ROYE Royal Energy Resources Inc (CE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

1. ORGANIZATION AND BASIS OF PRESENTATION

Organization —Rhino Resource Partners LP and subsidiaries (the “Partnership”) is a Delaware limited partnership formed on April 19, 2010 to acquire Rhino Energy LLC (the “Predecessor” or the “Operating Company”). The Partnership had no operations during the period from April 19, 2010 (date of inception) to October 5, 2010 (the consummation of the initial public offering (“IPO”) date of the Partnership). The Operating Company and its wholly owned subsidiaries produce and market coal from surface and underground mines in Kentucky, Ohio, West Virginia and Utah. The majority of the Partnership’s sales are made to electric utilities and other coal-related organizations in the United States. In addition to operating coal properties, the Partnership manages and leases coal properties and collects royalties from such management and leasing activities. In addition to the Partnership’s coal operations, the Partnership has invested in oil and natural gas mineral rights and operations that have provided revenues to the Partnership.

Initial Public Offering

On October 5, 2010, Rhino Resource Partners LP completed its IPO of 3,244,000 common units, representing limited partner interests in the Partnership, at a price of $20.50 per common unit. Net proceeds from the offering were approximately $58.3 million, after deducting underwriting discounts and offering expenses of $8.2 million. The Partnership used the net proceeds from this offering, and a related capital contribution by Rhino GP LLC, the Partnership’s general partner (the “General Partner”) of approximately $10.4 million, to repay approximately $69.4 million of outstanding indebtedness under the Operating Company’s credit facility. These net proceeds do not include $9.3 million that was used to reimburse affiliates of the Partnership’s sponsor, Wexford Capital LP (“Wexford Capital”), for capital expenditures incurred with respect to the assets contributed to the Partnership in connection with the offering. In connection with the closing of the IPO, the owners of the Operating Company contributed their membership interests in the Operating Company to the Partnership, and the Partnership issued 12,397,000 subordinated units representing limited partner interests in the Partnership and 9,153,000 common units to Rhino Energy Holdings LLC, an affiliate of Wexford Capital, and issued incentive distribution rights to the General Partner. Upon the closing of the IPO, and as required by the Operating Company’s credit agreement by and among the Operating Company, as borrower, and its subsidiaries as guarantors, and PNC Bank, National Association, as agent, and the other lenders thereto (as amended from time to time, the “Credit Agreement”), the Partnership pledged 100% of the membership interests in the Operating Company to the agent on behalf of itself and the other lenders to secure the Operating Company’s obligations under the Credit Agreement.

Follow-on Offerings

On July 18, 2011, the Partnership completed a public offering of 2,875,000 common units, representing limited partner interests in the Partnership, at a price of $24.50 per common unit. Of the common units issued, 375,000 units were issued in connection with the exercise of the underwriters’ option to purchase additional units. Net proceeds from the offering were approximately $66.4 million, after deducting underwriting discounts and offering expenses of approximately $4.1 million. The Partnership used the net proceeds from this offering, and a related capital contribution by the General Partner of approximately $1.4 million, to repay approximately $67.8 million of outstanding indebtedness under the Partnership’s credit facility.

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RHINO RESOURCE PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

1. ORGANIZATION AND BASIS OF PRESENTATION (Continued)

On September 13, 2013, the Partnership completed a public offering of 1,265,000 common units, representing limited partner interests in the Partnership, at a price of $12.30 per common unit. Of the common units issued, 165,000 units were issued in connection with the exercise of the underwriter’s option to purchase additional units. Net proceeds from the offering were approximately $14.6 million, after deducting underwriting discounts and offering expenses of approximately $1.0 million. The Partnership used the net proceeds from this offering, and a related capital contribution by the General Partner of approximately $0.3 million, to repay approximately $14.9 million of outstanding indebtedness under the Partnership’s credit facility.

Basis of Presentation and Principles of Consolidation —The accompanying consolidated financial statements include the accounts of Rhino Resource Partners LP and its subsidiaries. Intercompany transactions and balances have been eliminated in consolidation.

Debt Classification —The Partnership evaluated its amended and restated senior secured credit facility at December 31, 2015 to determine whether this debt liability should be classified as a long-term or current liability on the Partnership’s consolidated statements of financial position. In April 2015, the Partnership entered into a third amendment to its amended and restated senior secured credit facility (see Note 10 for further details of the third amendment). The third amendment extended the expiration date of the amended and restated credit agreement to July 2017. The extension was contingent upon (i) the Partnership’s leverage ratio being less than or equal to 2.75 to 1.0 and (ii) the Partnership having liquidity greater than or equal to $15 million, in each case for either the quarter ending December 31, 2015 or March 31, 2016. If both of these conditions were not satisfied for one of such quarters, the expiration date of the amended and restated credit agreement would revert to July 2016. As of December 31, 2015, the conditions for the extension of the credit facility were not met as the Partnership’s leverage ratio was 3.2 to 1.0 and liquidity was approximately $1.1 million. In March 2016, the Partnership amended its amended and restated senior secured credit facility where the expiration date was set to July 2016. The Partnership is working with its lenders to extend the amended and restated credit agreement to December 2017. Since the credit facility has an expiration date of July 2016, the Partnership determined that its credit facility debt liability of $41.2 million at December 31, 2015 should be classified as a current liability on its consolidated statements of financial position, which results in a working capital deficiency of $36.3 million. The classification of the Partnership’s credit facility balance as a current liability raises substantial doubt of the Partnership’s ability to continue as a going concern for the next twelve months. The Partnership is also considering alternative financing options that could result in a new long-term credit facility. Since the credit facility has an expiration date of July 2016, the Partnership will have to secure alternative financing to replace its credit facility by the expiration date of July 2016 in order to continue its normal business operations and meet its obligations as they come due. The financial statements do not include any adjustments relating to the recoverability and classification of assets carrying amounts or the amount of and classification of liabilities that may result should the Partnership be unable to continue as a going concern.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL

Company Environment and Risk Factors. The Partnership, in the course of its business activities, is exposed to a number of risks including: fluctuating market conditions of coal, truck and rail transportation, fuel costs, changing government regulations, unexpected maintenance and equipment failure, employee benefits cost control, changes in estimates of proven and probable coal reserves, as well as the ability of the Partnership to maintain adequate financing, necessary mining permits and control of sufficient recoverable coal properties. In addition, adverse weather and geological conditions may increase mining costs, sometimes substantially.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL (Continued)

Trade Receivables and Concentrations of Credit Risk. See Note 17 for discussion of major customers. The Partnership does not require collateral or other security on accounts receivable. The credit risk is controlled through credit approvals and monitoring procedures.

During 2015 and 2014, the Partnership recorded accounts receivable allowances of approximately $0.5 million and $0.7 million, respectively, in relation to customers that had entered bankruptcy proceedings. The Partnership recorded these allowances based upon its best estimates of the ultimate collectability of the accounts receivable balances through the bankruptcy proceedings of these customers. As of December 31, 2015, the Partnership had accounts receivable allowances of approximately $0.2 million outstanding for remaining accounts that were estimated to be uncollectable.

Cash and Cash Equivalents. The Partnership considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.

Inventories. Inventories are stated at the lower of cost, based on a three month rolling average, or market. Inventories primarily consist of coal contained in stockpiles.

Advance Royalties. The Partnership is required, under certain royalty lease agreements, to make minimum royalty payments whether or not mining activity is being performed on the leased property. These minimum payments may be recoupable once mining begins on the leased property. The Partnership capitalizes the recoupable minimum royalty payments and amortizes the deferred costs once mining activities begin on the units-of-production method or expenses the deferred costs when the Partnership has ceased mining or has made a decision not to mine on such property.

Notes Receivable. In December 2015, the Partnership completed the sale of the Deane mining complex located in Central Appalachia (see Note 6 for further details on the Deane mining complex sale). The Partnership received $2.0 million for the Deane mining complex sale in the form of a note receivable from the third-party purchaser. The note receivable bears interest at an annual rate of 6% and has a maturity date of December 31, 2017. The note receivable was recorded in the Other non-current assets line of the Partnership’s consolidated statements of financial positon.

In August 2011, the Partnership closed on an agreement to sell and assign certain non-core mining assets and related liabilities located in the Phelps, KY area to a third party. The mining assets included leasehold interests and permits to surface and mineral interests that included steam coal reserves and non-reserve coal deposits. Additionally, the sales agreement included the potential for additional payments of approximately $8.75 million dependent upon certain future contingencies. Rhino recorded the sale of the assets and transfer of liabilities in the third quarter of 2011, but did not record any of the potential $8.75 million consideration since this amount relied on future contingent conditions to be met before it could be recognized. In 2014, the third party entered negotiations with the Partnership regarding the payment of the $8.75 million consideration as the third party anticipated the contingencies would be met in the near future. The third party negotiated with the Partnership to accept a note receivable in lieu of immediate payment since the third party did not have the available funds to pay the $8.75 million consideration. The Partnership believes the collection of the $8.75 million is in doubt due to the necessity of the third party to request a note receivable and the belief that the third party will not be able to economically mine this property for an extended period due to the lack of certain mining permits. Based on the uncertainty of collection of the note receivable, the Partnership recorded a note receivable balance along with a corresponding allowance against the entire $8.75 million note receivable balance. During 2015 and 2014, the Partnership received approximately $0.6 million and $0.3 million, respectively, in payments related to this note receivable and the balance at December 31, 2015 was $7.9 million, which remained fully reserved based on the factors discussed above.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL (Continued)

Property, Plant and Equipment. Property, plant, and equipment, including coal properties, oil and natural gas properties, mine development costs and construction costs, are recorded at cost, which includes construction overhead and interest, where applicable. Expenditures for major renewals and betterments are capitalized, while expenditures for maintenance and repairs are expensed as incurred. Mining and other equipment and related facilities are depreciated using the straight-line method based upon the shorter of estimated useful lives of the assets or the estimated life of each mine. Coal properties are depleted using the units-of-production method, based on estimated proven and probable reserves. Mine development costs are amortized using the units-of-production method, based on estimated proven and probable reserves. The Partnership assumes zero salvage values for its property, plant and equipment when depreciation and amortization are calculated. Gains or losses arising from sales or retirements are included in current operations.

