In what may be one of the most significant M&A transactions in recent history for the U.S. coal industry, CONSOL Energy and Arch Resources jointly confirmed on August 21 that they have combined in an all-stock merger and together will create a top North American natural resource company focused on global coal: Core Natural Resources.
The pairing will create a US$6.2 billion mining operator that will offer what it has called a “world-class portfolio” that will be quite diverse, with about 12 million tons annually of met-grade coals and more than 25 Mt/y of high-calorific value thermal coal for global customers and the establishment of a leading North American coal export business with approximately 25 million tons each year of export capacity via its ownership interests in two East Coast terminals as well as strategic access to West Coast and Gulf of Mexico ports.
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.
It will also now have a total of eight long-life, prolifically producing and low-cost longwalls.
In 2023, Arch and CONSOL sold an aggregate of approximately 101 million tons of coal to steelmaking, industrial, and power-generation customers.
“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,” the two said of the deal.
“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.”
They confirmed as well that, on a pro forma basis in 2023, Core Natural Resources would have delivered its more than 25 Mt/y to support key end-use applications including cement production, industrial uses, and resurgent power generation demand driven by AI, data centers, and EV expansion.
Additionally, tech-focused CONSOL Innovations will continue to provide the ability to focus on developing and commercializing cutting-edge technologies in carbon products and carbon management.
CONSOL CEO Jimmy Brock called the new company “ideally positioned to meet the rising demand for critical resources and energy around the world” with complementary assets that offers great diversification across coal types, end uses, and geographies.
“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,” he noted.
Added Arch CEO Paul Lang: “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.”
Leadership and headquarters
Core Natural Resources will be led by a proven team that reflects the strengths and capabilities of both Arch and CONSOL.
Brock will serve as Executive Chairman of Core Natural Resources’ Board of Directors, and 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 will be an equal split of four and four from each entity.
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.
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 close by the end of the first quarter of 2025, subject to stockholder approval, regulatory approvals, and other customary closing conditions.
Sources: archrc.com and consolenergy.com
