UBS2012 Coal ConferenceBoston, MANovember 29, 2012
Forward Looking StatementsThe statements made by representatives of Natural Resource Partners L.P. (“NRP”)during the cours...
NRP Overview               3
Business Overview                                                                              Revenues from NRP’s Assets ...
No Direct Operating Costs or Risks• Lack of ordinary operating costs and limited direct exposure to environmental,    perm...
Overview of NRP’s Coal Business• Diversified platform across the coal industry• 5th largest owner of coal reserves in the ...
Diverse Customer Base of Leading U.S. Coal Producers • Approximately 58% of coal royalty revenues from top 10 coal produce...
NRP’s Illinois Basin Growth Prospects• 2005 increased exposure to Illinois Basin• Production increased   – 5% to 22% of to...
NRP – Significant Metallurgical Exposure• 20-25% of all the metallurgical coal              U.S. Coal Production (5-Year A...
Growing Infrastructure Business•   Own preparation plants, rail load-outs    and beltline structures for both coal and    ...
Overview of NRP’s Aggregates Business       • 380 million tons of aggregates in 9 states for NRP (1)       • BRP has produ...
Overview of NRP’s Oil and Gas Business• Own, manage and lease oil and gas mineral                             Oil and Gas ...
Platform for Additional Growth -BRP Mineral Venture - ~ 9 mm acres •Formed venture with International Paper June 2010 - BR...
New Revenue Streams Through Disciplined Acquisition Strategy• 26% of 2011 revenues from assets other than coal royalty rev...
Executing on Business Strategy• Business strategy developed to exploit NRP’s competitive advantages during times of positi...
Consistent Growth and Diversification of Revenues    2012E reflects the midpoint of the guidance range updated in August 2...
Paid to Wait for Market Turnaround• Current quarterly distribution - $0.55 per unit• Large cash balance to help protect di...
Unique Tax Attributes for Individuals• Portion of current income deferred due to depletion, depreciation• Current income p...
Poised for Growth in 2013 and beyond• Potential for higher coal production  – NRP’s lessees produced 49.2 million tons in ...
Coal Market Outlook                      20
Coal – Fastest Growing Fossil Fuel in 2011• 2011 - Global primary energy consumption                 Global Energy Consump...
Global Coal Consumption Continues to Increase • Three largest global consumers of coal in                                 ...
U.S. Steam Coal Market • Coal continues to be a low-cost, reliable, and abundant source of fuel • Over the past 10 years, ...
Metallurgical Coal Market                            Global Steel Production                                              ...
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NRP UBS

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NRP UBS

  1. 1. UBS2012 Coal ConferenceBoston, MANovember 29, 2012
  2. 2. Forward Looking StatementsThe statements made by representatives of Natural Resource Partners L.P. (“NRP”)during the course of this presentation that are not historical facts are forward-looking statements. Although NRP believes that the assumptions underlying thesestatements are reasonable, investors are cautioned that such forward-lookingstatements are inherently uncertain and necessarily involve risks that may affectNRP’s business prospects and performance, causing actual results to differ fromthose discussed during the presentation.Such risks and uncertainties include, by way of example and not of limitation:general business and economic conditions; decreases in demand for coal; changesin our lessees’ operating conditions and costs; changes in the level of costs relatedto environmental protection and operational safety; unanticipated geologicproblems; problems related to force majeure; potential labor relations problems;changes in the legislative or regulatory environment; and lessee production cuts.These and other applicable risks and uncertainties have been described more fully inNRP’s most recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q.NRP undertakes no obligation to publicly update any forward-looking statements,whether as a result of new information or future events. 2