Stripping costs incurred in the production phase of a mine for the removal of overburden or waste materials for the purpose of obtaining access to coal that will be extracted are variable production costs that are included in the cost of inventory produced and extracted during the period the stripping costs are incurred. The Partnership defines a surface mine as a location where the Partnership utilizes operating assets necessary to extract coal, with the geographic boundary determined by property control, permit boundaries, and/or economic threshold limits. Multiple pits that share common infrastructure and processing equipment may be located within a single surface mine boundary, which can cover separate coal seams that typically are recovered incrementally as the overburden depth increases. In accordance with the accounting guidance for extractive mining activities, the Partnership defines a mine in production as one from which saleable minerals have begun to be extracted (produced) from an ore body, regardless of the level of production; however, the production phase does not commence with the removal of de minimis saleable mineral material that occurs in conjunction with the removal of overburden or waste material for the purpose of obtaining access to an ore body. The Partnership capitalizes only the development cost of the first pit at a mine site that may include multiple pits.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL (Continued)

Asset Impairments for Coal Properties, Mine Development Costs and Other Coal Mining Equipment and Related Facilities. The Partnership follows the accounting guidance in Accounting Standards Codification (“ASC”) 360, Property, Plant and Equipment, on the impairment or disposal of property, plant and equipment for its coal mining assets, which requires that projected future cash flows from use and disposition of assets be compared with the carrying amounts of those assets when potential impairment is indicated. When the sum of projected undiscounted cash flows is less than the carrying amount, impairment losses are recognized. In determining such impairment losses, the Partnership must determine the fair value for the coal mining assets in question in accordance with the applicable fair value accounting guidance. Once the fair value is determined, the appropriate impairment loss must be recorded as the difference between the carrying amount of the coal mining assets and their respective fair values. Also, in certain situations, expected mine lives are shortened because of changes to planned operations or changes in coal reserve estimates. When that occurs and it is determined that the mine’s underlying costs are not recoverable in the future, reclamation and mine closing obligations are accelerated and the mine closing accrual is increased accordingly. To the extent it is determined that coal asset carrying values will not be recoverable during a shorter mine life, a provision for such impairment is recognized. During 2015 and 2014, the Partnership recorded $31.1 million and $45.3 million, respectively, of asset impairment losses and related charges associated with multiple coal properties that are further described in Note 6. The Partnership also recorded an impairment charge of $0.5 million during 2015 related to intangible assets that are discussed further in Note 7. The asset impairment losses and related charges are recorded on the Asset impairment and related charges line of the Partnership’s consolidated statements of operations and comprehensive income. The Partnership also recorded an impairment charge of $5.9 million during 2014 related to the Partnership’s equity investment in the Rhino Eastern joint venture that is discussed further in Note 3. The impairment charge for the Rhino Eastern joint venture is recorded on the Equity in net (loss)/income of unconsolidated affiliates line of the Partnership’s consolidated statements of operations and comprehensive income.

Debt Issuance Costs. Debt issuance costs reflect fees incurred to obtain financing and are amortized (included in interest expense) using the effective interest method over the life of the related debt. Debt issuance costs are included in Prepaid expenses and other current assets as of December 31, 2015 since the Partnership classified its credit facility balance as a current liability (see Note 1). As of December 31, 2014, debt issuance costs were included in other non-current assets. In March 2014, the Partnership entered into a second amendment of its amended and restated senior secured credit facility that reduced the borrowing capacity to $200 million. As part of executing the second amendment to the amended and restated senior secured credit facility, the Operating Company paid a fee of approximately $0.1 million to the lenders in March 2014, which was recorded as an addition to Debt issuance costs. In addition, the Partnership wrote-off approximately $1.1 million of its unamortized debt issuance costs since the second amendment reduced the borrowing capacity under the amended and restated senior secured credit facility. In April 2015, the Partnership entered into a third amendment of its amended and restated senior secured credit facility that further reduced the borrowing commitment to $100 million. As part of executing the third amendment to the amended and restated senior secured credit facility, the Operating Company paid a fee of approximately $2.1 million to the lenders in April 2015, which was recorded as an addition to Debt issuance costs. The Partnership wrote-off approximately $0.2 million of its remaining unamortized debt issuance costs since the third amendment further reduced the borrowing commitment under the amended and restated senior secured credit facility. See Note 10 for further information on the amendment to the amended and restated senior secured credit facility.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL (Continued)

Asset Retirement Obligations. The accounting guidance for asset retirement obligations addresses asset retirement obligations that result from the acquisition, construction or normal operation of long-lived assets. This guidance requires companies to recognize asset retirement obligations at fair value when the liability is incurred or acquired. Upon initial recognition of a liability, an amount equal to the liability is capitalized as part of the related long-lived asset and allocated to expense over the useful life of the asset. The Partnership has recorded the asset retirement costs for its mining operations in coal properties.

The Partnership estimates its future cost requirements for reclamation of land where it has conducted surface and underground mining operations, based on its interpretation of the technical standards of regulations enacted by the U.S. Office of Surface Mining, as well as state regulations. These costs relate to reclaiming the pit and support acreage at surface mines and sealing portals at underground mines. Other reclamation costs are related to refuse and slurry ponds, as well as holding and related termination/exit costs.

The Partnership expenses contemporaneous reclamation which is performed prior to final mine closure. The establishment of the end of mine reclamation and closure liability is based upon permit requirements and requires significant estimates and assumptions, principally associated with regulatory requirements, costs and recoverable coal reserves. Annually, the Partnership reviews its end of mine reclamation and closure liability and makes necessary adjustments, including mine plan and permit changes and revisions to cost and production levels to optimize mining and reclamation efficiency. When a mine life is shortened due to a change in the mine plan, mine closing obligations are accelerated, the related accrual is increased and the related asset is reviewed for impairment, accordingly.

The adjustments to the liability from annual recosting reflect changes in expected timing, cash flow and the discount rate used in the present value calculation of the liability. Each respective year includes a range of discount rates that are dependent upon the timing of the cash flows of the specific obligations. Changes in the asset retirement obligations for the year ended December 31, 2015 were calculated with discount rates that ranged from 2.9% to 5.9%. Changes in the asset retirement obligations for the year ended December 31, 2014 were calculated with discount rates that ranged from 1.6% to 5.3%. The discount rates changed in each respective year due to changes in applicable market indicators that are used to arrive at an appropriate discount rate. Other recosting adjustments to the liability are made annually based on inflationary cost increases or decreases and changes in the expected operating periods of the mines. The related inflation rate utilized in the recosting adjustments was 2.3% for 2015 and 2014.

Workers’ Compensation Benefits. Certain of the Partnership’s subsidiaries are liable under federal and state laws to pay workers’ compensation and coal workers’ pneumoconiosis (“black lung”) benefits to eligible employees, former employees and their dependents. The Partnership currently utilizes an insurance program and state workers’ compensation fund participation to secure its on-going obligations depending on the location of the operation. Premium expense for workers’ compensation benefits is recognized in the period in which the related insurance coverage is provided.

The Partnership’s black lung benefit liability is calculated using the service cost method that considers the calculation of the actuarial present value of the estimated black lung obligation. The actuarial calculations using the service cost method for the Partnership’s black lung benefit liability are based on numerous assumptions including disability incidence, medical costs, mortality, death benefits, dependents and interest rates.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL (Continued)

In addition, the Partnership’s liability for traumatic workers’ compensation injury claims is the estimated present value of current workers’ compensation benefits, based on actuarial estimates. The actuarial estimates for the Partnership’s workers’ compensation liability are based on numerous assumptions including claim development patterns, mortality, medical costs and interest rates.

See Note 12 for more information on the Partnership’s workers’ compensation and black lung liabilities and expense.

Revenue Recognition. Most of the Partnership’s revenues are generated under long-term coal sales contracts with electric utilities, industrial companies or other coal-related organizations, primarily in the eastern United States. Revenue is recognized and recorded when shipment or delivery to the customer has occurred, prices are fixed or determinable and the title or risk of loss has passed in accordance with the terms of the sales agreement. Under the typical terms of these agreements, risk of loss transfers to the customers at the mine or port, when the coal is loaded on the rail, barge, truck or other transportation source that delivers coal to its destination. Advance payments received are deferred and recognized in revenue as coal is shipped and title has passed.

Coal sales revenues also result from the sale of brokered coal produced by others. The revenues related to brokered coal sales are included in coal sales revenues on a gross basis and the corresponding cost of the coal from the supplier is recorded in cost of coal sales in accordance with the revenue recognition accounting guidance on principal agent considerations.

Freight and handling costs paid directly to third-party carriers and invoiced to coal customers are recorded as freight and handling costs and freight and handling revenues, respectively.

