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We reiterate our Neutral recommendation on pure coal play, Natural Resource Partners L.P. (NRP - Analyst Report). The partnership continued to have a good run with strong financial outcomes in the third quarter of 2012. Natural Resources’ top and bottom line comfortably surpassed the Zacks Consensus Estimates.

With coal gradually losing the race to other eco-friendly energy sources, we believe the partnership’s acquisition of frac sand reserves in Wisconsin will help to accelerate near-term oil and natural gas production volumes.

The buyout of an overriding stake in the liquids-rich portion of the Marcellus Shale formation is another key strategic move that will sit well with the partnership’s targeted growth objectives.

However, the aforementioned positive triggers will face generic risks like price volatilities, especially in a laggard U.S. economy and pressing regulatory hurdles.

Looking forward, the steady rebound in the Chinese and South Korean markets could offer encouraging prospects to the partnership in the long run. Nevertheless, increasing coal stockpiles from the Central Appalachia operation could somewhat temper results in the upcoming quarters.

Taking into account these broad fundamentals, Natural Resources currently has a short-term Zacks #3 Rank (Hold). The Zacks Consensus Estimates for the fourth quarter and full year 2012 presently stand at 43 cents per unit and $1.84 per unit, respectively.

Another coal major, Arch Coal Inc. (ACI - Analyst Report) is also strapping up its business to combat the soft macro-environment with the development of the high-quality Leer Mine. In addition, the company plans to fortify its foothold in the Asia-Pacific markets and has locked in several deals on Powder River Basin (“PRB”) coal with Korea’s power generating companies.

The Houston, Texas based partnership is primarily engaged in the business of owning and managing mineral reserve properties. The partnership owns coal reserves and coal handling and transportation infrastructure in the three major coal producing regions of the United States –Appalachia, the Illinois Basin, and the Northern Powder River Basin (“NPRB”).

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