NATURAL RESOURCE PARTNERS LP

1. Basis of Presentation

Nature of Business

Natural Resource Partners L.P. (the "Partnership") engages principally in the business of owning, managing and leasing a diversified portfolio of mineral properties in the United States, including interests in coal and other natural resources and owns a non-controlling 49% interest in Sisecam Wyoming LLC ("Sisecam Wyoming"), a trona ore mining and soda ash production business. The Partnership is organized intotwo operating segments further described in Note6. Segment Information. The Partnership’s operations are conducted through, and its operating assets are owned by, its subsidiaries. The Partnership owns its subsidiaries throughone wholly owned operating company, NRP (Operating) LLC ("Opco"). As used in these Notes to Consolidated Financial Statements, the terms "NRP," "we," "us" and "our" refer to Natural Resource Partners L.P. and its subsidiaries, unless otherwise stated or indicated by context.

Principles of Consolidation and Reporting

The accompanying unaudited Consolidated Financial Statements of the Partnership have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") for interim financial information and with Rule10-01 of Regulation S-X. Accordingly, they donot include all of the information and footnotes required by GAAP for complete financial statements. These financial statements should be read in conjunction with the financial statements for the year ended* December 31, 2023* and notes thereto included in the Partnership's Annual Report on Form10-K, which was filed with the SEC on* March 7, 2024.Reclassifications have been made to prior year amounts in the Consolidated Financial Statements to conform with current year presentation. These reclassifications hadno* impact on previously reported total assets, total liabilities, partners' capital, net income, or cash flows from operating, investing or financing activities.

Recently Issued Accounting Standard

In* November 2023,the FASB issuedASUNo. 2023-07—Segment Reporting (Topic280)—Improvements to Reportable Segment Disclosures*("ASU2023-07"). The amendments in ASU2023-07 improve reportable segment disclosure requirements, primarily through enhanced disclosures about segment expenses. The guidance is effective for annual periods beginning after* December 15, 2023and quarterly periods beginning after December 15, 2024and will be adopted retrospectively to all prior periods presented in the financial statements. NRP doesnot* expect the adoption of ASU2023-07 to have a material effect on its Consolidated Financial Statements.

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2. Revenues from Contracts with Customers

The following table presents the Partnership's Mineral Rights segment revenues from contracts with customers by major source:

The following table details the Partnership's Mineral Rights segment receivables and liabilities resulting from contracts with customers:

The following table shows the activity related to the Partnership's Mineral Rights segment deferred revenue:

The Partnership's non-cancelable annual minimum payments due under the lease terms of its coal and aggregates royalty leases are as follows as of* March 31, 2024* (in thousands):

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3. Class A Convertible Preferred Units and Warrants

On* March 2, 2017,NRP issued $250 million of Class A Convertible Preferred Units representing limited partner interests in NRP (the "preferred units") to certain entities controlled by funds affiliated with The Blackstone Group Inc. (collectively referred to as "Blackstone") and certain affiliates of GoldenTree Asset Management LP (collectively referred to as "GoldenTree") (together the "preferred purchasers") pursuant to a Preferred Unit and Warrant Purchase Agreement. NRP issued 250,000 preferred units to the preferred purchasers at a price of $1,000 per preferred unit (the "per unit purchase price"), less a 2.5% structuring and origination fee. The preferred units entitle the preferred purchasers to receive cumulative distributions at a rate of 12% of the purchase price per year, up toone* half of which NRP* may*pay in additional preferred units (such additional preferred units, the "PIK units"). The preferred units have a perpetual term, unless converted or redeemed as described below.

NRP also issuedtwo tranches of warrants (the "warrants") to purchase common units to the preferred purchasers (warrants to purchase 1.75 million common units with a strike price of $22.81 and warrants to purchase 2.25 million common units with a strike price of $34.00). The warrants* maybe exercised by the holders thereof at any time before theeighth* anniversary of the closing date. Upon exercise of the warrants, NRP* may,at its option, elect to settle the warrants in common units or cash, each on a net basis. However, in thefirst* quarter of2024 the remaining warrants were settled andnone of the Partnership's warrants remain outstanding as of* April 18, 2024.*

After* March 2, 2022and prior to March 2, 2025,the holders of the preferred units mayelect to convert up to 33% of the outstanding preferred units in any12*-month period into common units if the volume weighted average trading price of our common units (the "VWAP") for the30 trading days immediately prior to date notice is provided is greater than $51.00. In such case, the number of common units to be issued upon conversion would be equal to the per unit purchase price plus the value of any accrued and unpaid distributions divided by an amount equal to a 7.5% discount to the VWAP for the30 trading days immediately prior to the notice of conversion. Rather than have the preferred units convert to common units in accordance with the provisions of this paragraph, NRP would have the option to elect to redeem the preferred units proposed to be converted for cash at a price equal to the per unit purchase price plus the value of any accrued and unpaid distributions.