Other revenues generally consist of coal royalty revenues, limestone sales, coal handling and processing, oil and natural gas royalty revenues, rebates and rental income. Coal royalty revenues are recognized on the basis of tons of coal sold by the Partnership’s lessees and the corresponding gross revenues from those sales. The leases are based on (1) minimum monthly or annual payments, (2) a minimum dollar royalty per ton and/or a percentage of the gross sales price, or (3) a combination of both. Coal royalty revenues are recorded from royalty reports submitted by the lessee, which are reconciled and subject to audit by the Partnership. Most of the Partnership’s lessees are required to make minimum monthly or annual royalty payments that are recoupable over certain time periods, generally two years. If tonnage royalty revenues do not meet the required minimum amount, the difference is paid as a deficiency. These deficiency payments received are recognized as an unearned revenue liability because they are generally recoupable over certain time periods. When a lessee recoups a deficiency payment through production, the recouped amount is deducted from the unearned revenue liability and added to revenue attributable to the coal royalty revenue in the current period. If a lessee does not recoup a deficiency paid during the allocated time period, the recoupment right lost becomes revenue in the current period and is deducted from the liability.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL (Continued)

With respect to other revenues recognized in situations unrelated to the shipment of coal or coal royalties, the Partnership carefully reviews the facts and circumstances of each transaction and does not recognize revenue until the following criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the seller’s price to the buyer is fixed or determinable and collectibility is reasonably assured. Advance payments received are deferred and recognized in revenue when earned.

Equity-Based Compensation. The Partnership applies the provisions of ASC Topic 718 to account for any unit awards granted to employees or directors. This guidance requires that all share-based payments to employees or directors, including grants of stock options, be recognized in the financial statements based on their fair value. The General Partner has currently granted restricted units and phantom units to directors and certain employees of the General Partner and Partnership that contain only a service condition. The fair value of each restricted unit and phantom unit award was calculated using the closing price of the Partnership’s common units on the date of grant.

The Compensation Committee of the board of directors of the General Partner has historically elected to pay some of the awards in cash or a combination of cash and common units. This policy has resulted in all employee awards being classified as liabilities and, thus, the employee awards are required to be marked-to-market each reporting period until they are vested. Restricted unit awards granted to directors of the General Partner are considered nonemployee equity-based awards since the directors are not elected by unitholders. Thus, these director awards are also required to be marked-to-market each reporting period until they are vested. Expense related to unit awards is recorded in the selling, general and administrative line of the Partnership’s consolidated statements of operations and comprehensive income.

Derivative Financial Instruments. On occasion, the Partnership has used diesel fuel contracts to manage the risk of fluctuations in the cost of diesel fuel. The Partnership’s diesel fuel contracts have met the requirements for the normal purchase normal sale (“NPNS”) exception prescribed by the accounting guidance on derivatives and hedging, based on management’s intent and ability to take physical delivery of the diesel fuel. The Partnership did not have any diesel fuel contracts as of December 31, 2015.

Investments in Joint Ventures. Investments in joint ventures are accounted for using the equity method or cost basis depending upon the level of ownership, the Partnership’s ability to exercise significant influence over the operating and financial policies of the investee and whether the Partnership is determined to be the primary beneficiary of a variable interest entity. Equity investments are recorded at original cost and adjusted periodically to recognize the Partnership’s proportionate share of the investees’ net income or losses after the date of investment. Any losses from the Partnership’s equity method investment are absorbed by the Partnership based upon its proportionate ownership percentage. If losses are incurred that exceed the Partnership’s investment in the equity method entity, then the Partnership must continue to record its proportionate share of losses in excess of its investment. Investments are written down only when there is clear evidence that a decline in value that is other than temporary has occurred.

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RHINO RESOURCE PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL (Continued)

In May 2008, the Operating Company entered into a joint venture, Rhino Eastern, with an affiliate of Patriot to acquire the Eagle mining complex. To initially capitalize the Rhino Eastern joint venture, the Operating Company contributed approximately $16.1 million for a 51% ownership interest in the joint venture and accounted for the investment in Rhino Eastern and its results of operations under the equity method. The Partnership considered the operations of this entity to comprise a reporting segment (“Eastern Met”) and has provided additional detail related to this operation in Note 21, “Segment Information.”

On December 31, 2014, the Partnership entered into an agreement with a wholly owned subsidiary of Patriot that effectively terminated the Rhino Eastern joint venture. This agreement officially closed in January 2015 and is described further in Note 3.

The Partnership determined it was not the primary beneficiary of the variable interest entity for the year ended December 31, 2014 by performing a qualitative and quantitative analysis based on the controlling economic interests of the Rhino Eastern joint venture. This included an analysis of the expected economic contributions of the joint venture. The Partnership concluded that it was not the primary beneficiary of Rhino Eastern primarily because of certain contractual arrangements by the joint venture with Patriot and the fact that the Rhino Eastern joint venture was managed by a committee of an equal number of representatives from Patriot and us.

As of December 31, 2014, the Partnership recorded its equity method investment of $13.2 million in the Rhino Eastern joint venture as a long-term asset. See Note 3 for a discussion of the impairment charge incurred on the Partnership’s equity method investment as of December 31, 2014. During 2014, the Partnership contributed additional capital based upon its ownership share to the Rhino Eastern joint venture in the amount of $4.8 million.

In December 2012, the Partnership made an initial investment of approximately $2.0 million in a new joint venture, Muskie Proppant LLC (“Muskie”), with affiliates of Wexford Capital. Muskie was formed to provide sand for fracking operations to drillers in the Utica Shale region and other oil and natural gas basins in the United States. During 2014, the Partnership contributed additional capital based upon its ownership share to the Muskie joint venture in the amount of $0.2 million. As disclosed in Note 19 “Related Party and Affiliate Transactions”, during 2013 the Partnership provided a loan to Muskie totaling approximately $0.2 million which was fully repaid in November 2014 in conjunction with the Partnership’s contribution of its interest in Muskie to Mammoth Energy Partners LP (“Mammoth”), which is discussed below.

In November 2014, the Partnership contributed its investment interest in Muskie to Mammoth in return for a limited partner interest in Mammoth. Mammoth was formed to own various companies that provide services to companies who engage in the exploration and development of North American onshore unconventional oil and natural gas reserves. Mammoth’s companies provide services that include completion and production services, contract land and directional drilling services and remote accommodation services. The non-cash transaction was a contribution of the Partnership’s investment interest in the Muskie entity for an investment interest in Mammoth. Thus, the Partnership determined that the non-cash exchange of the Partnership’s ownership interest in Muskie did not result in any gain or loss. Prior to the Partnership’s contribution of Muskie to Mammoth, the Partnership recorded its proportionate portion of Muskie’s operating loss for 2014 of approximately $0.1 million. As of December 31, 2015 and 2014, the Partnership has recorded its investment in Mammoth of $1.9 million as a long-term asset, which the Partnership has accounted for as a cost method investment based upon its ownership percentage. The Partnership has included its investment in Mammoth and its prior investment in Muskie in its Other category for segment reporting purposes. See Note 21 for information on the Partnership’s reportable segments.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL (Continued)

In September 2014, the Partnership made an initial investment of $5.0 million in a new joint venture, Sturgeon Acquisitions LLC (“Sturgeon”), with affiliates of Wexford Capital and Gulfport. Sturgeon subsequently acquired 100% of the outstanding equity interests of certain limited liability companies located in Wisconsin that provide frac sand for oil and natural gas drillers in the United States. The Partnership accounts for the investment in this joint venture and results of operations under the equity method based upon its ownership percentage. The Partnership recorded its proportionate portion of the operating income for this investment during 2015 and 2014 of approximately $0.3 million and $0.4 million, respectively. The Partnership has recorded its investment in Sturgeon on the Investment in unconsolidated affiliates line of the Partnership’s consolidated statements of financial position. The Partnership has included its investment in Sturgeon in its Other category for segment reporting purposes.

Income Taxes. The Partnership is considered a partnership for income tax purposes. Accordingly, the partners report the Partnership’s taxable income or loss on their individual tax returns.

Loss Contingencies. In accordance with the guidance on accounting for contingencies, the Partnership records loss contingencies at such time that an unfavorable outcome becomes probable and the amount can be reasonably estimated. When the reasonable estimate is a range, the recorded loss is the best estimate within the range. If no amount in the range is a better estimate than any other amount, the minimum amount of the range is recorded. The Partnership discloses information concerning loss contingencies for which an unfavorable outcome is probable. See Note 15, “Commitments and Contingencies,” for a discussion of such matters.

Management’s Use of Estimates. The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Recently Issued Accounting Standards. In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). ASU 2014-09 clarifies the principles for recognizing revenue and establishes a common revenue standard for U.S. financial reporting purposes. The guidance in ASU 2014-09 affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts). ASU 2014-09 supersedes the revenue recognition requirements in ASC 605, Revenue Recognition, and most industry-specific accounting guidance. Additionally, ASU 2014-09 supersedes some cost guidance included in ASC 605-35, Revenue Recognition—Construction-Type and Production-Type Contracts. In addition, the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer (for example, assets within the scope of ASC 360, Property, Plant, and Equipment, and intangible assets within the scope of ASC 350, Intangibles—Goodwill and Other) are amended to be consistent with the guidance on recognition and measurement (including the constraint on revenue) in ASU 2014-09. In July 2015, the FASB approved to defer the effective date of ASU 2014-09 by one year. Accordingly, ASU 2014-09 will be effective for public entities for annual reporting periods beginning after December 15, 2017 and interim periods therein. The Partnership is currently evaluating the requirements of this new accounting guidance.

