On December 17, Alliance Resource Partners (ARLP) entered into definitive agreements to acquire the general partner interests in AllDale Minerals LP and AllDale Minerals II LP and all of the limited partner interests in AllDale not currently owned by ARLP’s affiliate, Cavalier Minerals JV LLC. ARLP has also begun development of the Excel mine No. 5, an extension of its MC Mining operation in Pike County, Kentucky.
“Today’s announcements reflect ARLP’s commitment to continually invest in our business to build and support long-term cash flows,” said Joseph W. Craft III, president and CEO. “The AllDale acquisition gives ARLP control of a significant ownership position in the oil and gas minerals sector and lays the foundation for a new growth platform for the future.”
Regarding the Excel Mine No. 5 development, Craft said it will allow the company to retain and grow its market share in the domestic and international coal markets for this highly valued low sulfur, high BTU product.
Currently, ARLP owns a 96% interest in Cavalier, which owns approximately 72% of the limited partner interest in AllDale. Upon closing of the transaction, ARLP will own 100% of the general partner and approximately 97% of the limited partner interests in AllDale, controlling approximately 42,000 net royalty acres positioned in the core of the Anadarko, Permian, Williston and Appalachian basins.
ARLP will acquire the partnership interests for a cash purchase price of $175.96 million, which will be funded with cash on hand and borrowings under its credit facility. The transaction is expected to close in early January.
In addition, ARLP also owns approximately 3,950 net royalty acres through its limited partner interest in AllDale Minerals III LP.
ARLP has begun development activity for the Excel Mine No. 5 and currently anticipates deploying total capital of approximately $45 million to $50 million over the next 18 to 24 months. ARLP’s subsidiary, MC Mining LLC, controls the estimated 15 million tons of coal reserves assigned to the Excel Mine No. 5 and will own the new mining complex, and the Excel Mining LLC subsidiary will conduct all mining operations. The underground operation will utilize continuous mining units employing room-and-pillar mining techniques and annual production capacity is expected to be approximately 1.3 million tons of high BTU, low-sulfur coal.
MC Mining plans to utilize its existing underground mining equipment and preparation plant to produce and process coal from the Excel Mine No. 5 and expects to ship coal produced from the mine to various transloading facilities on the Ohio River and the Big Sandy River for barge deliveries or directly to customers via the CSX railroad and by truck. MC Mining expects to transition its current workforce to the Excel Mine No. 5 and will continue to employ approximately 211 workers.
The development plan for the Excel Mine No. 5 is designed to provide a seamless transition from the current MC Mining operation as its reserves deplete in 2020.
