Alliance Resource Partners, L.P. (NASDAQ:ARLP)

CAPS Rating: 4 out of 5

The Company is a producer and marketer of coal to major United States utilities and industrial users.

Recs

3
Player Avatar Studyearnenjoy (39.34) Submitted: 11/24/2012 4:23:59 AM : Outperform Start Price: $25.37 ARLP Score: +42.83

ARLP is the ninth largest coal producer in the United States and they have management in place who know how to make smart acquisitions. Earlier this year they made a deal with Green River Collieries to purchase all of their coal related assets in western Kentucky. The purchase includes the Onton 9 mining complex, which produces 2.1 million tons of coal annual and has estimated reserves of 40 millions tons.(http://www.miningnewstoday.net/2012/02/alliance-resource-partners-lp-announces.html#.ULCOgOR3gZk)Currently the price of coal in the Illinois basin (which includes parts of western Kentucky for some reason) is 47.90 per ton (http://www.eia.gov/coal/news_markets/index.cfm)Assuming an incredibly conservative price of 40 dollars for the coal over the life of the mine, ARLP would generate 840 million in revenue each year. Apply their ..176 5 yr avg profit margin and that gives them 14.7 million in profit. If you believe the 40 million ton estimate then the mine can operate for 15-20 years. So with very conservative estimates on the price of Illinois coal you get 14.7 million in profit each year for the next 15-20 years. And how much did our pals at ARLP pay for this opportunity? A measly 100 millions dollars. (http://www.sec.gov/Archives/edgar/data/1086600/000110465912075780/a12-22453_110q.htm#Item5_OtherInformation_090043) Page 7 "4. Acquisition of Business"

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