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RHINO RESOURCE PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL (Continued)

In January 2015, the FASB issued ASU 2015-01, “Income Statement-Extraordinary and Unusual Items”. ASC 225-20, Income Statement—Extraordinary and Unusual Items, required that an entity separately classify, present, and disclose extraordinary events and transactions. ASU 2015-01 eliminates the concept of extraordinary items. The amendments in ASU 2015-01 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. A reporting entity also may apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The effective date is the same for both public business entities and all other entities. The adoption of ASU 2015-01 on January 1, 2016 is not expected to have a material impact on the Partnership’s financial statements.

In February 2015, the FASB issued ASU 2015-02, “Consolidation”. ASU 2015-02 affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. All legal entities are subject to reevaluation under the revised consolidation model. Specifically, the amendments of ASU 2015-02: a) modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities, b) eliminate the presumption that a general partner should consolidate a limited partnership, c) affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships and d) provide a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. ASU 2015-02 is effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. A reporting entity may apply the amendments in this Update using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption. A reporting entity also may apply the amendments retrospectively. The adoption of ASU 2015-02 on January 1, 2016 is not expected to have a material impact on the Partnership’s financial statements.

In April 2015, the FASB issued ASU 2015-03, “Interest—Imputation of Interest (Subtopic 835-30)-Simplifying the Presentation of Debt Issuance Costs”. ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. Prior to ASU 2015-03, debt issuance costs have been presented in the balance sheet as a deferred charge, or asset. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. For public business entities, ASU 2015-03 is effective for financial statements issued for fiscal years

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RHINO RESOURCE PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

3. SUBSEQUENT EVENTS

For the quarter ended December 31, 2015, the Partnership continued the suspension of the cash distribution for its common units, which was initially suspended for the quarter ended June 30, 2015. No distribution will be paid for common or subordinated units for the quarter ended December 31, 2015. Pursuant to the Partnership’s partnership agreement, the Partnership’s common units accrue arrearages every quarter when the distribution level is below the minimum level of $0.445 per unit. The Partnership initially lowered its quarterly common unit distribution below the minimum level of $0.445 per unit with the quarter ended September 30, 2014. Thus, the Partnership’s distributions for each of the quarters ended September 30, 2014 through the current quarter ended December 31, 2015 were below the minimum level and the current amount of accumulated arrearages as of December 31, 2015 related to the common unit distribution is approximately $44.3 million.

On January 21, 2016, a definitive agreement (“Definitive Agreement”) was completed between Royal Energy Resources, Inc. (“Royal”) and Wexford where Royal acquired 6,769,112 issued and outstanding common units of the Partnership previously owned by Wexford for $3.5 million. The Definitive Agreement also included the committed acquisition by Royal within sixty days from the date of the Definitive Agreement of all of the issued and outstanding membership interests of Rhino GP LLC, the general partner of the Partnership, as well as 9,455,252 issued and outstanding subordinated units of the Partnership currently owned by Wexford for $1.0 million.

On March 17, 2016, Royal completed the acquisition of all of the issued and outstanding membership interests of Rhino GP LLC as well as the 9,455,252 issued and outstanding subordinated units from Wexford. Royal obtained control of, and a majority limited partner interest, in the Partnership with the completion of this transaction.

On March 21, 2016, the Partnership and Royal entered into a securities purchase agreement (the “Securities Purchase Agreement”) pursuant to which the Partnership issued 60,000,000 common units in the Partnership to Royal in a private placement at $0.15 per common unit for an aggregate purchase price of $9.0 million. Royal paid the Partnership $2.0 million in cash and delivered a promissory note payable to the Partnership in the amount of $7.0 million. The promissory note is payable in three installments: (i) $3.0 million on July 31, 2016; (ii) $2.0 million on or before September 30, 2016 and (iii) $2.0 million on or before December 31, 2016. In the event the disinterested members of the board of directors of the General Partner determine that the Partnership does not need the capital that would be provided by either or both installments set forth in (ii) and (iii) above, in each case, the Partnership has the option to rescind Royal’s purchase of 13,333,333 common units and the applicable installment will not be payable (each, a “Rescission Right”). If the Partnership fails to exercise a Rescission Right, in each case, the Partnership has the option to repurchase 13,333,333 common units at $0.30 per common unit from Royal (each, a “Repurchase Option”). The Repurchase Options terminate on December 31, 2017. Royal’s obligation to pay any installment of the promissory note is subject to certain conditions, including that the Operating Company has entered into an agreement to extend the Amended and Restated Credit Agreement, as amended, to a date no sooner than December 31, 2017. In the event such conditions are not satisfied as of the date each installment is due, Royal has the right to cancel the remaining unpaid balance of the promissory note in exchange for the surrender of such number of common units equal to the principal balance of the promissory note divided by $0.15.

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RHINO RESOURCE PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

3. SUBSEQUENT EVENTS (Continued)

On March 17, 2016, the Operating Company, as borrower, and the Partnership and certain of its subsidiaries, as guarantors, entered into an amendment (the “Fourth Amendment”) of its amended and restated credit agreement, dated July 29, 2011, as amended by the first, second and third amendments thereto, with PNC Bank, National Association, as Administrative Agent, PNC Capital Markets and Union Bank, N.A., as Joint Lead Arrangers and Joint Bookrunners, Union Bank, N.A., as Syndication Agent, Raymond James Bank, FSB, Wells Fargo Bank, National Association and the Huntington National Bank, as Co-Documentation Agents and the lenders party thereto. The Fourth Amendment amends the definition of change of control in the amended and restated credit agreement to permit Royal to purchase the membership interests of the General Partner and sets the expiration date of the facility at July 2016. The Fourth Amendment reduces the borrowing capacity under the credit facility to a maximum of $80 million and reduces the amount available for letters of credit to $30 million. The Fourth Amendment eliminates the option to borrow funds utilizing the LIBOR rate plus an applicable margin and establishes the borrowing rate for all borrowings under the facility to be based upon the current PRIME rate plus an applicable margin of 3.50%. The Fourth Amendment eliminates the capability to make Swing Loans under the facility and eliminates the ability of the Partnership to pay distributions to its common or subordinated unitholders. The Fourth Amendment alters the maximum leverage ratio, calculated as of the end of the most recent month, on a trailing twelve month basis, to 6.75 to 1.00. The leverage ratio shall be reduced by 0.50 to 1.00 for every $10 million of net cash proceeds, in the aggregate, received by the Partnership after the date of the Fourth Amendment from a liquidity event; provided, however, that in no event shall the maximum permitted leverage ratio be reduced below 3.00 to 1.00. A liquidity event is defined in the Fourth Amendment as the issuance of any equity by the Partnership on or after the Fourth Amendment effective date (other than the Royal equity contribution discussed above), or the disposition of any assets by the Partnership. The Fourth Amendment requires the Partnership to maintain minimum liquidity of $5 million and minimum EBITDA, calculated as of the end of the most recent month, on a trailing twelve month basis, of $8 million. The Fourth Amendment limits the amount of the Partnership’s capital expenditures to $15 million, calculated as of end of the most recent month, on a trailing twelve month basis. The Fourth Amendment requires the Partnership to provide monthly financial statements and a weekly rolling thirteen week cash flow forecast to the administrative agent.

4. DISCONTINUED OPERATIONS

Divestiture of Utica Shale Oil and Natural Gas Assets

Beginning in 2011, the Partnership and an affiliate of Wexford Capital participated with Gulfport to acquire interests in a portfolio of oil and natural gas leases in the Utica Shale. As of December 31, 2013, the Partnership had invested approximately $31.1 million for its pro rata interest in the Utica Shale portfolio of oil and natural gas leases, which consisted of a 5% interest in a total of approximately 152,300 gross acres, or approximately 7,615 net acres. In addition, per the joint operating agreement among the Partnership, Gulfport and an affiliate of Wexford Capital, the Partnership had funded its proportionate share of drilling costs to Gulfport for wells being drilled on the Partnership’s acreage. As of December 31, 2013, the Partnership had funded approximately $23.3 million of drilling costs.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

4. DISCONTINUED OPERATIONS (Continued)

In March 2014, the Partnership completed a purchase and sale agreement (the “Purchase Agreement”) with Gulfport to sell the Partnership’s oil and natural gas properties in the Utica Shale region for approximately $184.0 million (the “Purchase Price”). The Purchase Agreement was effective as of January 1, 2014 and the Purchase Price was adjusted for any unsettled expenditures made and/or proceeds received from the Partnership’s portion of its Utica Shale properties prior to the effective date. At the closing of the Purchase Agreement, the Partnership was immediately due approximately $179.0 million, net of any adjustments described above, and the remaining approximately $5.0 million was scheduled to be paid within approximately 90 days of March 20, 2014, subject to ongoing legal title work related to specific properties. In December 2014, the Partnership settled the remaining $5.0 million due from Gulfport based upon net amounts payable from the Partnership to Gulfport prior to the effective date of the Purchase Agreement as well as amounts due the Partnership related to legal reviews of the properties subject to the Purchase Agreement and other unsettled items due to the Partnership prior to the effective date of the Purchase Agreement. The net effect of this settlement resulted in the Partnership paying Gulfport approximately $46,000 in December 2014. The Partnership recorded a gain of approximately $121.7 million during the year ended December 31, 2014 related to this sale, which is recorded in Income from discontinued operations in the consolidated statements of operations and comprehensive income. The gain from the Utica Shale transaction is included in the (Gain) on sale/disposal of assets—net line in the operating activities section of the Partnership’s consolidated statements of cash flows. The proceeds from the Utica Shale transaction are included in the Proceeds from sales of property, plant, and equipment line in the investing activities section of the Partnership’s consolidated statements of cash flows.

