Eastern America’s Largest Coal miner, ARLP, Bitcoin Mining Strategy post-halving

Joe Craft, Chief Executive Officer, and Cary Marshall, Chief Financial Officer at Alliance Resource Partners (ARLP), responded to questions about the company’s involvement and interest in Bitcoin mining during the company’s Q1 2024 Earnings Call.

ARLP is the largest coal mining company in Eastern America. In 2023 alone, they produced 34.9 million tons of coal. The company’s interest in mining cryptocurrencies aligns with a growing trend of conventional companies growing interest in digital assets.

ARLP venture into Bitcoin Mining

During the call, Marshall revealed that the company piloted the Bitcoin mining project in the second half of 2020. The move was driven by the need to monetize their ‘paid for yet underutilized electricity load’ at their River View mine.

The company’s pilot project has since grown over the years. By the end of Q1 2024, the company’s book balance (property, plant, and equipment) was $7.3 million.

The CFO also revealed that they had mined and now owned Bitcoin worth approximately $30 million. The amount totaled 425 Bitcoins. He reiterated that they had no business in purchasing cryptocurrencies. Sales were only made to cover some of their expenses.

They also rented some of their extra capacity to other Bitcoin miners. 

Besides Bitcoin mining, the company has diversified its portfolio into royalty income from mineral interests owned in coal and oil and gas-producing regions across the country.

Impact of the Bitcoin Halving Event

The Bitcoin Halving event halves the amount of new Bitcoin generated/ awarded to miners approximately every four years.

On this end, the CFO expressed that pre-halving, in the first quarter of 2024, they mined 69 Bitcoin and sold 18 to cater for some of their expenses. Post-halving, he expressed optimism, meaning they anticipated they would remain profitable, considering the costs. The CFO expressed that their costs of generating Bitcoin were lower, so they anticipated accumulating more in the coming months.

He projected they would mine between 175 and 190 Bitcoin in 2024, monetizing some to cover expenses. By the end of the year, he protected a net of around 60%.

The Threat of Renewable Energy

When asked about the threat of renewable energy on their coal mining activities, the two executives downplayed it. They expressed their company’s critical role in providing affordable electricity and the growing demand that renewable sources could not meet.

Here was Joe Craft’s response to the threat of growing sources of renewable energy:

No. I think that, in fact, I guess it’s probably given us some more optimism that our coal … we believe that our demand is going to be extended longer than what we thought at the time we entered into this type of strategy several years ago

Joe expressed that they saw a lot of opportunities in the growing rate of data centers driven by Artificial Intelligence and industrial load led by electric vehicles and battery manufacturing in the country, areas that the US looked forward to having a first mover advantage.

The executives also expressed that Biden’s fossil onslaught did not change the fundamental realities of electricity supply and demand across the country.

Alliance Resource Partners is a master limited partnership with common units traded on the NASDAQ Global Select Market under the ticker “ARLP.”