Core Natural Resources - Earnings Call - Q4 2024

Transcript

Operator (participant)

Good morning, and thank you very much for your patience. Today we've had a few technical difficulties with the dial-in phone number for today's event. The issue transpired on the end of Cision, the provider, and we would like to give you phone numbers to dial in today if you do not choose to just listen through today's webcast. Those phone numbers, updated phone numbers, are 1-800-860-2442. Again, that's 800-860-2442, and alternate number is 412-858-4600. Thank you very much for your patience once again, and we want to welcome you to Core Natural Resources Inc Fourth Quarter 2024 Earnings Conference Call. All participants will be in a listen-only mode, and should you need assistance once you dial in, you may do so by pressing star, then zero for the operator. After today's presentation, there will be an opportunity to ask questions.

To ask a question at that time, you may press star then one on your touch-tone phone. Please note this event is being recorded. I would now like to turn the conference over to Deck Slone, Senior Vice President, Strategy. Please proceed.

Deck Slone (SVP of Strategy)

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 investor 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?

Paul Lang (CEO)

Thanks, Deck, and good morning, everyone. Welcome to the inaugural earnings call for Core Natural Resources. It's an exciting time for the team, and we're happy you could join us this morning. I'm pleased to report that Core is off to an exceptionally strong start across a wide range of key operating and financial priorities.

In the five weeks since the completion of the merger, the Core team has made tremendous progress in integrating the combined operating, marketing, and logistics portfolio into a cohesive, high-performing unit (a unit, I might add, that we view as unmatched in the global coal landscape), adopted a robust capital return framework heavily weighted towards share repurchases, announced board authorization for $1 billion in share repurchases in support of that framework, taken steps just in the first few weeks to lock in approximately one-third of indicated synergies at the midpoint of guidance, and resumed development work with continuous miners at Leer South nearly two months earlier than originally indicated. Now, let's delve a little further into the capital return framework, which is designed to reward shareholders for their strong, ongoing support and which the board views as a central tenet of the company's long-term value proposition.

The centerpiece of this framework is to target the return of 75% of free cash flow to shareholders, with the vast majority of that cash directed towards share repurchases, complemented by a small, sustaining quarterly dividend of $0.10 per share. We expect such purchases to be highly value-creating at current valuations. As for the small dividend, the board believes this component will ensure that the widest range of potential investors can participate in the core story, including those who require a dividend. In a strong show of confidence, the board has authorized a total of $1 billion in share repurchases in support of this new framework. I'd now like to spend a few moments on the Core team's strong progress right out of the gate in the area of synergy capture.

As you might imagine, delivering on the synergy potential of the merger ranks among our highest priorities in the early stages of the integration process. In just a few weeks' time, the team has already executed strategies that are expected to yield synergy-driven value creation of more than $40 million. As a reminder, we're projecting to capture between $110 million and $140 million per year in total savings. Mitesh will spend more time on the composition of these early wins, but let me assure you that we plan to remain sharply focused on delivering the previously advertised value in the most expeditious manner possible.

At the same time, let me reiterate that we believe there is more synergistic value to be created beyond the initially advertised numbers, via the sharing of best practices, as just one example, and the team's plan to pursue such incremental opportunities with an equivalent level of intensity as we move forward. Now, let's turn to the status of Leer South. As you're aware, the Leer South mine experienced a combustion event right around the time of the merger completion. Although disappointing, the most important aspect of this event was the fact that the Leer South team, in close collaboration with federal and state regulatory officials, prioritized the safety of the workforce in every step they took. On behalf of the Board and the entire senior management team, I commend everyone involved for their actions.

Once employee safety was assured, the Leer South team moved quickly to the next objective: protecting the long-term viability of the mine. Here, too, the team did a tremendous job, taking steps to ensure that the issue remained isolated to a small, previously mined area that was 300-500 ft behind the longwall face. The success of the operations team's efforts is evident in the currently projected timeline for the resumption of mining activities. On Monday, the Leer South team, again in close collaboration with federal and state regulators, safely re-entered the mine and resumed development work with continuous miners. As you will recall, we had indicated that this step could take as long as three months, so accomplishing this milestone in just over a month was clearly a significant step forward in this journey.

