Core Natural Resources, Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Core had solid Q3 performance despite operational headwinds, generating free cash flow, deploying $19M to share buybacks and $5M to dividends, and securing 26 million tons of future business.
• Verified presence of rare earth elements and critical minerals at PRB mines and Eastern operations.
• At Leer South mine, advanced continuous mining sections and worked with MSHA for reentry, received first insurance tranche for fire mitigation.
• Integrated legacy companies, implementing standardized production schedules, sharing equipment/resources, and leveraging logistical networks for value uplift.
• Returned over 60% of Q3 '25 free cash flow to shareholders, with $19M towards share repurchases and $5M to dividends, and declared a $0.10 per share dividend payable in December.

Segment Performance

• High CV Thermal: Q3 '25 production was 7.6 million tons. Realized coal revenue was $59.78 per ton, with cash cost of $40.53 per ton. Operational challenges at West Elk affected segment cash costs, but Pennsylvania Mining Complex outperformed expectations.
• Metallurgical: Production was 2.3 million tons. Realized coking coal revenue was $112.94 per ton, and overall segment revenue (including thermal byproduct sales) was $101.60 per ton. Cash cost was $94.18 per ton. Incurred $18 million in Leer South fire and idle-related expenses, offset by $19 million in insurance advanced payments.
• Powder River Basin (PRB): Production was 12.9 million tons. Realized coal revenue was $14.09 per ton, with cash cost of $13.04 per ton. Lowered due to federal royalty rate reduction and cost savings passed to customers.

Guidance

• High CV Thermal: Maintaining sales volume, reducing price range to $60-$61 per ton, raising cash cost guidance to $39-$41 per ton due to West Elk operational challenges.
• Metallurgical: Lowering coking coal sales volume guidance to 7.4-7.8 million tons, decreasing cash cost guidance to $93-$97 per ton, anticipating $15-25M in idle and fire mitigation costs in Q4.
• PRB: Increasing sales volume guidance to 47-49 million tons, maintaining cash cost guidance, lowering capital expenditure guidance to $260-$290 million.

Risks

• Operational challenges at West Elk with initial methane and dewatering issues affecting production and costs.
• Government shutdown delaying MSHA personnel for Leer South reentry efforts.
• Weak benchmark prices for commodities impacting margins.
• International market uncertainties, such as prolonged monsoon season affecting Indian thermal demand and macro conditions pressuring global coking coal prices.

Question and Answer

Q: Could you provide more color on West Elk's methane levels and future cost/production impacts, and 2026 outlook?

A: West Elk had methane issues managed by ventilation and control changes. Methane situation is behind us. Anticipate West Elk to be back up and running early next week, with low costs expected once running consistently.

Q: Breakdown of High CV and PRB contracts for 2026?

A: High CV has ~17 million tons committed for 2026 (14M from PAMC, 3M from West Elk), with pricing in upper 50s basis $105 API2. PRB has ~41 million tons committed, with pricing in low to mid-14s.

Q: Potential range of insurance proceeds from Leer South?

A: Year-to-date spent ~$75M on fire and idling costs, guiding to another $15-25M in Q4, with overall claim expected to be in the triple digits as business interruption claims are also ongoing.

Q: Merger-related synergies achieved and future savings?

A: Made progress on synergies, with SG&A trends and byproduct sales reflecting progress, and expecting full run rate synergies to be realized by second quarter of next year.

Q: Insurance timelines for Leer South proceeds?

A: Claims submitted with lag, expecting early next year for initial claims, with business interruption claims taking longer, but most proceeds expected next year.