CNR - NYSE

Good morning, ladies and gentlemen, and welcome to the Core Natural Resources, Incorporation First Quarter 2025 Earnings Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions]. This call is being recorded on Thursday, May 8, 2025. I would now like to turn the conference over to Mr. Deck Slone. Please go ahead.

Good morning from Canonsburg, 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 Investors 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, Deck, 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 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 million and $150 million. Made excellent progress towards the full resumption of operations at Leer 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 Leer mine, which also served to partially mitigate the impact of the longwall outage at the Leer South operation. 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 longwall at Leer South midyear 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 cost 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 cost 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 Leer 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 targeted 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 $0.10 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 million 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 mines. 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 Leer 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 Leer 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 longwall operations by midyear. To-date, the team has safely sealed off the affected area, extinguish combustion-related activity, and resume 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 miner 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 operation. 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 from 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 mines, 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?

Thank you, Paul, and good morning, everyone. Let me begin by providing an update on several actions we took to firm up the capital structure of Core that resulted in enhanced liquidity, extended maturities, reduced financing costs, and improved financial flexibility, which has lowered our weighted average cost of capital. In conjunction with the merger closing in mid-January, we completed an upsizing of our revolving credit facility from $355 million to $600 million. We not only achieved a sizable increase in capacity, but we also reduced our credit spread by 75 basis points across the grid and improved our financial flexibility through less restrictive negative covenants. We also extended the maturity to April 30, 2029. More recently, we successfully remarketed and refinanced our three legacy tranches of tax exempt bonds previously issued by CONSOL or Arch at the end of the quarter. We increased the total bond amount from $276 million to $307 million, established a new 10-year term and reduced the weighted average interest rate by 92 basis points, which equates to nearly $3 million in annual interest savings despite a high interest rate environment relative to when those bonds were previously issued. Most importantly, we were successful in removing multiple restrictive covenants and eliminating first and second lien securities on our West Virginia and Pennsylvania bonds respectively. With our financial flexibility through our low debt levels, no significant near-term debt maturities and strong liquidity, we believe we have built a solid balance sheet capable of withstanding the cyclicality of the coal markets while also promoting the company's long-term growth and shareholder return goals. Now, let me provide a quick update on our financial results before providing an update on the outlook and synergy fronts. This morning we reported a net loss of $69 million or $1.38 per diluted share and adjusted EBITDA of $123 million for 1Q 2025. In the quarter, we spent $65 million on capital expenditures and generated $49 million in free cash flow. Additionally, during 1Q 2025, we incurred some atypical items that damped our earnings such as $49 million in merger-related expenses, $12 million in debt extinguishment and refinancing cost and $36 million related to the Leer South combustion event and idling cost. We successfully managed our capital expenditures to shift the spending to align with our expectation of a stronger back half of 2025 when Leer South longwall operations resume. In February, we announced our comprehensive capital return program, which envisioned returning approximately 75% of free cash flow with the optionality to deploy additional cash that was built during the period between merger announcement and completion. Due to the current market dynamics impacting our share price, the progress being made at Leer South and our success on the financing front, we felt confident in deploying additional cash towards our shareholder return program in 1Q 2025. As Paul indicated, during the quarter, we repurchased 1.4 million shares for approximately $101 million at the weighted average share price of $73.52 and paid dividends totaling approximately $5 million. In addition, we announced this morning that the Board of Directors has declared a $0.10 per share dividend payable on June 13, 2025, to stockholders of record on May 30, 2025. At the end of the quarter, CNR had total liquidity of $858 million. Shifting to our operating results. During 1Q 2025, we sold 7.1 million tons of high CV thermal coal at a realized coal revenue per ton sold of $63.18. Due to a colder than normal winter, we received substantial uplift on our power price link contracts stemming from higher PJM West day ahead power prices. The high CV thermal segment had a cash cost of coal sold of $42.78 per ton, mostly driven by three scheduled longwall moves at the PMC in the first quarter and higher power cost. The remainder of the year, we expect more ratable cadence of longwall moves. On the Metallurgical side, during 1Q 2025, we sold 2.3 million tons including 442,000 tons of thermal by product. For the cooking product alone, we achieved a realized coal revenue per ton sold of $113.70 and $98.26 per ton for the entirety of the Metallurgical segment. Metallurgical segment reported a cash cost of coal sold of $91 per ton, which excluded the Leer South idle and combustion related costs. For the PRB segment, we took advantage of strong demand during the quarter and sold 10.7 million tons at a realized coal revenue per ton sold of $14.93 and a cash cost of coal sold of $12.44 per ton. During 1Q 2025, we increased our 2025 high CV thermal and Metallurgical