Other Oil and Natural Gas Activities

In January 2014, the Partnership received approximately $8.4 million of net proceeds from the sale by Blackhawk Midstream LLC (“Blackhawk”) of its equity interest in two entities, Ohio Gathering Company, LLC and Ohio Condensate Company, LLC, to Summit Midstream Partners, LLC. As part of the joint operating agreement for the Utica Shale investment discussed above, the Partnership had the right to approximately 5% of the proceeds of the sale by Blackhawk. In February 2015, the Partnership received approximately $0.7 million in additional proceeds from the sale by Blackhawk that had been held in escrow. For the years ended December 31, 2015 and 2014, the Partnership recorded the $0.7 million and $8.4 million, respectively, in Income from discontinued operations in the consolidated statements of operations and comprehensive income. The gain from the Blackhawk transaction is included in the (Gain) on sale/disposal of assets—net line in the operating activities section of the Partnership’s consolidated statements of cash flows. The proceeds from the Blackhawk transaction are included in the Proceeds from sales of property, plant, and equipment line in the investing activities section of the Partnership’s consolidated statements of cash flows.

Debt issuance costs are included in Prepaid expenses and other current assets as of December 31, 2015 since the Partnership classified its credit facility balance as a current liability (see Note 1). As of December 31, 2014, debt issuance costs were included in other non-current assets (see Note8). Debt issuance costs were $11.6 million and $9.1 million as of December 31, 2015 and 2014, respectively. Accumulated amortization of debt issuance costs were $9.4 million and $7.6 million as of December 31, 2015 and 2014, respectively. In March 2014, the Partnership entered into a second amendment of its amended and restated senior secured credit facility that reduced the borrowing capacity to $200 million. As part of executing the second amendment to the amended and restated senior secured credit facility, the Operating Company paid a fee of approximately $0.1 million to the lenders in March 2014, which was recorded as an addition to Debt issuance costs. In addition, the Partnership wrote-off approximately $1.1 million of its unamortized debt issuance costs since the second amendment reduced the borrowing capacity under the amended and restated senior secured credit facility.

In April 2015, the Partnership entered into a third amendment of its amended and restated senior secured credit facility that further reduced the borrowing commitment to $100 million. As part of executing the third amendment to the amended and restated senior secured credit facility, the Operating Company paid a fee of approximately $2.1 million to the lenders in April 2015, which was recorded as an addition to Debt issuance costs. The Partnership wrote-off approximately $0.2 million of its remaining unamortized debt issuance costs since the third amendment further reduced the borrowing commitment under the amended and restated senior secured credit facility. See Note 10 for further information on the amendments to the amended and restated senior secured credit facility.

Depreciation expense for mining and other equipment and related facilities, depletion expense for coal and oil and natural gas properties, amortization expense for mine development costs, amortization expense for intangible assets and amortization expense for asset retirement costs for the years ended December 31, 2015 and 2014 was as follows:

Taylorville Land Sale

On December 30, 2015, the Partnership completed the sale of its land surface rights for the Taylorville property in central Illinois for approximately $7.2 million in net proceeds. The sale agreement allows the Partnership to retain the mining permit and control of the proven and probable coal reserves at the Taylorville property as the Partnership has the option to repurchase the rights to the land within seven years from the date of the sale agreement. In accordance with ASC 360-20-40-38, Real Estate Sales—Derecognition , since the Partnership has the option to repurchase the rights to the land, the transaction has been accounted for as a financing arrangement rather than a sale. The Taylorville property is recorded in the consolidated statements of financial position within the net property, plant and equipment caption and the related liability is recorded in the consolidated statements of financial position within the other noncurrent liability caption.

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RHINO RESOURCE PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

6. PROPERTY, PLANT AND EQUIPMENT (Continued)

Asset Impairments-2015

As the prolonged weakness in the United States coal markets continued during 2015, the Partnership performed a comprehensive review of its current coal mining operations as well as potential future development projects to ascertain any potential impairment losses. The Partnership identified various properties, projects and operations that were potentially impaired based upon changes in its strategic plans, market conditions or other factors, specifically in Northern Appalachia where market conditions related to the Partnership’s operations deteriorated in the fourth quarter of 2015. The Partnership believes that an oversupply of coal being produced in Northern Appalachia has contributed to depressed coal prices from this region. The Partnership believes the oversupply of coal has been created due to historically low natural gas prices in this region, which competes with coal as a source of electricity generation. Utilities have chosen cheap natural gas for electricity generation over coal and, additionally, the Partnership believes the amount that the utilities’ power plants have been dispatched for electricity generation has fallen due to low electricity demand. The production of natural gas from the Utica Shale and Marcellus Shale regions that are located within the Northern Appalachian region have kept natural gas prices low and larger coal producers have low-cost long-wall mines in Northern Appalachia that can compete to sell lower priced coal to utilities that still require coal supplies in this region. The Partnership believes this combination of factors have decreased coal prices in Northern Appalachia to levels where certain current operations as well as future plans for the development of the Leesville Field will be unprofitable in the near term. In addition to impairment charges related to certain Northern Appalachia operations, the Partnership also recorded asset impairment and related charges for the sale of the Deane mining complex and the Cana Woodford oil and natural gas investment that are discussed further below. The Partnership recorded approximately $31.1 million of total asset impairment and related charges related to property, plant and equipment for the year ended December 31, 2015, which is recorded on the Asset impairment and related charges line of the consolidated statements of operations and comprehensive income.

Hopedale Mining Complex

The Partnership owns the Hopedale mining complex located in Northern Appalachia that includes an underground mine, preparation plant and full-service rail loadout facility. Hopedale had long-term coal sales contracts with two utility customers that officially expired at the end of 2015, but had carry-over provisions for contracted coal shipments that were not delivered in 2015 that are to be shipped in 2016. These carry-over tons under these sales contracts have prices well above current market levels for coal being sold in this region, but do not constitute annual coal sales volumes that Hopedale has historically been able to sell. The Partnership has been unsuccessful in securing any contracted sales business at profitable prices for Hopedale coal to replace these expiring sales contracts due to the depressed Northern Appalachia coal market conditions discussed above. Based upon these factors, the Partnership performed a detailed analysis of potential impairment for the Hopedale mining complex as of December 31, 2015. The Partnership’s projection of future undiscounted net cash flows to be generated from the Hopedale mining complex indicated that a potential impairment existed since the carrying amount of the long-lived asset group at the Hopedale mining complex exceeded the sum of the projected undiscounted net cash flows. Thus, the Partnership performed a further analysis to determine what, if any, impairment existed for the Hopedale mining complex asset group. The Partnership utilized a discounted cash flow method (i.e. income approach) to estimate the fair value of the Hopedale mining complex. Based on this analysis, the Partnership recorded total asset impairment and related charges of $19.0 million for the Hopedale mining complex for the year ended December 31, 2015.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

6. PROPERTY, PLANT AND EQUIPMENT (Continued)

Sands Hill Mining Complex

The Partnership owns the Sands Hill mining complex in Northern Appalachia that includes two surface coal mines located near Hamden, Ohio. The infrastructure at Sands Hill includes a coal preparation plant along with a river front barge and dock facility on the Ohio River. Coal produced at Sands Hill is primarily trucked to local industrial customers in the southeastern region of Ohio. In addition to coal production, limestone aggregate is also produced at Sands Hill as the process of removing overburden to access the coal seams includes the removal of high quality limestone. The Sands Hill complex includes limestone processing facilities that crush and size the limestone for sale to local customers. Sands Hill has contracted coal sales through the end of 2016 from its surface coal mine operations, but no contracted coal sales beyond this date. Limestone is sold on a non-contracted basis from Sands Hill’s operation.

During 2015, the Partnership contracted with a third party engineering firm to perform an audit of the Partnership’s coal mineral. As part of the third party expert’s audit, they performed an independent pro forma economic analysis using industry-accepted guidelines and these were used, in part, to classify coal mineral as either proven and probable coal reserves or non-reserve coal deposits, based on current market conditions. In the depressed Northern Appalachia coal market environment described above, a majority of the Sands Hill coal mineral that had previously been classified as proven and probable coal reserves was re-classified as non-reserve coal deposits as of December 31, 2015 due to unfavorable projected economic performance. The Partnership’s long-term plan had previously included the eventual development of underground coal reserves at Sands Hill, which were reclassified to non-reserve coal deposits as of December 31, 2015 per the discussion above. However, due to the lack of contracted sales beyond year-end 2016 and the depressed Northern Appalachia coal market discussed above, the Partnership decided as of December 31, 2015 to no longer pursue the development of the underground coal deposits at Sands Hill. Thus, the Partnership will cease surface coal mining at the end of 2016 when its Sands Hill contracted coal sales are fulfilled. The Partnership currently plans to continue limestone sales into 2017 since adequate limestone inventory will remain once coal mining has ceased. Based upon the factors that led to the Partnership’s decision to discontinue coal mining at Sands Hill as of year-end 2016, the Partnership performed a detailed analysis of potential impairment for the Sands Hill mining complex.

