Alliance Resource Partners, L.P. reports record quarterly results; announces development of Gibson South Mine

Alliance Resource Partners, L.P. (NASDAQ: ARLP) today reported record financial results for the quarter ended June 30, 2011 (the “2011 Quarter”). Record coal sales volumes combined with record average coal sales prices drove revenues in the 2011 Quarter to a record $457.9 million, an increase of 14.4% compared to the quarter ended June 30, 2010 (the “2010 Quarter”). ARLP also posted records in the 2011 Quarter for EBITDA, which increased 13.7% to $146.7 million; net income, which climbed 14.9% to $98.2 million; and net income per basic and diluted partner unit, which increased 12.1% to $2.04 per unit, each as compared to the 2010 Quarter. (For a definition of EBITDA and related reconciliations to comparable GAAP financial measures, please see the end of this release).

“ARLP remains on track to post its eleventh consecutive year of record financial performance in 2011 after once again delivering record second quarter and first half results”

ARLP also announced that the Board of Directors of its managing general partner increased the cash distribution to unitholders for the 2011 Quarter to $0.9225 per unit (an annualized rate of $3.69 per unit), payable on August 12, 2011 to all unitholders of record as of the close of trading on August 5, 2011. The announced distribution represents a 13.9% increase over the cash distribution of $0.81 per unit for the 2010 Quarter and a 3.7% increase over the cash distribution of $0.89 per unit for the first quarter of 2011 (the “Sequential Quarter”).

In addition, ARLP announced that the Board has approved development of the Gibson South mine. ARLP’s independent operating subsidiary Gibson County Coal (South), LLC will develop the Gibson South mine as an underground mining complex utilizing four continuous mining units employing room-and-pillar mining techniques to access approximately 48.4 million tons of medium-sulfur coal from the Indiana No. 5 coal seam. The new Gibson South mine will be located near ARLP’s current Gibson mining complex outside the city of Princeton, Indiana. Initial production is currently expected to begin by the third quarter of 2014 and it is anticipated that at full capacity the Gibson South complex will employ approximately 310 miners and produce up to 3.3 million tons of coal annually. Total capital expenditures to develop the Gibson South mining complex are currently estimated in a range of $200 – $210 million and will be funded with current cash on hand and cash generated from operations.

“ARLP remains on track to post its eleventh consecutive year of record financial performance in 2011 after once again delivering record second quarter and first half results,” said Joseph W. Craft III, President and Chief Executive Officer. “In addition to this outstanding operating performance, we recently received the permits necessary to begin construction of the Gibson South mining complex enabling us to expand our presence into the growing international and domestic market for this higher valued, medium-sulfur coal. Once completed the Gibson South mine combined with the Gibson North mine will give ARLP over 6 million tons of annual production of a less than three pound SO2 product, which today commands over a $15 per ton premium in the domestic market compared to the typical five pound product sold from the Illinois Basin. The international market for this product enjoys an even greater spread. ARLP’s continued execution of its growth strategy and solid year-to-date performance led our Board to approve a 3.7% increase to the quarterly distribution to our unitholders.”

Consolidated Financial Results

Three Months Ended June 30, 2011 Compared to Three Months Ended June 30, 2010

Record revenues in the 2011 Quarter were driven primarily by record average coal price realizations and record coal sales volumes. As a result of improved pricing under ARLP’s coal sales contracts and increased pricing of export market sales, average coal sales prices in the 2011 Quarter rose 8.8% to a record $56.08 per ton sold, compared to the 2010 Quarter. Increased production and sales tons in the 2011 Quarter, particularly from the River View, Pattiki and Central Appalachia mines, pushed coal sales volumes up 5.4% to a record 7.9 million tons while production volumes rose 8.9% to 7.5 million tons, both as compared to the 2010 Quarter.

Increased coal production and sales tons also contributed to higher operating expenses in the 2011 Quarter, which increased 15.2% to $284.1 million compared to the 2010 Quarter. Operating expenses were particularly impacted by higher materials and supplies expenses, sales-related expenses, maintenance costs and labor-related costs during the 2011 Quarter. Operating expenses during the 2011 Quarter also reflect increased costs associated with incidental production at the Tunnel Ridge mine development project.

