Core Natural (CNR) Q1 2026 Earnings Transcript

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DATE

Thursday, May 7, 2026 at 10 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — James Brock
• Chief Financial Officer — Mitesh Thakkar
• Senior Vice President, Marketing — Robert Braithwaite
• Senior Vice President, Strategy and Public Policy — Deck Slone

TAKEAWAYS

• Coal Sales – High CV Thermal -- 7.7 million tons sold, with realized coal revenue of $58.86 per ton, up from $58.11 per ton in Q4 2025, and cash costs of $42.56 per ton, increased from $41.42 per ton in Q4, due to higher winter power costs and challenging mining conditions at the Pennsylvania Mining Complex.
• Metallurgical Coal Segment -- 2.1 million tons sold, realized coking coal revenue of $122.11 per ton, a 7% sequential improvement, with cash costs reduced to $92.35 per ton from $103.49 per ton, and adjusted EBITDA up $79 million quarter over quarter to $58 million.
• Powder River Basin (PRB) Segment -- 11.9 million tons sold, realized coal revenue of $14.39 per ton, and cash cost of $13.64 per ton, in line with the prior quarter's $13.62 per ton; future PRB margins could be pressured by higher diesel prices if current trends persist.
• Core Marine Terminal (CMT) -- Shipped 4.8 million tons, compared to 5 million tons in Q4 2025, with $16 million in adjusted EBITDA matching the previous quarter.
• Shareholder Returns -- $47 million returned in Q1 2026, representing 85% of free cash flow, with $42 million in share repurchases and $5 million in dividends; since February 2025, $292 million returned, mainly via buybacks equating to approximately 7% of shares outstanding.
• Financial Results -- Net income was $21 million, or $0.41 per diluted share; adjusted EBITDA totaled $180 million, compared to a $79 million net loss and $103 million adjusted EBITDA in Q4 2025; capital expenditures were $73 million, and free cash flow reached $56 million, impacted by $52 million of negative working capital changes.
• Liquidity Position -- Total liquidity of $935 million, including $413 million in unrestricted cash and cash equivalents, at quarter-end.
• Contracted Sales Positions -- High CV Thermal segment contracted 29.1 million tons, 94% of midpoint guidance range, at an average committed and collar price of $57.85 per ton; Metallurgical segment contracted 8.3 million coking tons, of which 3.8 million tons are priced at $122.40 per ton; PRB segment contracted approximately 48 million tons at $14.20 per ton.
• Cost Guidance -- Management did not alter annual cost guidance, citing normalization expected in segment cash costs as abnormal power pricing and difficult mining conditions recede.
• Synergy Run Rate -- CFO Mitesh Thakkar stated, "when you add all those up, I think you are looking at over $160 million in synergy run rate," confirming target top end of $165 million, above the original $110 million-$140 million merger synergy range.
• Aerospace and Defense Business Expansion -- Completed a 30% expansion of the Triadelphia, West Virginia facility and acquired Sawyer Composite in Fort Worth, Texas for $8 million, resulting in 75,000 square feet of manufacturing, 80 employees, and a customer base exceeding 40 defense contractors.
• Insurance Recoveries -- CFO Mitesh Thakkar said, "we are optimistic that we'll start seeing some approvals trickle here in 2Q. In aggregate, I would expect to collect another $100 million in incremental proceeds from insurance."

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RISKS

• Management explicitly cited that elevated diesel prices caused by Middle East conflict could negatively impact PRB segment margins if sustained.
• Segment cash costs for High CV Thermal were elevated due to extreme winter weather, with a warning that further unexpected power price volatility could affect future cost structure.
• Global economic uncertainty linked to Middle East conflict was acknowledged as weighing on metallurgical coal export demand.

SUMMARY

Management reported significantly improved financial results, driven by higher pricing and lower cash costs in the metallurgical coal segment and an increase in adjusted EBITDA over the prior quarter. The company accelerated shareholder capital returns, deploying a substantial portion of free cash flow via share repurchases and dividends, and continues to enhance its long-term contracted sales position across all segments. Core Natural Resources announced strategic investments to expand its aerospace and defense materials business, including an acquisition and facility expansion, aiming to diversify future revenue streams. Management anticipates collecting up to $100 million in insurance proceeds related to prior incidents, supporting ongoing liquidity and capital plans.

