As part of the agreement, NRP will acquire an overriding royalty interest on additional coal from subsidiaries of PinnOak. NRP will then lease these reserves back to other subsidiaries of PinnOak Resources that will mine the reserves and pay royalties to NRP.
The deal covers the Pinnacle mine in Pineville, West Virginia and the Oak Grove mine near Birmingham, Alabama. PinnOak Resources produces low volatile metallurgical coal from these longwall mines and has on-site preparation plants.
Over 85% of the current production is under contract for use primarily by the steel industry both domestically and abroad, including approximately 35% contracted to United States Steel Corporation and a similar amount slated for export.
NRP expected the deal to close by mid-July with cash flow and earnings receivable immediately, adding $5.7 to $5.8 million in royalty revenues for the remainder of this year.
PinnOak is jointly owned by Benjamin Statler LLC and Questor Partners Funds, which bought the assets of U.S. Steel Corporation’s U.S. Steel Mining Co in late May. PinnOak is now reselling those assets.
NRP owns and manages coal properties in Appalachia, the Illinois Basin and the Powder River Basin.