Natural Resources Partners LP

Natural Resource Partners (NRP) is positioned as a coal and soda ash royalty business with a strong margin of safety. Despite recent challenges in pricing conditions for key commodities, including a cash infusion for their soda ash joint venture, the long-term outlook remains positive. The coal market, while currently oversupplied, is expected to benefit from increased global demand and the ongoing need for low-cost baseload power, particularly with the rise of artificial intelligence. NRP's royalty structure minimizes price risk, and management is focused on demonstrating improved cash flow distributions. The potential for normalization in the soda ash market and higher coal prices presents significant upside, with the manager confident that the upside could exceed 100% of today's price over time.

Natural Resource Partners (NRP) is positioned as a coal and soda ash royalty business with a strong margin of safety. Despite recent challenges in pricing conditions for key commodities, including a cash infusion for their soda ash joint venture, the long-term outlook remains positive. The coal market, while currently oversupplied, is expected to benefit from record global consumption and potential price normalization. NRP's royalty structure minimizes price risk, and management is focused on demonstrating improved cash flow distributions. The potential for upside is significant, with a projected yield of around 13% based on current free cash flow figures, and the possibility of over 100% upside from today's price over time.

Natural Resource Partners (NRP) is our coal royalty business that has been consistently paying down debt since 2017, aiming for a net cash balance sheet within 12-15 months. Despite a less-than-stellar near-term outlook due to lower royalties, we are optimistic about long-term upside. NRP's business has proven resilient, remaining cash flow positive even in the worst coal price environments. I estimate NRP will generate $130-140mm in unlevered free cash flow in 2025, representing a 10% FCF yield on the current market cap. With projected record global coal consumption in 2025 and potential price increases, my estimate of intrinsic value is greater than 100% of today’s price.

Natural Resource Partners (NRP) is our coal royalty business that has been consistently paying down debt since 2017, aiming for a net cash balance sheet within 12-15 months. Despite a less-than-stellar near-term outlook due to lower met coal prices, we are optimistic about long-term upside. NRP's business has proven resilient, generating $76mm in free cash flow even during the worst coal price environments. For 2025, we estimate NRP will generate $130-140mm in unlevered FCF, representing a 10% FCF yield on the current market cap. With projected record global coal consumption and potential price increases, we believe the intrinsic value is greater than 100% of today’s price.

Natural Resource Partners generated $250mm in free cash flow during FY24, showcasing the strength of its royalty business model with no ongoing capital requirements and minimal operating expenses. Although free cash flow for 2025 is expected to be lower than 2024, NRP will soon have the flexibility to repurchase units and significantly increase distributions to unitholders, potentially yielding 15-20% at the current price. The intrinsic value is estimated between $200-250/share, compared to the current price of $100/share, indicating that NRP is undervalued and not priced for perfection.

Natural Resource Partners generated $250mm in free cash flow during FY24, showcasing the strength of its royalty business model with no ongoing capital requirements and minimal operating expenses. Although free cash flow is expected to decrease in 2025, NRP will soon have the flexibility to repurchase units and significantly increase distributions to unitholders, potentially yielding 15-20% at the current price. The intrinsic value is estimated between $200-250/share, compared to the current price of $100/share, indicating that NRP is undervalued and not priced for perfection.

Natural Resource Partners generated $250mm in free cash flow during FY24, showcasing the strength of its royalty business model with no ongoing capital requirements and minimal operating expenses. Although free cash flow is expected to decrease in 2025, NRP will soon have the flexibility to repurchase units and significantly increase distributions to unitholders, potentially yielding 15-20% at the current price. The intrinsic value is estimated between $200-250/share, compared to the current price of $100/share, indicating that NRP is undervalued and not priced for perfection.

Natural Resource Partners generated $250mm in free cash flow during FY24, showcasing the strength of its royalty business model with no ongoing capital requirements and minimal operating expenses. Although free cash flow is expected to decrease in 2025, NRP will soon have the flexibility to repurchase units and significantly increase distributions to unitholders, potentially yielding 15-20% at the current price. The intrinsic value is estimated between $200-250/share, compared to the current price of $100/share, indicating that NRP is undervalued and not priced for perfection.