On or after* March 2, 2025,the holders of the preferred units mayelect to convert the preferred units to common units at a conversion rate equal to the Liquidation Value divided by an amount equal to a 10% discount to the VWAP for the30* trading days immediately prior to the notice of conversion. The “liquidation value” will be an amount equal to the greater of: (1) (a) the per unit purchase price multiplied by (i) prior to* March 2, 2020,1.50, (ii) on or after March 2, 2020and prior to March 2, 2021,1.70 and (iii) on or after March 2, 2021,*1.85, less (b)(i) all preferred unit distributions previously made by NRP and (ii) all cash payments previously made in respect of redemption of any PIK units; and (2) the per unit purchase price plus the value of all accrued and unpaid distributions.

To the extent the holders of the preferred units havenot elected to convert their preferred units before* March 2, 2029,NRP has the right to force conversion of the preferred units at a price equal to the liquidation value divided by an amount equal to a 10% discount to the VWAP for the30* trading days immediately prior to the notice of conversion.

In addition, NRP has the ability to redeem at any time (subject to compliance with its debt agreements) all or any portion of the preferred units and any outstanding PIK units for cash. The redemption price for each outstanding PIK unit is $1,000 plus the value of any accrued and unpaid distributions per PIK unit. The redemption price for each preferred unit is the liquidation value divided by the number of outstanding preferred units. The preferred units are redeemable at the option of the preferred purchasers only upon a change in control.

The terms of the preferred units contain certain restrictions on NRP's ability to pay distributions on its common units. To the extent that either (i) NRP's consolidated Leverage Ratio, as defined in the Partnership's Fifth Amended and Restated Partnership Agreement dated* March 2, 2017 (the "Restated Partnership Agreement"), is greater than 3.25x, or (ii) the ratio of NRP's Distributable Cash Flow (as defined in the Restated Partnership Agreement) to cash distributions made or proposed to be made is less than 1.2x (in each case, with respect to the most recently completedfour*-quarter period), NRP* maynot* increase the quarterly distribution above $0.45 per quarter without the approval of the holders of a majority of the outstanding preferred units. In addition, if at any time after* January 1, 2022,any PIK units are outstanding, NRP maynot* make distributions on its common units until it has redeemed all PIK units for cash.

The holders of the preferred units have the right to vote with holders of NRP’s common units on an as-converted basis and have other customary approval rights with respect to changes of the terms of the preferred units. In addition, pursuant to the Restated Partnership Agreement, Blackstone had certain approval rights over certain matters as identified in the Restated Partnership Agreement. GoldenTree has limited approval rights that expanded when Blackstone's ownership fell below the minimum preferred unit threshold (as defined below). These approval rights arenot transferrable without NRP's consent and terminate at such time that Blackstone (together with their affiliates) or GoldenTree (together with their affiliates), as applicable,no longer own at least 20% of the total number of preferred units issued on the closing date, together with all PIK units that have been issued butnot redeemed (the "minimum preferred unit threshold").

At the closing, pursuant to the Board Rights Agreement, the Preferred Purchasers received certain board appointment and observation rights, and Blackstone appointedone director andone observer to the Board of Directors. However, in2023, we repurchased all of Blackstone's preferred units which were subsequently retired andno longer remain outstanding, and all rights of Blackstone related thereto ceased as a result. In connection with the repurchase, Blackstone's board designee resigned from the Board of Directors. GoldenTree didnot exercise itsone-time option pursuant to the Board Rights Agreement to appoint either a director or an observer to the Board of Directors within30 days of receipt of notice that Blackstone (and their affiliates)no longer own the Minimum Preferred Unit Threshold and GoldenTreeno longer has the right to appoint either a director or an observer to the Board of Directors.