The Partnership’s projection of future undiscounted net cash flows to be generated from the Sands Hill mining complex indicated that a potential impairment existed since the carrying amount of the long-lived asset group at the Sands Hill mining complex exceeded the sum of the projected undiscounted net cash flows. Thus, the Partnership performed a further analysis to determine what, if any, impairment existed for the Sands Hill mining complex asset group. The Partnership utilized a discounted cash flow method (i.e. income approach) to estimate the fair value of the Sands Hill mining complex. Based on this analysis, the Partnership recorded total asset impairment and related charges of $5.7 million for the Sands Hill mining complex for the year ended December 31, 2015.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

6. PROPERTY, PLANT AND EQUIPMENT (Continued)

Leesville Field

The Partnership owns the Leesville field that is located in the Northern Appalachia coal region in eastern Ohio and is approximately 20 miles north of the Partnership’s Hopedale mining complex. The Leesville field is an undeveloped property that contains approximately 27.9 million tons of coal mineral that was classified as non-reserve coal deposits as of December 31, 2015. Prior to 2015, the Leesville field coal mineral had been classified as proven and probable coal reserves. The Leesville field coal mineral that had previously been classified as proven and probable coal reserves was re-classified as non-reserve coal deposits due to unfavorable projected economic performance based upon the third party engineering firm’s audit of the Partnership’s coal mineral that was discussed above. The Partnership’s long-term plan had included the eventual development of Leesville field to supplement the production from the Partnership’s nearby Hopedale mining complex because the coal qualities at Leesville closely matched the coal qualities at Hopedale. However, due to the recent downturn in the coal markets in Northern Appalachia discussed above, the reclassification of the Leesville field coal mineral to non-reserve coal deposits and the difficult economic conditions being experienced at Hopedale discussed above, the Partnership decided to reevaluate its plans for the Leesville field and examine this undeveloped property for potential impairment.

The Partnership believes that the Leesville field mineral would be uneconomic to produce in current market conditions, which are not expected to improve in the near future, and would not produce positive undiscounted net cash flows. Thus, this fact pattern indicated that a potential impairment existed since the carrying amount of the long-lived asset group at Leesville exceeded the sum of any projected undiscounted net cash flows. The Partnership analyzed the Leesville asset group and determined the fair value of the Leesville asset group should be based on any compensation that could be received by the Partnership by selling the assets to a third party in the current marketplace since it would be uneconomic to develop this project in the current market environment. Based on the current depressed state of the Northern Appalachia coal markets, the Partnership determined the Leesville field asset group had zero value as of December 31, 2015. The Partnership recorded total asset impairment and related charges of $3.5 million for the Leesville field for the year ended December 31, 2015.

Deane Mining Complex

On October 30, 2015, the Partnership executed a binding letter of intent with a third party for the purchase of the Partnership’s Deane mining complex. The sale of the Deane mining complex was completed on December 30, 2015. The Deane mining complex is located in eastern Kentucky and includes one underground mine that was idle during 2015. The infrastructure at the Deane mining complex consists of a preparation plant and a unit train loadout facility. The sale of the Deane complex transferred the underground mine, related equipment, the preparation plant and loadout facility in exchange for $2.0 million in the form of a promissory note receivable from the third party, while the Partnership also retained the mineral rights for the proven and probable steam coal reserves at this complex. The Deane mining complex sale also included a royalty agreement with the third party pursuant to which the Partnership will collect future royalties for coal mined and sold from the Deane complex. The sale of the Deane mining complex also relieved the Partnership of significant reclamation liabilities and bonding requirements. For third quarter 2015 financial reporting purposes, the Partnership evaluated the appropriate held for sale accounting criteria to determine if the Deane mining complex should be classified as held for sale as of September 30, 2015. Based on this evaluation, the Partnership determined the Deane mining complex met the held for sale criteria at September 30, 2015 and, accordingly, the Deane mining complex asset group was written down to its estimated fair value of $2.0 million. Due to the determination that the Deane mining complex met the held for sale criteria, the Partnership recorded an impairment charge of approximately $2.3 million for the third quarter ended September 30, 2015 and the Partnership ceased depreciation of this asset group at this time. Upon the completion of the sales agreement for the Deane mining complex, the Partnership removed the assets and liabilities related to this mining complex, which resulted in a gain of $0.4 million that was record in the Asset impairment and related charges line of the consolidated statements of operations and comprehensive income. The net $1.9 million asset impairment charge/loss for the Deane mining complex is recorded on the Asset impairment and related charges line of the consolidated statements of operations and comprehensive income.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

6. PROPERTY, PLANT AND EQUIPMENT (Continued)

Cana Woodford Oil and Natural Gas Investment

In August 2015, the Partnership completed the sale of its oil and natural gas investment of approximately 1,900 net mineral acres in the Cana Woodford region of western Oklahoma. The Partnership received a total of approximately $5.7 million in proceeds from the sale of the Cana Woodford oil and natural gas mineral rights. In the second quarter of 2015, the Partnership evaluated the appropriate held for sale accounting criteria to determine if the Cana Woodford mineral rights should be classified as held for sale. Based on this evaluation, the Partnership determined these mineral rights met the held for sale criteria at June 30, 2015 and, accordingly, these mineral rights were written down to their estimated fair value of $5.8 million. Due to the determination that the mineral rights met the held for sale criteria, the Partnership recorded an impairment charge of approximately $2.2 million for the Cana Woodford mineral rights during the second quarter of 2015. The impairment charge for the Cana Woodford mineral rights is recorded on the Asset impairment and related charges line of the consolidated statements of operations and comprehensive income.

Bevins Branch Operation

As discussed further below, the Partnership had a steam coal surface mine operation in eastern Kentucky (referred to as “Bevins Branch”) in its Central Appalachia segment that was idled during mid-2014 as that location’s contract with its single customer expired at that time. In May 2015, the Partnership finalized a contractual agreement with a third party to assume the Bevins Branch operation. As of December 31, 2015, the Partnership removed the assets and liabilities related to this mining complex, which resulted in a gain of $1.2 million that was record in the asset impairment and related charges line of the consolidated statements of operations and comprehensive income. In addition, as of December 31, 2015, the Partnership removed the approximately $2.3 million of remaining assets and any related liabilities that had been previously classified as held for sale on its consolidated statements of financial position.

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RHINO RESOURCE PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

6. PROPERTY, PLANT AND EQUIPMENT (Continued)

Asset Impairments-2014

Due to the prolonged weakness in the U.S. coal markets and the dim prospects for an upturn in the coal markets in the near term, in the fourth quarter of 2014, the Partnership performed a comprehensive review of its current coal mining operations as well as potential future development projects to ascertain any potential impairment losses. The Partnership’s appointment of new executive management in the fourth quarter of 2014 and the Partnership’s annual budgeting process in the fourth quarter of 2014 led to some changes in the Partnership’s strategic views. The Partnership identified various properties, projects and operations that were potentially impaired based upon changes in its strategic plans, market conditions or other factors. The Partnership recorded approximately $45.3 million of asset impairment and related charges for the year ended December 31, 2014, which is recorded on the Asset impairment and related charges line of the consolidated statements of operations and comprehensive income. As discussed in Note 3, the Partnership also recorded an impairment charge of $5.9 million related to the Rhino Eastern joint venture that is recorded on the Equity in net (loss)/income of unconsolidated affiliates line of the consolidated statements of operations and comprehensive income. The major components that comprise this total asset impairment and related charges are described below.

Red Cliff Project

The Partnership controls certain mineral rights and related surface land located eleven miles north of Loma, Colorado (referred to as the “Red Cliff” property). The Partnership had been working with the U.S. Bureau of Land Management (“BLM”) agency since 2005 on an environmental impact statement report (“EIS report”) that was required to be completed before the Partnership could move forward with the development and permitting of a mining project on the Red Cliff property. The Partnership capitalized the cost associated with the ongoing EIS report process as mine development costs, which had accumulated to approximately $11.2 million at December 31, 2014. In addition, the Partnership invested approximately $11.0 million to acquire land for the purpose of building a rail spur to the property and also purchased certain land tracts at a cost of approximately $5.0 million for the purpose of constructing a rail load-out facility. At December 31, 2014, the Partnership had a carrying amount of approximately $16.2 million for the purchased land and approximately $2.0 million for mineral rights associated with a lease of coal reserves with the BLM. These amounts are in addition to the $11.2 million of mine development cost discussed above. Additionally, the Partnership had $0.3 million of accrued liabilities in BLM refunds related to the Red Cliff EIS report. In summary, the Partnership had total carrying costs of approximately $29.1 million for the Red Cliff property at December 31, 2014 that was included in the Partnership’s Rhino Western segment. In early 2010, the Partnership had a detailed mine development study performed for the Red Cliff property by an independent third party, which estimated the total cost to build out the project would be approximately $420 million once the EIS report was finalized.

The EIS report outlines the environmental effects a potential project would have on the affected area. An initial EIS report was issued for public comment and review in 2009, which received over 20,000 comments in the 90-day comment period. Based on the volume of comments received on the initial report, the BLM decided that the EIS report process needed to be restarted. The Partnership agreed to restart the EIS report and the first two chapters of the EIS report were completed and work on chapters three and four was ready to begin in November 2014. Chapters three and four of the EIS report involve the costlier portion of report project since this includes detailed studies of the impacts to air quality, wildlife, etc. Up to the fourth quarter of 2014, the Partnership had decided to continue with the EIS report despite the prolonged weakness in the coal markets. However, the decision was made by the Partnership’s executive management to limit capital spending on all projects due to the weak coal market conditions that had adversely affected the Partnership’s financial results during 2014. Thus, due to the lack of progress in getting the EIS report finalized, the amount of money spent on the project to date, the impending higher costs to be incurred on the next phase of the EIS report and the desire to limit capital spending on certain projects due to the ongoing weakness in the coal markets, the Partnership decided to suspend the EIS report process in November 2014. Based on the fact pattern described above, the Partnership determined at December 31, 2014 that it would not pursue the development of the Red Cliff property and the related assets would be abandoned or sold for current market value.

