Core Natural Resources, Inc. · NYSE:CNR
Core Natural Resources — CONSOL Mining — Investor Presentation (November 2017)
41 slides from Core Natural Resources's investor presentation, Nov 6, 2017
Slide 1: CONSOL Mining Corp Investor Presentation
November 2017 CONSOL Mining Corp Investor Presentation Exhibit 99.1
Slide 2: Disclaimer
Disclaimer This presentation contains statements, estimates and projections which are forward-looking statements (as defined in Section 21E of the Securities Exchange Act of 1934, as amended). Statements that are not historical are forward-looking, and include, without limitation, statements regardi
Slide 3: Disclaimer (cont'd)
Disclaimer (cont’d) This presentation includes unaudited “non-GAAP financial measures” as defined in Regulation G under the Securities Exchange Act of 1934, including EBITDA, Adjusted EBITDA, Bank EBITDA and Free Cash Flow. CONSOL Energy Inc. and CONSOL Mining Corporation believe that the presentati
Slide 4: Introduction
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Slide 5: CMC Management Presenters
CMC Management Presenters Jimmy BrockChief Executive Officer David Khani Executive VP and Chief Financial Officer Jim McCaffrey Senior VP-Coal Marketing Mitesh ThakkarDirector – Finance and Investor Relations
Slide 6: Creation of a New, World-class Coal Company
Creation of a New, World-class Coal Company Created through the spin-off of CONSOL Energy’s (“CEI”) coal business (“CONSOL Mining Corp” or “CMC”) and a distribution of CMC common stock to CEI shareholders 1) Foundation is the premier US mining complex, Pennsylvania Mining Complex (“PAMC”) ~90% econo
Slide 7: Pennsylvania Mining Complex Overview
Pennsylvania Mining Complex Overview Source:CONSOL Mining Corp. management, ABB Velocity Suite, EIA Note:Data shown on a 100% basis for PAMC (1)For the fiscal year period ending and as of 12/31/2016 (2) Represent the average of power plant deliveries for the 36 months ending 6/30/17 per EIA / ABB Ve
Slide 8: Differentiated and Sustainable Coal Story with Significant Upside Potential
Differentiated and Sustainable Coal Story with Significant Upside Potential The premier U.S. coal mining complex with a proven track record of operational excellence 1 Significant existing presence and optionality in both the thermal and met export markets through our wholly owned Baltimore Marine T
Slide 9: The Premier U.S. Coal Mining Complex
The Premier U.S. Coal Mining Complex Largest underground coal reserve base in the US(1) Leading 2016A NAPP cash margin per ton(3) U.S. mines International mines Source:CONSOL Mining Corp. management, Mine Safety and Health Administration (“MSHA”), Wood Mackenzie, ABB Velocity Suite, EIA, and Argus M
Slide 10: Well-capitalized, Highly Efficient Longwall Operations
Well-capitalized, Highly Efficient Longwall Operations Historical total capital investments(1) ($ in millions) Source: CONSOL Mining Corp. management, ABB Velocity Suite, and MSHA (1)Includes expansion and improvement projects as well as maintenance capital investments (2)Figures represented in $ pe
Slide 11: Low-cost Production Sustains Margins and Provides Flexibility Through the Cycle
Low-cost Production Sustains Margins and Provides Flexibility Through the Cycle 1st quartile cost position in NAPP (2016) PAMC ($ per ton) 38.9% Cash margin % 34.9% 41.7% 40.2% 37.9% 31.1% 33.9% 37.4% 38.6% 35.0% ($ per ton) Century (Murray) Harrison County (Murray) Monongalia (Murray) Ohio County (
Slide 12: Experienced Management Team Focused on Safety, Compliance and Financial Discipline
Experienced Management Team Focused on Safety, Compliance and Financial Discipline 4299100.0% 4164100.0% Key performance results Significant expertise owning, developing, and managing coal mines Effectively reduced operating costs per ton sold by 19% from Q1 2015-Q2 2017 Strong focus on achieving an
Slide 13: Multi-pronged PAMC Marketing Strategy
Maximize sales to established customer base of rail-served power plants in the Eastern U.S., with a focus on top-performing environmentally-controlled plants Place approximately 2.0 – 2.5 million tons per annum in the seaborne met coal market Selectively place remaining tonnage in opportunities (dom
Slide 14: Highly-diversified Portfolio Provides Volume Stability and Multiple Paths to Upside
In 2016, the Company sold PAMC coal to 38 domestic power plants located in 18 states, and to thermal and metallurgical end-users located across four continents Highly-diversified Portfolio Provides Volume Stability and Multiple Paths to Upside 2016A Export Met: 26.1 22.9 24.6 2016A Domestic Thermal:
