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No. of Recommendations: 3
I think the reason for the recent huge volume and price drop are found in the following aticle.

"Alliance Resource Partners, L.P. Announces Record Quarterly Net Income; and Declares Quarterly Cash Distribution of $0.65 Per Unit"

TULSA, Okla., Oct 22, 2004

* * *

"As of September 30, 2004, the Partnership satisfied the financial tests required by the Partnership Agreement for conversion of the remaining subordinated units to common units. As a result, the outstanding 3,211,266 subordinated units held by Alliance Resource GP, LLC, the special general partner of the Partnership, will convert into common units on November 2, 2004. Following the conversion, Alliance Resource GP, LLC, will own 7,655,311 of the Partnership's outstanding common units. Pursuant to the Partnership's Long Term Incentive Plan, on November 2, 2004, 385,210 restricted units previously awarded to certain members of management, employees and directors will vest. As a result of this vesting, the Partnership will issue 231,126 common units. The remaining units will be settled in cash to satisfy tax obligations."

* * *

This conversion will eliminate substantial balance sheet debt, but will increase the outstanding shares, causing dilution. The price drop --- which is only down to the levels the stock was at ten days ago --- reflects this dilution, I believe. However, the conversion shows that the general partner prefers to have equity in this company rather than its debt. I think that is a good sign. Also consider the following headline from the day before the conversion announcement:

"Alliance Resource Partners, L.P. Increases Coal Reserve Holdings by 25% and Announces Plans to Increase Productive Capacity"

TULSA, Okla., Oct 21, 2004 (BUSINESS WIRE)

If you go into the articles, you'll see that news is even better than the headlines. There were two major non-recurring income events. One was the receipt of insurance proceeds from the mine fire. That could be viewed as "negative" long-term information because it was a one-time positive event (ongoing income would be lower by that amount). The other was a series of payments buying-out long-term contracts. That is a one-time expense that means higher income in the future from sales at current market prices.

Joe
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