Alliance Resource Partners, L.P. Stock

Alliance Resource Partners, L.P. (Alliance Resource Partners) operates as a natural resource company.

The company generates operating and royalty income from the production and marketing of coal to major domestic and international utilities and industrial users, as well as royalty income from oil and gas mineral interests located in strategic producing regions across the United States. The primary focus of the company’s business is to maximize the value of the company’s existing mineral assets, both in the production of coal from the company’s mining assets and the leasing and development of the company’s coal and oil and gas mineral ownership.

In addition, the company is positioning itself as a reliable energy provider for the future as the company pursue opportunities that support the advancement of energy and related infrastructure. The company intends to pursue strategic investments that leverage its core competencies and relationships with electric utilities, industrial customers, and federal and state governments.

The company is the second-largest coal producer in the eastern United States with seven operating underground mining complexes in Illinois, Indiana, Kentucky, Maryland, Pennsylvania, and West Virginia, as well as a coal-loading terminal in Indiana on the Ohio River. The company manages and reports the company’s coal operations under two regions, Illinois Basin and Appalachia. The company markets its coal production to major domestic and international utilities and industrial users.

The company owns mineral and royalty interests in approximately 61,400 net royalty acres in premier oil and gas producing regions in the United States, primarily the Permian, Anadarko, and Williston basins. The company markets its oil and gas mineral interests for lease to operators in those regions and generate royalty income from the leasing and development of those mineral interests.

The company has invested in energy and infrastructure opportunities, including Francis Renewable Energy, LLC (‘Francis’), Infinitum Electric, Inc. (‘Infinitum’), and NGP ETP IV, L.P. (‘NGP ETP IV’).

In addition, the company develops and markets industrial, mining and technology products and services.

The company is managed by its sole general partner, Alliance Resource Management GP, LLC (MGP), a Delaware limited liability company, which holds a non-economic general partner interest in Alliance Resource Partners, L.P.

Oil and Gas Acquisitions

Boulders

On October 13, 2021, AR Midland, LP (‘AR Midland’), an indirect subsidiary of Alliance Minerals, LLC (Alliance Minerals), acquired approximately 1,480 oil and gas net royalty acres in the Delaware Basin from Boulders Royalty Corp. (‘Boulders’).

Belvedere

On September 9, 2022, AR Midland acquired approximately 394 oil and gas net royalty acres in the Delaware Basin from Belvedere Operating, LLC (‘Belvedere’).

Jase

On October 26, 2022, AR Midland acquired approximately 3,928 oil and gas net royalty acres in the Permian Basin from Jase Minerals, LP (‘Jase’).

Acquisition Agreement

On January 27, 2023, the company entered into an one-year collaborative agreement with a third party effective January 1, 2023 for the acquisition of oil and gas mineral interests in the Midland and Delaware basins. Under the agreement, the third party will assist the company in the identification, evaluation, and acquisition of target oil and gas mineral interests.

JC Resources

On February 22, 2023, the company acquired approximately 2,682 oil and gas net royalty acres in the Delaware Basin from JC Resources LP (‘JC Resources’), a related party entity owned by Mr. Craft.

Coal Mining Operations

The company produces bituminous coal from its underground mines that is sold to customers principally for electric power generation (thermal) and the production of steel (metallurgical). The company has established long-term relationships with customers through exemplary and consistent performance.

As of December 31, 2022, the company’s mining operations had access to approximately 1.17 billion tons of measured, indicated and inferred coal mineral resources in Illinois, Indiana, Kentucky, Maryland, Pennsylvania, and West Virginia. The company produces a diverse range of thermal and metallurgical coal with varying sulfur and heat contents, which enables the company to satisfy the broad range of specifications required by the company’s customers. In 2022, the company sold 35.6 million tons of coal and produced 35.5 million tons. Of the 35.6 million tons sold, approximately two-thirds were leased from Alliance Resource Properties. The coal the company sold in 2022 was approximately 4.4% low-sulfur coal, 60.4% medium-sulfur coal, and 35.2% high-sulfur coal. In 2022, approximately 82.4% of the company’s tons sold were purchased by domestic electric utilities and 12.5% were sold into the international markets through brokered transactions. The balance of the company’s tons sold was to third-party resellers and industrial consumers.

Illinois Basin Operations

The company’s Illinois Basin mining operations are located in western Kentucky, southern Illinois, and southern Indiana. As of December 31, 2022, the company operated four active mining complexes in the Illinois Basin.

