This summary highlights information contained elsewhere in this prospectus. You should read the entire prospectus carefully, including the historical and pro forma consolidated financial statements and the notes to those financial statements, before purchasing our common units. The information presented in this prospectus assumes that the underwriters’ option to purchase additional common units is not exercised unless otherwise noted. You should read “Risk Factors” beginning on page 23 for information about important risks that you should consider before purchasing our common units.

 

Market and industry data and certain other statistical data used throughout this prospectus are based on independent industry publications, government publications and other published independent sources. In this prospectus, we refer to information regarding the coal industry in the United States and internationally that was obtained from the U.S. Department of Energy’s Energy Information Administration, or the EIA, John T. Boyd Company and the U.S. Mine Safety and Health Administration, or MSHA. These organizations are not affiliated with us.

 

References in this prospectus to “Oxford Resource Partners, LP,” “we,” “our,” “us” or like terms refer to Oxford Resource Partners, LP and its subsidiaries, including our wholly owned subsidiary, Oxford Mining Company, LLC, which is also our accounting predecessor. References to “Oxford Resources GP” or “our general partner” refer to Oxford Resources GP, LLC. We have included a glossary of some of the terms used in this prospectus as Appendix B .

 

We are a low cost producer of high value steam coal, and we are the largest producer of surface mined coal in Ohio. We focus on acquiring steam coal reserves that we can efficiently mine with our modern, large scale equipment. Our reserves and operations are strategically located in Northern Appalachia and the Illinois Basin to serve our primary market area of Illinois, Indiana, Kentucky, Ohio, Pennsylvania and West Virginia. We market our coal primarily to large utilities with coal-fired, base-load scrubbed power plants under long-term coal sales contracts. We believe that we will experience increased demand for our high-sulfur coal from power plants that have or will install scrubbers. Currently, there is over 54,500 megawatts of scrubbed base-load electric generating capacity in our primary market area and plans have been announced to add over 18,400 megawatts of additional scrubbed capacity by the end of 2017. We also believe that we will experience increased demand for our coal from power plants that use coal from Central Appalachia as production in that region continues to decline.

 

We currently have 17 active surface mines that are managed as eight mining complexes. During the first quarter of 2010, our largest mine represented 12.6% of our coal production. This diversity reduces the risk that operational issues at any one mine will have a material impact on our business or our results of operations. Consistent coal quality across many of our mines and the mobility of our equipment fleet allows us to reliably serve our customers from multiple mining complexes while optimizing our mining plan. Our operations also include two river terminals, strategically located in eastern Ohio and western Kentucky, that further enhance our ability to supply coal to our customers with river access from multiple mines.

 

During 2009 and the first quarter of 2010, we produced 5.8 million tons and 1.8 million tons of coal, respectively. During each of the last two quarters, we produced 0.4 million tons from the reserves we acquired in western Kentucky from Phoenix Coal on September 30, 2009. Based on our coal production for the first quarter of 2010, our annualized coal production for 2010 would be 7.2 million tons. During 2009 and the first quarter of 2010, we sold 6.3 million tons and 2.0 million tons of coal, respectively, including 0.5 million tons and 0.3 million tons of purchased coal, respectively. We currently have long-term coal sales contracts in place for 2010, 2011, 2012 and 2013 that represent 97.6%, 101.5%, 71.3% and 40.9%, respectively, of our 2010 estimated coal sales of 8.2 million tons. Members of our senior management team have long-standing relationships within our industry, and we believe those relationships will allow us to continue to obtain long-term contracts for our coal production that will continue to provide us with a reliable and stable revenue base.

 

As of December 31, 2009, we controlled 91.6 million tons of proven and probable coal reserves, of which 68.6 million tons were associated with our surface mining operations and the remaining 23.0 million tons consisted of underground coal reserves that we have subleased to a third party in exchange for an overriding royalty. Historically, we have been successful at replacing the reserves depleted by our annual production and growing our reserve base by acquiring reserves with low operational, geologic and regulatory risks and that were located near our mining operations or that otherwise had the potential to serve our primary market area. Over the last five years, we have produced 23.3 million tons of coal and acquired 52.6 million tons of proven and probable coal reserves, including 24.6 million tons of coal reserves that we acquired in connection with the Phoenix Coal acquisition. We believe that our existing relationships with owners of large reserve blocks and our position as the largest producer of surface mined coal in Ohio will allow us to continue to acquire reserves in the future.