  3. 3. NRP Overview 3
  4. 4. Business Overview Revenues from NRP’s Assets (2011)• Own, manage and lease mineral properties in the U.S. – 2.3 billion tons of proven and probable coal reserves in three major coal producing regions – 380 million tons of aggregate reserves – Oil and gas• Lease reserves to experienced mine operators under long-term leases in exchange for royalty payment – >percentage of gross sales price or fixed price per ton – periodic minimum payments NRP Revenues (2011)• Own and lease infrastructure assets including ($ in millions) transportation, handling and processing facilities and receive throughput fees• Expect 2012 revenue guidance in range of $340 million - $365 million• Publicly traded on NYSE (“NRP”) with market cap of $2.0 billion(1)(1) Market data as of November 23, 2012. Unit price of $18.74 4
  5. 5. No Direct Operating Costs or Risks• Lack of ordinary operating costs and limited direct exposure to environmental, permitting and labor risks drive industry-leading margins Operating Cost Operating Risks• Capital Expenditures • Reclamation Exposure• Labor • Regulatory/Permitting• Employee Benefits • Competition• Property Taxes • Weather• Transportation / Processing • Economy MLP EBITDDA Margins (2011) 87.3% 56.7% 33.3% 31.1% 23.7% 20.9% 12.9% 9.9% 9.0% 7.3% 4.6% NRP Boardwalk Williams Alliance Energy PVR Partners Enbridge Buckeye Enterprise NuStar Energy Plains All Pipeline Partners Resource Transfer Energy Partners Products American Partners Partners Partners Pipeline 5Source: Company filings and FactSet.
  6. 6. Overview of NRP’s Coal Business• Diversified platform across the coal industry• 5th largest owner of coal reserves in the U.S. – 2.3 billion tons• Strategically located in Appalachia, Illinois Basin, Western U.S. Illinois Basin• Increased production expected from development of ILB properties Reserves 276 mt Production 10.2 mt• LTM coal production of 49.5 mt and coal royalty revenues of $260.7 million % Metallurgical 0% % Underground 95% Key Lessees The Cline Group, Knight Hawk Coal Northern Powder River Basin Northern AppalachiaReserves 102 mt Reserves 494 mtProduction 2.1 mt Production 7.6 mt% Metallurgical 0% % Metallurgical 2%% Underground 0% % Underground 99%Key Lessees Westmoreland Coal Key Lessees Alliance Resource Partners, Arch Coal, MetInvest Central Appalachia Reserves 1,281 mt Production 26.4 mt Southern Appalachia States in which NRP % Metallurgical 31% Reserves 123 mt generates coal royalty % Underground 82% revenues/overrides Production 2.8 mt Key Lessees Alpha Natural % Metallurgical 35% Resources, Arch % Underground 79% Coal, Mechel, Patriot Key Lessees Cliffs Natural Resources 6Note: LTM as of September 30, 2012.
  7. 7. Diverse Customer Base of Leading U.S. Coal Producers • Approximately 58% of coal royalty revenues from top 10 coal producers in U.S. • Over 200 leases with over 70 lessees • Well-established lessee base that invested significant capital to develop operations Top 10 U.S. Coal Producers (2011) FY 2011 Market 2011 % of U.S. Total($ in billions) Revenues Capitalization(1) Location Production Coal ProductionPeabody Energy Corporation $8.0 $6.7 PRB, ILB, Australia 203.9 18.6%Arch Coal, Inc. 4.3 1.4 WBIT, PRB, CAPP 151.7 13.9Alpha Natural Resources 7.0 1.6 PRB, CAPP, NAPP 102.3 9.3Cloud Peak Energy, Inc. 1.6 1.2 PRB 97.2 8.9CONSOL Energy Inc. 6.0 7.3 NAPP, CAPP 62.6 5.7Luminant (Energy Future Holdings) n/a n/a Texas 32.3 3.0Alliance Resource Partners 1.8 2.1 ILB, NAPP, CAPP 30.8 2.8Kiewit Mining Group, Inc. n/a n/a PRB 30.0 2.7Patriot Coal Corporation 2.4 0.0 ILB, NAPP, CAPP 28.8 2.6North American Coal Corporation n/a n/a ND, Gulf Coast 27.9 2.5Source: 2011 National Mining Association survey of major coal producers published in May 2012; data is as of 2011.Note: The Company’s lessees denoted by blue shade.(1) Market data as of November 20, 2012. 7
