Rhino Resource Partners LP Announces Agreements with Royal
Energy Resources, Inc. and Yorktown Partners LLC
LEXINGTON, KY-(Marketwired - Dec 30, 2016) - Rhino Resource
Partners LP (OTCQB: RHNO) ("Rhino" or the "Partnership") announced
today that it has entered into an option agreement (the "Option
Agreement") with Royal Energy Resources, Inc. (OTCQB: ROYE)
("Royal"), Rhino Resource Partners Holdings, LLC ("Rhino
Holdings"), an entity wholly-owned by certain investment
partnerships managed by Yorktown Partners LLC ("Yorktown"), and
Rhino GP LLC, the general partner of Rhino, whereby Rhino has
received an option (the "Call Option") from Rhino Holdings to
acquire substantially all of the outstanding common stock of
Armstrong Energy, Inc. ("Armstrong Energy") that is currently owned
by investment partnerships managed by Yorktown. The Option
Agreement stipulates that Rhino can exercise the Call Option no
earlier than January 1, 2018 and no later than December 31, 2019.
In exchange for Rhino Holdings granting Rhino the Call Option to
purchase Armstrong, the Partnership issued 5.0 million new common
units (the "Call Option Premium Units") to Rhino Holdings upon the
execution of the Option Agreement.
The Option Agreement stipulates Rhino can exercise the Call
Option and purchase the common stock of Armstrong Energy, a coal
producing company with mines located in the Illinois Basin in
western Kentucky, in exchange for a number of newly issued Rhino
common units to be issued to Rhino Holdings, which when added with
the Call Option Premium Units discussed above, will result in Rhino
Holdings owning 51% of the fully diluted common units of Rhino. The
purchase of the Armstrong Energy common stock through the exercise
of the Call Option would also require Royal to issue 51% ownership
interest of Rhino GP, currently owned and controlled by Royal, to
Rhino Holdings. The exercise of the Call Option in the Option
Agreement is dependent upon a successful negotiation with the
current bondholders of Armstrong Energy to restructure their bonds
as well as the refinancing of the Partnership's current revolving
credit facility.
The Option Agreement also contains an option (the "Put Option")
granted from Rhino to Rhino Holdings whereby Rhino Holdings has the
right, but not the obligation, to cause the Partnership to purchase
substantially all of the outstanding common stock of Armstrong
Energy from Rhino Holdings under the same terms and conditions
discussed above for the Call Option. The exercise of the Put Option
is dependent upon a successful negotiation with the current
bondholders of Armstrong Energy to restructure their bonds as well
as the termination and repayment of any outstanding balances under
the Partnership's current revolving credit facility.
Rhino and Armstrong Energy will continue to operate and be
governed as independent entities until the Call Option or Put
Option is exercised if either such options were to occur.
Rhino also announced today that it has entered into a new
preferred financing agreement (the "Financing Agreement") with a
group of investors led by Weston Energy LLC, a Yorktown portfolio
company. The investors will invest $15 million of cash in exchange
for Series A Preferred units of Rhino. Rhino will use the proceeds
to reduce its current outstanding debt under its credit facility as
well as potentially expand the Partnership's metallurgical coal
production in Central Appalachia to take advantage of the recent
upturn in the worldwide metallurgical coal markets. The Series A
Preferred has a five-year term and requires the Partnership to
remit 50% of the free cash flow, as defined in the Financing
Agreement, from Rhino's Central Appalachia operations, subject to
an 8% minimum annual rate. The Series A Preferred can be converted
into Rhino common units once a cumulative return of cash threshold
is met under terms defined in the Financing Agreement.
About Rhino Resource Partners LP
Rhino Resource Partners LP is a diversified energy limited
partnership that is focused on coal and energy related assets and
activities, including energy infrastructure investments. Rhino
produces metallurgical and steam coal in a variety of basins
throughout the United States. Additional information regarding
Rhino is available on its web site - RhinoLP.com.
About Royal Energy Resources, Inc.
Royal Energy Resources, Inc. is a diversified energy company,
with investments and holdings in coal, gas and renewable energy
assets in North America. Royal is the majority equity owner of
Rhino Resource Partners LP, and its general partner, Rhino GP LLC.
Additional information regarding Royal is available on its web site
- royalenergy.us.
About Armstrong Energy, Inc.
Armstrong Energy, Inc., through its 100% wholly owned
subsidiaries, is a leading producer of steam coal in the Illinois
Basin. Armstrong controls over 550 million tons of proven and
probable coal reserves and operates six mines in Western Kentucky.