segment contractor position to 26.5 million tons and 7.2 million tons respectively. We also contracted additional volume in the PRB segment to bring the 2025 contracted position to 41.9 million tons. Now let me provide a quick update on our outlook for 2025. As Paul mentioned, we are maintaining our guidance ranges for most categories while improving the following. On the metallurgical cash cost side, we are lowering our cash cost of coal sold guidance by $2 to a new range of $94 to $98 per ton mainly due to some cost saving measures and the transfer of some of the best practices as a result of the merger. We are also improving our committed tonnage position for the high CV thermal segment to approximately 87% of tons contracted at the midpoint of our guidance range and maintaining our projected pricing range between $61 and $63 per ton. Even though commodity prices have declined since our last earnings call, we are able to offset this impact due to higher power prices and lending synergies we expect to achieve. For our PRB segment, we are increasing our sales volume guidance by 2.5 million tons at midpoint to 39 million to 42 million tons, committed and price position by 4 million tons to 41.9 million tons at a realized coal revenue of approximately $14.70 per ton. Let me now just provide our thoughts on the near-term market dynamics that underpins our 2025 guidance. The high CV thermal segment, tariff uncertainties, and muted demand in Europe are being counterbalanced by nearly 10% year-on-year annual cement production growth in India. Furthermore, as Paul noted, strong natural gas prices led to improved coal fired power generation, which increased the demand for our high CV and PRB thermal product in the domestic market where coal fired generation hit the quarterly highest level since 1Q 2022. In comparison to the first quarter of 2024, natural gas prices increased 93% while gas storage levels declined year-over-year by 22% and 6% below the five-year average, providing further support for incremental domestic demand. On the Metallurgical side, geopolitical risk and reciprocal tariffs continue to reduce demand and result in lower PRB pricing. Our pricing has begun to increase as marginal production costs remain below pricing levels and at the midpoint of the guidance range; we have 93% of our metallurgical coking coal production committed. We'll continue to optimize our portfolio to minimize any potential impact of tariffs, but realize that we operate in a very uncertain environment and our outlook may be further impacted. Let me now provide an update on the progress we have made on the synergy front. As a reminder, at the merger announcement guided to an average annual run rate of $110 million to $140 million of synergies within 6 months to 18 months following close. The two companies combined, the key goal was to improve our value creating process. We are pleased to report that we now expect an updated range of $125 million to 150 million of expected annual synergy within 18 months. During our last call, we highlighted that we had already executed strategies expected to yield approximately $40 million in annualized synergies and we have continued to make meaningful progress since that time. In less than four months, since the close of the merger, we have now executed strategies that are expected to yield over $100 million in annual synergies. Let us delve a little deeper into some of these synergy items. First, for marketing, we have already realized $6 million in actual blending synergies. Based on the success, we now forecast approximately $30 million in blending synergies during 2025. Through the strategic ownership of our Baltimore terminal and our ownership interest in the DTA terminal, coupled with our diversified and high quality product slate, we continue to enhance the value of our products via blending and transportation synergies. On the administrative front, we have realized $16 million in annualized synergies during 1Q 2025. Additional synergies are expected to be achieved through the further elimination of overlapping corporate and support position. As a reminder, we anticipate this number will grow as we transition various systems and processes and build out a new IT infrastructure. We expect the annualized synergy run rate to reach $30 million in overall administrative cost within 12 months of the merger close. We have also realized approximately $24 million in synergies associated with sharing of best practices, which we believe will lower the cost of sales for our Metallurgical coal segment. The remaining pocket of executed synergies includes items such as procurement, financing costs, legal costs, and other public company costs as well as best practices. Continue to identify additional public company cost reductions and we secure incremental financing cost reductions with the completion of the tax exempt bond refinancing. Our operations team have worked closely to share best practices and resources across the organization, remain focused on driving standardization through ongoing collaboration, and have already seen intangible, potential and quantifiable results in this regard. Furthermore, from a procurement perspective, we continue to work closely with our suppliers to leverage our size and scale in order to secure improved pricing and payment terms. While we are still early in the process, we are moving quickly and are pleased with our synergy progress to-date. We also have multiple ions in the fire from which we expect to yield additional synergies in the near-term and we are aggressively pursuing upside to the initial range in an effort to create additional value for our shareholders. In closing, we are very pleased with the progress that has been made since the merger closed in mid-January. We have successfully completed multiple refinancing efforts, continued to make progress on synergies, provided investors with a strong first quarter capital return, and made significant strides towards resuming longwall production at Leer South. Paul noted, let me finish by thanking our employees for their efforts over these last four months. Our operations, marketing and corporate support teams continue to remain focused on getting the highest value for our products and keeping our costs low, all while working safely and compliantly. Combining the legacy companies into one seamless integrated unit has been no small feat and the progress the team has made so far is a testament to the hard work, dedication and professionalism. Operator, we are now ready to begin the Q&A session of our call. Could you please provide the instruction to our callers?

