Brings Together Two Best-in-Sector Operating Platforms with a World-Class Portfolio of High-Quality, Low-Cost, Long-Lived Longwall Coal Mining Assets and Strong Distribution Networks
Creates Diversified Coal Producer Serving Global Steel, Industrial, and Power Generation Customers with ~12 Mtpa of Metallurgical Grade Coals and More than 25 Mtpa of High Calorific Value Thermal Coal
Creates a Leading North American Coal Export Business with ~25 Mtpa of Export Capacity via Ownership Interests in Two East Coast Terminals as well as Strategic Access to West Coast and Gulf of Mexico Ports
Expected to Generate Substantial Free Cash Flow to Fuel Robust Capital Returns to Core Natural Resources’ Stockholders, Supported by a Strong Balance Sheet and a Pro Forma Positive Net Cash Position
Expected to Generate $110 Million to $140 Million of Annual Cost and Operational Synergies
Companies to Host Joint Conference Call Today at 8:30 a.m. ET / 7:30 a.m. CT
ST. LOUIS and CANONSBURG, Pa., Aug. 21, 2024 /PRNewswire/ — Arch Resources, Inc. (“Arch”) (NYSE: ARCH) and CONSOL Energy Inc. (“CONSOL”) (NYSE: CEIX) today announced that they have entered into a definitive agreement to combine in an all-stock 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 United States. In addition, the combined company will have access to global markets via ownership interests in two export terminals on the U.S. 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 capitalization 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 EBITDA1 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 realize meaningful operating synergies through the optimization 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.”
Strategic and Financial Benefits of the Proposed Merger
- High-quality coal portfolio underpinned by eight low-cost, long-lived longwalls: The merger will create a diversified coal producer with a broad portfolio of high-quality metallurgical and thermal coals focused on seaborne markets where the business is highly contracted. More than 35 Mtpa 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.
- 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 urbanization, and the build-out of a low-carbon 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 Mtpa 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 centers, and EV expansion. In addition, CONSOL Innovations provides the ability to focus on developing and commercializing cutting edge technologies in carbon products and carbon management.
- Expands North American logistics and export capabilities to serve growing global customer base: Core Natural Resources will have an ownership interest in approximately 25 Mtpa of export coal capacity across two marine export terminals on the U.S. Eastern seaboard and have strategic connectivity to ports on the West Coast and Gulf of Mexico. The potential to optimize this expanded export capacity and logistics capabilities is expected to enhance reliable, efficient coal delivery to global customers.
- Accretive to cash flows: The transaction is expected to be accretive to free cash flow for both Arch and CONSOL in the first full year following close.
- Expected significant value creation from anticipated cost savings and operational synergies: 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 optimization, coal blending and related opportunities, as well as procurement and SG&A efficiencies.
- Anticipated strong cash flow and balance sheet expected to deliver substantial capital returns: On a pro forma basis, excluding the impact of synergies, Core Natural Resources would have generated approximately $1.4 billion of free cash flow2 in 2023, and would have had a net cash3 position of approximately $260 million as of June 30, 2024. Its strong cash flow and balance sheet is expected to provide significant financial flexibility and improved access to capital to support robust capital returns in a wide range of market environments as well as value creating investments. Discretionary cash flow is expected to be returned to stockholders via share buybacks and a potential modest sustaining dividend.
- Shared values and stakeholder commitments to support smooth integration: Both Arch and CONSOL have among the best safety records and lowest incident rates in the mining industry, and as a combined company, safety, compliance, and continuous improvement will remain core values. Core Natural Resources will maintain a strong, diverse workforce and provide competitive compensation and comprehensive benefits programs, consistent with its objective of being an employer of choice where it operates. As a larger, stronger organization, Core Natural Resources is expected to have an enhanced ability to retain, attract, and develop its people. Environmental stewardship, innovation, and ongoing community support will continue to be prioritized.
Leadership and Headquarters
Core Natural Resources will be led by a proven team that reflects the strengths and capabilities of both Arch and CONSOL.
Mr. Brock will serve as Executive Chairman of Core Natural Resources’ Board of Directors, and Mr. Lang will serve as Chief Executive Officer and as a member of the Board. In addition, Mitesh Thakkar, CONSOL’s President and Chief Financial Officer, will serve as President and CFO of the combined company. George Schuller Jr., Arch’s Chief Operating Officer, Bob Braithwaite, CONSOL’s Senior Vice President of Marketing, and Deck Slone, Arch’s Senior Vice President of Strategy, will each serve in the same capacity at Core Natural Resources.