Gibson Complex: The company’s subsidiary, Gibson County Coal, LLC (‘Gibson County Coal’), operates the Gibson South mine, located near the city of Princeton in Gibson County, Indiana. The Gibson South mine is an underground mine and utilizes continuous mining units employing room-and-pillar mining techniques to produce low/medium-sulfur coal. The Gibson South mine's preparation plant has throughput capacity of 1,800 tons of raw coal per hour. Production from the Gibson South mine is shipped by truck or transported by rail on the CSX Transportation, Inc. (‘CSX’) or Norfolk Southern Railway Company (‘NS’) railroads from the company’s rail loadout facility directly to customers or various transloading facilities, including the company’s Mt. Vernon Transfer Terminal, LLC (‘Mt. Vernon’) transloading facility, for barge delivery. Production from the mine began in April 2014. Gibson County Coal production in 2022 was 5.3 million tons.

Hamilton Complex: The company’s subsidiary, Hamilton County Coal, LLC (‘Hamilton’), operates the Hamilton mine, located near the city of McLeansboro in Hamilton County, Illinois. The Hamilton mine is an underground longwall mining operation producing medium/high-sulfur coal. Longwall mining began in October 2014 and the company acquired complete ownership and control in 2015. Hamilton's preparation plant has throughput capacity of 2,000 tons of raw coal per hour. Hamilton has the ability to ship coal from the Hamilton mine via the CSX, Evansville Western Railway, or NS rail directly to customers or various transloading facilities, including the company’s Mt. Vernon transloading facility, for barge deliveries. Hamilton coal production in 2022 was 4.7 million tons.

River View Complex: The company’s subsidiary, River View Coal, LLC (‘River View’), operates the River View mine, which is located in Union County, Kentucky; and is the largest room-and-pillar coal mine in the United States. The River View mine began (multi-seam) production in 2009 and utilizes continuous mining units to produce medium/high-sulfur coal. River View's preparation plant has throughput capacity of 2,700 tons of raw coal per hour. Coal produced from the River View mine is transported by overland belt to a barge loading facility on the Ohio River. River View coal production in 2022 was 10.2 million tons.

Warrior Complex: The company’s subsidiary, Warrior Coal, LLC (‘Warrior’), operates an underground mining complex located near the city of Madisonville in Hopkins County, Kentucky. Warrior utilizes continuous mining units employing room-and-pillar mining techniques to produce medium/high-sulfur coal. Warrior's preparation plant has throughput capacity of 1,200 tons of raw coal per hour. Warrior's production is shipped via the CSX or Paducah and Louisville Railway, Inc. (‘PAL’) railroads or by truck directly to customers or potentially to various transloading facilities, including the company’s Mt. Vernon transloading facility, for barge deliveries. Warrior coal production in 2022 was 4.1 million tons.

Mt. Vernon Transfer Terminal, LLC: The company’s subsidiary, Mt. Vernon, leases land and operates a coal-loading terminal on the Ohio River at Mt. Vernon, Indiana. Coal is delivered to Mt. Vernon by both rail and truck. The terminal has a capacity of 8.0 million tons per year with existing ground storage of approximately 200,000 tons. In 2022, the terminal loaded approximately 1.9 million tons for customers of Gibson County Coal and Hamilton.

Appalachian Operations

The company’s Appalachian mining operations are located in eastern Kentucky, Maryland, and West Virginia. As of December 31, 2022, the company operated three mining complexes in Appalachia.

MC Mining Complex: The MC Mining Complex is located near the city of Pikeville in Pike County, Kentucky. The company’s subsidiary, MC Mining, LLC (‘MC Mining’), through its subsidiary, Excel Mining, LLC (‘Excel’) operates the Excel Mine No. 5. Excel completed the development of Mine No. 5 in May 2020 and transitioned its employees and equipment from Mine No. 4 in July 2020. The underground operation utilizes continuous mining units employing room-and-pillar mining techniques to produce low-sulfur coal. The existing preparation plant, which has throughput capacity of 1,000 tons of raw coal per hour, is utilized by Mine No. 5. Substantially all of the coal produced at MC Mining in 2022 met or exceeded the compliance requirements of Phase II of the Federal Clean Air Act (‘CAA’). Coal produced from the mine is shipped via the CSX railroad directly to customers or various transloading facilities on the Ohio River for barge deliveries, or by truck directly to customers or various docks on the Big Sandy River for barge deliveries. MC Mining coal production in 2022 was 1.5 million tons.