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions]. Your first question comes from Mr. Nathan Martin from Benchmark Company. Please go ahead.

A couple questions I guess on the Met segment to start, first, just to clarify, appears you did not back the cost for idled operations out of your adjusted EBITDA $123 million, correct?

So it is not in that number if that's what you mean. We'll be back.

So the $123 million…

The guidance also doesn't reflect the idle mine cost.

Right. But I guess Mitesh; my question is $123 million with adjusted EBITDA that doesn't add back the $36 million of Leer South idling costs we talked about. We're thinking that that $36 million is kind of one-time assuming that the mine comes back mid-year.

It does add back.

Okay. So that's all included in that $123 million.

Yes.

Got it. Then strong cost performance on the Met segment side well below, the low end of even your new lower guidance range. So was that mainly because of higher sales? I know you called out record production at Leer. Are there any other productivity improvements there that could possibly carry forward? Just trying to get a sense of 2Q Met segment costs before that plan restart at Leer South and then your guidance going to the low-90s as you’ve reiterated.

Hey Nate, this is Paul. Look, Q1 was a great quarter and I said in my comments, the costs across most portfolio were some really good numbers. But clearly what led the pack was we had an outstanding performance at Leer. And you think about it, it was the best record production we've had in 13 years at the mine and they really did a great job. As you look at Q2, Nate, I think probably the one thing that we will see is Leer does have a longwall move coming up. So look, I think the guidance takes into account that we were off to a great start. So we lowered the guidance down. And we're looking for a little bit more favorable than what we had said at the start of the year. But Q2 will be slightly impacted by planned longwall movement at Leer.

Okay, good to know. Thank you for that, Paul. And then maybe sticking with one more on the Met side of things. Average realized price per ton for coking coal $114 a little lower than expected if I kind of assume the average 1Q flat High-Vol price, which I think is about $180. But maybe it was quality mix or more CFR sales. But can you just help us bridge kind of that to that $114 realized price?

Sure, Nate, this is Bob. During the quarter, approximately 1.8 million of our 1.9 million coking coal tons were exported in the first quarter. As Paul mentioned on the call and as we discussed in the past, the growth for this coal has really shifted to Asia, especially in the first quarter. So as a result the mix of our, I'll say PLV contracts had increased. In fact about 45% of the coal under our Metallurgical segment moved into the Asian market in Q1. Good news is the product has been really well received in the Asian market and we've seen very high customer retention rate. Looking ahead in Q2, the lake season's open so that, that affords us ability to move more coal of our contracted coal, I'll say domestically. So we could see a slight improvement there quarter-on-quarter as we have a little bit more domestic tons in our mix. But really when you look at just the balance of the year, you're probably going to look at that 40%-so level in into the Pacific market or the Asian market going forward.

And Bob, those tons -- are those CFR tons then were you guys responsible for the ocean freight?

It's a mixture, but majority of them, yes, CFR tons.

Okay, got it. Perfect. And Bob, while I have you, could we get an updated breakdown of the 26 million tons of committed and priced coal in the high CV segment?

Yes. So in the first quarter it was 7.1 million tons of which 6.4 was PAMC. 700,000 was West Elk. That leaves us with about 19.4 million left contracted for the Q2 through Q4. About 16.3 million of that is PAMC. We have about 3.1 million that's linked to API-2. All have ceilings and floors and I'll tell you Nate, we're hovering around the floor now so there's not much downside to that. We have 1.8 million linked to power and about 300,000 linked to High-Vol B and then the balance of that would be fixed price. And then 3.1 million is West Elk, 2.6 is fixed price and the balance, or call it roughly 500,000 is linked to Newcastle.

