Alliance Resource Partners, L.P. (NASDAQ: ARLP) today announced that it has entered into a transaction with White Oak Resources, LLC and related entities (collectively “WOR”) to support the development of a longwall mining operation currently under construction near McLeansboro, in Hamilton County, Illinois. The transaction features several components, including a preferred equity investment, the acquisition and leaseback of reserves and surface rights, a coal handling and services agreement, and a backstop equipment financing facility. Including an initial investment at closing of $69.5 million, ARLP currently expects its total investment in the project in a range of $400.0 - $525.0 million to be funded over the next three to four years. ARLP plans to utilize current cash balances, availability under its revolving credit facility and future cash flow from existing operations to fund its participation in the White Oak project.
"Strategically, Alliance’s participation in this new, low-cost longwall operation further expands our investment in the growing Illinois Basin coal market,” said Joseph W. Craft III, President and Chief Executive Officer of ARLP. "This venture allows ARLP to partner with the White Oak team in the development of this new mine and, if future market conditions warrant, the opportunity to participate in additional longwall mines within White Oak’s extensive reserve base. Moreover, through the use of our MLP structure and strong balance sheet, we are able to generate attractive long-term recurring cash flows for Alliance.”
White Oak Details
WOR is a privately-owned company which intends to develop and operate Mine No. 1 as a longwall mining operation to access approximately 200 million tons from the Herrin No. 6 coal seam. Construction of Mine No. 1 is underway and WOR currently anticipates longwall production will begin in the 2014 timeframe, depending on timing of slope construction and initial mine development. Once the longwall is in operation, WOR currently estimates Mine No. 1 will produce approximately 6.0 – 6.5 million tons of coal annually, which WOR intends to market in the domestic and export thermal coal markets.
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