Alliance Resources: Astoundingly Adept - Only Why?
Alliance Resources (ARLP:NASDAQ) is a listed original express partnership (MLP) inwards the coal mining space. The General Partner (AHGP) is also listed. The GP is also structured equally an MLP.
Alliance mines roughly 35 1000000 tonnes of coal annually which makes it a large mining functioning but solely virtually a 7th of the size of the American giants (Peabody, Arch Coal) as well as those are modest compared to BHP which has over thirteen billion dollars inwards coal revenue.
Alliance is unique among large coal companies inwards that the stock toll as well as profitability is at an all fourth dimension high.
Everyone else is suffering - or at to the lowest degree guiding to to a greater extent than or less sufferance.
This is the get-go of a serial of notes to endeavor as well as operate out why. You tin coloring me skeptical upwardly front. The performance of Alliance is - relative to the contest - flat-out extraordinary. And that gets my spidey-sense on total alert.
Background to Alliance's operations as well as the electrical flow nation of the coal industry
Alliance mines are by as well as large high sulfur as well as metro - to a greater extent than or less inwards the (very) high cost Appalachia but most inwards the lower cost Illinois Basin.
It is also no clandestine that the coal mining manufacture inwards America is stretched. Very stretched. There are a bunch of reasons - but for thermal coal the principal 1 is that coal fired powerfulness stations are closing - driven past times 2 principal factors:
And in that location are enough of signs of the stress. I am going to quote the last conference call of CSX - the railway companionship that hauls lots of coal - because it is Alliance's principal carrier:
It is nonetheless fair that inwards this misery Illinois Basin coal has done relatively well. Whilst Powder River Basin (PRB) coal is silent cheaper Central Appalachian Coal is flatly noncompetitive. Quoting from the query as well as respond session inwards the same conference call:
Alliance has bucked these trends. It has produced ascent volumes inwards both the Illinois Basin as well as the Northern Appalachia (with falling volumes inwards the Central Appalachia due to regulatory issues). And - reverse to all manufacture trends - they are reporting rising prices in the Illinois Basin. Specifically inwards the recently filed 10-K the toll achieved inwards the Illinois Basin rose from $50.45 per ton inwards 2011 to $52.51 per ton inwards 2012. Not solely are these prices non next manufacture trends but they are several dollars per ton higher than prices reported on Bloomberg for Illinois Basin coal of similar grades.
Coal mining is non a complicated describe of piece of job concern - as well as unless you lot involve hold a substantially amend resources than anyone else it is hard to brand these form of numbers. Moreover whist 1 mine may live extraordinary Alliance operates xi mines. It is unlikely they are all extraordinary.
So it must live something done past times the management. Something genuinely extraordinary done past times the management. The principal shout out for of this serial of weblog posts is to operate out just what.
John
PS. As readers know I am a brusk seller. Whenever I come across something similar this I am skeptical. In this illustration you lot tin assume I am short.
Alliance mines roughly 35 1000000 tonnes of coal annually which makes it a large mining functioning but solely virtually a 7th of the size of the American giants (Peabody, Arch Coal) as well as those are modest compared to BHP which has over thirteen billion dollars inwards coal revenue.
Alliance is unique among large coal companies inwards that the stock toll as well as profitability is at an all fourth dimension high.
Everyone else is suffering - or at to the lowest degree guiding to to a greater extent than or less sufferance.
This is the get-go of a serial of notes to endeavor as well as operate out why. You tin coloring me skeptical upwardly front. The performance of Alliance is - relative to the contest - flat-out extraordinary. And that gets my spidey-sense on total alert.
Background to Alliance's operations as well as the electrical flow nation of the coal industry
Alliance mines are by as well as large high sulfur as well as metro - to a greater extent than or less inwards the (very) high cost Appalachia but most inwards the lower cost Illinois Basin.