As for the timing of resuming longwall production, it is standard industry protocol to keep the area where the combustion occurred sealed and inert for a period of time. Even with this waiting period, however, and given the team's successful efforts to seal the affected area, we still fully expect to resume longwall mining by mid-year. It's also important to note that the team has assessed, via the deployment of infrared cameras and other remote monitoring activities, that the mine's longwall equipment was largely unaffected by the event. Before handing the call to Mitesh, I'd like to now spend a few moments on global coal market dynamics. As indicated, pricing is currently soft in each of our main market segments, which is to say global metallurgical and high-calorific value thermal coals. In fact, both API-2 and High-Vol A pricing are near three-year lows.

Importantly, however, that softness in the High-CV thermal market is counterbalanced by Core's already strong committed and priced position, which Mitesh will discuss in more detail shortly. Moreover, the U.S. domestic thermal market, a key secondary outlet for Core, has tightened somewhat in recent weeks in the wake of extremely cold temperatures. We estimate that generator stockpiles in the East are approaching target levels and, in select instances, have fallen into the critical zone, particularly at some merchant plants. This recent drawdown is creating opportunities for spot market sales and should translate into a stronger contract markets, contract season as the year progresses. Even in the Midwest, which is the primary market for our Powder River Basin segment and where stockpiles have perhaps been the most bloated, generators are cycling train sets more rapidly, which has led to healthier shipment levels early in the year.

As for coking coal markets, we believe that, despite the current weakness, the long-term market dynamics remain compelling. New blast furnace capacity continues to come online in Southeast Asia. Indian imports of seaborne coking coal were up an estimated 5% in 2024, and Chinese imports of seaborne coking coal increased 17 million tons in 2024, which acted to counterbalance the higher Chinese steel exports. The most significant reason for optimism, however, continues to be the supply side of the equation.

Aggregate production in three primary supply countries for high-quality seaborne coking coal (Australia, the United States, and Canada) remains around 40 million tons lower in 2024 than at peak levels of a decade ago, despite historically strong pricing across most of that timeframe. We expect such supply constraints, which are the function of both underinvestment and degradation and depletion of global reserve base, to support an increasingly positive supply-demand balance over time.

Moreover, currently depressed pricing levels are beginning to take a toll on smaller and higher-cost metallurgical producers, which should also precipitate a more constructive market environment down the road. Looking ahead, we're more confident than ever that Core's two world-class complementary operating segments, metallurgical coal and high-calorific thermal coal, create a unique and compelling opportunity for value creation and cash generation in the decades ahead. With its skilled workforce, strategic asset base, low-cost mining operations, expansive logistics network, tremendous synergy potential, and industry-leading sustainability practices, Core is exceptionally well-equipped to capitalize on what we view as a highly constructive and durable market environment for our products. With that, I'll now turn the call over to Mitesh for some additional detail on our financial outlook, ongoing progress on synergies, and continued efforts to optimize the value of our high-quality products. Mitesh?

Mitesh Thakkar (President and CFO)

Thank you, Paul, and good morning, everyone. Let me begin by providing an update on our sales book and some of our key marketing priorities, followed by our financial and synergy progress. With the macro backdrop that Paul provided, it is very clear that we are in a different market today than we have been throughout the past several years. We believe the diversity and scale of Core Natural Resources allow us to better manage these markets. Throughout the prepared remarks, you will hear me reference our future reporting segments: the metallurgical segment, which consists of the Leer, Leer South, Beckley, Mountain Laurel, and Itmann locations, High-CV thermal segment, which includes our Pennsylvania Mining Complex and the West Elk mine, and our Powder River Basin segment, which consists of our Black Thunder and Coal Creek mines. We have made strong contracting progress across all segments for 2025.

Our goal at Core is to create a solid base of revenue through our thermal contracted book while maintaining the potential to capture the upside pricing volatility in the met market. This was one of the main strategic rationales of the merger, as it allows us to opportunistically deploy capital in both challenging and robust markets. As we look forward, we have identified three focus areas for the combined product portfolio. First, we expect to further expand the reach of our products. Historically, both the PMC and Leer have been well-received by their respective customer bases, and now we have an opportunity to cross-sell these products by targeting the specific needs of each customer with a broader product portfolio. For instance, Bailey crossover metallurgical coal has already generated interest among current Leer customers. Similarly, we were recently able to sell some of the Beckley product to a legacy CONSOL customer.

Second, we expect to generate revenue uplift by blending different qualities of coal. We have now successfully sold a blend of thermal byproduct from our metallurgical segment with High-CV PMC thermal product and expanded the margins by double digits for the thermal byproduct. Third, we plan to optimize the utilization of our logistics assets. This includes operational improvements as well as rerouting of different coal qualities, which will allow us to operate more efficiently and, when advantageous, at higher capacity utilization. We still have a lot of work ahead of us, but we are very pleased with the progress made so far, and we are looking forward to creating more opportunities for the core product portfolio. Let's now segue to a brief update on the early progress we have made on the synergy front.