Financial results for the 2011 Quarter compared to the 2010 Quarter were also impacted by higher depreciation, depletion and amortization, which increased $3.4 million to $39.1 million primarily as a result of capital expenditures at the River View mine and mine infrastructure and equipment expenditures at the Dotiki mine. In addition, outside coal purchases increased $1.3 million, compared to the 2010 Quarter, due to increased brokerage activity as well as higher cost per ton of coal purchased for sale into the export market and general and administrative expenses rose $1.4 million primarily as a result of increased incentive compensation expense and professional service fees.

Six Months Ended June 30, 2011 Compared to Six Months Ended June 30, 2010

For the six months ended June 30, 2011 (the “2011 Period”), ARLP reported records for all major operating and financial metrics. Led by increased production and sales volumes at River View, tons produced climbed 8.9% and tons sold increased 3.8%, compared to the six months ended June 30, 2010 (the “2010 Period”). Higher coal sales volumes and increased average coal sales prices, which rose $4.67 per ton sold, combined to drive 2011 Period revenues to $881.2 million, up 12.8% compared to the 2010 Period, while EBITDA for the 2011 Period increased 16.5% to $288.9 million, compared to EBITDA of $247.9 million for the 2010 Period. Net income for the 2011 Period increased 20.6% to $193.6 million, or $4.03 of net income per basic and diluted limited partner unit, compared to net income of $160.4 million, or $3.38 of net income per basic and diluted limited partner unit, for the 2010 Period.

Regional Results and Analysis

(1) Sales price per ton is defined as total coal sales divided by total tons sold.

(2) For definitions of Segment Adjusted EBITDA expense per ton and Segment Adjusted EBITDA and related reconciliations to comparable GAAP financial measures, please see the end of this release.

(3) Total includes other, corporate and eliminations.

ARLP sold a record 7.9 million tons of coal in the 2011 Quarter, an increase of 5.4% over the 2010 Quarter and 4.7% over the Sequential Quarter. Increased coal sales volumes in the Illinois Basin primarily reflect continued strong sales performance from the River View mine and the resumption of full production at the Pattiki mine earlier this year. Increased coal production and sales volumes from the MC Mining and Pontiki mines drove Central Appalachian coal sales volumes higher in both the 2011 and Sequential Quarters. Higher total coal sales volumes also reflect increased sales of purchased tons and coal inventory during the 2011 Quarter. Total coal inventories fell to approximately 830,000 tons at the end of the 2011 Quarter, a decrease of approximately 240,000 tons and 230,000 tons from inventories at the end of the 2010 and Sequential Quarters, respectively. ARLP currently anticipates coal inventories to continue to trend lower throughout the balance of this year.

Coal prices improved in all of ARLP’s operating regions during the 2011 Quarter, particularly for sales of its Northern Appalachian coal into the high priced export markets, resulting in record average coal sales prices of $56.08 per ton sold – an increase of 8.8% compared to the 2010 Quarter. Sequentially, coal sales prices increased 3.7% due to improved contract pricing in the Central Appalachia region and strong export market pricing in the Northern Appalachian region.

Total Segment Adjusted EBITDA Expense per ton in the 2011 Quarter increased 9.5% and 6.7% compared to the 2010 and Sequential Quarters, respectively. The continued impact of increasingly stringent regulatory compliance requirements as well as higher sales related expenses contributed to higher Segment Adjusted EBITDA Expense per ton during the 2011 Quarter in all of our operating regions. For the 2011 Quarter, Segment Adjusted EBITDA Expense per ton in the Illinois Basin increased compared to the 2010 Quarter primarily as a result of lower production due to mining conditions at the Warrior and Dotiki mines and weather-related disruptions at the Gibson North and Hopkins mines. Seasonal off-time schedules in the Illinois Basin also impacted Segment Adjusted EBITDA Expense per ton compared to the Sequential Quarter. Segment Adjusted EBITDA Expense per ton for the 2011 Quarter decreased in Central Appalachia compared to both the 2010 and Sequential Quarters due to the previously discussed increases in production at both of ARLP’s Central Appalachian mines. Higher Segment Adjusted EBITDA Expense per ton in Northern Appalachia in the 2011 Quarter, compared to both the 2010 and Sequential Quarters, reflects increased cost per ton of coal purchased for sale into the export markets and continued difficult geological conditions at the Mountain View mine in addition to increased expenses at the Tunnel Ridge mine development project discussed above.