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RHINO RESOURCE PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

6. PROPERTY, PLANT AND EQUIPMENT (Continued)

Since the Partnership reached a decision to abandon the potential development of the Red Cliff asset group at December 31, 2014, the Partnership evaluated the assets for impairment in accordance with applicable accounting guidelines. The Partnership determined that the mine development costs and mineral rights could not be sold to a third party, so the Partnership recorded an asset impairment loss of $13.2 million for the year ended December 31, 2014 for these assets, which represented the write down of the previous carrying value of these assets to zero. The land related to the Red Cliff project was recorded at fair value (based on a third party appraisal) less costs to sell for a total net fair value of approximately $6.9 million since the Partnership had committed to a plan to sell these assets, which resulted in an additional asset impairment charge of $9.3 million. In total, after netting the $0.3 million of BLM refunds that will not be repaid due to abandoning the EIS report process, the Partnership recorded asset impairment and related charges of $22.2 million related to its Red Cliff assets at December 31, 2014. The $6.9 million of land is recorded on the Non-current assets held for sale line of the Partnership’s consolidated statements of financial position.

Rich Mountain Property

In June 2011, the Partnership acquired coal mineral rights in Randolph and Upshur Counties, West Virginia for approximately $7.5 million (referred to as the “Rich Mountain” property). These development stage properties were unpermitted and contained no infrastructure. The Partnership conducted a core drilling program on the Rich Mountain property after it was purchased and determined the property contained an estimated 8.2 million tons of proven and probable underground metallurgical coal reserves. The Partnership capitalized the cost associated with its core drilling as mine development costs and the total value in property, plant and equipment for the Rich Mountain property was $8.3 million at December 31, 2014. The Partnership included this property in its Other category for segment reporting purposes since it was undeveloped.

The ongoing deterioration in the metallurgical coal markets has resulted in weak demand and historically low prices for this quality of coal. In the fourth quarter of 2014, the Partnership reassessed its strategy for these mineral rights and determined that it was not economical to develop this small coal reserve given the cost of building the required infrastructure. Although the Partnership did not have an active marketing strategy for the Rich Mountain property, the Partnership contacted a third party coal company with current operations in the general area of the Rich Mountain property to determine if there would be any interest in acquiring these mineral rights. Repeated attempts to obtain a non-binding price quote for the Rich Mountain mineral rights from this or other third parties resulted in no indicative bids being offered. Based on the factors discussed above, the Partnership determined at December 31, 2014 that it would not pursue the development of the Rich Mountain property and the related assets would be abandoned.

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RHINO RESOURCE PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

6. PROPERTY, PLANT AND EQUIPMENT (Continued)

In accordance with applicable accounting guidelines, the Partnership reviewed its Rich Mountain assets as of December 31, 2014 for any impairment indicators that may have been present for this long-lived asset group. Since the Partnership reached a decision to abandon the potential development of this asset group, the Partnership recorded an asset impairment loss of $8.3 million for the year ended December 31, 2014, which represented the write down of the previous carrying value of this asset group to zero. The Partnership determined the Rich Mountain assets had zero value since the Partnership could not solicit any financial bid for the Rich Mountain assets and the Partnership does see any alternative uses of the mineral right assets in their current state to generate value.

Bevins Branch Operation

The Partnership had a steam coal surface mine operation in eastern Kentucky, referred to as Bevins Branch, in its Central Appalachia segment that was idled during mid-2014 as that location’s contract with its single customer expired at that time. The Partnership actively attempted to market the coal from this operation to potential new customers and had maintained the mine so that production could resume in a relatively short time period whenever new customers could be secured. The Partnership had unsuccessfully been able to market the coal from this operation as the coal markets had been especially weak for coal from Central Appalachia and the lower quality of coal from the Bevins Branch operation proved especially difficult to market. As the Partnership found it difficult to market the quality of coal found at this mine in the current market place, the Partnership initiated negotiations in October 2014 with a third party for the potential sale of the Bevins Branch operation. At December 31, 2014, the Partnership received a letter of intent from the third party interested in the Bevins Branch operation to accept ownership of this operation, including its related reclamation obligations. In May 2015, the Partnership finalized a contractual agreement with the third party to assume the Bevins Branch operation. The contractual agreement had the third party assume the Bevins Branch operation where the only financial compensation the Partnership received is a future override royalty and the assumption of the reclamation obligations by the buyer. The closing of the transaction also allowed the Partnership to avoid the ongoing maintenance costs of this operation.

The Partnership reviewed the Bevins Branch operation as of December 31, 2014 in accordance with the accounting guidance for long-lived asset impairment. Since the Partnership received a letter of intent at December 31, 2014 to transfer this operation to a third party, the Partnership determined this asset group should be written down to an estimated fair value of approximately $2.4 million, which equates to the estimated fair value of the future royalty of approximately $0.2 million and the benefit to be recognized of transferring the reclamation obligations of approximately $2.2 million. Based on this analysis, the Partnership recorded total asset impairment and related charges of $8.3 million for the Bevins Branch operation for the year ended December 31, 2014. The total asset impairment and related charges include approximately $1.7 million for the write-off of advanced royalty balances related to the Bevins Branch operation that the Partnership does not expect to recover in the future. The Partnership also recorded an $6.6 million write-down of mineral value and mine development costs to the estimated fair value of $2.4 million of the royalty asset and benefit from transferring the reclamation obligations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

6. PROPERTY, PLANT AND EQUIPMENT (Continued)

Other Asset Impairments

As of December 31, 2014, the Partnership also performed a comprehensive review of its other mining operations, primarily in Central Appalachia since this region had experienced the most extensive downturn in the coal markets, to determine if any other assets might be potentially impaired. The Partnership’s review resulted in an additional $6.5 million of asset impairment and related charges, with $3.2 million related to mineral rights, $1.8 million of mine development costs and $1.5 million of advanced royalties that the Partnership did not expect to recover. The majority of these additional charges, approximately $4.9 million, related to low quality steam coal operations in Central Appalachia that the Partnership determined were uneconomical to mine due to the ongoing downturn in the markets for this quality of coal. The remaining $1.5 million primarily related to advanced royalties that the Partnership did not expect to recover at its Central Appalachia operations, which were determined as part of the Partnership’s strategic reviews that were conducted in the fourth quarter of 2014.

7. GOODWILL AND INTANGIBLE ASSETS

ASC Topic 350 addresses financial accounting and reporting for goodwill and other intangible assets subsequent to their acquisition. Under the provisions of ASC Topic 350, goodwill and other intangible assets with indefinite useful lives are not amortized but instead tested for impairment at least annually. The Partnership reviews finite-lived intangible assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.

Intangible assets of the Partnership as of December 31, 2015 consisted of the following:

The Partnership had a licensing agreement with a third party that was attempting to develop a commercially viable roof bolt product that utilized the intellectual property of the Partnership’s patent and developed technology assets. In the fourth quarter of 2015, the third party notified the Partnership that they would not renew the licensing agreement and pursue the development of the product that would utilize the Partnership’s patent and developed technology. Based on the third party’s decision to discontinue the license agreement, the Partnership performed an impairment analysis of its patent and developed technology intangible assets. This analysis determined these intangible assets had no realizable value since the Partnership could not market these asset to another third party for development and the Partnership could not internally develop a product utilizing the technology of these intangible assets. As of December 31, 2015, the Partnership recorded an impairment charge of approximately $0.5 million to reduce the carrying amount of its patent and developed technology intangible assets to zero. The impairment charge for the intangible assets is recorded on the Asset impairment and related charges line of the consolidated statements of operations and comprehensive income.

The Partnership considers the trade name and customer list intangible assets to have a useful life of twenty years. These intangible assets are amortized over their useful life on a straight line basis. Amortization expense for the years ended December 31, 2015 and 2014 is included in the depreciation, depletion and amortization table included in Note 6.

The future total amortization expense for each of the five succeeding years related to intangible assets that are currently recorded in the consolidated statement of financial position is estimated to be as follows at December 31, 2015:

As of December 31, 2015 and 2014, the non-current receivable balance of $23.9 million and $14.2 million, respectively, consisted of the amount due from the Partnership’s workers’ compensation and black lung insurance providers for potential claims that are the primary responsibility of the Partnership, but are covered under the Partnership’s insurance policies. See Note 12 for a discussion of the $23.9 million and $14.2 million that is also recorded in the Partnership’s other non-current workers’ compensation liabilities.

The $2.3 million deferred revenue balance as of December 31, 2015 decreased compared to the $4.1 million balance as of December 31, 2014 due to adverse coal market conditions in Central Appalachia during 2015 that affected lessees at the Partnership’s Elk Horn coal leasing operation. The $0.3 million and $0.5 million accrued for insured litigation claims as of December 31, 2015 and 2014, respectively, consists of probable and estimable litigation claims that are the primary obligation of the Partnership. The amount accrued for litigation claims decreased due to the settlement of various litigation claims during the year ended December 31, 2015. This amount is also due from the Partnership’s insurance providers and is included in Accounts receivable, net of allowance for doubtful accounts on the Partnership’s consolidated statements of financial position. The Partnership presents this amount on a gross asset and liability basis as a right of setoff does not exist per the accounting guidance in ASC Topic 210. This presentation has no impact on the Partnership’s results of operations or cash flows.