 

For the year ended December 31, 2009 and the first quarter of 2010, we generated revenues of approximately $293.8 million and $88.1 million, respectively, net income (loss) attributable to our unitholders of approximately $23.5 million and $(0.3) million, respectively, and Adjusted EBITDA of approximately $50.8 million and $10.0 million, respectively. Please read “Selected Historical and Pro Forma Consolidated Financial and Operating Data” for our definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income (loss) attributable to our unitholders. The following table summarizes our mining complexes, our coal production for the year ended December 31, 2009 and the first quarter of 2010 and our coal reserves as of December 31, 2009:

 

 

 

 

On June 22, 2010, our 51% owned subsidiary, Harrison Resources, entered into an agreement with CONSOL to purchase 3.4 million tons of coal reserves located near the Harrison mining complex for a purchase price currently estimated at approximately $17.0 million. A down payment of $850,000 is due at closing, with the balance of the purchase price to be funded by a non-interest bearing promissory note to be issued at the closing by Harrison Resources to CONSOL. Payments on the promissory note will not begin until the reserves are permitted, which is currently expected to occur in late 2011 or early 2012, and are payable thereafter in three annual installments of one-third, one-third and one-sixth of the principal amount, with the remainder payable as a royalty stream on certain excess coal tonnage produced from the reserves. The closing of this purchase is expected to occur on or before July 31, 2010.

Business Strategies

 

Our primary business objective is to maintain and, over time, increase our cash available for distribution by executing the following strategies:

 

 

We believe the following competitive strengths will enable us to execute our business strategies successfully:

 

 

 

 

 

Coal consumption and production in the United States have been driven in recent periods by several market dynamics and trends. The recent global economic downturn has negatively impacted coal demand in the short-term, but long-term projections for coal demand remain positive.

 

 

We are a Delaware limited partnership that was formed in August 2007 by American Infrastructure MLP Fund, L.P. and our founders, Charles C. Ungurean, the President and Chief Executive Officer of our general partner and a member of the board of directors of our general partner, and Thomas T. Ungurean, the Senior Vice President, Equipment, Procurement and Maintenance of our general partner. Each of our two founders has over 37 years of experience in the coal mining industry. In connection with our formation, our founders contributed all of their interests in Oxford Mining Company to us.

 

Our founders formed Oxford Mining Company in 1985 to provide contract mining services to a mining division of a major oil company. In 1989, our founders transitioned Oxford Mining Company from a contract miner into a producer of its own coal reserves. In January 2007, Oxford Mining Company entered into a joint

venture, Harrison Resources, with a subsidiary of CONSOL Energy to mine surface coal reserves purchased from CONSOL Energy.

 

In September 2009, we completed the acquisition of Phoenix Coal’s active surface mining operations. The Phoenix Coal acquisition provided us with an entry into the Illinois Basin in western Kentucky and included one mining complex comprised of four mines as well as the Island river terminal on the Green River in western Kentucky. In connection with this acquisition, we increased our total proven and probable coal reserves by 24.6 million tons.

 

American Infrastructure MLP Fund, L.P., together with its subsidiaries and affiliates, or AIM, is a private investment firm specializing in natural resources, infrastructure and real property. AIM, along with certain of the funds that AIM advises, indirectly owns all of the ownership interests in AIM Oxford Holdings, LLC, or AIM Oxford. Brian D. Barlow, Matthew P. Carbone and George E. McCown serve on the board of directors of our general partner and are principals of AIM and have ownership interests in AIM. After completion of this offering, AIM Oxford will continue to hold 66.3% of the ownership interests in our general partner and will hold 9.0% of our common units and 66.3% of our subordinated units (36.9% of our total units).

 

C&T Coal, Inc., or C&T Coal, is owned by our founders, Charles C. Ungurean and Thomas T. Ungurean. After completion of this offering, C&T Coal will continue to hold 33.7% of the ownership interests in our general partner and will hold 4.6% of our common units and 33.7% of our subordinated units (18.8% of our total units).