• CFO Mitesh Thakkar confirmed, "about $1 megawatt change could be around $750,000 for us," quantifying the company's exposure to power price movements in its operational cost structure.
• Management advised that all but 3 million tons of the remaining High CV Thermal segment sales for 2026 are at fixed prices, with 3 million tons linked to the API2 benchmark, reflecting limited sensitivity to spot price volatility.
• Approximately 50% of High CV Thermal segment volume for 2027 is contracted, with management noting recent advantageous pricing achieved during periods of elevated API2 benchmarks.
• The synergy run rate achievement stems from reductions in SG&A, improved marketing execution, and lower financing costs, as explicitly outlined by the CFO.
• The company is maintaining guidance for segment-level cost structures, projecting normalization of previously elevated Q1 costs as abnormal operating factors resolve.
• Long-term domestic thermal coal demand was cited as benefiting from data center build-out plans and recent legislative decisions to extend coal plant operations in Pennsylvania through at least 2032.
• Expansion of the West Elk coal shipments into Eastern U.S. utilities was facilitated by new long-term domestic contracts and improved rail logistics.

INDUSTRY GLOSSARY

• High CV Thermal: Coal segment producing high calorific value thermal coal, primarily for electricity generation.
• PAMC: Pennsylvania Mining Complex, Core's longwall mining operations in Pennsylvania.
• PRB: Powder River Basin, a major U.S. coal-producing region underpinning the company's western operations.
• CMT: CONSOL Marine Terminal, Core's coal export terminal at the Port of Baltimore.
• API2: A widely used European coal price benchmark for delivered coal at the port of Rotterdam.
• PLV: Premium Low Volatile, a type of metallurgical coal benchmark.
• SG&A: Selling, General, and Administrative expenses, operational costs not directly tied to production.
• MIBS: Metallurgical Industrial Byproduct Sales, lower-value coal or coal byproducts blended for additional revenue.
• Longwall: High-productivity underground mining method used in Core's operations.
• CBAM: Carbon Border Adjustment Mechanism, an EU regulatory policy affecting coal demand for steelmaking markets.

Full Conference Call Transcript

James Brock: Thank you, Deck, and good morning, everyone. After a challenging 2025, I am excited to report a strong start to 2026. Our results for this quarter reflect the resilience of our business model and the commitment of our team members across the company. Our operating platform delivered efficient, reliable performance throughout the first quarter, underpinned by our safety-driven culture. As we turn the page from the Leer South fire, the mine set the pace, achieving strong production and cash cost performance throughout the quarter. As expected, the mining conditions have been favorable, and we are now running as a premier world-class longwall mine.

In addition, West Elk shifted into high gear in BC, where geologic conditions are favorable, capturing significant operational efficiencies with an improved cost structure. Now let me dive a little deeper into our operational results. Coal sales within the High CV Thermal segment came in at 7.7 million tons in Q1 '26 compared to 7.8 million tons in Q4 of '25. During the quarter, our High CV Thermal segment reported realized coal revenue of $58.86 per ton compared to $58.11 per ton in the previous quarter. In Q1 '26, cash costs came in at $42.56 per ton compared to $41.42 per ton in Q4 '25.

Segment cash costs for the current quarter were elevated due in part to this winter's Arctic outbreak, which drastically increased power costs at the Pennsylvania Mining Complex as well as a few weeks of tough mining conditions, which are now behind us at PMC. In the Metallurgical segment, coking coal sales came in at 2.1 million tons in Q1 '26. During the quarter, our Metallurgical segment reported realized coking coal revenue of $122.11 per ton, which represented a 7% improvement over the previous quarter. The segment as a whole, inclusive of the 300,000 tons of thermal byproduct sales achieved an average selling price of $112.03 per ton. Segment realization increased $6.58 per ton compared to the previous quarter.

Cash costs for the quarter came in at $92.35 per ton compared to $103.49 per ton in the previous period, reflecting a full operating quarter at Leer South Mine. Adjusted EBITDA for the segment totaled $58 million, which was up $79 million from the previous period. In the Powder River Basin segment, coal sales within the segment came in at 11.9 million tons in Q1 '26. During the quarter, our PRB segment reported realized coal revenue of $14.39 per ton and cash cost of $13.64 per ton, which was in line with the prior quarter's cash cost of $13.62 per ton. Due to the current conflict in the Middle East, we are seeing significant increases in diesel prices.