Bob, appreciate that. And then maybe just one more guys, if I could kind of higher level, Paul, maybe your thoughts on the recent executive orders that bolstering the U.S. coal industry and coal fired generation. What are you guys hearing from your customers so far? Any additional color would be helpful. And then do you see the possibility of more capital being spent to bring online thermal coal production or keep coal fired plants running longer? What do you think would incentivize that or make people comfortable doing that? Thanks.

I mean it's an interesting question, Nate. I mean I think first and foremost it's nice to have an administration that recognizes the industry and the importance that it has on the U.S. economy and really what it means relative to power prices in the U.S., they believe coal should be in the mix and should stay in the mix. I think the executive orders reflected that general sentiment. So I think that's all positive. I think one of the concerns of any that the utilities have is, these are all well and good, but what is going to happen four years from now, and is this the basis to make strong investments or I think they're waiting. Everybody's being a little cautious about it. And look, I think it's headed in the right direction. And I think there's some actions that I think the administration would like to do legislatively that could instill some of these things a little more solid. And that's really what we'd like to see is these be a little more durable and something that people could plan after.

Nate, it's Deck. Listen, I would add to that, the fact is that just since last fall, the delayed retirements have continued to build. And so we're looking now, relative to last fall, an additional 4 gigawatts of operating capacity and 2026, 2027, 2028, and hopefully that drumbeat will continue. And look as important as the sort of the policy stuff is, and it's really important, I think what you saw in January, February, in terms of capacity factors for the fleet is equally important because last year the fleet in its entirety operated about 43%. January, February, it operated at more than 60%, which tells you the art of the possible there. So as we do see growth in power demand, last year it was up 3%. So far, year-to-date, it's up 3.8%. So we still -- we're seeing that power demand growth continue to manifest itself. But as we see that, we believe that the fleet that continues can operate at substantially higher capacity factors, which obviously is also quite significant. Gas prices being now, if you look at the strip, around $4 is another -- will be another dynamic that will serve to lift those capacity factors potentially. So we're enthusiastic about what we're seeing.

All right, great. Very helpful, guys. I'll leave it there. Best of luck.

Thank you.

Thanks, Nate.

Thank you. Your next question comes from Chris LaFemina from Jefferies LLC. Please go ahead.

Just on the capital return, so big buyback in the quarter, which at these prices, it seems like a pretty good use of capital but obviously the buyback in the first quarter was well above what your free cash flow was, even if you include the proceeds from the asset sales and the cash proceeds from the merger. So you still have a strong balance sheet. Guidance is for at least 75% of free cash flow to be used for buybacks or capital returns. If the share price stays kind of where it is now, should we expect buybacks to exceed the free cash flow? I mean, do you see this as a highly opportunistic level to step in and buy more or should we now think about balance sheet has been rebased and now it's back to 75% of free cash flow. Thanks.

Chris, this is Mitesh here. As you can imagine, we don't want to get into providing guidance on a quarterly basis. We have provided you with two signposts, if you will. One is, as you mentioned, our target to return approximately 75% of the free cash flow. And second is our preference for a net debt neutral balance sheet. And as we demonstrated in Q1, as cash builds on our balance sheet, we will continue to deploy it opportunistically towards the best use. Right now, that is the share buyback route. And given the value proposition of our stock today, I wouldn't be surprised if we have another robust quarter of share repurchases.

Okay, thanks. And then, secondly, on Leer South, can you just give us the timeline and the next steps in terms of getting the longwall back online there? Thank you.

Hey, Chris, so, the mine's been sitting for about 90 or 100 days inert, which is kind of around the rule of thumb timeframe. We currently have a plan with MSHA to re-enter the mine here in the next week or two. We're going to keep watching the readings and if we feel comfortable and the authorities feel comfortable, we'll reenter the mine relative to the area with the longwall, we'll breach the seals and get ventilation reestablished in that area. Then once we breach the seals, there's a 72-hour waiting period. Once that gets through, we'll start the usual inspection of the sealed area as well as the longwall equipment. The good news right now and I mentioned it in my preparation remarks is, we have cameras on the longwall equipment and by all indications, the longwall has stayed well intact. And we feel pretty good about where we're at. The difficulty on given the timeline is the unknowns, Chris. And while the longwall itself is in good shape. And I think establishing that small area and the ventilation is not going to be a big issue. The unknowns relatively are some of these electronics have been sitting in a very humid environment for three or four months. And the difficulty is that going to take us a week to fix or three weeks to fix? But those are all fixable things and we won't know the exact timing until we get in there and put our hands on things. But I just got to say, I feel really good about where we're at. We hit the schedule that we laid out in early January and right now things seem to be clicking along as they should. There's a critical step coming up here the next couple weeks, but I really feel the team's ready for it and it should be set.

