THE LEADER VOLUME 19 • NUMBER 9
Coal consolidation
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Arch Resources , Inc and CONSOL Energy Inc have announced that they have entered into a definitive agreement to combine in an allstock merger of equals to create Core Natural Resources , a premier North American natural resource company focused on global markets . Core Natural Resources will be a leading producer and exporter of high-quality , low-cost coals with offerings ranging from metallurgical to high calorific value thermal coals . With mining operations and terminal facilities across six states , the combined company will own 11 mines , including one of the largest , lowest cost , and highest calorific value thermal coal mining complexes in North America and one of the largest , lowest cost , and highest quality metallurgical coal mine portfolios in the US .
In addition , the combined company will have access to global markets via ownership interests in two export terminals on the US Eastern seaboard , along with strategic connectivity to ports on the West Coast and Gulf of Mexico . Arch and CONSOL sold an aggregate of approximately 101 million tons of coal in 2023 to steelmaking , industrial , and power-generation customers .
Pro forma , Core Natural Resources would have a market capitalisation of approximately $ 5.2 billion as of August 19 , 2024 , and on a pro forma basis for 2023 , revenues were approximately $ 5.7 billion and adjusted EBITDA was approximately $ 1.8 billion , excluding expected synergies .
Jimmy Brock , Chairman and Chief Executive Officer of CONSOL , said : “ We are excited to bring our companies together to create a new industry leader that is ideally positioned to meet the rising demand for critical resources and energy around the world . Our assets are highly complementary , resulting in increased diversification across coal types , end uses , and geographies . In addition , Core Natural Resources is expected to have a strong balance sheet , ample liquidity , and robust free cash flow to deliver industry-leading capital returns . We look forward to working closely together to continue meeting the world ’ s steel , infrastructure , and energy needs that are so critical to our everyday lives and to capture the significant benefits and long-term value we believe this merger will create for our stockholders , employees , customers , and the communities in which we live and operate .”
Paul Lang , Chief Executive Officer of Arch , said : “ This merger will join two proven leadership teams and best-in-sector operating platforms to establish a premier North American coal producer with worldwide reach and world-class mining and logistics capabilities . Core Natural Resources will enjoy the benefits of CONSOL ’ s growing seaborne thermal business focused on industrial applications coupled with Arch ’ s significant exposure to attractive global metallurgical coal markets . Together , we expect to realise meaningful operating synergies through the optimisation of support functions , greatly enhanced marketing opportunities , and a significantly expanded logistics network , which will enhance our ability to deliver coal reliably and efficiently to our global customers . Importantly , both companies are driven by a deep commitment to safety , environmental and social stewardship and operating excellence , and we will continue to build around these commitments as we work to deliver superior value to stockholders .”
The merger will create a diversified coal producer with a broad portfolio of highquality metallurgical and thermal coals focused on seaborne markets where the business is highly contracted . More than 35 Mt / y of this coal will be produced by a best-in-sector portfolio of longwall operations at CONSOL ’ s Pennsylvania Mining Complex and Arch ’ s Leer , Leer South and West Elk mines .
The companies say that it will bring greater diversification across multiple growth markets and geographies with little , if any , overlap . The ability of Core Natural Resources to provide a range of coal qualities and blends will enable it to serve a more diverse customer base across multiple growth markets and geographies . For example , metallurgical coal produced by the combined company is a key input in the production of new steel from blast furnaces . Blast furnace steel constitutes 70 % of the world ’ s steel output .
Metallurgical coal is expected to remain in strong demand for decades to come , as new steel will be essential in supporting the world ’ s growing population , ongoing economic development , continued urbanisation , and the build-out of a lowcarbon economy . Furthermore , the high calorific value thermal coal mined by the combined company is increasingly sought after in industrial markets . On a pro forma basis in 2023 , Core Natural Resources would have delivered more than 25 Mt / y to support key end-use applications , including cement production and other industrial uses , as well as to serve resurgent power generation demand driven by AI , data centres , and EV expansion . In addition , CONSOL Innovations provides the ability to focus on developing and commercialising cutting edge technologies in carbon products and carbon management .
Core Natural Resources will have an ownership interest in approximately 25 Mt / y of export coal capacity across two marine export terminals on the US Eastern seaboard and have strategic connectivity to ports on the West Coast and Gulf of Mexico . The potential to optimise this expanded export capacity and logistics capabilities is expected to enhance reliable , efficient coal delivery to global customers .
The transaction is expected to be accretive to free cash flow for both Arch and CONSOL in the first full year following close . The combination is expected to generate $ 110 million to $ 140 million of annual cost and operational synergies within six to 18 months following the close of the transaction , primarily from logistics optimisation , coal blending and related opportunities , as well as procurement and SG & A efficiencies . Core Natural Resources will be headquartered in Canonsburg , Pennsylvania , leveraging its close proximity to the majority of its mining and export operations , and will maintain a presence in St . Louis .
Paul Moore Editorial Director paul @ im-mining . com
SEPTEMBER 2024 | International Mining 3