While there was a limited impact of higher diesel prices in Q1, we expect it to weigh on our PRB margins in the future periods if these elevated prices continue. Moving to the Core Marine Terminal. The CMT shipped 4.8 million tons during the first quarter of 2026 compared to 5 million tons in Q4 of '25. CMT reported $16 million in adjusted EBITDA in Q1 '26, which was in line with the previous quarter. As a result of our strong financial performance, we were again able to return significant value to our shareholders.

As you know, our capital return framework targets the return to stockholders of around 75% of free cash flow, the majority of which will be returned via share repurchases. During Q1 '26, we returned $47 million to our shareholders or 85% of free cash flow with $42 million invested in share repurchases and $5 million in the form of dividends. Since the program's inception in February of 2025, we have deployed $292 million via the capital return program. Of that total, $266 million has been used to repurchase approximately 7% of the company's shares outstanding as of the program's inception. Now that the operating platform is at full strength, we expect strong shareholder returns to continue.

Now let me turn the call over to Mitesh to provide the marketing and financial updates.

Mitesh Thakkar: Thank you, Jimmy, and good morning, everyone. Let me start by providing an update on our financial performance. This morning, we reported solid first quarter financial results. For 1Q '26, we reported net income of $21 million or $0.41 per diluted share and adjusted EBITDA of $180 million compared to a net loss of $79 million and adjusted EBITDA of $103 million in 4Q '25 due to a strong contribution from our metallurgical coal platform. In the quarter, we spent $73 million on capital expenditures and generated $56 million in free cash flow, which was impacted by $52 million of negative working capital changes, including the timing impact of the 45X tax credit accrual versus cash benefit.

At the end of the first quarter, we had total liquidity of $935 million, including $413 million in unrestricted cash and cash equivalents. Now let me update you on the marketing front. Global energy markets have been quite volatile in recent months given the ongoing Middle East conflict. On the metallurgical export front, the threat of a global economic downturn caused by the conflict continues to broadly weigh on demand in these markets. Counterbalancing that fact, we are also seeing some challenges on the supply side. The closure of the Strait of Hormuz is having a significant impact on diesel supplies into Australia and could lead to fuel rationing measures potentially reducing coal supplies.

Those cost pressures come on the heels of heavy rainfall-related supply disruptions in Australia earlier this year. As a result, Australian PLV benchmark prices have remained elevated, and we continue to position Core to capitalize on that fact. In contrast, the international thermal markets are benefiting from energy supply disruptions and fuel switching tailwinds due to disrupted oil and gas flows through the Strait of Hormuz. There is a view that European natural gas prices will remain elevated this summer to incentivize gas to coal switching to allow Europe to shore up its natural gas inventories ahead of the winter.

The EU is also looking into returning legacy coal-fired power plants from capacity reserves to the wholesale markets, which could act to bolster coal demand. Petcoke prices in India have also risen significantly since the start of the year, which is benefiting the demand for our PAMC coal. In the domestic thermal market, coal consumption declined during the first quarter due to weak natural gas pricing and increased natural gas inventories. However, despite the decline in consumption, power plant coal inventories have reduced since the end of 2025. Longer term, we remain bullish on the outlook for domestic thermal coal demand given the robust planned data center build-outs.

Recently, the state of Pennsylvania has taken steps to enable the Keystone and Conemaugh coal-fired power plants to continue operating through at least 2032 and potentially much longer. We strongly support this extension, which will boost the availability of affordable and reliable energy here in our backyard. During the quarter, we continued to build momentum on the contracting front, including further expanding our West Elk coal shipments into domestic utilities in the Eastern United States. As a reminder, since the fourth quarter, we have had good success with test burning West Elk coal at a number of Eastern power plants and have entered into a term contract.

We appreciate the support of our railroad partners in helping unlock this opportunity and enabling reliable delivery into these markets. Since year-end 2025, our marketing team has made meaningful progress broadening and extending our sales book, securing an additional 11.5 million tons of contracted volume through 2028 at attractive prices. Building on that long-term foundation, we have also strengthened our near-term position for 2026 across each of our mine segments. Now let me provide an update on our outlook for 2026. On the guidance front, we are generally maintaining our guidance levels as indicated in the earnings release with the exception of our segment level sold positions.

