Core Natural Resources: A Coal Giant's Buyback-Backed Value Play

The merger of Arch Resources and CONSOL Energy to form Core Natural Resources (NYSE: CNR) in January 2025 created a low-cost, diversified coal powerhouse positioned to capitalize on global demand for metallurgical and high-grade thermal coal. Despite headwinds in the energy transition, Core's strategic integration, robust balance sheet, and $1 billion buyback program are unlocking shareholder value—making it a compelling contrarian play in an undervalued sector.

The Merger's Synergies: Building a Global Leader

Core's formation combined Arch's metallurgical coal expertise with CONSOL's thermal coal assets and logistics infrastructure, creating a vertically integrated operator with cost advantages and export dominance. Key synergies include:
- Operational Efficiency: Annual savings of $110–$140 million from combined mine operations, logistics optimization, and reduced overhead.
- Export Capacity: Ownership of two East Coast terminals and partnerships with Gulf/West Coast ports enable 25 million tons/year of seaborne exports, critical for serving Asia's steelmaking and power sectors.
- Contracted Revenue: ~75% of 2025 metallurgical coal volumes are under long-term agreements at premium prices, shielding the company from near-term price volatility.

The Buyback: A Catalyst for Shareholder Returns

Core's $1 billion buyback program, launched in February 2025, has already repurchased $101 million of shares (1.4 million at an average price of $73), with $899 million remaining. This program is underpinned by:
- Strong Free Cash Flow: Pro forma 2023 EBITDA of $1.8 billion and 2025 guidance for $373 million in free cash flow, even after $302 million in CAPEX.
- Debt Reduction: A $600 million revolving credit facility (up from $355 million) and a 75-basis-point interest rate reduction improve liquidity, allowing buybacks without overleveraging.

Valuation: Undervalued Despite Buybacks

Core's stock trades at a P/E of 15.6 and an EV/EBITDA of 8.8—both below the sector median (P/E 17.6, EV/EBITDA 8.02). This discount ignores its:
- Low Cost Base: All-in sustaining costs of $45/ton for metallurgical coal, among the lowest in the sector.
- Growth Catalysts: Resumption of Leer South mine production by mid-2025 and expanded thermal coal sales to India/Europe.

Risks and Mitigants

• Regulatory Pressure: U.S. clean energy policies and global coal phaseouts pose long-term demand risks. Mitigated by metallurgical coal's irreplaceable role in steelmaking and Core's export focus.
• Commodity Volatility: Thermal coal prices fell 15% YTD. Mitigated by long-term contracts and cost discipline.

Investment Thesis

Core Natural Resources is a rare value proposition in energy: a company with $1.8 billion in pro forma EBITDA, a fortress balance sheet ($858 million liquidity), and a buyback program returning 75% of free cash flow to shareholders. At $75/share, it trades at 8.8x EV/EBITDA—cheap relative to its peers and its own historical multiples.

Actionable Takeaway: Investors seeking a contrarian energy play should consider Core Natural Resources. While coal's long-term decline is undeniable, Core's focus on metallurgical coal, disciplined capital returns, and undervalued stock make it a buy at current levels.

Risks remain, but the reward-to-risk ratio favors Core as a speculative but data-backed bet.