 

In connection with the contribution of Oxford Mining Company to us in August 2007, C&T Coal, Charles C. Ungurean and Thomas T. Ungurean agreed that they would not compete with us in the coal mining business in Illinois, Kentucky, Ohio, Pennsylvania, West Virginia and Virginia. This non-compete agreement is in effect until August 24, 2014.

Summary of Risk Factors

 

An investment in our common units involves risks associated with our business, our partnership structure and the tax characteristics of our common units. The following is a summary of our risk factors. Please read “Risk Factors” beginning on page 23 carefully for a more thorough description of these risks.

 

Risks Related to Our Business

 

 

 

 

Risks Inherent in an Investment in Us

 

 

 

 

Tax Risks

 

 

 

Immediately prior to the closing of this offering:

 

 

 

 

 

In connection with the closing of this offering:

 

 

We are managed and operated by the board of directors and executive officers of our general partner, Oxford Resources GP. Currently, and upon the consummation of this offering, C&T Coal and AIM Oxford will own all of the ownership interests in our general partner. Our unitholders will not be entitled to elect our general partner or its directors or otherwise directly participate in our management or operation. Charles C. Ungurean, the President and Chief Executive Officer of our general partner and a member of the board of directors of our general partner, and Thomas T. Ungurean, the Senior Vice President, Equipment, Procurement and Maintenance of our general partner, own all of the equity interests in C&T Coal. In addition, Brian D. Barlow, Matthew P. Carbone and George E. McCown serve on the board of directors of our general partner and are principals of AIM and have ownership interests in AIM. For information about the executive officers and directors of our general partner, please read “Management.” Our general partner will be liable, as general partner, for all of our debts (to the extent not paid from our assets), except for indebtedness or other obligations that are made specifically nonrecourse to it. Whenever possible, our general partner intends to cause us to incur indebtedness or other obligations that are nonrecourse to it.

 

In order to maintain operational flexibility, our operations will be conducted through, and our operating assets will be owned by, Oxford Mining Company and its subsidiaries. However, we, Oxford Mining Company and its subsidiaries do not have any employees. All of the employees that conduct our business are employed by our general partner, but we sometimes refer to these individuals in this prospectus as our employees.

 

Following the consummation of this offering, our general partner and its affiliates will not receive any management fee or other compensation in connection with our general partner’s management of our business, but will be reimbursed for expenses incurred on our behalf. These expenses include the costs of officer and director and other employee compensation and benefits properly allocable to us, and all other expenses necessary or appropriate for the conduct of our business and allocable to us. Our partnership agreement provides that our general partner will determine in good faith the expenses that are allocable to us.

 

Our general partner owns general partner units representing a 2.0% general partner interest in us, which entitles it to receive 2.0% of all the distributions we make. Our general partner also owns all of our incentive distribution rights, which will entitle it to increasing percentages, up to a maximum of 48.0%, of the cash we distribute in excess of $0.5031 per unit per quarter, after the closing of our initial public offering. Please read “Certain Relationships and Related Party Transactions.”

 

Our principal executive offices are located at 41 South High Street, Suite 3450, Columbus, Ohio 43215. Our phone number is (614) 643-0314. Following the completion of this offering, our website will be located at http://www.oxfordresources.com. We expect to make our periodic reports and other information filed with or furnished to the SEC available, free of charge, through our website, as soon as reasonably practicable after those reports and other information are electronically filed with or furnished to the SEC. Information on our website or any other website is not incorporated by reference into this prospectus and does not constitute a part of this prospectus.

Summary of Conflicts of Interest and Fiduciary Duties

 

General.   Our general partner and its directors and officers have a legal duty to manage us in a manner beneficial to our unitholders. This legal duty originates under state law in statutes and judicial decisions and is commonly referred to as a “fiduciary duty.” However, because our general partner is owned by C&T Coal and AIM Oxford, the directors and officers of our general partner also have fiduciary duties to manage the business of our general partner in a manner beneficial to C&T Coal and AIM Oxford. As a result, conflicts of interest may arise in the future between us and our unitholders, on the one hand, and our general partner and its affiliates, on the other hand. For a more detailed description of the conflicts of interest and fiduciary duties of our general partner, please read “Conflicts of Interest and Fiduciary Duties.”