NRP also entered into a registration rights agreement (the "preferred unit and warrant registration rights agreement") with the preferred purchasers, pursuant to which NRP is required to file (i) a shelf registration statement to register the common units issuable upon exercise of the warrants and to cause such registration statement to become effectivenot later than90 days following the closing date and (ii) a shelf registration statement to register the common units issuable upon conversion of the preferred units and to cause such registration statement to become effectivenot later than the earlier of thefifth anniversary of the closing date or90 days following thefirst issuance of any common units upon conversion of preferred units. In addition, the preferred unit and warrant registration rights agreement gives the preferred purchasers piggyback registration and demand underwritten offering rights under certain circumstances. The shelf registration statement to register the common units issuable upon exercise of the warrants became effective on* April 20, 2017.The shelf registration statement to register the common units issuable upon exercise of the preferred units became effective on February 11, 2022.*

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Accounting for the Preferred Units and Warrants

Classification

The preferred units are accounted for as temporary equity on NRP's Consolidated Balance Sheets due to certain contingent redemption rights that* may*be exercised at the election of preferred purchasers. The warrants are accounted for as equity on NRP's Consolidated Balance Sheets.

Initial Measurement

The net transaction price was allocated to the preferred units and warrants based on their relative fair values at inception date. NRP allocated the transaction issuance costs to the preferred units and warrants primarily on a pro-rata basis based on their relative inception date allocated values.

Subsequent Measurement

Preferred Units

Subsequent adjustment of the preferred units willnot occur until NRP has determined that the conversion or redemption of all or a portion of the preferred units is probable of occurring. Once conversion or redemption becomes probable of occurring, the carrying amount of the preferred units will be accreted to their redemption value over the period from the date the feature is probable of occurring to the date the preferred units canfirst be converted or redeemed.

During thethree months ended* March 31, 2023,the Partnership received a notice from holders of the Class A Preferred Units exercising their right to either convert or redeem, at the election of NRP, an aggregate of 47,499 Class A Preferred Units. The Partnership chose to redeem the preferred units for $47.5 million in cash rather than issuing common units. Of the originally issued 250,000 Class A Preferred Units,71,666 Class A Preferred Units remained outstanding as of March 31, 2024and December 31, 2023.These preferred units had a $47.2 million carrying value included in class A convertible preferred on the Partnership's Consolidated Balance Sheets at March 31, 2024and December 31, 2023.*

Warrants

Subsequent adjustment of the warrants willnot occur until the warrants are exercised, at which time, NRP* may,*at its option, elect to settle the warrants in common units or cash, each on a net basis. The net basis will be equal to the difference between the Partnership's common unit price and the strike price of the warrant. Once warrant exercise occurs, the difference between the carrying amount of the warrants and the net settlement amount will be allocated on a pro-rata basis to the common unitholders and general partner.

During thethree months ended* March 31, 2024,the Partnership settled a total of 1,219,665 warrants to purchase common units with a strike price of $34.00. On January 29, 2024 (the "January 2024exercise date"), holders of the Partnership's warrants exercised 462,165 warrants at a strike price of $34.00. The Partnership settled the warrants on a net basis with $10.0 million in cash and 198,767 common units. The15*-day VWAP ending on the business day prior to the* January 2024exercise date was $97.62. On February 7,2024 (the "February 7, 2024exercise date"), holders of the Partnership's warrants exercised 128,750 warrants at a strike price of $34.00. The Partnership settled the warrants on a net basis with $8.0 million in cash. The15*-day VWAP ending on the business day prior to the* February 7, 2024exercise date was $96.29. On February 8, 2024 (the "February 8, 2024exercise date"), holders of the Partnership's warrants exercised 128,750 warrants at a strike price of $34.00. The15*-day VWAP ending on the business day prior to the* February 8, 2024exercise date was $95.63. The Partnership settled these warrants on a net basis with $7.9 million in cash. On February 14,2024 (the "February 14, 2024exercise date"), holders of the Partnership's warrants exercised 500,000 warrants at a strike price of $34.00. The15*-day VWAP ending on the business day prior to the* February 14, 2024exercise date was $93.47. The Partnership settled these warrants on a net basis with $29.7 million in cash. Of the originally issued 4,000,000 warrants,320,335 and 1,540,000 warrants to purchase common units with a strike price of $34.00 remained outstanding as of March 31, 2024and December 31, 2023,respectively. These warrants had a carrying value of $4.8 million and $23.1 million included in warrant holders' interest within partners' capital on the Partnership's Consolidated Balance Sheets at March 31, 2024and December 31, 2023,respectively. In thefirst* quarter of2024, the remaining 320,335 warrants were settled andnone of the Partnership's warrants remain outstanding as of* April 18, 2024.See Note17.* Subsequent Events for more information.