Slide 15: Well-established Diversified Blue Chip Customer Base Minimizes Market Risk
Market cap: $52.3bn Baa2 / BBB+ Market cap: $19.8bn Baa1 / BBB+ Well-established Diversified Blue Chip Customer Base Minimizes Market Risk Average capacity factor (weighted by capacity) Blue-chip customers(1) Market cap: $61.8bn Baa1 / A- Market cap: $52.4bn Baa2 / A- Private - / - Private B1 / B+ S
Slide 16: Proven Track Record of Growing Domestic Thermal Market Share
CMC has achieved a 20% point increase in market share at its top 15 customer plants since 2011, largely by displacing other NAPP and CAPP producers, with more room to grow Proven Track Record of Growing Domestic Thermal Market Share at Targeted Customer Plants Provide steady demand for >50 mm tons o
Slide 17: Minimal Impact from Announced Power Plant Retirements on NAPP Rail Coal Demand
Minimal Impact from Announced Power Plant Retirements on NAPP Rail Coal Demand Source: CONSOL Mining Corp. management, EIA, ABB Velocity Suite, EPA Includes all plants that took delivery of NAPP rail coal in 2016 Based on 2016 NAPP rail market share and average of 2015-2016 coal consumption In 2016,
Slide 18: Significant Opportunities in Improving Export Markets
Significant Opportunities in Improving Export Markets Historically, exports (thermal and crossover met) have averaged approximately 20% of annual sales volume Strong committed sales base for 2018 allows for selective placing of remaining tons to maximize FOB mine realizations Export sales provide si
Slide 19: Excellent Access to Transportation Infrastructure Provides Global Reach
Excellent Access to Transportation Infrastructure Provides Global Reach Eastern U.S. coal regions and points of export(1) Dual-served railroad access Source: CONSOL Mining Corp. management (1)Represents estimated ocean/rail rates to port terminals, exclusive of terminaling charges 4 PAMC
Slide 20: 100% Owned, Strategically Situated Port to Access Export Markets
100% Owned, Strategically Situated Port to Access Export Markets Overview Coal export terminal strategically located in Baltimore, MD 15.0 million tons per year throughput capacity 1.1 million tons coal storage yard capacity Sole East Coast coal export terminal served by two railroads Opened for thr
Slide 21: Highly Competitive with Natural Gas Today
Highly Competitive with Natural Gas Today Source:ABB Velocity Suite, NYMEX, Coaldesk, EIA Thermal coal prices have significantly rebounded due to improved natural gas prices Strong burn / Inventory drawdown Inventory imbalance Gas-implied equilibrium price Coal Share of U.S. generation vs. natural g
Slide 22: Compelling Cost Position vs. Appalachian E&P Producers
CONSOL Mining Total Cash Costs Build-Up vs. Appalachian E&P Producers and Other US Basins(1) Compelling Cost Position vs. Appalachian E&P Producers Source:Fully Loaded Production Costs for CONSOL Mining Corp. and E&P producers are from CONSOL Mining Corp.’s Form 10 and KLR Group, respectively; the H
Slide 23: Limited Exposure to Natural Gas Basis Differential, with Improving Outlook
Limited Exposure to Natural Gas Basis Differential, with Improving Outlook Growing natural gas exports and industrial demand support stronger gas prices and pull gas from electric power generation Basis differentials may improve beyond current expectations due to overbuild of pipeline projects out o
Slide 24: Compelling Industry Backdrop with Global Coal Demand on the Rise
Compelling Industry Backdrop with Global Coal Demand on the Rise Global Coal Demand by Industry Source:Clarksons Plateau Securities 6 5.8 5.8 5.8 5.9 5.9 5.9 6.0 6.1 6.1 6.2 6.2 6.2 6.2 6.3 6.3
Slide 25: Multi-year Underinvestment in the Coal Sector
Global Coal Capex Multi-year Underinvestment in the Coal Sector ($ in billions) Source:Company filings and Wood Mackenzie Note: Wood Mackenzie excludes data from China and Africa 2017E capex is expected to be only 38% of peak capex in 2011 Wood Mackenzie expects spending to remain at low levels thro
Slide 26: NAPP Production Declining as Mines Continue to Come Offline
NAPP Active Mine Count Trend NAPP Production Trend US Active Mine Count Trend US Production Trend NAPP Production Declining as Mines Continue to Come Offline (million tons) (million tons) Source:Stifel compilation of MSHA Data Note: 2017A figures are annualized based on 1H 2017 actual figures Deplet
Slide 27: Multiple Paths to Additional Value Creation as a New Standalone Entity