Mettiki Complex: The Mettiki Complex (‘Mettiki’) comprises the Mountain View mine located in Tucker County, West Virginia operated by the company’s subsidiary, Mettiki Coal (WV), LLC (‘Mettiki (WV)’) and a preparation plant located near the city of Oakland in Garrett County, Maryland operated by the company’s subsidiary, Mettiki Coal, LLC (‘Mettiki (MD)’). Mettiki (WV) began longwall mining in November 2006. The Mountain View mine produces low/medium-sulfur coal, which is transported by truck either to the Mettiki (MD) preparation plant for processing for shipment into the metallurgical coal market or otherwise, or directly to the coal blending facility at the Virginia Electric and Power Company Mt. Storm Power Station. The Mettiki (MD) preparation plant has throughput capacity of 1,350 tons of raw coal per hour. Coal processed at the preparation plant can be trucked to the blending facility at Mt. Storm or shipped via the CSX railroad, which provides the opportunity to ship into the domestic and international thermal and metallurgical coal markets. Mettiki WV coal production in 2022 was 1.4 million tons.

Tunnel Ridge Complex: The company’s subsidiary, Tunnel Ridge, LLC (‘Tunnel Ridge’), operates the Tunnel Ridge mine, an underground longwall mine in the Pittsburgh No. 8 coal seam, located near Wheeling, West Virginia. Longwall mining operations began at Tunnel Ridge in May 2012. The Tunnel Ridge preparation plant has throughput capacity of 2,000 tons of raw coal per hour. Coal produced from the Tunnel Ridge mine is medium/high-sulfur coal and is transported by conveyor belt to a barge loading facility on the Ohio River. Tunnel Ridge has the ability through a third-party facility to transload coal from barges for rail shipment on the Wheeling and Lake Erie Railway with connections to the CSX and the NS railroads. Tunnel Ridge coal production in 2022 was 8.3 million tons.

Coal Marketing and Sales

The company sells coal to an established customer base through opportunities as a result of existing business relationships or through formal bidding processes. As is customary in the coal industry, the company has entered into long-term coal supply agreements with many of the company’s customers. Although some utility customers have appeared to favor a shorter-term contracting strategy, in 2022 approximately 85.0% and 65.6% of the company’s sales tonnage and total coal sales, respectively, were sold under long-term contracts with committed term expirations ranging from 2022 to 2029. The company’s initial 2023 guidance includes 34.7 million priced and committed tons for delivery in 2023.

The international coal market has been a part of the company’s business with indirect sales to end-users in Europe, Africa, Asia, North America, and South America. The company’s sales into the international coal market are considered exports and are made through brokered transactions.

Reliance on Major Customers

In 2022, the company derived more than 10% of its total revenue from each of Duke Energy, Louisville Gas and Electric Company, and Tennessee Valley Authority.

Coal Competition

The company’s principal competitors include American Consolidated Natural Resources Inc., CONSOL Energy, Inc., Alpha Metallurgical Resources, Inc., Foresight Energy LP, and Peabody Energy Corporation.

Coal Transportation

The company’s coal is transported from its mining complexes to its customers by barge, rail, and truck reflecting important flexibility advantages in supplying the company’s customers. Approximately 51.8% of the company’s 2022 sales volume was initially shipped from the mining complexes by barge, 30.0% was shipped from the mining complexes by rail, and 18.2% was shipped from the mining complexes by truck. With respect to the company’s export volumes from the United States to other countries, the company generally sells coal to its customers at an export terminal in the United States and the company is responsible for the cost of transporting coal to the export terminals. The company’s export customers generally negotiate and pay for ocean vessel transportation.

Mineral Interest Activities

The company’s mineral interest activities include both oil and gas and coal mineral interests. The company’s oil and gas mineral interest business includes all activities related to the oil and gas mineral interests held directly or indirectly by Alliance Minerals and includes Alliance Minerals' equity interest in AllDale Minerals III, L.P. (‘AllDale III’). The company’s mineral interests are primarily located on private lands in three basins, which are also the company’s areas of focus for future development by operators.

These include the Permian (Delaware and Midland), Anadarko (SCOOP/STACK), and Williston (Bakken) Basins. The company’s developed and undeveloped net acres standardized to a 1/8th royalty equate to nearly 61,400 oil and gas net royalty acres, including 3,968 oil and gas net royalty acres owned through the company’s equity interest in AllDale III.