At the merger announcement, we guided to an average annual run rate of $110 million-$140 million of synergies within six to 18 months following close. As Paul mentioned, we are off to a solid start. Since the close of the merger about five weeks ago, we have already started to reduce duplicative public company costs, locking down favorable finance rates, working with our business partners on the procurement side, and kickstarting several synergy-focused work streams on the marketing side. We have already executed strategies that are expected to yield just over $40 million in synergies on an annualized run rate basis. Approximately 40% of this is expected to come from marketing, blending, and transportation, the majority of which have been achieved via the blending of different products in our portfolio, an example I covered earlier.

Approximately one-third of the synergy run rate comes from eliminating some overlapping positions at the corporate office. This number is expected to grow as we transition various systems and processes and build out the IT infrastructure to support the company. The remaining synergy run rate is split between procurement and financing costs. We have already started to see cost efficiencies as we work with our suppliers to create a mutually beneficial outcome. We are still in the early innings here, but we are looking forward to continuing to identify and execute on opportunities that create value for our shareholders. Now, let me provide a quick update on our financial results before providing our 2025 guidance and outlook. This morning, we reported Core's 2024 financial performance, which essentially are the results of the legacy CONSOL Energy on a stand-alone basis.

For the full year 2024, we reported net income of $286 million, or $9.61 per diluted share, adjusted EBITDA of $655 million, and free cash flow of $301 million. Our net income was impacted by certain one-time items such as pretax reserve of $68 million related to the indemnification of 1974 Pension Plan litigation. In conjunction with the merger closing earlier this year, we took advantage of the increased size and scale of CNR and upsized our revolving credit facility from $355 million to $600 million, extended the maturity into 2029, and reduced the interest rate by 75 basis points across the grid. We received overwhelming support from our existing banks and were able to add nine banks to the facility. Through this amendment, we have already demonstrated enhanced capital market access as a result of the merger. I would like to thank our banking partners for their continued support.

Moving forward, we intend to maintain our financial flexibility through a combination of strong liquidity and manageable debt levels. At the close of the merger, CNR had $590 million in cash and cash equivalents in short-term investment, plus approximately $100 million that was deployed towards the repurchase of Arch's tax-exempt West Virginia municipal bonds. Prior to the close of the merger, CONSOL opted to repurchase these bonds to preserve their tax-exempt status. This gives Core the ability to remarket these bonds in the tax-exempt muni market subject to market conditions. We are also considering a remarketing of our other tax-exempt muni bonds to potentially improve the collateral package and benefit from the scale and diversity of Core. Once completed, we expect to have approximately $300 million of debt on the balance sheet associated with these bonds. Now, let me provide our outlook for 2025.

Starting with High-CV thermal segment, we are expecting 29-31 million sales tons. We are approximately 80% contracted at the midpoint of our guidance range, inclusive of collateral tons at a projected price of between $61 and $63 per ton. Given the state of the met market and ongoing issues with tariffs, we expect the majority of the open tons to go into the industrial, brick, and domestic power gen markets. We expect our High-CV thermal average cash cost of coal sold to be $38-$40 per ton. The bottom end of our cost guidance captures the potential for deflation in key commodities as well as fixed cost leverage at the higher end of the sales volume range.

Conversely, the top end accounts for reduced tonnage or a stronger commodity market, which would be a net benefit to our cash margins but a potential headwind to our power and supply costs. For our metallurgical segment, we are introducing annual coking sales tonnage of 7.5-8 million tons, which excludes approximately 1.5 million tons of thermal byproduct in the metallurgical coal segment. On the committed tons that are priced, we are expecting $135.82 in average coal revenue per ton sold. On the metallurgical cash cost side, we expect an average cash cost of coal sold of $96-$100 per ton. Our metallurgical segment sales tonnage and cost guidance is highly dependent on the timing of normalized production at the Leer South longwall.

In the second half of the year, after the projected restart of Leer South, we expect cash cost for the metallurgical segment to be in the low $90 per ton range. For our PRB segment, on the sales front, we have approximately 37 million tons contracted and priced at an average coal revenue of approximately $14.78 per ton. On the cash cost side, we expect an average cash cost of coal sold per ton range of $13.75-$14.25. For 2025, we expect cash-based SG&A to be between $110 million-$125 million. Longer term, we expect cash-based SG&A to decrease to about $90 million when system integration is complete and merger synergies are fully realized.