Outlook

Commenting on Alliance’s outlook Mr. Craft continued, “During the 2011 Quarter we entered into new coal sales agreements for deliveries of 4.2 million tons through 2016 at prices above current price realizations, bringing our total new contract commitments to approximately 9.7 million tons since the beginning of this year. In particular, demand for ARLP’s scrubber quality coal from the Illinois Basin and Northern Appalachian regions continues to show growth as the markets for these products expand both domestically and internationally. We remain optimistic that our strategy of focusing on these expanding markets bodes well for ARLP’s future growth prospects.”

Based on results to date and current estimates, ARLP anticipates 2011 coal production within the previously provided range of 31.6 to 32.6 million tons. ARLP continues to expect 2011 coal sales in a range of 32.0 to 33.0 million tons, substantially all of which is committed and priced. Beyond 2011, ARLP has secured coal sales commitments for approximately 28.1 million tons, 27.2 million tons and 21.1 million tons in 2012, 2013 and 2014, respectively, of which approximately 3.0 million tons in 2012, 6.2 million tons in 2013 and 6.6 million tons in 2014 remain open to market pricing.

ARLP is updating its estimated ranges for 2011 revenues, excluding transportation revenues, to $1.80 to $1.85 billion, EBITDA to $550.0 to $585.0 million, and net income to $355.0 to $385.0 million. With approval of the Gibson South mine opening, the addition of the previously announced mining unit at the Pontiki mine and current construction schedules at the Tunnel Ridge mine development, ARLP is now anticipating 2011 total capital expenditures, including maintenance capital expenditures, near the upper end of its previously provided range of $320.0 to $360.0 million. (For a definition of EBITDA and related reconciliations to comparable GAAP financial measures, please see the end of this release.)

A conference call regarding ARLP’s 2011 Quarter financial results is scheduled for today at 10:00 a.m. Eastern. To participate in the conference call, dial (866) 783-2143 and provide pass code 35336200. International callers should dial (857) 350-1602 and provide the same pass code. Investors may also listen to the call via the “investor information” section of ARLP’s website at http://www.arlp.com.

An audio replay of the conference call will be available for approximately one week. To access the audio replay, dial (888) 286-8010 and provide pass code 56211031. International callers should dial (617) 801-6888 and provide the same pass code.

This announcement is intended to be a qualified notice under Treasury Regulation Section 1.1446-4(b), with 100% of the partnership’s distributions to foreign investors attributable to income that is effectively connected with a United States trade or business. Accordingly, ARLP’s distributions to foreign investors are subject to federal income tax withholding at the highest applicable tax rate.

About Alliance Resource Partners, L.P.

ARLP is a diversified producer and marketer of coal to major United States utilities and industrial users. ARLP, the nation’s first publicly traded master limited partnership involved in the production and marketing of coal, is currently the fourth largest coal producer in the eastern United States with mining operations in the Illinois Basin, Northern Appalachian and Central Appalachian coal producing regions. ARLP operates nine mining complexes in Illinois, Indiana, Kentucky, Maryland and West Virginia and is also constructing a new mining complex in West Virginia. In addition, ARLP operates a coal loading terminal on the Ohio River at Mount Vernon, Indiana.

News, unit prices and additional information about ARLP, including filings with the Securities and Exchange Commission, are available at http://www.arlp.com. For more information, contact the investor relations department of ARLP at (918) 295-7674 or via e-mail at[email protected].

The statements and projections used throughout this release are based on current expectations. These statements and projections are forward-looking, and actual results may differ materially. These projections do not include the potential impact of any mergers, acquisitions or other business combinations that may occur after the date of this release. At the end of this release, we have included more information regarding business risks that could affect our results.