The Board of Directors of the combined company will have eight directors. Four directors will be selected by CONSOL, including Mr. Brock. Four directors will be selected by Arch, including Mr. Lang and Richard Navarre, currently Independent Chairman of the Arch Board, who will serve as Lead Independent Director on the Core Natural Resources Board.
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.
Transaction Terms
Under the terms of the agreement, which has been unanimously approved by the Boards of Directors of both companies, Arch stockholders will receive a fixed exchange ratio of 1.326 shares of CONSOL common stock for each share of Arch common stock owned.
Upon closing of the transaction, Core Natural Resources will trade under a new ticker. Arch stockholders will own approximately 45% of Core Natural Resources, and CONSOL stockholders will own approximately 55% on a fully diluted basis. The merger is expected to be tax-free to stockholders of both companies for U.S. federal income tax purposes.
Approvals and Closing
The merger is expected to close by the end of the first quarter of 2025, subject to approval by both companies’ stockholders, regulatory approvals, and the satisfaction of other customary closing conditions.
Arch, CONSOL Dividend and Share Repurchases
In connection with the execution of the agreement, the CONSOL Board declared a dividend equal to $0.25 per share. The dividend will be payable in cash on September 13, 2024, to holders of record of CONSOL common stock as of the close of business on August 30, 2024. In addition, each of Arch and CONSOL is permitted to pay quarterly dividends of up to $0.25 per share to their respective stockholders during the pendency of the merger, with the declaration of any dividends subject to the approval of the respective company’s Board of Directors.
Arch and CONSOL will suspend share repurchases until the transaction is completed.
Advisors
Perella Weinberg Partners is serving as exclusive financial advisor to Arch, and Latham & Watkins LLP and Gibson, Dunn & Crutcher LLP are serving as legal counsel.
Moelis & Company LLC is serving as exclusive financial advisor to CONSOL, and Wachtell, Lipton, Rosen & Katz and McGuireWoods LLP are serving as legal counsel.
Conference Call and Webcast
Arch and CONSOL will host a joint conference call and webcast today, August 21, 2024 at 8:30 a.m. ET / 7:30 a.m. CT to discuss the merger.
The conference call will be available via live webcast on the investor relations section of each company’s website at https://www.archrsc.com/ and https://www.consolenergy.com/, or directly at the following web address: https://event.choruscall.com/mediaframe/webcast.html?webcastid=KidiPfmS. Associated presentation materials will also be available for viewing on the same website prior to the call.
The conference call can also be accessed by dialing 1-866-524-3160 within the U.S. and 1-412-317-6760 for all other locations. An archive of the webcast will be available for at least 30 days after the event.
About Arch Resources, Inc.
Arch Resources is a premier producer of high-quality metallurgical products for the global steel industry. The company operates large, modern and highly efficient mines that consistently set the industry standard for both mine safety and environmental stewardship. Arch Resources from time to time utilizes its website – www.archrsc.com – as a channel of distribution for material company information. To learn more about us and our premium metallurgical products, go to www.archrsc.com.
About CONSOL Energy Inc.
CONSOL Energy Inc. (NYSE: CEIX) is a Canonsburg, Pennsylvania-based producer and exporter of high-Btu bituminous thermal coal and metallurgical coal. It owns and operates some of the most productive longwall mining operations in the Northern Appalachian Basin. CONSOL’s flagship operation is the Pennsylvania Mining Complex, which has the capacity to produce approximately 28.5 million tons of coal per year and is comprised of 3 large-scale underground mines: Bailey Mine, Enlow Fork Mine, and Harvey Mine. CONSOL recently developed the Itmann Mine in the Central Appalachian Basin, which has the capacity when fully operational to produce roughly 900 thousand tons per annum of premium, low-vol metallurgical coking coal. The company also owns and operates the CONSOL Marine Terminal, which is located in the port of Baltimore and has a throughput capacity of approximately 20 million tons per year. In addition to the ~584 million reserve tons associated with the Pennsylvania Mining Complex and the ~28 million reserve tons associated with the Itmann Mining Complex, the company controls approximately 1.3 billion tons of greenfield thermal and metallurgical coal reserves and resources located in the major coal-producing basins of the eastern United States. Additional information regarding CONSOL Energy may be found at www.consolenergy.com.