Additionally, for 2025, we expect a merger-related cash outflow of approximately $100 million for expenses incurred before and after the closing of the merger and includes fees for legal and financial advisors, severance costs, and other non-recurring costs. Lastly, on the capital expenditures front, for 2025, we expect a range of $300 million-$330 million. In closing, I want to reiterate our commitment to our capital allocation framework, which continues to emphasize ensuring financial strength and flexibility through a combination of modest debt levels and strong liquidity while creating long-term value for our shareholders. Another key priority for us is ensuring appropriate levels of capital to ensure safe, compliant, and efficient operations of all our key assets. Given the progress that we have already made on these two priorities, we have better wherewithal to allocate our discretionary cash flow to shareholder returns, which Paul described in his opening remarks.

Although our near-term cash flow is impaired by the Leer South outage, we have built some excess cash throughout the merger process, and we expect to deploy some of that cash towards our capital return program. Our capital allocation is underpinned by our ability to generate robust free cash flow. 2025 is shaping up to be a challenging year with a weak commodity price backdrop and the combustion event at Leer South. Our priority for 2025 is to mitigate these impacts by safely and compliantly conducting our operations at the lowest possible cost while delivering on the synergy and revenue expansion potential that the Core platform offers. Operator, we are now ready to begin the Q&A session for our call. Could you please provide the instruction to our callers?

Operator (participant)

Thank you. We will now begin our Q&A session. To ask a question, you may press star, then one on your touch-tone phone. To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster, and the first question will be from Nathan Martin from The Benchmark. Please go ahead.

Nathan Martin (Analyst)

Thanks, operator. Good morning, everyone, and congratulations on completing the merger.

Paul Lang (CEO)

Thanks, Nate.

Mitesh Thakkar (President and CFO)

Thanks for joining.

Paul Lang (CEO)

Good morning.

Nathan Martin (Analyst)

So starting within the cooking coal segment, guidance sales of 7.5-8 million tons, could you guys give us any approximation of quality mix today after the combined companies, or is there a capture rate maybe versus the LC Benchmark price that you guys are targeting?

Bob Braithwaite (SVP of Marketing and Sales)

So on the mix, Nate, we have about 2 million tons, I'll call it, of our Low-Vol product, which is Beckley and Itmann. About a million tons of High-Vol B, and then the balance will be our Leer High-Vol A product. So of the 6.6 million tons we have sold, about a million and a half of that is staying domestic, 5.1 is export. And what we have sold today is 1.2 million tons of Low-Vol, 4.4 million tons of High-Vol A, and about a million tons of High-Vol B. So that gives us, call it, a million tons left to sell this year. A million to a million and a half, I'll say, and about 800,000 of that is Low-Vol, and the balance of that will be High-Vol.

Nathan Martin (Analyst)

All right. Very helpful, Bob. Appreciate that. Maybe while I have you too, could we get a breakdown of the committed and priced High CV thermal tons between export, domestic, etc.?

Bob Braithwaite (SVP of Marketing and Sales)

Yeah. So of the 24.6, about 21.6 of it is PAMC coal. And as you noticed, we gave a range in what we have in terms of pricing. I will tell you that in that 21.6, 4.2 million tons is linked to API-2. And then we have about 2.5 million tons linked to power, our power netback contracts. And then the balance, or 3 million tons, is our West Elk product. About 2.4 million is fixed price, and then the balance is about 600,000 tons. That's what's shown as unpriced, and that is all priced against the Newcastle index. And then the breakdown in total, I'll say, is 13 million is domestic and 11.6 is export.

Nathan Martin (Analyst)

Okay. A lot of numbers. Typing quickly, Bob. Appreciate it.

Bob Braithwaite (SVP of Marketing and Sales)

Sorry.

Nathan Martin (Analyst)

No, no worries. Very helpful. I guess taking a step back, guys, I don't really know, Paul, if you made direct comments on this in your prepared remarks or not. If I did, I apologize. But it'd be great to get your thoughts on how this current Chinese tariff on U.S. coal imports is impacting your business or how it could potentially impact your business. How many tons did the combined company sell into China in 2024? And then are you assuming any in your current guidance? Thanks.