In the High CV Thermal segment, we added 5.6 million tons to our sold position, bringing our total contracted volume to 29.1 million tons. The High CV Thermal segment is now 94% contracted at the midpoint of the guidance range and average coal revenue on the committed and collar tons is projected to be $57.85 per ton. For the Metallurgical segment, we added 1.6 million tons to our sold position, bringing the segment to 8.3 million coking tons contracted for 2026 with approximately 3.8 million tons priced at an expected average coal revenue of $122.40 per ton.

For the PRB segment, our contracted position now stands at approximately 48 million tons at an expected average coal revenue of $14.20 per ton. Lastly, on the cash SG&A front, we had, as expected, some residual integration-related costs in Q1, but expect those costs to phase out as we progress through the year. Finally, let me provide a quick update on our Core innovations group, which has been extremely busy growing our capabilities to support the aerospace and defense industries.

During the first part of 2026, we completed a 30% expansion of our manufacturing facility in Triadelphia, West Virginia and spent $8 million on acquiring Sawyer Composite in Fort Worth, Texas to further accelerate our growth and elevate our profile in the aerospace supply chain. With these moves, we have built upon our coal-based C4 seam materials business to now become a full-service provider of high-performance materials, tooling, parts and assemblies to meet the growing needs of our nation's aerospace and defense sector. Between our West Virginia and Texas locations, our Aerospace venture now has 75,000 square feet of manufacturing space, 80 employees and serves more than 40 customers, including many of the top defense primes.

We see a lot of opportunities for continued growth in this business. Now let me pass it back to Jimmy for some closing remarks before we open the call for Q&A.

James Brock: Thanks, Mitesh. As we head into the second quarter and beyond, there are a few key areas of focus. First, we will continue to identify best practices across our operations while sustaining our safety-driven culture. Second, I am optimistic about our cost outcomes in the High CV Thermal and metallurgical segments, with both PAMC longwalls out of the tough mining conditions we saw in Q1 of '26, power prices normalizing and Leer transitioning to the North reserves, we expect our cost to improve relative to the first quarter. Third, we are actively pursuing insurance recoveries from the Leer South fire event.

We are pleased with the results of Q1 '26 as they mark the first quarter after the merger with all our assets fully operational. I believe we have just scratched the surface with our capabilities, both operationally and financially. Going forward, we will focus on our controllables as the markets remain dynamic, given the global economic uncertainty. Our high-rank coals, however, continue to receive strong demand as we shift focus to the most advantageous market for our products. Throughout our operations, we continue to focus on cost-saving measures during this market uncertainty, and we fully anticipate carrying this positive momentum throughout the rest of the year. Finally, let me finish by recognizing our employees.

Throughout last year, they worked tirelessly to integrate and develop Core Natural Resources into what it is today, a premier world-class company. Throughout 2025, the teams believed in the vision as we push to restart the Leer South longwall and focused on identifying best practices. We are accustomed to navigating the cyclical nature of the coal markets, and we will continue to manage our costs while focusing on our core values of safety and compliance, continuous improvement and financial performance. With that, I will hand the call back over to the operator to begin the Q&A portion of our call. Operator, can you please provide the instructions to our callers?

Operator: [Operator Instructions] Your first question comes from George Eadie with UBS.

George Eadie: Firstly, just on the High CV segment, can you remind me the sensitivity of that 28.5 million to the API2 price given I think there was sort of 3 million or 4 million tons pegged to the API2 benchmark?

Robert Braithwaite: Sure, George. This is Bob. So for the balance of the year, we have left to sell Q2 through Q4. It's just around 3 million tons is linked to API2. We also have a little bit, call it, 300,000 tons linked to High Vol B as well. The rest is fixed price. And right now, the sensitivity is roughly about $0.07 a ton across the segment. And that's assuming about $120 API2 price. Right now, API2 is around $110, $115, but we expect that to continue to be volatile, as you know, what's going on in the Middle East.

