In a significant move within the natural resources sector, Arch Resources and CONSOL Energy have announced a definitive agreement to merge in an all-stock transaction. This merger aims to form Core Natural Resources, a premier North American company focused on serving global markets. With both firms recognized for their operational excellence, this merger is set to create a formidable player in the coal industry, leveraging their combined strengths to meet the increasing demand for essential resources.
Core Natural Resources will emerge as a leading producer and exporter of high-quality, low-cost coals, boasting a diverse portfolio that includes both metallurgical and high calorific value thermal coals. The merger will consolidate their mining operations and terminal facilities across six states, resulting in a combined ownership of 11 mines. Notably, this includes one of North America's largest and most cost-effective thermal coal mining complexes, alongside a significant portfolio of high-quality metallurgical coal mines. This strategic combination will enhance their ability to serve a wide array of customers in the steel, industrial, and power generation sectors.
The combined entity is projected to have a remarkable export capacity, with approximately 25 million metric tons per annum of coal available for export through ownership interests in two marine terminals on the U.S. East Coast. Additionally, Core Natural Resources will have strategic access to ports on the West Coast and the Gulf of Mexico, further expanding its reach into global markets. In 2023 alone, Arch and CONSOL sold around 101 million metric tons of coal to various industries, underscoring their robust market presence and the potential for growth in the newly formed company.
Financially, the merger is expected to generate substantial free cash flow, which will be utilized for capital returns to stockholders. Both companies have reported a strong balance sheet and a pro forma positive net cash position, positioning Core Natural Resources for significant financial flexibility. The merger is anticipated to yield annual cost and operational synergies ranging from $110 million to $140 million within the first 18 months, primarily through logistics optimization and enhanced procurement strategies.
Leadership for Core Natural Resources will reflect the strengths of both companies, with Jimmy Brock from CONSOL taking the role of Executive Chairman, while Paul Lang from Arch will serve as Chief Executive Officer. This leadership structure is designed to ensure a smooth transition and effective integration of the two companies, capitalizing on their combined expertise and operational efficiencies. The Board of Directors will consist of eight members, with equal representation from both firms, fostering collaboration and strategic oversight.
The merger is expected to close by the end of the first quarter of 2025, pending approval from stockholders and regulatory bodies. In the interim, both companies plan to maintain shareholder value through dividend payments and will suspend share repurchases until the transaction is finalized. This careful approach reflects their commitment to maximizing shareholder returns while navigating the complexities of the merger process.
