Dive Brief:
- Coal producers Arch Resources and Consol Energy plan to combine their companies, creating a $5.2 billion industry titan.
- The new public entity, Core Natural Resources, will produce and export multiple offerings of coal types, with operations and terminals across six states and 11 mines, Arch Resources said in its announcement Wednesday.
- The merger, if approved, will make Core Natural Resources one of the country's largest coal producers and is expected to close by the end of Q1 2025.
Dive Insight:
The two U.S.-based companies are combining even as coal production falls in the U.S. amid heightened regulations and a push toward cleaner energy sources.
Annual coal production fell 23.6% between 2018 and 2023, according to the U.S. Energy Information Administration. Within that shrinking market, more producers are prioritizing their export operations, which Core Natural Resources plans to do as well.
"We anticipate that more than 67% of the combined company's pro-forma volume will be exported to fast growing Asian markets," Consol Energy Chairman and CEO Jimmy Brock said on a call with analysts Wednesday.
China, India and Southeast Asian countries dominate coal consumption. China accounts for more than half of global consumption, and the country’s electricity intake continues to rise, according to the International Energy Agency. India is the world’s second-largest source of coal consumption growth, increasing 9% in 2023, while Vietnam is set to become the world’s fifth-largest consumer.
Brock will serve as executive chairman of the new company's board of directors, while Arch Resources CEO Paul Lang will serve as CEO and have a board seat. Core Natural Resources will be based in Canonsburg, Pennsylvania, where Consol Energy is currently headquartered.
The new company will be focused on customers in steel, infrastructure and energy, Arch Resources said in its announcement. The two businesses bring little customer base overlap, creating a highly diversified coal company.
An integral element of the merger is growing the companies' network across key logistics points in the U.S. The new firm will have ownership interests in two export terminals on the East Coast, as well as "strategic connectivity" to ports on the West Coast and Gulf of Mexico, according to the announcement.
"Our assets are highly complementary, resulting in increased diversification across coal types, end uses, and geographies," Brock said in a statement. "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."
Core Natural Resources expects to save between $110 million and $140 million in annual costs within 18 months of the deal's close.