George Eadie: Yes. And then just on the tons contracted for 2027 for each business segment, can you just remind me what percent of the business is contracted next year, please?

Robert Braithwaite: Yes. So on the High CV side, we're sitting here roughly, give or take, around 50% of our volume contracted. And to be honest with you, if you look at PAMC and West Elk, it's basically 50-50 in terms of where we are against what our expected production is going to be in 2027. And the good news for us is we've certainly been able to take advantage of the situation in the Middle East over the last couple of months and lock in some volumes at some attractive pricing when API2 prices were up in that $130, $140 range.

So we're not prepared to give exactly what we're looking at pricing-wise, but I can tell you the market, if you look at year-on-year, isn't getting there.

George Eadie: Yes. And then lastly, Mitesh, sorry if I missed this earlier, but insurance prices, can you remind us the timing and latest on dollars as well there for the rest of the year?

Mitesh Thakkar: Yes, George, sure. So as you know, the Baltimore bridge claim is settled on the Leer South front, we have submitted our final claims, which indicate a limit loss. The insurance companies are reviewing the claims and going through their internal review and approval process, which could take different times for different insurance companies. However, we are optimistic that we'll start seeing some approvals trickle here in 2Q. In aggregate, I would expect to collect another $100 million in incremental proceeds from insurance. p id="-1" name="Operator" /> The next question comes from Nick Giles with B. Riley Securities.

Nick Giles: I just wanted to go back to High CV cash costs, obviously elevated here in 1Q, but you've maintained the guide. Can you just help us understand kind of the cadence of those cost improvements throughout the year, kind of sensitivity to electricity prices and then how much West Elk is contributing today?

James Brock: Nick, it's Jimmy. Yes, we left our guidance alone when you look on the cost side of it because we had some things in Q1 that I feel like it's going to normalize, and we'll be back on track in Q2 and for the remainder of the year. So we had 2 of our longwalls that's in the Pennsylvania mining complex that were in sand rock intrusions. We've had those before. We've been able to dive down underneath them. These were a little different. They struggled. So we don't have that. Both those longwalls are out of that now.

And then we also had -- as you stated earlier, we did have abnormal power pricing that hit us in Q1 that we think will normalize and come down here as the weather changes. It was mostly due to that Arctic blast, as we said in our comments. And then, of course, when you're going through those sand rock and rolls like that, it requires more supplies to mine the coal, higher bit pricing, you use more of those, you wear those out. So we think we're going to be in a really good spot there. Looking at West Elk, West Elk is running great. There was no far in West Elk.

It's just the trains of us moving the coal away, and that has certainly improved. We've been working with our rail partners, and we improved. But what happened to West Elk, they couldn't run at 100% capacity because we didn't have the space in our inventory. So we think that's going to levelize and go away. So I really think -- I didn't want to raise the cost guidance. I believe that we're going to be back on track and be in that and even have some improved marks for the remainder of the year.

Mitesh Thakkar: Yes. And just, Nick, following up on your question on sensitivity and just to give you some parameters around it, right? So if you think about PJM West power prices, I think in months like January, we were over $100 in power prices. Right now, we are already sub $50. And as you look at the curve, I think the curve is around that number. The summer months are a little bit higher and then fall, it comes back again. But just from a sensitivity perspective, about $1 megawatt change could be around $750,000 for us, just to keep that in mind.

Nick Giles: Maybe along a similar vein in the PRB, you maintained the guide. I was curious on just what enables you to do that. And then if we were to assume that diesel prices were to remain elevated, any sense on how much kind of upward cost pressure that would create in the PRB?

James Brock: I think when you look at PRB, there's a couple of things there. Number one, we lost a couple of weeks of production out there with the connecting link that was on the dragline boom, which obviously hurt the volumes a little bit. And then we're kind of in shoulder season out there now as well. And then we're also looking at other cost incentives out there, such as optimizing our truck fleet, looking at what we can do with the schedules that we're working. And the team out there is working really hard to bring that back within the guidance.

And I think if you add those volumes back, if diesel prices do sort of normalize or reduce some, I think we'll be right back on track where our cost guidance is and even an opportunity to improve that. So it's something we continue to work on, Nick, and I have a pretty high degree of confidence that we're going to reach that.

Operator: We now have a question from Nathan Martin with The Benchmark Company.

