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Natural Resource Partners L.P. (NYSE:NRP) Q3 2023 Earnings Call Transcript

Natural Resource Partners L.P. (NYSE:NRP) Q3 2023 Earnings Call Transcript November 3, 2023

Operator: Thank you for standing by. My name is Eric, and I will be your conference operator today. At this time, I would like to welcome everyone to the Natural Resource Partners LP Third Quarter 2023 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Tiffany Sammis, Manager of Investor Relations. Please go ahead.

Tiffany Sammis: Thank you. Good morning, and welcome to the Natural Resource Partners Third Quarter 2023 Conference Call. Today's call is being webcast, and a replay will be available on our website. Joining me today are Craig Nunez, President and Chief Operating Officer; Chris Zolas, Chief Financial Officer; and Kevin Craig, Executive Vice President. Some of our comments today may include forward-looking statements reflecting NRP's views about future events. These matters involve risks and uncertainties that could cause our actual results to materially differ from our forward-looking statements. These risks are discussed in NRP's Form 10-K and other Securities and Exchange Commission filings. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

Our comments today also include non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP measures are included in our third quarter press release, which can be found on our website. I would like to remind everyone that we do not intend to discuss the operations or outlook for any particular coal lessee or detailed market fundamentals. Now I would like to turn the call over to Craig Nunez, our President and Chief Operating Officer.

A mining truck hoding a payload of mineral ore, a visual representation of the companies resources.


Craig Nunez: Thank you, Tiffany, and good morning, everyone. NRP generated $80 million of free cash flow in the third quarter and $304 million of free cash flow over the last 12 months. We continue to utilize this cash to aggressively retire debt, preferred equity and warrants. During the third quarter, we permanently retired $50 million of our 12.5% preferred equity, increasing our total preferred equity retirement for the year to $178 million and lowering our outstanding balance of preferred equity to $72 million. We also repurchased 1.46 million warrants, which included 812,500 warrants in the third quarter and 650,000 warrants in October for a total of $52 million to $56 million in cash. After these transactions, we only have 1.54 million warrants outstanding with a strike price of $34.

As of today, our total obligations, which includes debt, preferred equity and warrants, are around $325 million. We continue to believe that aggressive retirement of debt, preferred equity and settlement of warrants, while maintaining common unit distributions is the right strategy to maximize long-term common unitholder value. Our Mineral Rights business generated $62 million of free cash flow during the third quarter. Metallurgical coal prices improved during the quarter but remained below the record levels seen in 2022. The global supply-demand balance for met coal remains well supported, and we believe it will remain so for the foreseeable future due to solid long-term demand trends and somewhat muted investment in new met supply. Thermal coal prices stabilized in the third quarter after mild winter weather and decreased utility burn drove prices down in the first half of the year.

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