That's good. Thank you and good luck with that.

Thank you, Chris.

Okay. Thank you. Your next question comes from Nick Giles from B. Riley Securities. Please go ahead.

Is obviously three longwall moves in 1Q that impacted costs on the high CV side and you are maintaining your full year guide. So I was wondering how we should think about both volume and cost cadence in the quarters ahead. And if I saw correctly, there are two longwall moves left. So curious when we could see those. Thank you.

One of them is going on right now and the other one can be back half of the year. As you look at the costs and one thing that's kind of been lost here is one of the positives was the power price adjustment we had, particularly at PAMC. And the offset of that was we paid higher power costs. Now we made a lot more on the revenue, but roughly about $0.50 of that increase in cost at PAMC for the quarter was a good reason because power costs in PJM were so high. So I think we feel that as we get through, we should see a drop in Q2 costs on the high CV thermal segment, then kind of averaging down as we go through the year.

I'll just add, Nick, as I mentioned on my prepared remarks, I think the cadence of the longwall moves is pretty readable for the remainder of the year as well by quarter. So I think that should provide some tailwinds for the back half. So again, things could change, but the way I would think about it is second quarter, we are going to see some drop relative to the first quarter and then third and fourth quarter will be a little bit lower as well in the second quarter.

Got it. Thank you. Paul and Mitesh, that's very helpful. My next question was just on the high CV pricing side and API-2 has been hanging in there somewhat especially relative to Newcastle. So I was curious if you could touch on some of the supply demand dynamics you're seeing out there. Are you still seeing relative strength in pet coke and which end markets have you been targeting more recently? If you wouldn't mind touching on the domestic market as well, I'd appreciate it.

Yes, Nick, I mean on the thermal side I think we mentioned it. We've seen a significant increase in demand domestically year-on-year and I think Paul referenced some statistics in his remarks and Deck further reiterated. One thing too, if you look at the PGM market, which is what I would call our Core primary market for our PAMC coal total generation there was actually up 5% with coal generation up over 30%. We've seen inventory levels come down significantly across our customer base and because of that we've actually were successful in locking in some spot deals most recently and in fact, we're seeing RFPs out earlier than what we usually would. We actually have a couple RFPs out today. One is actually through 2030, one through 2028. So again I think you're starting to see the customer base there really looking at securing longer-term contracts, which is going to benefit us in the long-term as well. Looking at the international markets, primarily India and Egypt, which is our large industrial markets that we serve. Demand is there and continues to grow. We are in a bit of a price lull. We have seen pet coke prices come off a bit but we would expect that to pick back up in the coming months. And then the other thing we need -- we haven't really touched upon. But if we do see a trade deal between China and the U.S., I would suggest that China will be back buying U.S. coal and not only coal but pet coke, which will certainly tighten that market for India. So overall, I'll tell you I'm very bullish. Thermal coal specifically on our portfolios of coal for the reasons I just mentioned.

And Nick, maybe I'll jump in just on the macro perspective. Look we are seeing those cuts Russian exports down appreciably last year so these prices are weighing on supply. The Columbia cuts that we've seen announced recently is certainly useful and interesting. Australian exports down through the first four months of the year. So look, some positive developments out there. Now exactly when those corrective measures begin to affect price is TBD. But you can see that these prices are weighing on some of these suppliers. And we'll just add again, as we've said before, look, one of the great advantages of Core is that we can toggle between these markets. As Bob just discussed, because we are so exceptionally high rank in our high CV thermal segment, we are able to enter those markets that are most attractive to move into the cement markets when those are most promising. And obviously, we continue to see good growth in Indian cement. So we do have that ability to move between and toggle between markets. We talked about the domestic thermal opportunity. We'll continue to capitalize on that.

Bob, Deck, I really appreciate all those comments. Maybe just on the synergy side, you appear to have made some strong progress thus far and apologies if I missed any of this, but curious how we should think about the incremental EBITDA impact that we could see in the second half, as you approach full run rates or said differently, is there anything that we that would not be fully reflected in your current guidance that we could see? Thank you.

