Natural Resource Partners L.P. Q3 FY2025 earnings call

• NRP generated $42 million of free cash flow in Q3 2025 and $190 million over the last 12 months despite headwinds in metallurgical coal, thermal coal, and soda ash.
• Metallurgical coal markets face challenges from slowing global growth and soft steel demand. Thermal coal markets struggle with muted demand from mild weather, cheap natural gas, etc., though regulatory and data center demand optimism exists but no material support yet. Soda ash market is oversupplied with international prices below cash costs, in a generational bear market.
• NRP retired nearly $130 million of debt over the last 12 months, with $70 million remaining debt. Aim to retire all debt and increase unitholder distributions, but market conditions could delay.
• Oxy dropped CO2 sequestration lease on 65,000 acres, Exxon did same last year; CO2 sequestration industry faces high costs, insufficient revenue, and regulatory issues.

In the third quarter of 2025, NRP generated $31 million of net income, $41 million of operating cash flow, and $42 million of free cash flow. The Mineral Rights segment contributed $41 million net income, $44 million operating cash flow, and $45 million free cash flow. Compared to the prior year third quarter, the Mineral Rights segment's net income was flat, while operating and free cash flow each decreased $9 million due to weaker metallurgical coal markets. Metallurgical coal made up approximately 70% of coal royalty revenues and 50% of coal royalty sales volumes. The soda ash segment had a net income decrease of $11 million compared to the prior year third quarter, with operating and free cash flow each down $6 million, primarily due to lower international sales prices from weakened glass demand and new Chinese soda ash supply. The Corporate and Financing segment saw net income improve $3 million, and operating and free cash flow each improve $2 million due to less debt outstanding, resulting in lower interest costs.

• Continue to generate robust free cash flow and work toward retiring all outstanding debt.
• Expect to increase unitholder distributions in August 2026, but market conditions for key commodities could delay the timing.
• Plan to achieve a fortress balance sheet with no permanent debt and $30 million of cash on hand, then allocate capital to unitholder distributions, unit repurchases at material discounts to intrinsic value, or opportunistic acquisitions.

• Commodity price volatility due to factors like global growth, weather, and renewables adoption.
• Soda ash market oversupply and prolonged downturn leading to continued low prices.
• CO2 sequestration industry challenges with high costs, insufficient revenue streams, and lack of consistent regulation.
• Delays in distribution increases due to continued bear markets in metallurgical coal, thermal coal, and soda ash.

Q: Please provide information on leasing for lithium mining in the Smackover region?

A: NRP is active in leasing acreage in the Smackover formation for lithium production to multiple lessees, but details on terms are not commented on.

Q: What goes into the operating and maintenance expense line?

A: Includes salaries, property taxes, royalty expenses; there's a zero-based budgeting approach to keep costs low.

Q: Are the majority of mineral rights specific to certain minerals? And any nat gas production opportunities?

A: Generally specific to certain minerals. Drilling has picked up a bit in the Haynesville basin, and NRP benefits from increased activity, though oil/gas revenues are not material to the partnership.

Q: Criteria for unit repurchases and thoughts on capital allocation?

A: Aim for a fortress balance sheet (no permanent debt, $30M cash), then prioritize unitholder distributions, unit repurchases at discounts to intrinsic value, and opportunistic acquisitions. Intrinsic value details are in unitholder letters.

Q: Will thermal coal infrastructure scale up for data center demand?

A: Uncertain, but significant capital investment would likely be needed to scale up production for increased data center demand.