Thank you for standing by. My name is Danica, 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 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the call over to Tiffany Sammis, Manager of Investor Relations. Please go ahead.

Thank you. Good morning, and welcome to the Natural Resource Partners third quarter 2024 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 second 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.

Thank you, Tiffany, and good morning, everyone. NRP generated $55 million of free cash flow in the third quarter and $263 million of free cash flow over the last 12 months. While we realized lower prices for metallurgical and thermal coal during the quarter and significantly lower prices for soda ash, we continue to generate robust free cash flow and make noteworthy progress toward our goal of eliminating all financial obligations. Notably, we paid off the remaining $32 million of preferred securities during the quarter and are now free of all preferred and warrant liabilities. As of today, our total remaining financial obligations, which consist solely of debt, stand at $181 million, a decrease of 44% from one year ago. While we believe the current market softness for our key commodities will persist for the foreseeable future, resulting in a material drop in our expected free cash flow as compared to the last 12 months, we remain on track with our deleveraging plan. We will continue to pay down debt with internally generated cash in the coming months and look forward to the day, when common unitholders will have no competing claims on the partnership's free cash flow. We remain steadfast in our belief that, this is the best strategy to maximize intrinsic value per unit. Additionally, in October, we closed a five year bank credit facility that extends our revolver's maturity date over two years to October 2029. This extension provides us with greater financial flexibility and further de-risks our capital structure. We have an exceptional group of banks that have become more than lenders. They are trusted business partners. Our Mineral Rights segment generated $54 million of free cash flow during the third quarter. Soft global steel demand continues to pressure metallurgical coal prices and low-priced, North American…

Thank you, Craig. In the third quarter of 2024, NRP generated $39 million of net income, $54 million of operating cash flow and $55 million of free cash flow. Our Mineral Rights segment generated $41 million of net income and $54 million of both operating cash flow and free cash flow during the third quarter of 2024. When compared to the prior year quarter, our Mineral Rights segment net income decreased $20 million and both operating cash flow and free cash flow decreased $7 million. These decreases were primarily due to soft coal markets resulting in lower metallurgical and thermal coal sales prices. Regarding our third quarter 2024 met thermal coal royalty mix, metallurgical coal made up approximately 75% of our coal royalty revenues, and 55% of coal royalty sales volumes. Shifting to our Soda Ash business segment, net income in the third quarter of 2024 was $8 million, a decrease of $4 million compared to the prior year quarter. This decrease was due to lower sales prices, driven by an oversupplied market and weakened demand for construction flat glass. Free cash flow from this segment was $6 million in the third quarter of 2024, a decrease of $17 million as compared to the prior year quarter. Soda ash pricing has declined from the record highs seen last year and until demand for flat glass rebounds and the market is able to absorb the additional supply from China, we expect prices to remain muted and our distributions received from Sisecam, Wyoming to reflect the business performance. Moving to our Corporate & Financing segment. In the third quarter of 2024, we achieved another milestone towards our goal of eliminating our financial obligations by redeeming the final $32 million of outstanding preferred units. I'm pleased to note that we were able to…

Thank you. [Operator Instructions] We will pause for just a moment to compile our Q&A roster. It looks like we have one question from Mark Zand with Wexford. Please go ahead.

Craig, how are you doing?

Hello, Mark. How are you?

We're doing well. It's good to hear you, and, congratulations. I missed the very beginning of the call, so I'm unclear on what exactly you need to do, if anything, in order to basically be unconstrained in your ability to pay dividends. I'd heard part about wanting to pay down debt, but with the redemption of the preferred and the extinguishment of the warrants, is it just your desire? Just explain to me what your thoughts are going forward in terms of distributions.

Our goal is still to, get to the point where we have eliminated, or practically eliminated all of our liabilities which currently stand at $181 million of debt, before we consider doing other things with the free cash that we have generated. And as we've talked to you about in the past, we're not making forecasts of this specific date that we believe that that will happen, but it is, you can look at our run rate of cash flow, free cash and you can look at the outstanding balance and you can see that, we appear to be coming up on the cusp of reaching that point.

So is your goal really to get to get debt down to zero?

Yes. That is our goal, but the reality of it is that, does it have to be exactly zero? It could it be $10 million, close to zero.

Yes. And then do you have a sense on what your payout policy would be after that?

No. We don't have. We're not going to tell you here in advance, a year in advance potentially. We're not going to tell you know what or decide now what our distribution policy will be. But I do think that, we will approach it the same way we've approached distributions for the last 10 years and that is, do we have a more intelligent use for the cash than paying it out as distributions to owners. And, up to this point in time, we believe, we have had a more intelligent use for the cash, be it, redeeming, 12% preferred or, 10% debt or, et cetera. When we get to the point where our debt balances are zero or practically zero and we don't have as many opportunities to do more intelligent things, the decision to make a distribution becomes much easier. I would just say that, we do not have a bias against distributions at all. The bias is that, we need to have an intelligent use for the money internally to increase intrinsic value of the business or else we send it out.

