Attached files
| file | filename |
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| 8-K - FORM 8-K - NATURAL RESOURCE PARTNERS LP | d472207d8k.htm |
| EX-99.1 - PRESS RELEASE - NATURAL RESOURCE PARTNERS LP | d472207dex991.htm |
 OCI
Wyoming Acquisition Trona Interests
January 23, 2013
Exhibit 99.2 |
 Forward Looking Statements
The statements made by representatives of Natural Resource Partners L.P.
(“NRP”) during the course of this presentation that are not
historical facts are forward- looking statements. Although NRP believes
that the assumptions underlying these statements are reasonable, investors are
cautioned that such forward-looking statements are inherently uncertain
and necessarily involve risks that may affect NRP’s business prospects
and performance, causing actual results to differ from those discussed during
the presentation. Such risks and uncertainties include, by way of example and
not of limitation: all financial projections; general business and economic
conditions; decreases in
demand for trona, soda ash, coal, aggregates, and oil & gas; changes in our
lessees’ operating conditions and costs; operating costs and risks
associated with the trona mining business; changes in the level of costs
related to environmental protection and operational safety; unanticipated
geologic problems; problems related to force majeure; potential labor
relations problems; changes in the legislative or regulatory environment; and
lessee production cuts. These and other applicable risks and uncertainties have
been described more fully in NRP’s most recent Annual Report on Form
10-K or Quarterly Report on Form 10-Q. NRP undertakes no obligation to
publicly update any forward-looking statements, whether as a result of new
information or future events. 2 |
 Acquisition of Trona / Soda Ash Operations and Assets
3 |
 Transaction
•
NRP acquired Anadarko Petroleum Corporation’s (APC) ~49% equity interest in
OCI Wyoming, consisting of trona ore mining operations and a soda ash refinery
located in the Green River Basin, Wyoming
•
NRP acquired APC’s interest for a price of $292.5 million plus an earn-out
of up to a net present value of $50 million based on OCI performance in 2013,
2014 and 2015
•
Transaction financed through the following:
–
$200 million 3-year term loan
–
$76.5 million from equity issuance and GP contribution
–
$16.5 million cash
4 |
 Strategic Rationale
•
Further diversification of NRP’s revenue
–
Soda ash revenue tied to broad and diverse set of industrial markets
–
Favorable supply / demand fundamentals
–
Trona mining and processing operations not a focus of environmental or
geopolitical concerns •
Stable to increasing distributions and income based on long-life assets
–
Increasing income and annual distribution potential
–
Substantial trona ore reserves: 60+ year reserve life
–
Cash flow accretion to NRP of $0.18 to $0.22 per unit in 2013
•
OCI Partnership in good financial condition
–
Invested over past 15 years for expansion, efficiency, and sustainability (funded
with cash from operations) raising production capacity
–
Rated production capacity of 3.25 million tons annually
–
Balance sheet with room for levering future expansion capex
5
2009
2010
2011
2012
2013E
27.5
20.5
25.2
35.0
~35-40
38.0
33.8
55.0
N/A
N/A
Cash received on acquired interests, $mm
Revenue derived from acquired interests, $mm |
 Key
Operating Metrics – OCI Wyoming
•
Sales and Pricing:
–
Historical annual sales of refined soda ash: 2.3-2.5 mm tons (approximately
2/3rds exported) –
90% of export sales arranged by ANSAC (three member co-op: OCI, FMC, and
Tata); ANSAC is the largest soda ash exporter at ~4 mm metric tons of
natural soda ash –
OCI negotiates pricing with domestic companies each October for following year
(customers have rolling 1-yr contract terms)
•
Currently mining 2 trona beds:
–
#24 is 11.3’
thick, contains 89.6% trona, at a depth of 913’
–
#25 is 10.2’
thick, contains 88.6% trona, at a depth of 796’
–
Room-and-pillar mining using continuous miners
•
Natural soda ash has competitive cost advantage over
synthetic manufacturing
–
Natural soda ash cash costs are less than half the cost
of synthetics
6 |
 Pro
Forma Ownership Structure and Distributions •
NRP is due a preferred return of $4.7 million per year from OCI Wyoming Co.(accruing
interest at 9% per annum in the event not paid)
•
In addition, NRP receives 20% of distributions (net of tax) to OCI Wyoming Co. in
excess of the preferred return •
Finally, NRP is due 48.51% of any distributions from OCI Wyoming
L.P. after priority return is paid
7
NRP Operating
NRP Trona LLC
OCI Wyoming L.P.
OCI Wyoming
Holding Co.
OCI Wyoming Co.
OCI Chemical
Corporation
100% |
 OCI
Company Ltd. (Korean Parent) •
Headquartered
in
Seoul,
Korea,
OCI
Company
Ltd.
