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.


Player Avatar Studyearnenjoy (< 20) Submitted: 11/24/2012 4:23:59 AM : Outperform Start Price: $25.03 ARLP Score: +16.93

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.( the price of coal in the Illinois basin (which includes parts of western Kentucky for some reason) is 47.90 per ton ( 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. ( Page 7 "4. Acquisition of Business"

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