Mineral Rights

The Partnership’s mineral rights consist of the following (in thousands):



	September 30, 2016
	(Unaudited)
	Carrying Value		Accumulated Depletion			Net Book Value
Coal Royalty and Other	$	1,270,295	$	(454,261	)	$	816,034
VantaCore	112,700		(4,553		)	108,147
Total	$	1,382,995	$	(458,814	)	$	924,181



	December 31, 2015
	Carrying Value		Accumulated Depletion			Net Book Value
Coal Royalty and Other	$	1,317,158	$	(442,254	)	$	874,904
VantaCore	112,700		(3,082		)	109,618
Total	$	1,429,858	$	(445,336	)	$	984,522

Depletion expense related to the Partnership’s mineral rights totaled $8.6 million and $11.6 million for the three months ended September 30, 2016 and 2015, respectively. Depletion expense related to the Partnership's mineral rights totaled $21.9 million and $30.9 million for the nine months ended September 30, 2016 and 2015, respectively.

Sales of Royalty Properties

As discussed in Note 1. "Basis of Presentation," the Partnership is currently pursuing or considering a number of actions, including dispositions of assets, in order to mitigate the effects of adverse market developments which could otherwise cause the Partnership to breach financial covenants under its debt agreements. As part of this plan, the Partnership executed a definitive agreement to sell all its mineral fee interests in Grant County, Oklahoma. As a result, approximately $5.5 million in the Partnership's oil and gas royalty mineral rights are classified as Current assets held for sale on the Consolidated Balance Sheets at September 30, 2016. In addition, the Partnership completed the sale of the following assets during the nine months ended September 30, 2016:

1)Oil and gas royalty and overriding royalty interests in several producing properties located in the Appalachian Basin for $36.4 million. The effective date of the sale was January 1, 2016, and the Partnership recorded an $18.6 million gain from this sale included in Gain on asset sales, net on its Consolidated Statement of Comprehensive Income.

2)Hard mineral reserves and related royalty rights at three aggregates operations located in Texas, Georgia and Tennessee for $10.0 million. The effective date of the sale was February 1, 2016, and the Partnership recorded a $1.5 million gain from this sale included in Gain on asset sales, net on its Consolidated Statement of Comprehensive Income.

In addition to the two asset sales described above, during the nine months ended September 30, 2016, the Partnership sold mineral reserves in multiple sale transactions for cumulative $9.8 million of gross sales proceeds and recorded $6.8 million of cumulative gain from these sale transactions that are included in Gain on asset sales, net on its Consolidated Statement of Comprehensive Income. The substantial majority of these amounts relate to eminent domain transactions with governmental agencies.

During the nine months ended September 30, 2015, the Partnership sold mineral reserves for $3.7 million in gross sales proceeds and recorded a $3.3 million gain on asset sales included in Gain on asset sales, net on its Consolidated Statement of Comprehensive Income.

Impairment of Mineral Rights

The Partnership has developed procedures to periodically evaluate its long-lived assets for possible impairment. These procedures are performed throughout the year and consider both quantitative and qualitative information based on historic, current and future performance and are designed to identify impairment indicators. If an impairment indicator is identified, additional evaluation is performed for that asset that considers both quantitative and qualitative information. A long-lived asset is deemed impaired when the future expected undiscounted cash flows from its use and disposition are less than the assets’ carrying value. Impairment is measured based on the estimated fair value, which is primarily determined based upon the present value of the projected future cash flow compared to the assets’ carrying value. The inputs used by management for fair value measurements include significant inputs that are not observable in the market and thus represent a Level 3 fair value measurement for these types of assets. In addition to the evaluations discussed above, specific events such as a reduction in economically recoverable reserves or production ceasing on a property for an extended period may require that a separate impairment evaluation be completed on a significant property. The Partnership believes the discount rates used in estimating fair value were representative of what market participants would use in valuing the impacted assets.

During the three and nine months ended September 30, 2016 and 2015, the Partnership identified facts and circumstances that indicated that the carrying value of certain of its mineral rights exceed future cash flows from those assets and recorded non-cash impairment expense as follows (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
Impaired Asset Description	2016		2015		2016		2015
	(Unaudited)
Coal properties (1)	$	3,817	$	247,815	$	3,908	$	249,362
Oil and gas royalty properties (2)	36		70,527		36		70,527
Aggregates royalty properties (3)	1,411		43,361		1,677		43,361
Total	$	5,264	$	361,703	$	5,621	$	363,250

(1)

The Partnership recorded $3.8 million and $3.9 million of coal property impairments during the three and nine months ended September 30, 2016, respectively. Total coal property impairment expense for the nine months ended September 30, 2015 was $249.4 million. The Partnership recorded $1.5 million of coal property impairment during the three months ended June 30, 2015 and the fair value measurement of these impaired assets recorded at fair value was $0.0 million at June 30, 2015. The Partnership recorded the remaining $247.8 million of coal property impairment during the three months ended September 30, 2015 and the fair value measurement of these impaired assets recorded at fair value was $28.4 million at September 30, 2015. These impairments primarily resulted from the continued deterioration and expectations of further reductions in global and domestic coal demand due to reduced global steel demand, sustained low natural gas prices, and continued regulatory pressure on the electric power generation industry. NRP compared net capitalized costs of its coal properties to estimated undiscounted future net cash flows. If the net capitalized cost exceeded the undiscounted future cash flows, the Partnership recorded an impairment for the excess of net capitalized cost over fair value. Significant inputs used to determine fair value include estimates of future cash flow, discount rate and useful economic life. Estimated cash flows are the product of a process that began with current realized pricing as of the measurement date and included an adjustment for risk related to the future realization of cash flows.

(2)

The Partnership recorded $70.5 million of oil and gas royalty property impairment during the three and nine months ended September 30, 2015. The fair value measurement of these impaired assets recorded at fair value were $13.0 million at September 30, 2015. This impairment primarily resulted from declines in future expected realized commodity prices and reduced expected drilling activity on its acreage. NRP compared net capitalized costs of its oil and gas royalty properties to estimated undiscounted future net cash flows. If the net capitalized cost exceeded the undiscounted future net cash flows, the Partnership recorded an impairment for the excess of net capitalized cost over fair value. A discounted cash flow method was used to estimate fair value. Significant inputs used to determine the fair value include estimates of: (i) oil and gas reserves and risk-adjusted probable and possible reserves; (ii) future commodity prices; (iii) production costs, (iv) capital expenditures, (v) production and (vi) discount rates. The underlying commodity prices embedded in the Partnership's estimated cash flows are the product of a process that begins with NYMEX forward curve pricing as of the measurement date, adjusted for estimated location and quality differentials.

(3)

The Partnership recorded $1.4 million and $1.7 million of aggregates royalty property impairments during the three and nine months ended September 30, 2016, respectively. The Partnership recorded $43.4 million of aggregates royalty property impairments during the three and nine months ended September 30, 2015. The fair value measurement of these impaired assets recorded at fair value was $13.1 million at September 30, 2015. This impairment primarily resulted from greenfield development projects that have not performed as projected, leading to recent lease concessions on minimums and royalties combined with the continued regional market decline for certain properties. NRP compared net capitalized costs of its aggregates properties to estimated undiscounted future net cash flows. If the net capitalized cost exceeded the undiscounted cash flows, the Partnership recorded an impairment for the excess of net capitalized cost over fair value. A discounted cash flow model was used to estimate fair value. Significant inputs used to determine fair value include estimates of future cash flow, discount rate and useful economic life. Estimated cash flows are the product of a process that began with current realized pricing as of the measurement date and included an adjustment for risk related to the future realization of cash flows.