Okay. I mean, do you have any sense that you would do that there'd be some line of business that you would invest in, something that you would use the cash for other than a distribution and if so what might it possibly be?

Do not have any ideas about that at the moment, do not have any plans at the moment. Right now, we're trying to finish out the strategy that we've had in place for a long time. As we get nearly a little bit closer to the end of that process, we will be looking at the next step, and we'll be explaining to the public quite clearly what we plan to do at that time.

How many shares of stock are outstanding now, I guess, after the redemption of the warrants gone?

Roughly 13.3 million.

Okay. That makes sense. Can you -- and I don't know if anybody else got any questions, but let me just ask one final one and we can see. Can you just give a -- you'd said that you expect the sort of weak conditions in the met coal market to persist for an extended period of time. Could you just elaborate on what your thoughts are on the market?

Yes. We have excess capacity and we have sluggish demand in all three of our key commodities that's metallurgical coal, soda ash and thermal coal. At the moment, I can't see any specific drivers that are going to change this environment here in the near to intermediate future. Now, I'm always surprised about that, because I never do see the factor, the drivers that are going to turn the market, for these commodities, but they eventually do turn. But just right now, I cannot point to any of that. The good news, that I think would be important to note here for us, is that, despite the fact that, this is a very negative time in terms of the collective sentiment of all three of our, and the collective outlook for all three of our key commodities, it's actually a pretty robust time for the business outlook for our common equity, simply because of the fact that we are coming to the end of eliminating our obligations at which time there'll be a lot of free cash that's freed up for common equity. So it's sort of a tale of two cities. It's a bad time for the business outlook. Actually, collectively for all three of our commodities together, I would say that, with the exception of COVID, this is the worst collective business outlook we've had in my almost 10 year tenure here at NRP. But, it's certainly the best outlook from the standpoint of an equity holder that we've had in the almost 10 years that I've been in NRP.

Yes. You've gotten everything fixed. It's taken a while, but it's done. So, congratulations.

Thank you for that. But also thanks to all our stakeholders and to you and everyone who's supported us along the way.

Good for you. Thank you. And I'll just listen to see if anybody else has any questions. Thanks.

Thank you, Mark.

All right. Our next question comes from John Mason with Aegis Company. Please go ahead.

Hi, guys. Thanks for taking my question. I just wanted to ask really quickly. How strict is the plan to eliminate all debt, including both the facility and the senior notes before you initiate, return to capital? I know you just mentioned it doesn't have to be zero. I'm just trying to understand the order of priority and the capital allocation flexibility, given how attractive the yield on the common is now, especially relative to the senior notes? Like, could you pay off the facility and just begin distribution then and let the senior notes roll off at maturity, I think in like December of '26 or, I mean, if it is really strict on, we want to get to that 10 or basically zero number first, totally understand. Just wanted to get a sense.

No. It's not that strict. It is as you described, actually. We're going to use a common sense approach, and we're going to pay off the highest cost debt first. And then when we -- it's a common sense approach. It's not strict to the penny.

Great. Thanks so much.

You bet. Alright.

We have a question from Neil Patel with Sawgrass Beach. Please go ahead.

Good morning, everyone. Craig and Chris, thanks for answering my responding my question. Very impressed with all the work you and the team have done over the past few years in terms of deleveraging and sticking to that discipline. So curious about as now you kind of have the preferred and the warrants out of the way and are now deleveraging debt at a rapid speed. If there's any thought put into repurchasing, common units, especially when the current kind of yield is on calculating, it could be around 15% or more. So curious, I know there's some language that's changed within the most recent credit agreement. Not sure if that's related, but it mentioned equity interest. So curious about your philosophy on that, just given where the price is. And I know you've all bought back warrants kind of what price was earlier in the year?

This is Craig. I'll take a first stab at that. In answer to your question, have we thought of and do we consider and would we consider in the future repurchases of units if they trade it at material discounts to our estimates of intrinsic value? The answer is, yes. I do want to clarify, you made a comment about a 15% yield. I want to clarify that what I believe you're referring to there is our free cash flow yield. It is not our actual current yield of our common equity, at this point in time. Just want to clarify that. And then third thing, you mentioned the credit agreement. Yes, you did pick up on that. There were two main reasons to put the new credit agreement in place that Chris and his team did. The first was to extend the maturity to get us a longer period of time to a longer maturity. The second was to loosen up some of the handcuffs that had been put in place, when we were a less creditworthy borrower. And the loosening of the handcuffs frees up, it makes it easier for us going forward to do things such as repurchase units.

Got it. Thank you.

You bet.

At this time, I will now turn the call back over to Craig Nunez for closing remarks.

Thank you very much, Danica. And thank you everyone for participating in our call today. And thank you for your continued support of NRP. Have a good day.