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Alliance beats odds, delivers upped profit

WHILE many of its contemporaries continued to feel the impact of the rough market, Alliance Resou...

Donna Schmidt

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For the period ended June 30, the Oklahoma-based producer had revenues of $553.6 million, a rise of 4.5% year-on-year. Net income rose 9% from 2012 totaled to $104.1 million.

Alliance increased its volumes from the prolific Tunnel Ridge longwall operation, which will soon mark its 15th month in production. It also had strong performances at the Gibson North, River View and Onton mines.

Sales rose notably. In the June quarter coal sales volumes were up 13.3% to a record 9.8 million tons, and production volumes were higher by 23.6% to a record 10.1 million tons year-on-year.

While Alliance officials noted it was expected, the company did continue be negatively impacted by losses related to the development of its White Oak Mine No.1.

“ARLP continued its strong operating and financial performance in the 2013 quarter – posting new benchmarks for coal sales and production volumes, revenues and EBITDA,” president and chief executive officer Joseph Craft III said.

“The ability to deliver these exceptional results, especially in such challenging market conditions, speaks to the soundness of ARLP's strategy, the quality of our assets and the hard work and dedication of our people,” he said.

“These attributes keep ARLP well positioned for the future and gave the board the confidence to increase distributions to our unitholders for the twenty-first consecutive quarter.”

ARLP's coal inventory was down just slightly at the end of the second quarter to 808,000t from an ending inventory of 822,000t for the same period in 2012.

It also marked a lower total coal sales price per tons sold, though again officials said it anticipated the drop due to the lack of metallurgical coal sales during the quarter.

However, higher prices in the period for Illinois Basin and Central Appalachian sales volumes were able to essentially offset the lower NAPP prices because of shipment timing and allocation.

Looking ahead, Craft said the second half of the year was looking as bright as the first, especially with the progress made on several fronts during the second quarter.

“Production at Tunnel Ridge increased nearly 54% compared to the sequential quarter and remains on track to reach an annualized run rate of 6Mt by year-end,” he said.

“The strong performance of our Illinois Basin operations through the first half of 2013 is expected to continue over the balance of the year.”

Additionally, it was able to bolster its contract portfolio even more during the June period, securing new coal sales commitments for delivery of about 2.6Mt through 2015.

“Our performance to date and expectations for the remainder of 2013 allow us to increase full year guidance and give us confidence that ARLP will deliver its thirteenth consecutive year of record results,” Craft said.

Whole year, Alliance is targeting a production range of 39.3 to 39.6Mt and sales volumes of 38.6 to 39.6Mt.

Assuming customer deliveries occur as planned, the company said it was fully priced and committed for its anticipated 2013 coal sales volumes and had secured commitments for approximately 31.9Mt, 25.7Mt and 19.1Mt in 2014, 2015 and 2016, respectively.

About 1Mt in 2014, 2.5Mt in 2015 and 3.3Mt in 2016 remains open to market pricing.

Capex is anticipated to range between $370 and $400 for 2103, including expenditures for mine expansion and infrastructure projects, maintenance capital, continued development of the Gibson South mine and reserve acquisitions and construction of surface facilities related to the White Oak mine development project.

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