Arch Resources and Consol Energy announced early Wednesday that the two coal companies have agreed to an all-stock merger. The new company, Core Natural Resources, will reportedly have a market capitalization of approximately $5 billion. Shares of both ARCH and CEIX jumped early before paring those gains Wednesday.
Arch Resources stock fell 2% to 124.21 during Wednesday's market action, while CEIX stock popped early before ending the day up 0.8% to 95.51.
St. Louis-based Arch Resources has a market value of around $2.3 billion. Meanwhile, the Pennsylvania-based Consol Energy has a market capitalization of about $2.8 billion. Both companies produce metallurgical and thermal coal. The merger is expected to close by the end of the first quarter of 2025, according to the press release. Core Natural Resources will trade under a new ticker.
Under the merger agreement, Arch Resources stockholders will receive a fixed exchange ratio of 1.326 shares of Consol Energy common stock for each share of ARCH common stock owned. Arch Resources stockholders will own approximately 45% of Core Natural Resources and Consol Energy shareholders will own approximately 55% on a fully diluted basis.
Arch Resources stock has fallen more than 20% this year and Consol Energy shares have declined around 6%.
The two coal mining outfits said Wednesday they expect the new business entity to generate $110 million-$140 million of annual cost and operational synergies within 6-18 months following the close of the transaction.
Metallurgical, or coking coal, is a critical ingredient in traditional blast-furnace steel production. U.S. met coal comes from Appalachian region mines and earns a hefty premium to the thermal coal used in power generation.
In 2023, 60% of Arch Resources revenue came from met coal and 40% thermal coal. Meanwhile, Consol reported 48% of revenue from thermal coal, 37% industrial coal and 15% metallurgical coal.
In 2022, Russia's invasion of Ukraine supercharged natural gas prices, making coal once again price-competitive and sending mining earnings soaring and coal stocks into a rally. However, U.S. natural gas prices have since come back to earth and are currently trading around $2.20 per British thermal unit, down around 30% on the year.
Arch Resources reported six quarters of earnings declines through the second quarter. Consol had reported four quarters of declines. Both companies are expected to report revenue and earnings declines for the September quarter.
Arch Resources stock has a 19 Composite Rating out of a best-possible 99. Shares also have a 15 Relative Strength Rating and a 42 EPS Rating.
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