  8. 8. NRP’s Illinois Basin Growth Prospects• 2005 increased exposure to Illinois Basin• Production increased – 5% to 22% of total today – expected to continue to grow• Invested ~$586 million since 2005 on coal reserve royalty and infrastructure properties• Projects recent completion – Hillsboro (Deer Run) –should add 7-9 million tons on an annual basis – Sugar Camp infrastructure and ORRI – add ~$8 million in cash flows in 2012• Agreement with Cline Group - opportunities on up to 3 billion tons of coal reserves or infrastructure• Illinois Basin coal well situated – Additional scrubbers to handle Ill Basin coal – Transportation and BTU advantage over PRB coals – Thicker coal seams than Appalachia means very low operating costs compared to CAPP – Export capability through the mouth of the Mississippi River 8
  9. 9. NRP – Significant Metallurgical Exposure• 20-25% of all the metallurgical coal U.S. Coal Production (5-Year Average) produced in the U.S. is produced from NRP properties – In 2006, it was as high as 30%• Historically metallurgical coal has made up a significant portion of NRP’s coal royalty revenue – 22% to 37% of production – 29% to 47% of coal royalty revenues NRP’s % of U.S. Met Production (5-Year Average) – 3Q 2012 YTD - 33% of production and 44% of coal royalty revenues• 19 lessees currently produce metallurgical coal from NRP properties• Increases in metallurgical demand or prices can have a profound impact on NRP 9
  10. 10. Growing Infrastructure Business• Own preparation plants, rail load-outs and beltline structures for both coal and aggregates• Currently own 11 coal assets and 1 aggregate plant• Fees received based on • % of the gross selling price or • Fixed fee per ton of throughput• Recent Ill. Basin acquisition to provide significant increase for 2012 and beyond• Working to expand business 10
  11. 11. Overview of NRP’s Aggregates Business • 380 million tons of aggregates in 9 states for NRP (1) • BRP has production in 5 states • Currently less than 2% of revenues ($6.7 mm in 2011 on 5.9 mm tons production), but growing • Invested ~ $138 million since 2006 to acquire assets (1) White County (Mar 2010) BRP Hi-Crush ORRI (Nov 2012) Limestone (Jun DuPont (Jan 2007) Frac Sand 2010) Sand and GravelNorthern California (Apr 2010)Silica Putnam County (Apr 2010) Limestone Livingston County (Feb 2011) Limestone Rockmart (Jun 2010) Slate States in which NRP generates BRP aggregate revenues/overrides (Jun Date of acquisition in parenthesis 2010) BRP Tyler, TX (Jun 2011) (Jun (1) Does not include BRP Frac Sand 2010) Wise County (Jul 2009) McMinn County (Mar 2011) Limestone Limestone 11
  12. 12. Overview of NRP’s Oil and Gas Business• Own, manage and lease oil and gas mineral Oil and Gas Revenues from NRP’s Assets properties in the U.S. – Over 395,000 net leased oil, gas and CBM acres – More than 1,000 producing wells – Additional un-leased mineral interests throughout United States• Interest types include fee mineral ownership, overriding royalty ownership – Actively work with operators to provide best scenario for successful development• Since Dec 2011, acquired 19,200 net mineral States in which NRP generates acres in the Mississippian Lime oil play in oil and gas revenues Oklahoma for ~$64 million – Currently leased to several active operators – Continuing development through horizontal drilling• Continuing to lease BRP oil and gas acreage• Actively seeking to grow oil and gas portfolio through acquisitions – Minerals, royalties, ORRI, Net Profits Interest acquisitions – Provide development capital to operators in exchange for non-cost bearing interest• Oil and gas royalties currently only 4% of revenues, but growing as further development occurs on NRP properties 12