Embedded Features

Certain embedded features within the preferred unit and warrant purchase agreement are accounted for at fair value and are remeasured each quarter. See Note10. Fair Value Measurements for further information regarding valuation of these embedded derivatives.

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4. Common and Preferred Unit Distributions

The Partnership makes cash distributions to common and preferred unitholders on a quarterly basis, subject to approval by the Board of Directors of GP Natural Resource Partners LLC (the "Board of Directors"). NRP recognizes both common unit and preferred unit distributions on the date the distribution is declared.

Distributions made on the common units and the general partner's general partner ("GP") interest are made on a pro-rata basis in accordance with their relative percentage interests in the Partnership. The general partner is entitled to receive 2% of such distributions.

Income available to common unitholders and the general partner is reduced by preferred unit distributions that accumulated during the period. NRP reduced net income available to common unitholders and the general partner by $2.2 million and $6.7 million during thethree months ended* March 31, 2024and2023*, respectively, as a result of accumulated preferred unit distributions earned during the period. Of the $6.7 million in accumulated preferred unit distributions earned during thethree months ended* March 31, 2023,$0.6 million was paid in February 2023in connection with the preferred units that were redeemed in February 2023.Income available to common unitholders and the general partner is also reduced by the difference between the fair value of the consideration paid upon redemption and the carrying value of the preferred units. As such, NRP reduced net income available to common unitholders and the general partner by $16.2 during thethree* months ended* March 31, 2023.*

The following table shows the cash distributions declared and paid to common and preferred unitholders during thethree months ended* March 31, 2024and2023*, respectively:

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5. Net Income Per Common Unit

Basic net income per common unit is computed by dividing net income, after considering income attributable to preferred unitholders, the difference between the fair value of the consideration paid upon redemption and the carrying value of the preferred units, and the general partner’s general partner interest, by the weighted average number of common units outstanding. Diluted net income per common unit includes the effect of NRP's preferred units, warrants, and unvested unit-based awards if the inclusion of these items is dilutive.

The dilutive effect of the preferred units is calculated using the if-converted method. Under the if-converted method, the preferred units are assumed to be converted at the beginning of the period, and the resulting common units are included in the denominator of the diluted net income per unit calculation for the period being presented. Distributions declared in the period and undeclared distributions on the preferred units that accumulated during the period are added back to the numerator for purposes of the if-converted calculation. The calculation of diluted net income per common unit for thethree months ended* March 31, 2024* and2023 includes the assumed conversion of the remaining preferred units. The calculation of diluted net income per common unit for thethree months ended* March 31, 2023doesnot* include the assumed conversion of the preferred units that were redeemed during thethree months ended* March 31, 2023*as the inclusion of these units would be anti-dilutive.

The dilutive effect of the warrants is calculated using the treasury stock method, which assumes that the proceeds from the exercise of these instruments are used to purchase common units at the average market price for the period. The calculation of diluted net income per common unit for thethree months ended* March 31, 2024includes the net settlement of warrants to purchase 320,335 common units with a strike price of $34.00. The calculation of diluted net income per common unit for thethree* months ended* March**31,* 2023 includes the net settlement of warrants to purchase 752,500 common units at a strike price of $22.81 and the net settlement of warrants to purchase 2,250,000 million common units with a strike price of$34.00.

The following table reconciles the numerator and denominator of the basic and diluted net income per common unit computations and calculates basic and diluted net income per common unit:

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6. Segment Information

The Partnership's segments are strategic business units that offer distinct products and services to different customers in different geographies within the U.S. and that are managed accordingly. NRP has the followingtwo operating segments:

Mineral Rights—consists of mineral interests and other subsurface rights across the United States. NRP's ownership provides critical inputs for the manufacturing of steel, electricity and basic building materials, as well as opportunities for carbon sequestration and renewable energy. The Partnership is working to strategically redefine its business as a key player in the transitional energy economy in the years to come.

