Of late, Natural Resource Partners (NRP) has contracted with Colt LLC, a Cline Group affiliate, to acquire around 200 million tons of coal reserves located at the Deer Run mine in Illinois Basin. The deal is valued at $255 million and will be executed through 8 separate transactions through 2012.
NRP has recently paid Colt $10.0 million upon closing of the first transaction and gained control over nearly 3.3 million tons of reserves to be mined during the initial production scheduled in 2010.
The deal will expand NRP’s production capacity in the Illinois Basin to nearly 20 million tons of coal per year. In 2010, NRP expects around $12 million of revenues from initial production in the Deer Run mine. Revenues will grow substantially once the full-fledged production starts.
NRP estimates the annual production to be in the range of 8-10 million tons of coal, generating over $40 million of revenues each year.
NRP closed at $18.72 on Thursday, providing a distribution yield of 11.5%. We maintain our Outperform recommendation on the partnership.
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