  13. 13. Platform for Additional Growth -BRP Mineral Venture - ~ 9 mm acres •Formed venture with International Paper June 2010 - BRP •Own and manage ~9.1 million acres of mineral rights previously held by IP •NRP paid $42.5 million and has annual cumulative preferred distribution of $4.25 MM and 51% of any excess income •Royalty based model similar to NRP other assets •NRP has received distributions with regard to: •2012 (Jan – Sept) - $4.5 million •2011 - $6.9 million •2010 - $2.5 million (7 months) Current Income Development Oil and gas royalties √ √ ~75% of properties are located in Coal royalties √ √ the Gulf Coast region with next Aggregate royalties √ √ largest region the Pacific Cell tower royalties √ Northwest Coal bed methane √ Geothermal √ Water rights √ Precious metals √ Industrial minerals √ 13
  14. 14. New Revenue Streams Through Disciplined Acquisition Strategy• 26% of 2011 revenues from assets other than coal royalty revenues, a significant increase from only 10% in 2005• Added new asset types to portfolio for complementary sources of revenue 2005 Revenues ($ mm) 2011 Revenues ($ mm) Other Other $49 Steam - $17 Oil & Gas 17% Met Coal NPRB Met Coal $14 $125 $8 10% $44 4% Steam - 5% Aggregates $7 2% 33% ILB 3% 28% $4 Infra- 8% structure $30 Steam - 2% 54% NPRB $8 Steam - 11% APP Steam - 28% $86 ILB $41 Steam - APP $104 Total Revenue = $159.1 million Total Revenue = $377.7 million 14
  15. 15. Executing on Business Strategy• Business strategy developed to exploit NRP’s competitive advantages during times of positive industry dynamics and minimize downside risk in challenging markets Strategy Comment • Work with lessees to maximize production Maximize Royalty Revenues • Monitor lessees’ mining plans • Pursue geographic and mineral acquisition / Expand / Diversify diversification of reserves Mineral Reserves • Meaningful greenfield properties coming online • Explore new mineral reserves Explore New Opportunities • Partner with lessees Diversify Operator Base in all • Identify additional operators Minerals • Continue to diversify via acquisitions • Acquire additional aggregate reserves, oil and gas Develop / Expand New Growth properties, and infrastructure assets Platforms • $98 mm revenues in 2011, 125% increase since 2007 15
  16. 16. Consistent Growth and Diversification of Revenues 2012E reflects the midpoint of the guidance range updated in August 2012. 16
  17. 17. Paid to Wait for Market Turnaround• Current quarterly distribution - $0.55 per unit• Large cash balance to help protect distribution in weak markets 17
  18. 18. Unique Tax Attributes for Individuals• Portion of current income deferred due to depletion, depreciation• Current income predominantly taxed at Section 1231 – capital gains rates• At sale of units - very little recapture of depreciation and depletion• If units are held for more than one year, majority of all income generated by the partnership is taxed at capital gains rates 18
  19. 19. Poised for Growth in 2013 and beyond• Potential for higher coal production – NRP’s lessees produced 49.2 million tons in 2011 – NRP forecasts 2012 coal production of 48 million tons to 54 million tons • Some lessees moving back onto NRP property from other lessees • Increasing ILB tonnage in 2012 and 2013 based on earlier acquisitions• Growth in infrastructure and transportation – Increasing throughput from rising coal tonnage in ILB – New ILB infrastructure assets – Sugar Camp – New infrastructure assets in aggregates• Growth in oil and gas royalties due to recent acquisitions – Hired team in 2011 to evaluate acquisitions and expanding development on existing leases – Currently only 4% of revenues, but growing as further development occurs on NRP properties• Increased aggregates platform – Since 2006 acquired 10 properties for ~$138 million plus 1 infrastructure asset for $6 million – Combination of producing and greenfield projects – Providing growth in 2012 and beyond• Mineral venture with International Paper (BRP LLC) – Actively developing diverse portfolio of mineral rights in 31 states 19
