Core Natural Resources, Inc.

Good morning, ladies and gentlemen, and welcome to the CORE Natural Resources Incorporation first quarter 2025 earnings conference call. As this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star followed by zero for the operator. This call is being recorded on Thursday, May 8, 2025. I would now like to turn the conference over to Mr. Dex Sloan. Please go ahead.

Good morning from Cannonsburg, Pennsylvania, everyone, and thanks for joining us today. Before we begin, let me remind you that certain statements made during this call, including statements relating to our expected future business and financial performance, may be considered forward-looking statements according to the Private Securities Litigation Reform Act. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. These uncertainties, which are described in more detail in the annual and quarterly reports that we file with the SEC, may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required by law. I'd also like to remind you that you can find a reconciliation of the non-GAAP financial measures that we plan to discuss this morning at the end of our press release, a copy of which we have posted in the investor section of our website at corenaturalresources.com. Also participating on this morning's call will be Paul Lang, our CEO, Mitesh Thakkar, our President and CFO, and Bob Braithwaite, our Senior Vice President of Marketing and Sales. After some formal remarks from Paul and Mitesh, the four of us will be happy to take questions. With that, I'll now turn the call over to Paul. Paul?

Thanks, Dick, and good morning, everyone. We're happy you could join us on the call today. I'm pleased to report that CORE is off to an exceptionally strong start and is already delivering on its tremendous potential after just four months as a combined company. During the first quarter, the team generated $123.5 million in of adjusted EBITDA, despite generally soft market environment. Returned $106.6 million to investors through share buybacks and quarterly dividends. Increased our target for merger-related synergies by 10% at the midpoint of guidance to between $125 and $150 million. Made excellent progress towards the full resumption of operations at Lear South, and executed several well-timed capital market transactions that, in aggregate, have established a strong and strategic capital structure in support of our future growth prospects. Of equal importance, the team is executing at a strong level operationally. In particular, the high CV thermal segment continues to hit on all cylinders. This segment generated substantial free cash flow in Q1 by leveraging its strong book of contracted business taking advantage of strengthening domestic power markets and capitalizing on solid pricing in key segments of the international marketplace where we have a strategic advantage. While market conditions were more challenging for the metallurgical segment, the team turned in a solid cost performance across most of the portfolio, led by record quarterly production at the Lear mine, which also served to partially mitigate the impact of the longwall outage at the Lear South operations. We're focused on maintaining this strong operational momentum as we progress through the remainder of the year. This, along with our ongoing capture of the substantial and increasing synergies, as well as the projected restart of the long wall at Lear South mid-year, should provide further tailwinds in the months ahead. As you'll note from the guidance table contained in our earnings release, we have affirmed or improved upon our guidance in all instances. In particular, we're projecting a full year of cash costs for the high CV thermal segment of $39 at the midpoint of guidance, which is more than $3 per ton lower than in Q1 when we had three longwall moves at the Pennsylvania mining complex. We also reduced the projected cash costs for our metallurgical segment to $96 per ton at the midpoint of guidance, which is $2 per ton favorable to the previous estimate. For the back half of the year, following the restart of Lear South Longwall, we're still projecting a cash cost in the lower $90 per ton for the segment. I'd now like to spend a few minutes on the capital return program. As you recall, we announced a new capital return framework in February, which was designed to reward our shareholders for their strong, ongoing support, and which we consider a central tenet of CORE's long-term value proposition. The centerpiece of this framework is the target return to shareholders of around 75% of the previous quarter's free cash flow through share repurchases and a sustaining quarterly dividend of $0.10 per share. As indicated, we wasted no time in putting this capital return program into full effect. During Q1, we invested around $101 million to buy back 1.4 million shares, or around 3% of our outstanding shares at the program's launch. at an average price of $73.52 per share. We also returned about $5 million to stockholders through the March dividend payment. In addition, as noted in the release, we also intend to pay a quarterly dividend of 10 cents per share in June. Let me reiterate that we expect the share repurchases to be most highly value creating at current valuations. At a time when most of the global resource sector is focused on cash preservation, we're putting our excess cash to work opportunistically in today's depressed equity market environment. As indicated, the Board has authorized a total of $1 billion in share repurchases in support of the capital return framework, and at the end of Q1, we had roughly $900 million remaining on that authorization. That authorization level further underscores the Board's confidence in our near, mid, and long-term outlook as well as the company's