The company’s coal mineral interests are located in both the Illinois Basin and the Appalachia Basin.

Permian Basin—Delaware and Midland Basins

The Permian Basin ranges from West Texas into southeastern New Mexico and is the most active area for horizontal drilling in the United States. The Permian Basin is further subdivided into the Delaware Basin in the west and the Midland Basin in the east. Based on geologic data and the ongoing development by operators, the company’s mineral interests in the Permian Basin contain multiple producing zones of economic horizontal development, including but not limited to the Wolfcamp, Spraberry, and Bone Spring formations.

Anadarko Basin—SCOOP and STACK Plays

The SCOOP play (South Central Oklahoma Oil Province) is located in central Oklahoma in Grady, Garvin, Stephens, and McClain counties. Based on geologic data and the ongoing development by operators, the company’s mineral interests in the SCOOP play contain multiple producing zones of economic horizontal development, including multiple Woodford benches and the Springer Shale. In addition, operators are testing other formations in the area, including the Sycamore, Caney, and Osage, which is also referred to as SCORE (Sycamore Caney Osage Resource Expansion). The STACK play (derived from Sooner Trend, Anadarko Basin, Canadian and Kingfisher Counties) is located in central Oklahoma in Kingfisher, Canadian, Caddo, and Blaine counties. Based on geologic data and the ongoing development by operators, the company’s mineral interests in the STACK play contain multiple producing zones of economic horizontal development, including but not limited to the Meramec and Woodford formations.

Williston Basin—Bakken

The Williston Basin stretches from western North Dakota into eastern Montana. Based on geologic data and ongoing development by operators, the company’s mineral interests contain multiple producing zones of economic horizontal development, including the Bakken and Three Forks formations.

Other

The company’s other interests are consisted primarily of mineral interests owned in the Appalachia Basin that stretches throughout most of Ohio, West Virginia, and Pennsylvania, and extends into other states. The Appalachia Basin's most active plays in which the company has acreage are the Marcellus Shale and Utica plays, which cover most of Pennsylvania, northern West Virginia, and eastern Ohio. In addition to the interests held in the Appalachia Basin, the company owns a small number of mineral interests in the Tuscaloosa Marine Shale play in Mississippi. AllDale III also owns mineral interests in the Haynesville Shale formation located in northwest Louisiana.

Coal Royalties

The company’s coal mineral reserves and resources are located in the Appalachia and Illinois Basins in the United States. The company leases its reserves and resources to its mining complexes under long-term leases. Approximately two-thirds of the company’s royalty-based leases have initial terms of five to 40 years, with substantially all lessees having the option to extend the lease for additional terms.

Illinois Basin

Alliance Resource Properties, either directly or through its subsidiaries, holds coal mineral reserves and resources in the following counties in the Illinois Basin: Hopkins County, Kentucky; Webster County, Kentucky; Union County, Kentucky; Henderson County, Kentucky; Hamilton County, Illinois; Jefferson County, Illinois; and Gibson County, Indiana.

Alliance Resource Properties leases some of the reserves and resources in Union and Henderson counties from WKY CoalPlay, LLC (‘WKY CoalPlay’) or its subsidiaries, which are related parties.

Appalachia Basin

Alliance Resource Properties, either directly or through its subsidiaries, holds coal mineral reserves and resources in the following counties in the Appalachian Basin: Grant County, West Virginia; Tucker County, West Virginia; and Washington County, Pennsylvania.

Other Operations

Matrix Group

The company’s subsidiaries, Matrix Design Group, LLC (‘Matrix Design’) and its subsidiaries Matrix Design International, LLC, Matrix Design (Australia) PTY LTD and Matrix Design Africa (PTY) LTD, and Alliance Design Group, LLC (‘Alliance Design’) (collectively the Matrix Design entities and Alliance Design are referred to as the ‘Matrix Group’), provide a variety of technology products and services for the company’s mining operations and certain industrial and mining technology products and services to third parties. Matrix Group's products and services include data network, communication and tracking systems, mining proximity detection systems, industrial collision avoidance systems, and data and analytics software.

New Ventures

The company’s subsidiary, AROP II, LLC, and its subsidiary, AROP II Investments, LLC, make strategic investments in attractive opportunities that support the advancement of energy and related infrastructure. The company intends to pursue opportunities that leverage the company’s relationships with electric utilities, industrial customers, and federal and state governments.