  20. 20. Coal Market Outlook 20
  21. 21. Coal – Fastest Growing Fossil Fuel in 2011• 2011 - Global primary energy consumption Global Energy Consumption (2011 vs. 2010) increased 2.5% Renewables Coal Natural Gas Hydro Oil Nuclear – Coal was fastest growing fossil fuel, up 5.4% 17.7% – Renewables fastest growing fuel, but only accounts for 1.6% of global energy consumption 5.4% 2.2% 1.6%• 30.3% - Coal’s share of world energy 0.7% consumption in 2011 - highest since 1969 (4.3%)• Asia-Pacific is largest energy consumer Global Energy Consumption – 2011 (million tonnes oil equivalent) – 39.1% of global energy consumption 33.1% – 68.6% of global coal consumption 30.3%• 12th consecutive year oil’s share of global 23.7% energy consumption has declined – lowest since 1965 6.4% 4.9% 1.6% Oil Coal Natural Gas Hydro Nuclear RenewablesSource: BP Statistical Review of World Energy June 2012. 21
  22. 22. Global Coal Consumption Continues to Increase • Three largest global consumers of coal in Global Coal Consumption 2011 (million tonnes oil equivalent) – China – 49% 2,553 – U.S. – 14% – India – 8% 1,883 • Global coal consumption increased 56% between 2001 and 2011 1,160 – China increased ~155% – India increased ~104% 593 604 534 519 530 499 • Global coal consumption increased 19% 82 92 100 19 21 30 6 9 9 between 2006 and 2011 North America South & Europe & Middle East Africa Asia Pacific Central Eurasia America • U.S. coal reserves make up 28% of the 2001 2008 2011 world’s total coal reservesSource: BP Statistical Review of World Energy June 2012. 22
  23. 23. U.S. Steam Coal Market • Coal continues to be a low-cost, reliable, and abundant source of fuel • Over the past 10 years, coal-fired power plants produced ~40-50% of all U.S. electric power generation • Market share pressured by regulatory environment and gas competition, but expected >40% in long-term • Increasingly, U.S. producers focused on exports, capitalize on growing global demand U.S. Electric Power Generation by Fuel Type U.S. Coal Exports (billion kilowatthours) (million short tons) 60Fuel Type 2009A 2010A 2011A 2012E 2015E 2020E 2025E 50Coal 1,739 1,829 1,777 1,689 1,562 1,634 1,741 40Natural Gas 837 895 916 969 1,024 994 1,002Nuclear 799 807 786 813 830 887 917 30 (1)Renewables 386 393 469 445 506 547 582 20 (2)Other 31 31 22 22 20 21 23Total 3,793 3,955 3,970 3,938 3,942 4,083 4,264 10Coal as % of Total 45.9% 46.3% 44.8% 42.9% 39.6% 40.0% 40.8% 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Total U.S. Coal Exports (mt): 48.7 39.6 43.0 48.0 49.9 49.6 59.2 81.5 59.1 81.7 107.3 Europe Asia North America South America Africa Australia and OceaniaSource: EIA.(1) Renewables include conventional hydroelectric, geothermal, wood, wood waste, biogenic municipal waste, other biomass, solar thermal, photovoltaics and wind power. 23(2) Other includes petroleum, non-biogenic municipal waste, pumped storage, renewables and distributed generation.
  24. 24. Metallurgical Coal Market Global Steel Production U.S. Met Coal Exports• Monthly output in March 2012 was the • Met exports for October YTD 2012 increased highest ever 10% over YTD 2011• In 2011, global steel production rose 7%, • Met exports for 2011 increased 216% since including a 7% increase in the U.S. 2002• NRP expects production to continue to grow • U.S. continues to evolve from global “swing as economies around the globe improve supplier” to market leader(millions of metric tons) (millions of short tons)135 8.0125 7.0115 6.0105 5.0 95 4.0 85 75 3.0 Jan-07 Feb-08 Apr-09 May-10 Jul-11 Aug-12 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2010 2011 2012Source: World Steel. Source: EIA. 24

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