Armstrong ships coal to utilities via rail, truck and barge and has
the capability to provide low cost custom blend coal to fuel
virtually any electric power plant in the Midwest and Southeast
regions of the nation. Additional information regarding Armstrong
is available on its web site - www.armstrongenergyinc.com.
About Yorktown Partners LLC
Yorktown Partners LLC is a private investment manager founded in
1991 that invests exclusively in the energy industry. Yorktown has
raised 11 private equity funds totaling over $8 billion. The
investors in Yorktown's funds include university endowments,
foundations, families, insurance companies and other institutional
investors.
Forward Looking Statements
Except for historical information, statements made in this press
release are "forward-looking statements." All statements, other
than statements of historical facts, included in this press release
that address activities, events or developments that Rhino expects,
believes or anticipates will or may occur in the future are
forward-looking statements. These forward-looking statements are
based on Rhino's current expectations and beliefs concerning future
developments and their potential effect on Rhino's business,
operating results, financial condition and similar matters. While
management believes that these forward-looking statements are
reasonable as and when made, there can be no assurance that future
developments affecting Rhino will turn out as Rhino anticipates.
Whether actual results and developments in the future will conform
to expectations is subject to significant risks, uncertainties and
assumptions, many of which are beyond Rhino's control or ability to
predict. Therefore, actual results and developments could
materially differ from Rhino's historical experience, present
expectations and what is expressed, implied or forecast in these
forward-looking statements. Important factors that could cause
actual results to differ materially from those in the
forward-looking statements include, but are not limited to, the
following: Rhino's inability to obtain additional financing
necessary to fund its capital expenditures, meet working capital
needs and maintain and grow its operations or its inability to
obtain alternative financing upon the expiration of its credit
facility; Rhino's future levels of indebtedness, liquidity and
compliance with debt covenants; volatility and recent declines in
the price of Rhino's common units; sustained depressed levels of or
decline in coal prices, which depend upon several factors such as
the supply of domestic and foreign coal, the demand for domestic
and foreign coal, governmental regulations, price and availability
of alternative fuels for electricity generation and prevailing
economic conditions; declines in demand for electricity and coal;
current and future environmental laws and regulations, which could
materially increase operating costs or limit Rhino's ability to
produce and sell coal; extensive government regulation of mine
operations, especially with respect to mine safety and health,
which imposes significant actual and potential costs; difficulties
in obtaining and/or renewing permits necessary for operations; the
availability and prices of competing electricity generation fuels;
a variety of operating risks, such as unfavorable geologic
conditions, adverse weather conditions and natural disasters,
mining and processing equipment unavailability, failures and
unexpected maintenance problems and accidents, including fire and
explosions from methane; poor mining conditions resulting from the
effects of prior mining; the availability and costs of key supplies
and commodities such as steel, diesel fuel and explosives;
fluctuations in transportation costs or disruptions in
transportation services, which could increase competition or impair
Rhino's ability to supply coal; a shortage of skilled labor,
increased labor costs or work stoppages; Rhino's ability to secure
or acquire new or replacement high-quality coal reserves that are
economically recoverable; material inaccuracies in Rhino's
estimates of coal reserves and non-reserve coal deposits; existing
and future laws and regulations regulating the emission of sulfur
dioxide and other compounds, which could affect coal consumers and
reduce demand for coal; federal and state laws restricting the
emissions of greenhouse gases; Rhino's ability to acquire or
failure to maintain, obtain or renew surety bonds used to secure
obligations to reclaim mined property; Rhino's dependence on a few
customers and its ability to find and retain customers under
favorable supply contracts; changes in consumption patterns by
utilities away from the use of coal, such as changes resulting from
low natural gas prices; changes in governmental regulation of the
electric utility industry; Rhino's ability to successfully
diversify its operations into other non-coal natural resources;
disruption in supplies of coal produced by contractors operating
Rhino's mines; defects in title in properties that Rhino owns or
losses of any of its leasehold interests; Rhino's ability to retain
and attract senior management and other key personnel; material
inaccuracy of assumptions underlying reclamation and mine closure
obligations; and weakness in global economic conditions.
Other factors that could cause Rhino's actual results to differ
from its projected results are described in its filings with the
Securities and Exchange Commission, including its Annual Report on
Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on
Form 8-K.
Readers are cautioned not to place undue reliance on
forward-looking statements, which speak only as of the date hereof.
Rhino undertakes no obligation to publicly update or revise any
forward-looking statements after the date they are made, whether as
a result of new information, future events or otherwise, unless
required by law.
Investor Contact: Scott Morris +1 859.519.3622
smorris@rhinolp.com
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