Senior Secured Credit Facility with PNC Bank, N.A. —On July 29, 2011, the Operating Company and the Partnership, as a guarantor, executed an amended and restated senior secured credit facility with PNC Bank, N.A., as administrative agent, and a group of lenders, which are parties thereto. The maximum availability under the amended and restated credit facility was $300.0 million, with a one-time option to increase the availability by an amount not to exceed $50.0 million. Of the $300.0 million, $75.0 million was available for letters of credit. As described below, in March 2016, December 2015, April 2015 and March 2014, the amended and restated credit facility was amended and the borrowing capacity under the facility was reduced to $80.0 million, with the amount available for letters of credit reduced to $30 million. Borrowings under the facility bear interest based upon the current PRIME rate plus an applicable margin of 3.50%. As part of the agreement, the Operating Company is required to pay a commitment fee on the unused portion of the borrowing availability equal to 1.0%. Borrowings on the amended and restated senior secured credit facility are collateralized by all the unsecured assets of the Partnership. The amended and restated senior secured credit facility requires the Partnership to maintain certain minimum financial ratios and contains certain restrictive provisions, including among others, restrictions on making loans, investments and advances, incurring additional indebtedness, guaranteeing indebtedness, creating liens, and selling or assigning stock. The Partnership was in compliance with all covenants contained in the amended and restated senior secured credit facility as of and for the twelve-month period ended December 31, 2015. The amended and restated senior secured credit facility is set to expire in July 2016.

In March 2014, the Partnership entered into a second amendment of its amended and restated senior secured credit facility with PNC Bank, N.A., as administrative agent, and a group of lenders, which are parties thereto. This second amendment permitted the Partnership to sell certain assets to Gulfport, as described in Note 4, which previously constituted a portion of the collateral under the amended and restated senior secured credit facility. This second amendment also reduced the borrowing capacity under the amended and restated senior secured credit facility to a maximum of $200 million and altered the maximum leverage ratio. In addition, the second amendment adjusted the maximum investments (other than by the Partnership) in hydrocarbons, hydrocarbon interests and assets and activities related to hydrocarbons, in each case, excluding coal, in an aggregate amount not to exceed $50 million. As part of executing the second amendment to the amended and restated senior secured credit facility, the Operating Company paid a fee of approximately $0.1 million to the lenders in March 2014, which was recorded in Debt issuance costs in Other non-current assets on the Partnership’s consolidated statements of financial position and in Cash flows (used in) financing activities in the Partnership’s consolidated statements of cash flows. In addition, the Partnership recorded a non-cash charge of approximately $1.1 million to write-off a portion of its unamortized debt issuance costs since the second amendment reduced the borrowing capacity under the amended and restated senior secured credit facility, which was recorded in Interest expense on the Partnership’s consolidated statements of operations and comprehensive income.

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RHINO RESOURCE PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

10. DEBT (Continued)

In April 2015, the Partnership entered into a third amendment of its amended and restated senior secured credit facility. The third amendment extended the expiration date of the amended and restated credit agreement to July 2017. The extension is contingent upon (i) the Partnership’s leverage ratio being less than or equal to 2.75 to 1.0 and (ii) the Partnership having liquidity greater than or equal to $15 million, in each case for either the quarter ending December 31, 2015 or March 31, 2016. If both of these conditions are not satisfied for one of the periods, the expiration date of the amended and restated credit agreement will revert to July 2016. See Note 1 for further discussion regarding the extension of the expiration date of the credit agreement. The third amendment also reduced the borrowing commitment under the credit facility to a maximum of $100 million and reduced the amount available for letters of credit to $50 million. The third amendment also provides that the disposition of any assets by the Partnership consisting of net cash proceeds up to an aggregate $35 million shall reduce the total commitment under the facility on a dollar-for-dollar basis by up to a total of $10 million, and any dispositions of assets in excess of $35 million in the aggregate shall reduce the commitment under the facility on a dollar-for-dollar basis. The third amendment changed the maximum leverage ratio to 3.75 to 1.0 through September 30, 2015. The maximum leverage ratio decreases to 3.5 to 1.0 from October 1, 2015 through December 31, 2015 and then decreases to 3.25 to 1.0 from January 1, 2016 through March 31, 2016. The maximum leverage ratio decreases to 3.0 to 1.0 after March 31, 2016. Notwithstanding the above, the leverage ratio shall be reduced by 0.25 for every $10 million of gross cash proceeds received by the Partnership from the sale of any assets; provided, however, that in no event shall the maximum permitted leverage ratio be reduced below 3.0 to 1.0. The third amendment limits the Partnership’s quarterly distributions to a maximum of $0.035 per unit unless (i) the pro forma leverage ratio of the Partnership, immediately prior to and after giving effect to such distribution, is less than or equal to 3.0 to 1.0 and (ii) the amount of borrowings available under the credit facility, immediately prior to and after giving effect to such distribution, is at least $20 million. In addition, the third amendment removed the interest coverage ratio covenant and replaced it with a minimum fixed charge coverage ratio, which consists of the ratio of consolidated EBITDA minus maintenance capital expenditures to fixed charges. Fixed charges are defined in the third amendment to include the sum of cash interest expense, scheduled principal installments on indebtedness (as adjusted for prepayments), dividends and distributions. Commencing with the quarter ended September 30, 2015, the fixed charge coverage ratio for the trailing four quarters must be a minimum of 1.1 to 1.0. The third amendment also limits any investments made by the Partnership, including investments in hydrocarbons, to $10 million provided that the leverage ratio is less than or equal to 3.0 to 1.0 and the borrowers’ available liquidity is at least $20 million. The third amendment does not permit the Partnership to issue any new equity of the Partnership unless the proceeds of such equity issuance are used to reduce the outstanding borrowings under the facility. Issuances of equity under the Partnership’s long-term incentive plan are excluded from this requirement. The third amendment limits the amount of the Partnership’s capital expenditures to $20.0 million for fiscal year 2015 and limited capital expenditures to $27.5 million for each fiscal year after 2015. However, to the extent that capital expenditures for any fiscal year are less than indicated above, the Partnership may increase the following year’s capital expenditures by the lesser of such unused amount or $5.0 million. As part of executing the third amendment to the amended and restated senior secured credit facility, the Operating Company paid a fee of approximately $2.1 million to the lenders in April 2015, which was recorded in Debt issuance costs in Other non-current assets on the Partnership’s consolidated statements of financial position. In addition, the Partnership recorded a non-cash charge of approximately $0.2 million to write-off a portion of its unamortized debt issuance costs since the third amendment reduced the borrowing commitment under the amended and restated senior secured credit facility, which was recorded in Interest expense on the Partnership’s consolidated statements of operations and comprehensive income.

From the date of the third amendment in April 2015 of the amended and restated senior secured credit facility through December 31, 2015, the Partnership received gross proceeds from asset sales of approximately $14.3 million. Per the terms of the third amendment of the amended and restated senior secured credit facility described above for gross proceeds from asset sales in excess of $10 million but less than $35 million, the borrowing commitment under the credit facility was reduced to a maximum of $90 million and the maximum permitted leverage ratio decreased to 3.25 to 1.0 as of December 31, 2015.

On March 17, 2016, the Operating Company entered into an amendment (the “Fourth Amendment”) of its amended and restated senior secured credit facility. The Fourth Amendment amends the definition of change of control in the amended and restated credit agreement to permit Royal to purchase the membership interests of the General Partner and sets the expiration date of the facility at July 2016. The Fourth Amendment reduces the borrowing capacity under the credit facility to a maximum of $80 million and reduces the amount available for letters of credit to $30 million. The Fourth Amendment eliminates the option to borrow funds utilizing the LIBOR rate plus an applicable margin and establishes the borrowing rate for all borrowings under the facility to be based upon the current PRIME rate plus an applicable margin of 3.50%. The Fourth Amendment eliminates the capability to make Swing Loans under the facility and eliminates the ability of the Partnership to pay distributions to its common or subordinated unitholders. The Fourth Amendment alters the maximum leverage ratio, calculated as of the end of the most recent month, on a trailing twelve month basis, to 6.75 to 1.00. The leverage ratio shall be reduced by 0.50 to 1.00 for every $10 million of net cash proceeds, in the aggregate, received by the Partnership after the date of the Fourth Amendment from a liquidity event; provided, however, that in no event shall the maximum permitted leverage ratio be reduced below 3.00 to 1.00. A liquidity event is defined in the Fourth Amendment as the issuance of any equity by the Partnership on or after the Fourth Amendment effective date (other than the Royal equity contribution discussed above), or the disposition of any assets by the Partnership. The Fourth Amendment requires the Partnership to maintain minimum liquidity of $5 million and minimum EBITDA, calculated as of the end of the most recent month, on a trailing twelve month basis, of $8 million. The Fourth Amendment limits the amount of the Partnership’s capital expenditures to $15 million, calculated as of end of the most recent month, on a trailing twelve month basis. The Fourth Amendment requires the Partnership to provide monthly financial statements and a weekly rolling thirteen week cash flow forecast to the administrative agent.

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RHINO RESOURCE PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

At December 31, 2015, the Operating Company had borrowed $36.0 million at a variable interest rate of LIBOR plus 4.50% (4.70% at December 31, 2015) and an additional $5.2 million at a variable interest rate of PRIME plus 3.50% (7.00% at December 31, 2015). In addition, the Operating Company had outstanding letters of credit of $27.4 million at a fixed interest rate of 4.50% at December 31, 2015. Based upon a maximum borrowing capacity of 3.25 times a trailing twelve-month EBITDA calculation (as defined in the credit agreement), the Operating Company had not used $1.1 million of the borrowing availability at December 31, 2015.

For the year ended December 31, 2014, the Partnership capitalized interest costs of approximately $0.1 million, which was related to the construction of its Pennyrile mine in western Kentucky. The Partnership did not capitalize any interest costs during the year ended December 31, 2015.

Principal payments on long-term debt due subsequent to December 31, 2015 are as follows: