Arch Assets, Inc and CONSOL Vitality Inc have introduced that they’ve entered right into a definitive settlement to mix in an all-stock merger of equals to create Core Pure Assets, a premier North American pure useful resource firm targeted on international markets.
Core Pure Assets might be a number one producer and exporter of high-quality, low-cost coals with choices starting from metallurgical to excessive calorific worth thermal coals. With mining operations and terminal services throughout six states, the mixed firm will personal 11 mines, together with one of many largest, lowest value, and highest calorific worth thermal coal mining complexes in North America and one of many largest, lowest value, and highest high quality metallurgical coal mine portfolios within the US.
As well as, the mixed firm may have entry to international markets by way of possession pursuits in two export terminals on the US Japanese seaboard, together with strategic connectivity to ports on the West Coast and Gulf of Mexico. Arch and CONSOL offered an mixture of roughly 101 million tons of coal in 2023 to steelmaking, industrial, and power-generation clients.
Professional forma, Core Pure Assets would have a market capitalization of roughly $5.2 billion as of August 19, 2024, and on a professional forma foundation for 2023, revenues have been roughly $5.7 billion and adjusted EBITDA was roughly $1.8 billion, excluding anticipated synergies.
Jimmy Brock, Chairman and Chief Government Officer of CONSOL, mentioned: “We’re excited to convey our corporations collectively to create a brand new {industry} chief that’s ideally positioned to fulfill the rising demand for crucial sources and power all over the world. Our property are extremely complementary, leading to elevated diversification throughout coal sorts, finish makes use of, and geographies. As well as, Core Pure Assets is anticipated to have a robust steadiness sheet, ample liquidity, and strong free money stream to ship industry-leading capital returns. We stay up for working carefully collectively to proceed assembly the world’s metal, infrastructure, and power wants which are so crucial to our on a regular basis lives and to seize the numerous advantages and long-term worth we imagine this merger will create for our stockholders, workers, clients, and the communities by which we reside and function.”
Paul Lang, Chief Government Officer of Arch, mentioned: “This merger will be a part of two confirmed management groups and best-in-sector working platforms to determine a premier North American coal producer with worldwide attain and world-class mining and logistics capabilities. Core Pure Assets will take pleasure in the advantages of CONSOL’s rising seaborne thermal enterprise targeted on industrial purposes coupled with Arch’s vital publicity to engaging international metallurgical coal markets. Collectively, we count on to grasp significant working synergies via the optimisation of assist features, tremendously enhanced advertising alternatives, and a considerably expanded logistics community, which can improve our capability to ship coal reliably and effectively to our international clients. Importantly, each corporations are pushed by a deep dedication to security, environmental and social stewardship and working excellence, and we are going to proceed to construct round these commitments as we work to ship superior worth to stockholders.”
The merger will create a diversified coal producer with a broad portfolio of high-quality metallurgical and thermal coals targeted on seaborne markets the place the enterprise is extremely contracted. Greater than 35 Mt/y of this coal might be produced by a best-in-sector portfolio of longwall operations at CONSOL’s Pennsylvania Mining Advanced and Arch’s Leer, Leer South and West Elk mines.
Better diversification throughout a number of progress markets and geographies with little, if any, overlap. The power of Core Pure Assets to offer a spread of coal qualities and blends will allow it to serve a extra various buyer base throughout a number of progress markets and geographies. For instance, metallurgical coal produced by the mixed firm is a key enter within the manufacturing of latest metal from blast furnaces. Blast furnace metal constitutes 70% of the world’s metal output.
Metallurgical coal is anticipated to stay in robust demand for many years to return, as new metal might be important in supporting the world’s rising inhabitants, ongoing financial growth, continued urbanisation, and the build-out of a low-carbon economic system. Moreover, the excessive calorific worth thermal coal mined by the mixed firm is more and more wanted in industrial markets. On a professional forma foundation in 2023, Core Pure Assets would have delivered greater than 25 Mt/y to assist key end-use purposes, together with cement manufacturing and different industrial makes use of, in addition to to serve resurgent energy technology demand pushed by AI, knowledge centres, and EV enlargement. As well as, CONSOL Improvements offers the flexibility to concentrate on creating and commercialising leading edge applied sciences in carbon merchandise and carbon administration.
Core Pure Assets may have an possession curiosity in roughly 25 Mt/y of export coal capability throughout two marine export terminals on the US Japanese seaboard and have strategic connectivity to ports on the West Coast and Gulf of Mexico. The potential to optimise this expanded export capability and logistics capabilities is anticipated to reinforce dependable, environment friendly coal supply to international clients.
The transaction is anticipated to be accretive to free money stream for each Arch and CONSOL within the first full 12 months following shut. The mix is anticipated to generate $110 million to $140 million of annual value and operational synergies inside six to 18 months following the shut of the transaction, primarily from logistics optimisation, coal mixing and associated alternatives, in addition to procurement and SG&A efficiencies. Core Pure Assets might be headquartered in Canonsburg, Pennsylvania, leveraging its shut proximity to the vast majority of its mining and export operations, and can preserve a presence in St. Louis.