So I'm assuming your question is on the synergy side. I think from a synergy perspective, I would say, one of the components of the synergy is the blending synergies. And if you think about the guidance that we provide for the coking coal segment does not a guidance for the mids and mids as in the thermal byproduct, I think that's where we see a lot of the value uplift. I would think about 600,000 to 700,000 tons of mids a year for 2025 and around $30 value uplift. That's probably not reflected or captured in the guidance we provide. Does that give you some perspective?

Mitesh that's super helpful. Thanks so much and continue best of luck.

Thank you.

Thank you, Nick.

Thank you. Your last question comes from Mr. George [indiscernible] of UBS. Please go

Yes. Hi team, thanks for the opportunity. A few questions which are mostly follow-ups on previous ones but firstly just on Leer South, could you maybe quantify how far ahead development is of the longwall now and how does this compare to previous years where it's been a bit of a constraint and just secondly there, once it's up and running, how quick do you foresee if things are going well? You can get back to sort of usual production rates.

So we've been tight on development really for the last year-and-a-half and we were starting to open up at the end of last year and getting back in a better spot. But right now we are almost to the point where we're willing to slow down development because we are far enough ahead. I'd say, I don't want development is one of those things that you want to stay ahead on, but you don't want to get too far ahead on. And we're entering that sweet spot. And I'd call that 30 to 60 days. And if there's been anything positive out of this event, that's what we've been able to do. And it also means that we'll be able to pull back on some of the development going forward because we got into district 2, district 2 appears to be everything we thought it would be. And we're just moving forward with, well, intent about what we said. So I guess, in general it got us in a good spot and relative to the cadence once we start up, look, I think having been through these type of things, I know there's going to be some gremlins in the electronics for a while, but I expect us to hit the ground running pretty hard on a relatively quick pace.

Yes. Okay, now that's clear. Thank you. And then just moving to the balance sheet and financials a bit just on the buyback, so over $100 million this quarter, maybe just color on how much you could actually get done per quarter on a go-forward, sort of thinking about basis, given blackout periods, et cetera. Can you sort of comfortably manage $100 million if free cash flow prices sort of permitted, just how to think about that, how much you can actually do I guess?

Yes. George, so certainly we don't believe there's any sort of barrier there to that level of buyback. We'll have plenty of open days. We won't be restricted. So again, to your point, you're a good qualifier. Free cash flow permits. Absolutely that wouldn't -- that cadence would not be problematic.

How high could you guys sort of double that sort of ballpark, $200 million a quarter?

Just from a technical perspective, I don't think it would be a limitation. But like I said, we have to follow the signpost that I mentioned. That's what you have questioned.

Yes, yes, no, that's right. That's good. Thank you. And then just lastly on M&A, like, how are you thinking about that in context of everything you sort of flagged given potential supply rationalization as well, meaning assets could come online at reasonable prices as you flagged earlier on goes.

Look, George, this was an easy one at our current valuation, I think the best thing we could do is buy back our own stock. We're cheap. And that's the view from both management and the Board. That's what we're going to pursue here for the next couple quarters.

Yes. Okay, now that sounds good. Thanks, gents.

Thanks, George.

Thank you.

Thank you. We have a question from Nick Giles from B. Riley Securities. Please go ahead.

Thanks so much for taking my follow-up. And I think it -- I think Nate might have asked this earlier, but I did just want to clarify the idling cost of $36 million. These are added back and reflected to -- in your $123 million of adjusted EBITDA. I'm just looking at the bridge in the Met segment and seeing a roughly negative $20 million. And I would have assumed that this didn't include the idling cost.

Yes. So Nick, on the idling cost, let me just clarify. So if you look at the Metallurgical cash cost of $91 million, right? Then it is the -- idling cost is added back to reflect it appropriately that's the cash cost, right? But when you look at the EBITDA, we are not adding it back into the EBITDA. So hypothetically, if you were to add that back your EBITDA would be higher than the $123 million we reported. Does that clarify it?

That is extremely helpful, Mitesh. I really appreciate that.

Okay.

Thanks again, guys.

Thanks Nick.

Thank you. So there are no further questions at this time. So I will now turn the call over to Mr. Deck Slone. Please continue.

Well, you got Paul instead of Deck. So anyway, look, I want to thank you again for your interest in Core and participating in the call today. Look, these are exciting times for the company. In the current market environment, clearly indicates why, we did this merger. Because at this point in the market diversity, mass, low cost operations and a strong balance sheet, they do matter and will matter more in this market going forward. Stay safe and healthy everyone. And we look forward to reporting to the group in early August. Thank you.