Nathan Martin: Bob, maybe just going back to George's initial question. As we look at '26 in the High CV Thermal segment, you guys have 28.5 million, I think, million tons committed in price. Can we just get a breakdown of that between PAMC and West Elk and any sensitivities there? I think you said API2 was $0.07 off a 120 basis. I just want to make sure.

Robert Braithwaite: Yes, that's correct. And right now, of the 29.1 million tons in total, 23.4 million is PMC, 5.7 million is West Elk. West Elk contributed 1.1 million tons toward the sales line in Q1. So we expect, as Jimmy mentioned, as our railroad partners are certainly doing better today than they were in Q1, we expect that volume to start increasing as we move forward throughout this quarter and the balance of the year to get to that 5.7 million ton level. I will tell you, too, based on that, we're being somewhat cautious since we're only in April right now or May, I should say. But there's still certainly some opportunities out there.

The domestic market certainly is remaining somewhat strong, even though gas prices are down, we're still seeing a strong level of trains coming in, and offtake. And then in India as well, they're forecasting a strong El Nino, if that does happen, it will delay -- likely delay the monsoon season. And we're seeing, I'd say, more inquiries than we typically would this time of year. So very encouraging there, and we'll certainly look to place as much volume as we can and get as much volume out of PAMC as we can. So 5.7 million tons at West Elk, we're not sold out, but we're very close.

So all the balance of the volume left to sell is at PAMC. And again, encouraging that the fact that where prices are today, I will tell you that those specific prices today are above where our guidance is. So there's a chance that we could see some improvement as we move forward. The volume that you're seeing that is not priced is linked to Newcastle. That's some of our business we have into Asia out of our West Elk mine.

Nathan Martin: And then maybe just sticking with West Elk for a second. You guys talked about it last quarter, talked about it a little bit now. You're moving some domestic tons to power plants in the East. It sounds like that was mainly just a transportation problem, and I think you just mentioned inventory space. Any additional thoughts there? One of your peers also talking about exporting some more tons out of the West Coast. Maybe any thoughts you guys have as far as that goes as well.

Robert Braithwaite: Yes. So for West Elk, I'm very encouraged by what we've seen from our domestic customers in the East. A lot of overlap there with our PAMC coal as well. So I could tell you to date, we have one long-term contract in place. We're working on several others. The coal has been well accepted. Traditionally, it wasn't really a core market for the legacy Arch folks. But today, I'd tell you it is as we try to ramp that mine up to 6 million tons as we move forward. On the West Coast, we are moving West Elk through the West Coast out of Long Beach today. We anticipate that continuing.

And then -- in terms of additional West Coast capacity or additional export capacity off the West Coast, we're certainly looking into that for some opportunity to move some of our PRB coal as well. I know Oakland has been talked about by many. We're certainly in discussions there and then also some potential export capacity through Canada as well.

James Brock: Yes. Nate, we look at -- as far as export and moving coal, we look at all the ports. And obviously, when you have to start looking at how long the vessels set there for demurrage, you look at the travel distance and everything else, we try to -- just like we run to the market, we try to do the same thing with the ports. We try to go out the ones that are most economical for us. And obviously, we prefer to go out of our own. But I mean, we certainly look at all those West Coast ports, Long Beach as well as we even look at Vancouver and some of those.

Any way we can move the coal that makes economic sense, we certainly look at all of those.

Nathan Martin: Got it. Appreciate that. And then, Jimmy, maybe just one more while I have you. Any comments or thoughts on the administration's Section 303 determinations that were passed as it applies to helping the coal supply chains in baseload power gen?

James Brock: Yes. I'll start out with that and then turn it over to Deck to follow up on that. But we are very happy with the administration. I mean, particularly their ability to extend the life of some of these power plants. And we think it's certainly going to be needed if you look at the power, which has been basically flat for many, many years leading up to, say, 2024. But with the increase that everybody is projecting on power gen alone, we feel pretty good about what the administration has done to this point.

And I always say they can't solve the problems for us, but they certainly can give a solution to where we can work on those and they've been very, very positive as far as coal goes. I know President Trump, he brought back the National Coal Council and a lot of positive momentum coming out of the administration and Deck and team are working with them every day to make sure that we take full benefit of everything that we get out of there. And with that, I'll let Deck add some comments.