(OCI
Korea)
is
a
global
company
with a market capitalization of ~$4.5 billion
•
OCI Korea’s product portfolio spans the fields of inorganic chemicals, petro and
coal chemicals, fine chemicals, renewable energy and insulation
materials •
OCI is today the world’s fifth-largest producer of soda ash, having acquired
the Green River soda ash operations from Rhone Poulenc in 1996
•
OCI Enterprises, Inc., based in Atlanta, GA, is the North American subsidiary of
OCI Korea
8 |
 2012
Diversity of Revenue Proforma for Acquisition 9
2012 Revenues
2012 Revenues
Nine Months Actual, Three Months Forecast
Pro Forma for OCI Acquisition
Met Coal
32%
Steam -
APP
24%
Steam
-
ILB
14%
Steam
-
NPRB
2%
Coal I/structure,
ORR, Mins
15%
Aggregates
4%
Oil & Gas
2%
Other
8%
Met Coal
27%
Steam
-
APP
20%
Steam
-
ILB
12%
Steam
-
NPRB
2%
Coal I/structure,
ORR, Mins
13%
Aggregates &
Industrial
Minerals
17%
Oil & Gas
2%
Other
7% |
 Trona/Soda Ash Fundamentals and Markets
10 |
 Trona / Soda Ash Fundamentals
Trona ore is a naturally occurring form of soda ash, used worldwide in
manufacturing a variety of consumer products, primarily including glass,
chemicals, soap, and paper
Soda ash can also be produced synthetically from limestone, and even though
synthetic capacity is growing, it comes at a significantly higher cost
differential World demand for soda ash has been growing for the past three
decades, driven particularly by Asia, Middle East and Africa, while U.S.
demand has generally been stable at 6-7 million tons annually
11
Source: USGS
Soaps and
Detergents
8%
Pulp and Paper
2%
Water Treatment
1%
Flue Gas Desulfurization
3%
Distributors
5%
Other
3%
Fiber and Other Glass
5%
2011 US Consumers of Soda Ash |
 Global Production Capacity and Demand
Growing global demand for soda ash
Demand increased substantially in 2011 but slowed to an estimated 1.9% in 2012, with
an increase of 3.8% projected for 2013
Capacity additions and production levels continue to outpace demand, though capacity
utilization remains relatively high at 87.5%
Source: Santini & Associates, Inc.
2011
TOTAL
2012 Est.
TOTAL
2013 Fcst.
TOTAL
Nameplate Capacity
63,000
65,000
68,000
Effective Capacity
58,000
60,000
64,000
Production Estimate
52,000
53,000
56,000
Demand
52,000
53,000
55,000
Year-over-Year Growth
7.7%
1.9%
3.8%
Capacity Utilization
89.7%
88.3%
87.5%
12 |
 Competitive Landscape
Five producers of natural soda ash in the U.S., four located in Green
River, Wyoming and one, Searles Valley, in California
OCI Wyoming produces approximately 20% of the total U. S. production
of natural soda ash
13
FMC
32%
General
21%
Solvay
19%
SVM
8%
OCI
20% |
 U.S. Production and Demand
U.S. domestic demand and supply is fairly stable with almost 100%
capacity utilization
The export market is a key profit growth opportunity for U.S. producers
Prices increased at a CAGR of 7% from 2007 through 2011
14
Source: USGS: 2011 Minerals Yearbook, November 2012
11.1
11.3
9.3
10.6
10.7
104
122
130
116
134
0
30
60
90
120
150
0.0
3.0
6.0
9.0
12.0
15.0
2007
2008
2009
2010
2011
WY Historical Soda Ash Output
Production
Price |
 Financing of Transaction & Liquidity
Purchase Price of $292.5 million, plus an earn-out of up to $50 million
based on OCI performance criteria for 2013, 2014, and 2015
Financing:
–
$200 million funded with new 3-year term loan
–
$76.5
million
in
equity
issued
to
Sponsors
at
closing,
including
a
$1.5million general partner contribution
–
$16 million cash
Liquidity
following
transaction
-
$285
million
–
Adjusted Cash at 12/31/12 of $133 million following cash used for
transaction
–
Available on credit facility -
$152 million
15 |
 Term Loan Component
16
NRP (Operating LLC)
Borrower:
Partial funding of OCI Wyoming Acquisition
Purpose:
Size / Tenor / Type:
Interest Coverage 3.5x
Leverage Ratio 4.0x
Financial Covenants:
$200 mm / 3-Year / Senior Unsecured Term Loan Facility
Guarantors:
All existing and future Material Subsidiaries
Year 1: $10 mm due January 2014
Year 2: $20 mm due January 2015
Year 3: $170 mm due January 2016
Amortization:
Interest Rate:
LIBOR + 200bps |
 Equity Component
Raised $76.5 million
Issued $75 million in private placement equity to affiliates of NRP’s
general partner:
–
Corbin J. Robertson, Jr, Chairman and CEO of NRP, and members of
his family
–
Chris Cline
–
S. Reed Morian
–
W. W. Scott, Jr.
–
3,784,572 units issued at a discount rate of 4.5% to the volume-
weighted average price for the prior 15 trading days.
NRP (GP) L.P., the general partner of Natural Resource Partners L.P.,
contributed $1.5 million to maintain its 2% interest in Natural Resource
Partners L.P.
17 |
 Conclusions
The acquisition represents a significant step in NRP’s efforts to diversify
its portfolio of revenues
OCI has a long production and sales history in a relatively stable, slow
growth market
–
OCI is a low cost producer with high quality reserves that have an
estimated life in excess of 60 years
–
Natural soda ash production has competitive cost advantages over
synthetic soda ash
Investment is immediately accretive under the financing structure, adding
cash flow of ~$0.18 -
$0.22 per unit in 2013
18 |