great cash generating capabilities. Now let's turn to Synergy Capture, which also remains a sharp focus of the team and a huge lever for future value creation for us. During Q1, the team executed on strategies that put us on pace to deliver at the midpoint of the initially indicated guidance and identified another tranche of opportunities that prompted us to raise the bar still higher on this critically important front. With this, we now expect to deliver an annual synergy value of between $125 and $150 million, and we're not done. Remember, the full team has only been working together as an integrated unit for about four months, and the level of collaboration and creativity has been impressive. We expect those efforts to continue to develop new opportunities, particularly around the area of sharing of best practices between the minds. While Mitesh will provide additional commentary on this important topic in his prepared remarks, we still expect more uplift in the synergy arena as coal markets normalize, which should act to drive incremental value in areas such as marketing and product blending. Turning now to the status of Lear South, as you know, the mine experienced a combustion event around the time of the merger's completion. Once again, I want to commend the Lear South team, as well as the federal, and state regulators for their exceptional ongoing work in managing this situation in a safe and efficient manner. Since the combustion event occurred, the team has made tremendous progress in putting the mine on a path to resume long-wall operations by mid-year. To date, the team has safely sealed off the affected area, extinguished combustion-related activity, and resumed development work with continuous miner units. In addition, we continue to use remote cameras to monitor the longwall, which reaffirms our belief that the equipment was largely unaffected by the event. It's also worth underscoring that restart of the continuous mining units in mid-February has acted to significantly improve the development lead time for future longwall production. We expect this increased lead time to translate into higher longwall productivity once the system resumes operations. Before passing the call to Mitesh, I'd like to spend a few minutes on global market dynamics. As indicated, our two primary lines of business, metallurgical and high-CV thermal coal, continue to encounter soft market conditions in the international arena due in part to trade-related uncertainties. While we hope the current tariff situation proves to be transitory, we have pivoted quickly to redirect our products away from countries that have established retaliatory tariffs and we believe we're in generally good shape for the balance of 2025 and heading into 2026. In the high CV thermal segment, our substantial contracted position is also acting to counterbalance current export market softness along with continued stability in key industrial market segments and strong domestic demand. Through April, U.S. power generation is up 3.8% after increasing around 3% in 2024. The 2025 demand increase was satisfied with a 20% increase from coal that acted to offset a small decline for natural gas. Our ability to opportunistically direct tons on a real-time basis to the strongest market segment is invaluable. Importantly, we're starting to see production curtailments in major thermal supply regions, which should lead to improved market dynamics over time. In the metallurgical segment, the long-term market outlook remains compelling despite weak pricing levels. New blast furnace capacity continues to come online across Southeast Asia, while Indian imports of seaborne coking coal remain on an upward trend, increasing an estimated 3% in 2024. In addition, Chinese imports of seaborne coking coal increased around 20 million tons in 2024, a trend that is acting to support broader global market dynamics and to help counterbalance higher Chinese steel exports. While we believe the current market uncertainty is changing some of the historical trade patterns, we do not think it had an impact on the overall demand at this point. On the supply side, globally for both the metallurgical and high CV markets, mine output remains constrained by years of underinvestment, ongoing degradation and depletion of the global reserve base, as well as continuing regulatory pressure. Moreover, current pricing levels appear to be inducing supply rationalization among high-cost producers, not only in the United States but globally, which should act to support healthier supply-demand balance over time. In closing, the core team is off to an excellent start in integrating the combined operating, marketing, and logistics portfolio into a cohesive, high-performing unit and capturing the substantial and growing synergies created by our transformational merger. We believe we're building a company that is uniquely equipped to capitalize on compelling global coal market dynamics with our world-class minds, strategic logistical network, strong balance sheet, tremendous cash-generating capabilities, and most importantly, an exceptional workforce. A workforce that I want to thank for their hard work and support of the merger, as well as their creativity in finding synergies, while at the same time, maintaining operational excellence in the areas of safety, compliance, and continuous improvement. It is an amazing group to work with. As we look ahead, we expect to continue to generate significant amounts of free cash flow, particularly in the second half of the year, and to continue to return a majority of that cash to stockholders through our capital return program. With that, I'll now turn the call over to Mitesh for some additional detail on our financial performance and outlook as well as ongoing progress in the Synergy arena. Mitesh.