Deck Slone: Yes. Yes, thanks for that. And look, I totally agree with Jimmy. This administration is hugely supportive. And there are a whole range of areas where they're trying to be helpful. Look, I would say with the 2O2(c) authority, which is preventing some of these retirements prematurely of coal plants. We've got 5 2O2(c) orders in place right now. In aggregate, those plants used 10 million tons of coal last year. I think really clear then that they're needed. If they were running at that level last year, that capacity is needed. And we've talked about the fact that as we look out now, suddenly, there's been an inflection in terms of the outlook for U.S. power demand.

The numbers are -- there are a range of numbers, but one of the ones we've been looking at recently, grid strategies is suggesting that over the next 5 years, you could see a 3.7% growth rate in U.S. power demand. In that scenario, this administration is getting the fact that you have to have these coal plants. So that's hugely helpful. I think also addressing just a raft of regulations really that were designed to drive some of these coal plants into closure, this administration is trying to unwind those and doing really a superb job.

And the goal there is not just to keep the plants open, but to allow for reinvestment to make those plants young again because you can replace all the component parts. So that's useful. And obviously, as you know, look, the royalty rate reduction in the PRB has been helpful to us, and I think bodes well for the outlook there for a healthy industry in the PRB, the 45X production credit. So look, couldn't be more pleased with where this administration is going, and we're going to continue to work with them. We talked about the unlocking of export.

That's another area where this administration is highly focused on finding ways to liberate more tons, get more tons into the seaborne market. So a range of areas where we're getting good support.

James Brock: The administration has certainly given us a lot of resources to work on our problems that we have. So very, very appreciative and very thankful and very involved, quite frankly, with the administration.

Operator: Now have a question from Matthew Key with Texas Capital.

Matthew Key: In regards to the inflationary cost pressures, most notably diesel, while you obviously didn't raise your cost guidance. I was wondering if there's anything you could do to help manage those pressures such as hedging diesel or something like that?

Mitesh Thakkar: Yes. Matt, good question. And there's an additional disclosure in our 10-Q that we did hedge some diesel prior to the war starting in the Gulf area. I think we were on a path to hedge a significant portion of our cost on the diesel front, but there was a sudden spike, and we pulled back a little bit because the volatility was just too much to justify hedging at that point. Things are settling down a little bit, and we'll continue to look and evaluate it. As you can imagine, the curve is in backwardation again now, which is great.

And we'll continue to evaluate how we layer in those hedges to make sure that there is enough cushion between our selling price and the cost of mining.

Matthew Key: And met coal benchmark pricing did improve at least directionally in 1Q '26, still seeing a very wide spread for High-Vol A pricing versus premium low-vol benchmark. I was wondering if you could provide just some color on what you're seeing in the met coal market, specifically as it relates to High Vol A.

Mitesh Thakkar: Yes. I mean, again, we're in a really good position as we announced this morning, 8.3 million tons contracted for the balance for this year. And when you look at where we're at with what we have left to sell, majority of that is High Vol. There's some low vol as well. But I'd say the most encouraging thing, too, is the fact that we have over 30% of our volume this year linked to PLB prices. So Asia continues to grow for us, and that's where the growth and demand is. India certainly is growing.

But we are seeing some opportunities back in Brazil and also into Europe right now, CBAM being one that is helping the European steel markets. And we're not seeing as much steel dumping into Brazil today as we did last year. So that's encouraging as well. So I think those spreads will likely remain for a little bit of time here just for the simple fact that the High Vol is a little bit oversupplied today. But I see that as, again, we start seeing some higher cost operations continue to exit the market, specifically here in the domestic or sitting here in the United States. I think you'll start to see those spreads shrink over time.

But the team has done a great job, again, linking over 30% of our index volumes to PLB.

James Brock: Matt, I would maybe just to echo those views of sort of where the market is. Look, I mean, if you look last year at U.S. exports, they were down around 6 million tons. Australian exports of coking coal down around 6 million tons. So that's 12 million tons. I think there's been a lot of focus on the production that's coming back into the market, but there had been substantial rationalization and step down. So look, I do think that's important. That's an important dynamic there. And I would also say, look, there are indications that operational challenges are starting to sort of crop up elsewhere, as you would expect, right?

