NRP sweet on Sugar Camp

MASTER limited partnership Natural Resource Partners has paid $US58.8 million for infrastructure assets and royalty interests of an Illinois Basin mine from Cline Group affiliates Sugar Camp Energy and Ruger.
NRP sweet on Sugar Camp NRP sweet on Sugar Camp NRP sweet on Sugar Camp NRP sweet on Sugar Camp NRP sweet on Sugar Camp

A Natural Resource Partners property. Courtesy NRLP

Donna Schmidt

Under the deal, the Houston-based company acquired the Sugar Camp operation near Benton, a rail loadout and infrastructure assets.

The transaction was made up of $17.85 million cash with the balance coming from NRP’s credit facility.

The assets were obtained from Sugar Camp Energy while it obtained the contractual overriding royalty interest from Ruger.

NRP said its throughput fee would range between $1.05 and $1.17 per ton for the first 20 years and its fee would apply to all coal from the first longwall miner unit and development units.

It will also receive 3% of the gross selling price or $1.14/t for the tonnage associated with the contractual override, whichever is greater, for the anticipated 7-year lifespan.

Sugar Camp’s longwall unit began operations late last month and is projected to produce more than 5 million tons this year.

The deals will be immediately accretive to NRP and it said it would add approximately $7.5-8.5 million in additional cash flows to its distributable cash flow for 2012.

Last month, NRP closed its fifth and penultimate coal reserve acquisition from Cline division Colt at the Deer Run complex in the Illinois Basin for $40 million cash.

NRP has now paid $215 million of the $255 million slated for the deal, which includes about 200Mt of coal reserves in Montgomery and Bond counties near Hillsboro, Illinois.

The company’s final acquisition will also carry a $40 million price tag and align with the completion of the longwall’s first pass, which is scheduled for August.

The fourth reserve acquisition was in mid-January 2011 and totaled $55 million.

The multi-phase transaction for Deer Run was initially announced by NRP in September 2009, when it signed a definitive agreement for the reserves.

The first acquisition was 3.3Mt, for which it paid $10 million.

Deer Run’s coal reserves are leased to Cline affiliate Hillsboro Energy, which is continuing development at the operation.

With a lifespan anticipated to exceed two decades, NRP hopes to gain more than $40 million per year in income from Deer Run.

Production from NRP properties accounts for 25% of all metallurgical coal produced in the US and 5% of the nation’s coal is produced at the company’s properties, according to the producer’s data.

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