spanning decades, to ensure stable, recurring cash flows.

• Expanded into contract mining for industrial minerals, natural gas and oil royalties, and environmental mitigation services, all using a disciplined, low-maintenance CapEx approach.

• Emphasizes organic growth and disciplined investment criteria, avoiding risky acquisitions and prioritizing projects with strong IRR and NPV.

• Ownership structure with dual-class shares supports long-term strategy, with founding family maintaining significant control.

Growth initiatives and financial outlook

• Entered lithium mining in Nevada, partnering with Lithium Americas and General Motors, targeting the world's largest proven lithium reserve.

• Minerals and royalties business has invested $94 million, focusing on underdeveloped assets with long-term upside, and maintains a $20 million annual budget.

• Mitigation Resources of North America leverages reclamation expertise to restore streams and wetlands, generating credits for sale to developers and providing services to third parties.

• Signed new long-term projects in 2024 expected to add $11 million in annual EBITDA starting 2026, with built-in inflation protection.

• Targeting $150 million in EBITDA within five to seven years, up from a trailing 12-month figure of $57 million, driven by existing contracts and projects underway.

Operational and financial structure

• Coal mining operations are typically adjacent to customer power plants, with customers covering all capital and operating costs; company earns fees per ton delivered.

• Most coal mines are not consolidated in financial statements due to variable interest entity accounting, appearing as earnings from unconsolidated operations.

• Quarterly earnings in utility mining can fluctuate due to customer plant outages, weather, and natural gas prices, but EBITDA remains relatively stable due to low maintenance CapEx.

• Mitigation banking projects have a 10–12 year development and harvest cycle, with profitability expected in 2026 as early projects mature.

• Growth is fueled by reinvesting cash flows from legacy businesses into new long-term projects, creating a compounding effect over time.