Natural Resource Partners L.P. Q4 FY2025 earnings call

Craig Nunez mentioned that Natural Resource Partners L.P. generated $46 million of free cash flow in the fourth quarter of 2025 and $169 million of free cash flow in the full year 2025. All three key commodities - metallurgical coal, thermal coal, and soda ash - have sales prices near or below operators' marginal cost of production. 2025 was a very challenging year for the global soda ash industry and 2026 is expected to be worse. There has been no distribution from Sisecam Wyoming for the last two quarters and the partnership agreed to invest $39 million in the venture to reduce its bank credit facility. Regarding carbon-neutral initiatives, leasing interest for underground carbon sequestration is lackluster. In 2025, $109 million of debt was retired and the year ended with $33 million of debt. In November 2025, a $0.75 per common unit distribution was paid, in February a $0.75 distribution related to 2025 was paid, and a special distribution of $0.12 per common unit was announced to cover unitholder tax liabilities.

Natural Resource Partners L.P. generated $46 million of free cash flow in the fourth quarter of 2025 and $169 million of free cash flow in the full year 2025. For the Mineral Rights segment, in the fourth quarter of 2025, it generated $40 million of net income, $49 million of operating cash flow, and $50 million of free cash flow, and for the full year 2025, it generated $166 million of net income, $182 million of operating cash flow, and $185 million of free cash flow. Metallurgical coal made up approximately 70% of coal royalty revenues and 45% of coal royalty sales volumes in the fourth quarter of 2025, and 65% of coal royalty revenues and 45% of coal royalty sales volumes for the full year 2025. For the soda ash segment, net income in the fourth quarter and full year of 2025 decreased $3 million and $15 million respectively compared to prior-year periods, and operating and free cash flow also decreased. For the Corporate and Financing segment, Q4 2025 net income, operating cash flow, and free cash flow each improved $3 million compared to the prior-year period, and full-year net income improved by $9 million while operating and free cash flow each improved $8 million compared to the prior-year period.

Craig Nunez stated that 2026 is expected to be worse for the global soda ash industry with supply rationalization being a question of when. The $39 million investment in Sisecam Wyoming pushed back the expected distribution increase from August to a subsequent quarter. Based on free cash flow run rates, the distribution increase is likely in November, but the longer the bear market for key commodities continues, the more likely the timing could be pushed back.

Political, regulatory, and market uncertainties pose significant hurdles for underground carbon sequestration projects. The extended bear market for key commodities could push back debt retirement and distribution increases. The soda ash industry has excess capacity and a longer-than-expected downturn, and Sisecam Wyoming's financial performance is under pressure with no immediate resumption of distributions expected.

Q: Hi. How are you? Just to better understand the capital contribution to the soda ash JV, is there any way to provide how much bank debt was outstanding and whether the JV is now debt-free following the contribution?

A: The JV is not debt-free. The JV has $50-plus million of debt remaining after the contribution. We do not have that - that is not our plan right now. What I will say is that this is a very difficult soda ash market. We were early, and we were right on the downturn, but we have been wrong on the extent, the depth, and the duration of the downturn now that we are in it. If things get worse, there could be situations where we would elect to put more capital into the soda ash venture. That is always a possibility, but that is not what we are planning at the moment. It was our election.

Q: My question was related to the capital investment as well. I had lowered my hand, but not in time.

A: No. Not in May. If you do the math, you take our run rates that we are generating in free cash, you take into account the $39 million contribution we are making to the Sisecam Wyoming joint venture, the timing would say it is probably in November. What we have said before, though, in prior calls, and that is that the longer the bear market continues for all three of our key commodities, the greater the likelihood something happens that pushes that timing back. But that is what the timing looks like right now.

Q: Good morning. I attended the Pure Land Management sales auction of mineral rights for two of Warrior’s lines, and I was just curious why you guys did not bid.

A: Good question. Let me just tell you that the opportunities to acquire passive interests in natural resource assets at attractive prices - which are what we try to do - do not come along often. Auctions are typically not places where you come away with attractive opportunities for mineral-type assets, so you are not likely to see us participate in auctions. Furthermore, I will tell you, we are still on our path to delever, and our goal is to essentially pay off all of our debt and then focus primarily on returning capital to unitholders in the form of distributions. So those are the reasons we were not there.