Soda Ash—consists of the Partnership's 49% non-controlling equity interest in Sisecam Wyoming, a trona ore mining operation and soda ash refinery in the Green River Basin of Wyoming. Sisecam Wyoming mines trona and processes it into soda ash that is sold both domestically and internationally to the glass and chemicals industries.

Direct segment costs and certain other costs incurred at the corporate level that are identifiable and that benefit the Partnership's segments are allocated to the operating segments accordingly. These allocated costs generally include salaries and benefits, insurance, property taxes, legal, royalty, information technology and shared facilities services and are included in operating and maintenance expenses on the Partnership's Consolidated Statements of Comprehensive Income.

Corporate and Financing includes functional corporate departments that donot earn revenues. Costs incurred by these departments include interest and financing, corporate headquarters and overhead, centralized treasury, legal and accounting and other corporate-level activitynot specifically allocated to a segment and are included in general and administrative expenses on the Partnership's Consolidated Statements of Comprehensive Income.

The following table summarizes certain financial information for each of the Partnership's business segments:

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7. Equity Investment

The Partnership accounts for its 49% investment in Sisecam Wyoming using the equity method of accounting. Activity related to this investment is as follows:

The following table represents summarized financial information for Sisecam Wyoming as derived from their respective unaudited financial statements for thethree months ended* March 31, 2024and2023*:

8. Mineral Rights, Net

The Partnership’s mineral rights consist of the following:

Depletion expense related to the Partnership’s mineral rights is included in depreciation, depletion and amortization on its Consolidated Statements of Comprehensive Income and totaled $4.3 million and $3.9 million for thethree months ended* March 31, 2024and2023,* respectively.

The Partnership has developed procedures to evaluate its long-lived assets for possible impairment periodically or whenever events or changes in circumstances indicate an asset's net book value* may**not* be recoverable. Potential events or circumstances include, but arenot limited to, specific events such as a reduction in economically recoverable reserves or production ceasing on a property for an extended period. This analysis is based on historic, current and future performance and considers both quantitative and qualitative information. As a result of the Partnership's analyses, NRP hadno impairment expense during thethree months ended* March 31, 2024and2023.*

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9. Debt, Net

The Partnership's debt consists of the following:

Opco Debt

All of Opco’s debt is guaranteed by its wholly owned subsidiaries and is secured by certain of the assets of Opco and its wholly owned subsidiaries, other than BRP LLC and NRP Trona LLC. As of* March 31, 2024* and* December 31, 2023*, Opco was in compliance with the terms of the financial covenants contained in its debt agreements.

Opco Credit Facility

In* May 2023,the Partnership entered into the Sixth Amendment (the "Sixth Amendment) to the Opco Credit Facility (the "Opco Credit Facility"). The Sixth Amendment maintained the term of the Opco Credit Facility until August 2027.Lender commitments under the Opco Credit Facility increased from $130.0 million to $155.0 million, with the ability to expand such commitments to $200.0 million with the addition of future commitments. In February 2024,*the Partnership exercised its option under the Opco Credit Facility to increase the total aggregate commitment under the Opco Credit Facility twice, initially by $30.0 million from $155.0 million to $185.0 million and subsequently by $15.0 million from $185.0 million to $200.0 million. These increases in the total aggregate commitment were made pursuant to an accordion feature of the Opco Credit Facility. In connection with the initial increase, a new lender joined the lending group with a commitment of $30.0 million. The Opco Credit Facility continues to operate under its existing terms and conditions in all material respects. The Sixth Amendment also includes modifications to Opco’s ability to declare and make certain restricted payments. The Opco Credit Facility contains financial covenants requiring Opco to maintain:

As of* December 31, 2023,the Partnership had $95.8 million in borrowings outstanding under the Opco Credit Facility and $59.2 million of available borrowing capacity. During thethree* months ended* March 31, 2024,the Partnership borrowed $89.4 million and repaid $39.0 million, resulting in $146.2 million in borrowings outstanding under the Opco Credit Facility and $53.8 million of available borrowing capacity as of March 31, 2024.During thethree* months ended* March 31, 2023,the Partnership borrowed $94.2 million and repaid $73.0 million on the Opco Credit Facility. The weighted average interest rate for the borrowings outstanding under the Opco Credit Facility for thethree* months ended* March**31,* 2024 and2023 was 8.94% and 8.14%, respectively.