Bob Braithwaite (SVP of Marketing and Sales)

So, Nate, at the time that the tariff was announced, Core had about eight vessels on the water, one which was Leer and the balance were PAMC. I can tell you that the customer that we sold the Leer cargo to continued to take that cargo to China. And then of the PAMC cargos, we do know of one, I think now two, that are being taken to China still. The balance have been diverted. Some have been diverted to India. We had one diverted to Egypt, one to Vietnam.

But I'll tell you, we only have cargoes booked through the end of the first quarter out of PAMC. Nothing for the balance of the year for Leer right now. And China has always been an opportunistic market for us, for both legacy Arch and legacy CONSOL now Core. So even though we moved 3 million tons of Bailey into China in 2024, that was very opportunistic. I will tell you that where petcoke prices are today, they're significantly higher than what they were last year. So India has opened up to us again, and prices we're yielding back for cargoes to India are pretty lucrative to us. I will tell you, though, that the domestic market is where the bright spot is. January power prices came in at over $66. We're seeing some high power prices here in February.

Inventories, as Paul mentioned, in some cases have been into critical type levels, and the team continues to receive calls almost on a daily basis for some additional loadings for Q1 and for the back half of the year for that matter, so although the tariff situation certainly moved the trade around, I will tell you that there's certainly enough demand out there today to cover the volumes that we were moving to China last year.

Paul Lang (CEO)

I was going to say, Nate, this reminds me of two or three years ago when the Chinese did the embargo on the Australian coals. I mean, it's disruptive. It's messy for a short period of time, but things tend to realign themselves fairly quickly, and I think that's what you're seeing here. Obviously, we'd rather not have the uncertainty, but that's where we're at. And what I suspect will happen is pretty much what Bob said. It'll rejigger itself, and the demand is still out there. The demand is strong. It's just the destinations are going to get mixed.

Deck Slone (SVP of Strategy)

And Nate, this is Deck. And I was just going to say something similar, exactly right, when Xi locked out sort of the Australian coking coal. You had a period of six months of messiness where trade flows got realigned, but within a very short period of time, not only had markets sort of been restored, but they actually went to sort of all-time highs, so not suggesting that's going to be the case here, but it is a bit potentially of a game of musical chairs, and so, look, we think we're really well equipped to redirect volumes to wherever the markets are. And if this means that other countries, that China is taking more volume from other countries and then we're filling the gaps, they're all good. That all works. But we don't view this as more than a short-term disruption in all likelihood.

Nathan Martin (Analyst)

Appreciate that, team. And then just one final one coming back to High-CV thermal segment. Your price per ton and your committed 24 million tons at $61-$63. What API-2 price does that assume? And is there any sensitivity we should keep in mind?

Bob Braithwaite (SVP of Marketing and Sales)

Yeah. I think two things, Nate. One, we're assuming right around $110 API-2 price. The sensitivity is about $0.13 per ton across the entire segment. But I also mentioned to you that we have our power netbacks modeled at the floor. So in January alone, there was about an $8 million uplift there.

In February, it looks like we'll receive EMA again. So when we put the pieces together, we kind of looked at, okay, what's kind of like our worst case, best case, and that's why we came up with the range of $61-$63.

Deck Slone (SVP of Strategy)

So, Nate, importantly, that we think that while, again, lots of moving parts, and Bob just laid that out, the $61-$63 feels comfortable in almost any scenario we can envision for those committed volumes. So we could be higher in that range, lower in that range, but we feel pretty good about that we're going to land somewhere there regardless of those moving parts. So, as you said, a lot of numbers, and Bob's a master of them. But I think as everyone else sort of thinks about it, we're trying to give that sort of tight range as to that's where we're likely to land.

Nathan Martin (Analyst)

Okay. Great. And Bob, just any way to think about a PJM West power price for us as we look at that business?

Bob Braithwaite (SVP of Marketing and Sales)

So when you start seeing power prices, I'll say, get above $40-$42, that's typically when we start seeing EMA. So, again, I mentioned we were like 66 and change for the month of January. February is off to a good start as well. So anything over $40, we start to see EMA.

Nathan Martin (Analyst)

All right. Great, guys. Really appreciate the time and help. Best of luck in 2025.

Bob Braithwaite (SVP of Marketing and Sales)

Thank you.

Deck Slone (SVP of Strategy)

Thanks, Nate.

Paul Lang (CEO)

Thanks, Nate.

Operator (participant)

And again, as a reminder, if you would like to ask a question, please press star, then one. The next question is from Nick Giles from B. Riley Securities. Please go ahead.