Partnership Agreement Modifications of Fiduciary Duties.   Delaware law provides that Delaware limited partnerships may, in their partnership agreements, restrict or expand the fiduciary duties owed by the general partner to limited partners and the partnership. Our partnership agreement limits the liability of, and reduces the fiduciary duties owed by, our general partner and the directors and officers of our general partner to us and our unitholders. Our partnership agreement also restricts the remedies available to our unitholders for actions that might otherwise constitute breaches of fiduciary duty by our general partner and its directors and officers. By purchasing a common unit, our unitholders are treated as having consented to various actions contemplated in the partnership agreement and conflicts of interest that might otherwise be considered a breach of fiduciary or other duties under applicable law. Please read “Conflicts of Interest and Fiduciary Duties — Fiduciary Duties” for a description of the fiduciary duties imposed on our general partner and its directors and officers by Delaware law, the material modifications of these duties contained in our partnership agreement and certain legal rights and remedies available to our unitholders.

 

For a description of our other relationships with our affiliates, please read “Certain Relationships and Related Party Transactions.”

The Offering

 

 

 

 

 

 

 

 

 

 

 

 

 

The following table presents our summary historical consolidated financial and operating data, as well as that of our accounting predecessor and wholly owned subsidiary, Oxford Mining Company, as of the dates and for the periods indicated. The following table also presents our summary pro forma consolidated financial and operating data as of the dates and for the periods indicated.

 

The summary historical consolidated financial data presented as of August 23, 2007 and for the period from January 1, 2007 to August 23, 2007 are derived from the audited historical consolidated financial statements of Oxford Mining Company that are included elsewhere in this prospectus. The summary historical consolidated financial data presented as of December 31, 2007, for the period from August 24, 2007 to December 31, 2007 and as of and for the years ended December 31, 2008 and 2009 are derived from our audited historical consolidated financial statements included elsewhere in this prospectus. The summary historical consolidated financial data presented as of and for the quarters ended March 31, 2009 and 2010 are derived from our unaudited historical condensed consolidated financial statements included elsewhere in this prospectus.

 

The summary pro forma consolidated financial data presented for the year ended December 31, 2009 and as of and for the quarter ended March 31, 2010 are derived from our unaudited pro forma consolidated financial statements included elsewhere in this prospectus. Our unaudited pro forma consolidated financial statements give pro forma effect to (i) the Phoenix Coal acquisition and (ii) this offering and the transactions related to this offering described in “Summary — The Transactions” and the application of the net proceeds from this offering described in “Use of Proceeds.” The unaudited pro forma consolidated balance sheet as of March 31, 2010 assumes this offering occurred as of March 31, 2010. The unaudited pro forma consolidated statements of operations for the year ended December 31, 2009 and the quarter ended March 31, 2010 assume the Phoenix Coal acquisition, this offering and the transactions related to this offering occurred as of January 1, 2009. We have not given pro forma effect to incremental selling, general and administrative expenses of approximately $3.0 million that we expect to incur as a result of being a publicly traded partnership.

 

For a detailed discussion of the following table, please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The following table should also be read in conjunction with “Summary — The Transactions,” “Use of Proceeds,” “Business — Our History,” the historical consolidated financial statements of Oxford Mining Company, the historical combined financial statements for the carved-out surface mining operations of Phoenix Coal and our unaudited pro forma consolidated financial statements and audited consolidated financial statements included elsewhere in this prospectus. Among other things, those historical and pro forma consolidated financial statements include more detailed information regarding the basis of presentation for the information in the following table.

 

The following table presents a non-GAAP financial measure, Adjusted EBITDA, which we use in our business as it is an important supplemental measure of our performance. Adjusted EBITDA represents net income (loss) attributable to our unitholders before interest, taxes, depreciation, depletion and amortization, gain from purchase of a business, amortization of below-market coal sales contracts and non-cash equity compensation expense. This measure is not calculated or presented in accordance with GAAP. We explain this measure below and reconcile it to its most directly comparable financial measure calculated and presented in accordance with GAAP.