NRP Enters Into an Agreement With The Cline Group to Acquire Significant Coal Reserves and Coal Transportation Assets
14 Diciembre 2006 - 3:17PM
PR Newswire (US)
* NRP will acquire 49 million tons of reserves to be mined by Cline
in West Virginia and Illinois * NRP will acquire transportation
assets associated with Cline mining operations * NRP expects
approximately $40 million in net cash flows when the initial mines
reach full production, approximately half of which will be from
transportation related assets * In 2008, NRP anticipates acquiring
a royalty stream on approximately 100 million tons of reserves and
related transportation assets to be developed by Cline in Ohio *
NRP and Cline establish a long-term relationship; Cline will
receive an equity stake in NRP and join the general partner of NRP
* Cline will provide a pipeline of future acquisition opportunities
that encompasses approximately three billion tons of recoverable
coal reserves in Illinois HOUSTON, Dec. 14 /PRNewswire-FirstCall/
-- Natural Resource Partners L.P. (NYSE:NRP) and (NYSE:NSP),
announced today that it has executed a definitive agreement to
partner with The Cline Group, a private coal company that controls
over 3 billion tons of reserves in the Illinois and Northern
Appalachian coal basins. NRP will acquire 49 million tons of
reserves that are leased to active Cline mining operations. In
addition, NRP will acquire transportation assets and related
infrastructure at those mines. Consideration for the transaction
will be 4,455,036 units representing limited partner interests in
NRP, a portion of which will be Class B units. Through its
affiliate Adena Minerals, LLC, The Cline Group will also receive a
22% interest in the general partner and in the incentive
distribution rights of NRP in return for providing NRP with the
exclusive option to acquire additional reserves, royalty interests
and certain transportation infrastructure relating to future mine
developments by The Cline Group. The transaction is expected to
close in early 2007. "This transaction gives NRP immediately
accretive growth through Cline's current developments in West
Virginia and Illinois, and a strategic opportunity to acquire
additional royalty and transportation income in Ohio and the
Illinois Basin," said Nick Carter, President and Chief Operating
Officer of NRP. "The Cline Group is well known within the coal
industry as a great developer of coal mines and a low cost
operator. Their large reserve base, active development plans and
the growing market for higher sulfur coals should provide NRP
significant opportunities for growth and diversification in the
years to come." "The general partner is using its currency in this
acquisition to give NRP an opportunity to acquire significant
additional cash flows over the next 10 to 15 years. Using the
general partner's interests as another currency adds value to NRP's
unitholders. The owners of the general partner are willing to do
this transaction because it is accretive to both NRP and our
general partner," said Corbin J. Robertson, Jr., Chairman and Chief
Executive Officer of Natural Resource Partners and the largest
owner of the general partner. "It's a good fit for us," said
Christopher Cline, owner of The Cline Group. "We struck our first
deal with NRP in 2005. As we've worked together over the last two
years, we've been continually impressed by Corby, Nick and the NRP
team. They have rapidly grown NRP's cash flow and distributions
through good deal-making over a sustained period of time. When it
came down to entering into a long term strategic partnership, the
strength of our relationship and their ability to execute on a
growth strategy gave us confidence in our combined future." West
Virginia and Illinois Properties and Projected Cash Flows Upon
closing, NRP will acquire 37 million tons at Cline's Gatling mining
operation in Mason County, West Virginia. The initial transaction
also provides an area of mutual interest, surrounding Cline's
Gatling operations, in which any additional reserves acquired by
Cline will be contributed to NRP at no cost when acquired by Cline.
NRP will receive either a royalty or an overriding royalty interest
on all properties within the area of mutual interest. NRP is also
acquiring material handling and transportation infrastructure at
Gatling that will produce significant transportation income for
NRP. The Cline Group has recently completed construction of this
mine and will begin shipping a portion of its production to AEP
under a long-term contract in the first quarter of 2007. The coal
will be transported by beltline to AEP's adjacent power plant and
to a barge facility on the Ohio River for sale to other utility
customers. NRP will also acquire 12 million tons of reserves
adjacent to reserves currently owned by NRP at Cline affiliate
Williamson Energy's Pond Creek No 1 mine in Southern Illinois. In
addition, NRP will acquire certain transportation infrastructure,
including beltlines and rail load out facilities, at that mine. The
Cline Group recently finished construction of this mine and is
currently shipping coal from the mine by rail under a long- term
contract while it develops its longwall panels. Longwall production
is expected to commence in the second half of 2007. When the mining
operations at the Gatling mine in West Virginia and the Pond Creek
No 1 mine reach full productive capacity, which is anticipated to
occur in 2008, NRP expects net cash flows of approximately $40
million, about half of which are associated with transportation and
coal handling facilities. "In addition to diversifying our
reserves, the coal handling facilities and the related
transportation assets provide us a broader platform for future
growth, which we expect will allow us to continue to increase our
distributable cash flow at a steady pace," said Corbin J.