The Opco Credit Facility is collateralized and secured by liens on certain of Opco’s assets with carrying values of $312.4 million and $316.3 million classified as mineral rights, net and other long-term assets, net and $25.6 million and $26.3 million classified as long-term contract receivable, net on the Partnership’s Consolidated Balance Sheets as of* March 31, 2024* and* December 31, 2023*, respectively.

Opco Senior Notes

Opco has issued several series of private placement senior notes (the "Opco Senior Notes") with various interest rates and principal due dates. As of* March 31, 2024* and* December 31, 2023*, the Opco Senior Notes had cumulative principal balances of $43.0 million and $59.7 million, respectively. Opco made mandatory principal payments of $16.7 million during thethree months ended* March 31, 2024and2023*.

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10. Fair Value Measurements

Fair Value of Financial Assets and Liabilities

The Partnership’s financial assets and liabilities consist of cash and cash equivalents, a contract receivable and debt. The carrying amounts reported on the Consolidated Balance Sheets for cash and cash equivalents approximate fair value due to their short-term nature. The Partnership uses available market data and valuation methodologies to estimate the fair value of its debt and contract receivable.

The following table shows the carrying value and estimated fair value of the Partnership's debt and contract receivable:

NRP has embedded derivatives in the preferred units related to certain conversion options, redemption features and the change of control provision that are accounted for separately from the preferred units as assets and liabilities at fair value on the Partnership's Consolidated Balance Sheets. Level3 valuation of the embedded derivatives are based on numerous factors including the likelihood of the event occurring. The embedded derivatives are revalued quarterly and changes in their fair value would be recorded in other expenses, net on the Partnership's Consolidated Statements of Comprehensive Income. The embedded derivatives hadzero value as of* March 31, 2024* and* December 31, 2023*.

11. Related Party Transactions

Affiliates of our General Partner

The Partnership’s general partner doesnot receive any management fee or other compensation for its management of NRP. However, in accordance with the partnership agreement, the general partner and its affiliates are reimbursed for services provided to the Partnership and for expenses incurred on the Partnership’s behalf. Employees of Quintana Minerals Corporation ("QMC") and Western Pocahontas Properties Limited Partnership ("WPPLP"), affiliates of the Partnership, provide their services to manage the Partnership's business. QMC and WPPLP charge the Partnership the portion of their employee salary and benefits costs related to their employee services provided to NRP. These QMC and WPPLP employee management service costs are presented as operating and maintenance expenses and general and administrative expenses on the Partnership's Consolidated Statements of Comprehensive Income. NRP also reimburses overhead costs incurred by its affiliates, including Quintana Infrastructure Development ("QID"), to manage the Partnership's business. These overhead costs include certain rent, information technology, administration of employee benefits and other corporate services incurred by or on behalf of the Partnership’s general partner and its affiliates and are presented as operating and maintenance expenses and general and administrative expenses on the Partnership's Consolidated Statements of Comprehensive Income.

Direct general and administrative expenses charged to the Partnership by QMC, WPPLP and QID are included on the Partnership's Consolidated Statement of Comprehensive Income as follows:

The Partnership had accounts payable to QMC of $0.4 million on its Consolidated Balance Sheets at both* March 31, 2024* and* December 31, 2023* and$0.4 million and $0.2 million of accounts payable to WPPLP at* March 31, 2024* and* December 31, 2023*, respectively.

As a result of its office lease with WPPLP, the Partnership has a right-of-use asset and lease liability of$3.5 million included inother long-term assets, net andother non-current liabilities, respectively on its Consolidated Balance Sheets at both* March 31, 2024and December 31, 2023.*

During thethree months ended* March 31, 2024and2023*, the Partnership reco gnized$0.03 million and $2.0 million, respectively, in operating and maintenance expenses on its Consolidated Statements of Comprehensive Income related to an overriding royalty agreement with WPPLP.

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12. Major Customers

Revenues from customers that exceeded10 percent of total revenues for any of the periods presented below are as follows:

13. Commitments and Contingencies

NRP is involved, from time to time, in various legal proceedings arising in the ordinary course of business. While the ultimate results of these proceedings cannot be predicted with certainty, Partnership management believes these ordinary course matters willnot have a material effect on the Partnership’s financial position, liquidity or operations.