It is also no clandestine that the coal mining manufacture inwards America is stretched. Very stretched. There are a bunch of reasons - but for thermal coal the principal 1 is that coal fired powerfulness stations are closing - driven past times 2 principal factors:
- 1. Very depression natural gas prices are making gas-generated electricity really inexpensive - cheaper than coal generated electricity inwards many cases and
- 2. High environmental costs (especially mercury amelioration) causing plants to close.
And in that location are enough of signs of the stress. I am going to quote the last conference call of CSX - the railway companionship that hauls lots of coal - because it is Alliance's principal carrier:
Finally domestic coal declined 21% although the charge per unit of measurement of refuse moderated somewhat from what nosotros saw before inwards the year. Now let’s accept a closer aspect at to a greater extent than or less of the private markets inwards to a greater extent than particular as well as let’s start alongside coal. Coal revenue declined 18% to $747 million. Domestic book declined 21% equally natural gas prices stay depression leading to the continued displacement of coal as well as high stockpiles at many utilities. In addition, electrical generation declined inwards the Eastern United States. Export coal book declined 10% equally need for metallurgical coal softened specially inwards the Asian markets. Total revenue per unit of measurement was apartment equally centre pricing gains inwards domestic markets offset lower export rates. Looking ahead at this shout out for export coal book is expected to refuse inwards the get-go quarter as well as our best gauge of total twelvemonth book is virtually twoscore 1000000 tons.
Furthermore nosotros anticipate our rates to live pressured equally nosotros operate alongside producers to hold U.S. coal competitive globally inwards an surroundings where underlying commodity procedure for thermal as well as metallurgical coal are low. At the same fourth dimension domestic coal headwinds volition persist but nosotros aspect them to proceed to moderate throughout 2013. As a effect nosotros anticipate domestic book volition refuse inwards the 5% to 10% hit for the total year.
It is nonetheless fair that inwards this misery Illinois Basin coal has done relatively well. Whilst Powder River Basin (PRB) coal is silent cheaper Central Appalachian Coal is flatly noncompetitive. Quoting from the query as well as respond session inwards the same conference call:
David Vernon - Sanford Bernstein
Okay. And only equally a quick follow-up alongside the length of haul increase on the domestic, is that a alter inwards type of coal is it the Illinois Basin coming inwards perchance going into a found that used to live taking PRB or is it only the ebbs as well as flows across the network?
Michael Ward - Chairman, President as well as Chief Executive Officer of CSX
Some of it is Illinois Basin coal, but it’s non going into plants that took PRB, it was going into plants that took Central App. And the residue of it has only been the ordering patterns of the utilities fulfilling their coal contracts.This appraisal of Illinois Basin coal displacing Appalachia coal is widely reported. The Energy Information Administration has reported the same thing - alongside ascent volumes for Illinois basin coal but falling prices. They involve hold reported falling prices as well as volumes for Appalachian coal.
Alliance has bucked these trends. It has produced ascent volumes inwards both the Illinois Basin as well as the Northern Appalachia (with falling volumes inwards the Central Appalachia due to regulatory issues). And - reverse to all manufacture trends - they are reporting rising prices in the Illinois Basin. Specifically inwards the recently filed 10-K the toll achieved inwards the Illinois Basin rose from $50.45 per ton inwards 2011 to $52.51 per ton inwards 2012. Not solely are these prices non next manufacture trends but they are several dollars per ton higher than prices reported on Bloomberg for Illinois Basin coal of similar grades.
Coal mining is non a complicated describe of piece of job concern - as well as unless you lot involve hold a substantially amend resources than anyone else it is hard to brand these form of numbers. Moreover whist 1 mine may live extraordinary Alliance operates xi mines. It is unlikely they are all extraordinary.
So it must live something done past times the management. Something genuinely extraordinary done past times the management. The principal shout out for of this serial of weblog posts is to operate out just what.
John
PS. As readers know I am a brusk seller. Whenever I come across something similar this I am skeptical. In this illustration you lot tin assume I am short.
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