Multiple Paths to Additional Value Creation as a New Standalone Entity 7 Ability to pull multiple levers for value creation through prudent capital allocation and monetization of over 1 billion tons of undeveloped reserves Debottlenecking opportunities and Fines Coal Recovery project to improve the
Slide 28: Extensive, High-quality Reserve Base
Source: CONSOL Mining Corp. management Note: Coal reserves represent clean tons Undeveloped reserve holdings 4 Marshall Marion Braxton Wyoming Itmann Mine Coal reserves: ~26 million tons Pocahontas 3 Seam Low-vol met coal Birch Mine Coal reserves: ~117 million tons Coalburg / Lower Kittanning Seam T
Slide 29: Summary of Financial Policy
Summary of Financial Policy Deleveraging through debt repayment with free cash flow and EBITDA expansion Primary use of free cash flow will be used to de-lever the balance sheet in the near- and medium-term(1) LT incentive compensation of executives expected to be tied to leverage metrics, B/S stren
Slide 30: Exceptional cash generation throughout the cycle
Source:CONSOL Mining Corp. management and CEI’s historical SEC filings PAMC Adjusted EBITDA is a non-GAAP financial measure. Please see the Appendix for a reconciliation to earnings before income taxes Committed volumes for PAMC are as of October 9, 2017 and include any optional tons that the Compan
Slide 31: Well-capitalized Balance Sheet at Time of the Spin-off
Well-capitalized Balance Sheet at Time of the Spin-off Includes CNXC Senior Secured First Lien R/C Facility and capital leases Adjusted EBITDA is a non-GAAP financial measure. Please see the Appendix for a reconciliation to net income Includes $153 million of cash, $100MM A/R Securitization Facility
Slide 32: Concluding Remarks
Concluding Remarks Highly-experienced, proven management team with the vision and skills to optimize this world-class portfolio Significant existing presence and optionality in both the thermal and met export markets through our wholly owned Baltimore Marine Terminal Highly competitive with natural
Slide 33: Appendix
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Slide 34: CMC Organizational Structure Overview
CMC Organizational Structure Overview CONSOL Mining Corp will be comprised of the following: ~90% economic ownership and full operational control of the PAMC, consisting of: 75% undivided interest in PAMC ~60% LP ownership and 100% GP ownership in CNX Coal Resources LP (“CNXC”), which owns the remai
Slide 35: Key Facts of Spin-off
Key facts Distribution company CNX Resources Corp. (NYSE: CNX) “RemainCo” Distributed company CONSOL Energy, Inc. (NYSE: CEIX) “SpinCo” Distributed securities 100% CEIX common shares Shares distributed ~29 million Distribution ratio 1 share of CEIX stock for every 8 shares of CNX stock Date of when
Slide 36: Industrial Growth and Easing Regulations Support Improved Fundamentals for Coal
Industrial Growth and Easing Regulations Support Improved Fundamentals for Coal Growing natural gas exports and industrial demand support stronger gas prices and pull gas from electric power generation Electricity use continues to increase driven by resurgence in industrial demand Source:EIA annual
Slide 37: NAPP has had Less Supply / Demand Imbalance than Other Basins
NAPP has had Less Supply / Demand Imbalance than Other Basins During Recent Downturn Source: ABB Velocity Suite (MSHA data) and Wood Mackenzie (1)Peak production per Wood Mackenzie (2)Calculated with peak year of 2014 (3)Illustrative pricing data based on prompt month prices reported by Coaldesk LLC
Slide 38: Significant legacy liability reductions over past three years
Significant legacy liability reductions over past three years Divestitures drove substantial reduction in legacy liabilities in 2016 Cash payments related to legacy liabilities are predictable and declining over time Considerable tax benefits associated with legacy liability payments Legacy liabilit
Slide 39: Strong Financial Track Record
Strong Financial Track Record PAMC Production (100% Basis) & Capacity Utilization(1) PF Adjusted EBITDA - Capex (million tons) ($ in millions) CMC PF Adjusted EBITDA & Capex(2) ($ in millions) Capacity utilization based on PAMC annual production capacity of 28.5mm tons; 2014 capacity utilization is
Slide 40: CMC EBITDA Reconciliation
CMC EBITDA Reconciliation OK to use reconciliation thru Bank EBITDA. Will be lower than assumed
Slide 41: PAMC Adjusted EBITDA reconciliation
PAMC Adjusted EBITDA reconciliation ($mm)
CONSOL Mining — Investor Presentation (November 2017) on 6ix