Robertson. Ohio Properties At the closing of the initial
transaction, NRP will also enter into an agreement to purchase the
reserves and transportation infrastructure at Cline's Gatling Ohio
complex. This complex, with recoverable reserves of over 100
millions tons, is located in Meigs County, Ohio directly across the
river from Cline's Gatling mining operation in West Virginia. The
parties have agreed to a similar area of mutual interest for Ohio
with respect to reserves not controlled by Cline. The closing of
the second transaction is subject to customary closing conditions
and will occur upon commencement of coal production, which is
currently expected to be in 2008. As consideration for the
transaction, NRP will issue Adena 2,280,000 additional Class B
units, and the general partner of NRP will issue Adena an
additional 9% interest in the general partner and the incentive
distribution rights. Based on current projections and existing
market conditions, once the Gatling mine in Ohio has reached full
productive capacity, NRP anticipates receiving net cash flows in
excess of $70 million annually from the combined transactions in
Ohio, West Virginia and Illinois. Class B Units As discussed above,
a portion of the total units issued will be in the form of Class B
units. The Class B units to be issued to Adena are a new class of
limited partnership interests in NRP that will be converted to
regular common units upon the approval of NRP's unitholders (other
than Cline). The Class B units will be subordinate to the regular
common units, but senior to the subordinated units, with respect to
cash distributions (and in liquidation) and will be entitled to
110% of the cash distributions per common unit if they have not
been converted to common units six months following the closing of
the Ohio acquisition or September 30, 2008, whichever occurs first.
The Class B units are not listed for trading on the New York Stock
Exchange. All of the NRP units to be issued to Adena will be issued
in a transaction exempt from registration under the Securities Act.
"By issuing units in connection with these transactions, NRP
continues to maintain its strong balance sheet," said Dwight
Dunlap, Chief Financial Officer of Natural Resource Partners.
Future Acquisition Opportunities In consideration for the general
partner interest, The Cline Group will also enter into an agreement
under which NRP will receive the right to acquire any producing
coal reserves and royalty interests owned by Cline, as well as coal
transportation infrastructure associated with several identified
future development projects. "With over three billion tons of
reserves that The Cline Group currently controls, principally in
the Illinois Basin NRP's unitholders will substantially benefit
from the issuance of the interest in the general partner as The
Cline Group will have significant economic incentives to develop
and contribute additional properties to NRP," said Corbin J.
Robertson. "This pipeline of future development projects in the
Illinois Basin will also significantly diversify our coal holdings
into a growing market." New Directors The Cline Group will name two
directors to the board of directors of the general partner of NRP,
one of whom will be independent. Cline will nominate J. Matthew
Fifield, Managing Director of Adena Minerals LLC, as one of the two
directors and anticipates nominating an independent director in the
near term. With the addition of these two directors, NRP will have
nine directors, five of whom will be independent. Natural Resource
Partners L.P. is headquartered in Houston, TX, with its operation's
headquarters in Huntington, WV. NRP is a master limited partnership
that is principally engaged in the business of owning and managing
coal properties in the three major coal producing regions of the
United States: Appalachia, the Illinois Basin and the Powder River
Basin. The common units are traded on the New York Stock Exchange
(NYSE) under the symbol NRP and the subordinated units are traded
on the NYSE under the symbol NSP. For additional information,
please contact Kathy Hager at 713-751-7555 or . Further information
about NRP is available on the partnership's website at
http://www.nrplp.com/ . This press release includes
"forward-looking statements" as defined by the Securities and
Exchange Commission. Such statements include the estimated
reserves, revenues, cash flow, the date of anticipated production,
as well as the accretive nature of the transaction. All statements,
other than statements of historical facts, included in this press
release that address activities, events or developments that the
partnership expects, believes or anticipates will or may occur in
the future are forward-looking statements. These statements are
based on certain assumptions made by the partnership based on its
experience and perception of historical trends, current conditions,
expected future developments and other factors it believes are
appropriate in the circumstances. Such statements are subject to a
number of assumptions, risks and uncertainties, many of which are
beyond the control of the partnership. These risks include, but are
not limited to, decreases in demand for coal; changes in operating
conditions and costs; production cuts by our lessees; commodity
prices; unanticipated geologic problems; changes in the legislative
or regulatory environment and other factors detailed in Natural
Resource Partners' Securities and Exchange Commission filings.
Natural Resource Partners L.P. has no obligation to publicly update
or revise any forward-looking statement, whether as a result of new
information, future events or otherwise.
http://www.newscom.com/cgi-bin/prnh/20060109/NRPLOGO
http://photoarchive.ap.org/ DATASOURCE: Natural Resource Partners
L.P. CONTACT: Kathy Hager of Natural Resource Partners L.P.,
+1-713-751-7555, or Web site: http://www.nrplp.com/
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