14. Unit-Based Compensation

During thethree months ended* March 31, 2024and2023,* the Partnership granted service, performance and market-based awards under its2017 Long-Term Incentive Plan. The Partnership's service and performance-based awards are valued using the closing price of NRP's common units as of the grant date while the Partnership's market-based awards are valued using a Monte Carlo simulation. The grant date fair value of these awards granted duringthree months ended* March 31, 2024and2023* was $6.7 million and $15.9 million, respectively, which included a grant date fair value of $2.5 and $2.8 million for the market-based awards valued using a Monte Carlo simulation during thethree months ended* March 31, 2024and2023,* respectively. Total unit-based compensation expense associated with these awards was $3.0 million and $2.5 million for thethree months ended* March 31, 2024and2023,* respectively, and is included in general and administrative expenses and operating and maintenance expenses on the Partnership's Consolidated Statements of Comprehensive Income. The unamortized cost associated with unvested outstanding awards as of* March 31, 2024* is $17.5 million, which is to be recognized over a weighted average period of 2.0 years. The unamortized cost associated with unvested outstanding awards as of* December 31, 2023* was $13.3 million.

A summary of the unit activity in the outstanding grants during2024 is as follows:

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15. Financing Transaction

The Partnership owns rail loadout and associated infrastructure at the Sugar Camp mine in the Illinois Basin operated by a subsidiary of Foresight. The infrastructure at the Sugar Camp mine is leased to a subsidiary of Foresight and is accounted for as a financing transaction (the "Sugar Camp lease"). The Sugar Camp lease expires in2032 with renewal options for up to 80 additional years. Minimum payments are*$5.0* million per year through the end of the lease term. The Partnership is also entitled to variable payments in the form of throughput fees based on the amount of coal transported and processed utilizing the Partnership's assets. In the event the Sugar Camp lease is renewed beyond2032, payments become a fixedten thousand dollars per year for the remainder of the renewed term.

16. Credit Losses

The Partnership is exposed to credit losses through collection of its short-term trade receivables resulting from contracts with customers and a long-term receivable resulting from a financing transaction with a customer. The Partnership records an allowance for current expected credit losses on these receivables based on the loss-rate method. NRP assessed the likelihood of collection of its receivables utilizing historical loss rates, current market conditions, industry and macroeconomic factors, reasonable and supportable forecasts and facts or circumstances of individual customers and properties. Examples of these facts or circumstances include, but arenot limited to, contract disputes or renegotiations with the customer and evaluation of short and long-term economic viability of the contracted property. For its long-term contract receivable, management reverts to the historical loss experience immediately after the reasonable and supportable forecast period ends.

As of* March 31, 2024* and* December 31, 2023*, NRP had the following current expected credit loss (“CECL”) allowance related to its receivables and long-term contract receivable:

NRP recorded reversals of $0.8 million and $0.6 million of operating and maintenance expenses on its Consolidated Statements of Comprehensive Income related to the change in the CECL allowance during thethree months ended* March 31, 2024and2023,* respectively.

NRP has procedures in place to monitor its ongoing credit exposure through timely review of counterparty balances against contract terms and due dates, account and financing receivable reconciliation, bankruptcy monitoring, lessee audits and dispute resolution. The Partnership* may*employ legal counsel or collection specialists to pursue recovery of defaulted receivables.

17. Subsequent Events

The following represents material events that have occurred subsequent to* March 31, 2024* through the time of the Partnership’s filing of its Quarterly Report on Form10-Q with the SEC:

Common Unit and Preferred Unit Distributions

In* May 2024,the Board of Directors declared a distribution of $0.75 per common unit with respect to thefirst* quarter of2024. The Board of Directors also declared a $2.15 million cash distribution on NRP's outstanding preferred units with respect to thefirst quarter of2024.

Warrant Exercise

On* April 16, 2024 (the "exercise date"), holders of the Partnership's warrants exercised 320,335 warrants with a strike price of $34.00. On April 18, 2024,the Partnership settled the warrants on a net basis with $10.0 million in cash and 89,059 common units. The15*-day VWAP ending on the business day prior to the exercise date was $90.33. Of the originally issued 4.0 million warrants, none of the Partnership's warrants remain outstanding after this exercise. As a result of this exercise, warrant holders' interest on the Partnership's Statement of Partners' Capital decreased by $4.8 million during* April**2024.*

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