Natural Resource Partners L.P. announced that it had acquired coal reserves and infrastructure assets related to the Shay No. 1 mine in Illinois from Macoupin Energy, LLC, an affiliate of the Cline Group, for $143.7 million. Upon closing, NRP paid $83.7 million and will make three subsequent payments of $20 million each in 2009 based upon performance measures associated with the development of a new mine. The purchase price will be substantially funded through the partnership’s credit facility.
The Shay No. 1 mine will be located near Carlinville in Macoupin County, Illinois, in reserves formerly owned by ExxonMobil. Macoupin Energy recently acquired the reserves and infrastructure from ExxonMobil and plans to commence new development immediately. NRP will receive royalty income on the reserves and throughput fees for coal loaded through the rail loadout and transported on the rail loop. NRP expects first receipt of revenues to occur in the third quarter of 2009 and that the revenues will increase gradually as production increases at the mine. In 2009, Macoupin is obligated to pay NRP approximately $14 million in minimum royalties, of which over $4 million is expected to be recognized as revenues. Annual production from the mine is forecasted to achieve approximately three million tons in early 2011. Based upon anticipated production levels, the life of the mine is expected to exceed 30 years. NRP expects the acquisition to be accretive to cash flow in 2009 while the mine is still in development, and accretive to earnings in 2010.
“This acquisition evidences the dividends that we expect to receive from our relationship with the Cline Group in the Illinois Basin,” said Nick Carter, President and Chief Operating Officer. “The Shay No. 1 mine has excellent geologic characteristics and we believe that the market will welcome this coal. In addition to the Shay No. 1 mine, Cline controls another three billion tons of reserves in Illinois. NRP will have the opportunity to acquire Cline’s owned reserves as well as any infrastructure assets that serve the reserves over the next several years as the reserves are developed.”