Francis is active in the installation, management and operation of metered-for-fee, public-access EV charging stations. Francis also develops and contracts EV charging stations for third-party customers.

Infinitum is a Texas-based developer and manufacturer of electric motors featuring printed circuit board stators that have the potential to result in motors that are smaller, lighter, quieter, more efficient and capable of operating at a fraction of the carbon footprint of conventional electric motors.

NGP ETP IV focuses on investments that are part of the global transition toward a lower carbon economy by partnering with top-tier management teams and investing growth equity in companies that drive or enable the growth of renewable energy, the electrification of the company’s economy, or the efficient use of energy.

Environmental, Health, and Safety Regulations

The company is committed to conducting mining operations in compliance with applicable federal, state, and local laws and regulations. However, because of the extensive and detailed nature of these regulatory requirements, particularly the regulatory system of the Mine Safety and Health Administration (‘MSHA’) where citations can be issued without regard to fault and many of the standards include subjective elements, it is not reasonable to expect any coal mining company to be free of citations.

The operation of the company’s mines is subject to the Federal Mine Safety and Health Act of 1977 (‘FMSHA’), and regulations adopted pursuant thereto.

Although the company has minimal surface mining activity and no mountaintop removal mining activity, SMCRA nevertheless requires that comprehensive environmental protection and reclamation standards be met during the course of and upon completion of the company’s mining activities. SMCRA requires the company to restore the surface to approximate the original contours as contemporaneously as practicable with the completion of surface mining operations.

Some monitoring equipment that the company uses is subject to licensing under the Federal Atomic Energy Act. Water supply wells located on the company’s properties are subject to federal, state, and local regulations. In addition, the company’s use of explosives is subject to the Federal Safe Explosives Act. The company is also required to comply with the Federal Safe Drinking Water Act, the Toxic Substance Control Act, and the Emergency Planning and Community Right-to-Know Act.

The company’s coal mining operations typically require Section 404 permits to authorize activities, such as the creation of slurry ponds and stream impoundments.

Coal Properties

The company’s coal properties are located in the Illinois Basin and the Appalachia Basin. The company’s Illinois Basin properties are located in western Kentucky, southern Illinois, and southern Indiana. The company’s Appalachian properties are located in eastern Kentucky, Maryland, western Pennsylvania, and northern West Virginia. Mining operations on the company’s coal properties consist of underground mines that produce bituminous coal that is sold to customers principally for electric power generation (thermal) and the production of steel (metallurgical). In addition to the company’s coal mining operations, the company holds coal mineral interests that the company leases/subleases to its operations or holds for lease/sublease to the company’s operations or others.

Coal Mineral Resources

As of December 31, 2022, the company had approximately 1.165 billion tons of coal mineral resources.

Henderson/Union

The Henderson/Union Resources are located in Henderson and Union counties, Kentucky. The company has control in over 1,600 tracts encompassing over 127,000 acres. The property is controlled through both fee ownership and leases of the coal.

River View

River View is located in Union County, Kentucky and has approximately 54,250 underground acres permitted. The coal mineral reserves are leased or held for lease to River View almost exclusively by Alliance Resource Properties.

Hamilton

Hamilton, a longwall mine located in Hamilton County, Illinois, has approximately 10,500 underground acres and 1,300 surface acres permitted. The mine property is controlled through both fee ownership and leases of the coal. The coal mineral reserves and resources are leased or held for lease to Hamilton by Alliance WOR Properties, LLC (Alliance WOR Properties), a subsidiary of Alliance Resource Properties. Hamilton either owns or controls the surface properties upon which its facilities are located, including the preparation plant, refuse areas, mine offices, conveyor systems, shafts and slopes. Hamilton (or Alliance WOR Properties) holds rights to over 67,000 gross acres of coal mineral reserves and resources and subsidence rights, and 1,400 acres of surface properties.

Gibson South

Gibson South is located in Gibson County, Indiana and has approximately 23,350 underground acres permitted. The mine property is controlled through both fee ownership and leases of the coal. Gibson South holds rights to over 21,000 gross acres of coal.

Tunnel Ridge

Tunnel Ridge is an underground longwall mine in the Pittsburgh No. 8 seam of coal, and has approximately 20,890 underground acres permitted.

History

Alliance Resource Partners, L.P. was founded in 1971. The company was incorporated in 1999.