That's typically what happens is 5% to 10% of global supply is experiencing some level of challenge. So while the market remains under pressure, I do think there are counterbalances to, I think that top line story that, oh, there's some capacity that's come back into the market after some outage.

Operator: [Operator Instructions] You have another question from Nick Giles with B. Riley Securities.

Nick Giles: You kind of answered it there on the met side. But maybe I could just ask, as we try to model out met volumes throughout the course of the year, can you just remind us how many longwall moves you have scheduled, when those are scheduled in both just the Met segment and High CV?

James Brock: Yes. If you look at Q1 that we just finished up, we had 4 longwall moves there in Q1. In Q2, we have 3. We have 1 at PMC. We have 2 at our met mines, one at Leer, one at Leer South. And then I think for the remainder of the year, our Q4 is kind of heavy, but we have 13 for the year. So that's pretty much where we are. And Nick, as I've always said, I love longwall moves because that means progress is being made.

Nick Giles: Understood. No, I appreciate that, Jimmy. And maybe just on the synergy front, I'm not sure if you provided an update there, but I think of 2026 as one of the first full years that we can see the benefit of the synergies. So what metrics should we be paying attention to? And what should we use as the denominator as we try to measure that progress?

Mitesh Thakkar: Yes. So Nick, again, there are a lot of ways the synergies are playing out. I will say the most obvious one for you to see is on the SG&A side. And if you look at -- I'm going back to 2024, the first full year prior to the merger for both -- the last full year prior to the merger for both the companies, I think the combined company had cash SG&A of about $153 million, excluding any merger-related expenses and stock-based comp, right? And right now, we are guiding to a top end of about $100 million. So that tells you that significant progress is being made on the synergy front when it comes to cash SG&A.

Similarly, on the marketing side, if you look at the MIBS where we -- they are disclosed as thermal byproduct in our release, given where current met coal prices are on the legacy Arch side, which is mostly their product, you would have realized high 20s kind of a realization on the MIBS. We are blending it with some of our Pennsylvania mining complex and some of our other mines, and we have value uplifting it by almost $15 a ton, right? So when you add those pieces together, I think we are significantly ahead on the synergy achievement side.

I think what is clouding it a little bit on the marketing front is also overall, met coal prices are just lower, which reduces the value of those synergies. And we are hoping as those prices normalize, I think you will see more impactful numbers on the synergy front. But even on the High CV Thermal side, as the prices improve, the value of MIBS go up just from blending activity as well. So those are the 2 lines that you can easily see on our financials.

The other lines, I would say is we already talked about the financing synergy with the 3 bonds that we did, the rate that we got versus what each of those companies had it in the past. And on the insurance side, if you look at -- put all those 2 items together, there was $20-plus million in synergy on an annualized basis on that front as well.

So net-net, when you add all those up, I think you are looking at over $160 million in synergy run rate, which is -- I think the last midpoint we provided was around $165 million at the midpoint, which was higher than -- I think originally, at the merger, we said $110 million to $140 million and then raised it to a midpoint of $165 million. So we are tracking towards that high end already.

Nick Giles: Understood. Maybe one more, if I could. I think your commitment to shareholder return seems pretty clear to me. But kind of how do things stand on the M&A front? Are you seeing any opportunities across the M&A landscape, whether from a mine perspective, anything along the supply chain or anything from a logistics perspective that's worth looking at?

James Brock: Nick, it's something that we evaluate daily. I mean we look at a lot of things that come toward us. And as I've always said, my job to allocate capital is for the highest rate of return. So we do look at a lot of things that come in. I will tell you, currently today, we don't have anything to -- that we can put certainty around that we've done. But we do look at every opportunity that comes to us. We owe it to our shareholders and our employees to do that, and we'll continue to do so. And if something comes out there that makes sense, we certainly have the liquidity.

We have the ability to do it, and we would do it.

Operator: There are no further questions at this time. I will now turn the call over to Jimmy Brock for closing remarks. Please continue.

James Brock: Well, we'd like to thank everyone for joining us on the call today and certainly look forward to the rest of the year to come. And as I said in my opening remarks, I think the best is yet to come for Core Natural Resources. So thanks for joining.

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