Coal Miner MLP Rhino Plummets After Cutting Dividend

Rhino Resource Partners LP, a producer of coal in Appalachia, plunged the most since its 2010 initial public offering after cutting its quarterly dividend amid a slump in the price of the commodity.

Rhino tumbled 59 percent to close at $4.90 in New York trading.

The Lexington, Kentucky-based company said yesterday after the close of trading that it cut its distribution to 5 cents per common unit. The previous payment was 44.5 cents, according to data compiled by Bloomberg.

The “prolonged weakness in the coal markets” has curtailed cash flow, Chief Executive Officer Chris Walton said in a statement.

Rhino is a master limited partnership. MLPs have proven popular with investors in recent years as they typically pay no corporate income tax, allowing them to return more cash to shareholders in the form of dividends.

Rhino produces coal in central and northern Appalachia and also has a mine in Utah, according to its website. Some of Rhino’s U.S. competitors have closed or idled coal mines in Appalachia this year amid increased competition from cheap natural gas as a fuel source. Coal used in steelmaking has fallen to a six-year low on weaker demand from Chinese steelmakers.

Rhino will focus on cost-cutting efforts, including “reducing the carrying costs of non-core and idled operations,” Walton also said in yesterday’s statement.

Paul Forward, a Baltimore-based analyst for Stifel Nicolaus & Co Inc., said in a note today he expects Rhino’s third-quarter earnings before interest, taxes, depreciation and amortization to be $4 million, down from a previous estimate of $11 million.

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