Natural Resource Partners (NRP) has announced its fifth coal reserve acquisition at the Deer Run mine near Hillsboro, Illinois. With the five acquisitions, the partnership has acquired around 200 million tons of coal reserves at Deer Run mine near Hillsboro, Illinois from Colt LLC, an affiliate of the Cline Group.
This fifth transaction, valued at $40 million, would be funded with cash. This would take the cumulative value of the transactions to $255 million. The company will pay the amount to Colt LLC only after the completion of the first pass of the longwall, scheduled in August 2012.
The partnership benefited significantly from its Illinois Basin operations. In the third quarter 2011, total coal production increased by 10.0% to 13.6 million tons, driven by 49.6% production increase in Illinois Basin. The coal royalty revenue contributed by Illinois Basin was $15.8 million in third quarter 2011 versus $9.3 million in the year-ago quarter. This spiked the partnership’s coal royalty revenue by 27.0% to $76.4 million year over year.
As of September 30, 2011, Natural Resource had cash and cash equivalents of $150.1 million versus $95.5 million in the year-ago period. The partnership also completed a private placement of senior notes in early October 2011 for $50.0 million, which were used to finance a portion of its Hillsboro acquisitions. It had $300 million in available capacity under its credit facility.
In the third quarter of 2011, Natural Resource invested $8.2 million for acquisitions of coal reserves in Pennsylvania and Illinois. All payments in the third quarter were funded with the surplus cash balance from the 2011 private placements.
Natural Resource is slated to release its fourth quarterly numbers on February 6, 2012. The Zacks Consensus Estimates for the fourth quarter 2011 and fiscal year 2011 are currently at 47 cents per share and $1.95 per share, respectively.
Natural Resource Partners currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. The company competes with Peabody Energy Corporation (BTU) and CONSOL Energy Inc. (CNX).
Based in Houston, Texas, Natural Resource Partners, a master limited partnership (MLP), principally engages in the business of owning and managing mineral reserve properties. The partnership mainly owns coal, aggregate and oil and gas reserves across the United States.
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