Bob Braithwaite (SVP of Marketing and Sales)

Hey, Nick.

Nick Giles (Analyst)

Thanks, operator. Good morning, everyone.

Deck Slone (SVP of Strategy)

Morning, Nick.

Bob Braithwaite (SVP of Marketing and Sales)

Morning, Nick.

Nick Giles (Analyst)

I wanted to start on the met cost side, targeting low 90s as you resume longwall mining in the second half. Should we think about this as a normalized target level going forward, or could there be some additional improvement, whether from a synergy perspective or just returning to steady state?

Paul Lang (CEO)

Look, I'll start off and let the others join in, but look, I think the low 90s on the back half of the year is a number that we felt pretty comfortable with. But I tell you, the last couple of weeks, as we've gone through this, as we've gone through combining the teams, I think, as I mentioned in my earlier comments, I think there are some additional synergies that we haven't picked up and that there's things that we're learning from each other, particularly on the longwalls, that I think will apply to both the legacy company's operations. And I feel fairly confident about where these things are going, and it's off to a good start.

Mitesh Thakkar (President and CFO)

Yeah. I'll also add, Nick, from a procurement standpoint, as you can imagine, prior to the merger of the two companies, there's a limited amount of information that we can share. So with that out of the way now, I think that bucket of the synergies is just starting to pick up. So as we go through that, I think the 2026 run rate would be interesting to see. But back half of 2025 is a good starting point, and hopefully we can do better from there.

Deck Slone (SVP of Strategy)

And one of the things we've tried to highlight here is that $110 million-$140 million of guidance on the synergies that we provided initially were numbers that a small group on one side and a small group on the other side were able to collaborate on and sort of identify. But now, sort of unleashing the power of the full teams, we're getting really encouraged by what we're seeing on best practices across a whole range. So obviously, continuous improvement and delivering on these synergies and then on the synergies on the other side of the ones that are identified is clearly the focus, and we believe we'll be able to do that.

That low $90 range obviously puts us in the first quartile in the U.S. It's a strong number. The guidance is the guidance, but do we believe we provide a number that we're confident in and can hit? We do.

Nick Giles (Analyst)

Guys, I appreciate all that color. Maybe next one, it's nice to see a successful reentry at Leer South. And you've maintained your guidance of resuming longwall mining by mid-year. And I was curious to what extent this might be an added level of conservatism or maybe said differently. Would a resumption by mid-year be more reflective at the midpoint or the low end of guidance? Thanks very much.

Paul Lang (CEO)

Yeah. Look, I guess I want to start off with really complimenting the team for the actions they took as well as the assistance we received from the state and federal officials. They did a great job not only protecting the people, but they also did an amazing job, it looks like, keeping the mine intact. When we first gave our guidance on January 14th or 15th about it was going to be typically it's about three months to get in, then about six months to get the longwall restarted.

That was based on not only our own experiences over the years on these things and what we'd seen others do in the last couple of years. The team, in the end, did an amazing job getting the first part of this done, which was to seal the small area behind the longwall that was where the combustion event occurred. Because of that, we got it sealed quickly, and it appears we minimized any damage to a large extent.

We were able to get the CM started back up Monday, which was an amazing accomplishment. As we look forward, what I wanted to do was keep our guidance mid-year simply because I know these things take the life of their own and they have. These aren't straight-line paths. Right now, things are lining up well. I feel good about where the mine is, but there's no sense saying we're ready to go a lot faster than we will be. We need to be methodical and get this done, and we need to be prepared when we start back up on the things that we're going to do to try and prevent anything like this in the future.

Deck Slone (SVP of Strategy)

And Nick, obviously, it's a collaboration with federal and state officials. That's going exceptionally well. They have been tremendously supportive, and it's been a great piece of teamwork to get us to where we are. But because of that, we don't want to be any more specific. It is a collaboration, but we feel really good about where we are today. And obviously, being where we are after just a month, and we've provided guidance, as you know, that it could take up to three months, does mean that things are moving along quite nicely.

Nick Giles (Analyst)

Thanks for that, and nice to hear. But one more, if I could. In the release, you noted an expectation for excess cash available for shareholder returns. And I was wondering if you could speak to potential magnitude or appetite to take advantage of the weakness here and maybe relate it. How should we think about a minimum cash balance given the larger platform?

Mitesh Thakkar (President and CFO)

Yep. So Nick, on the cash front, we target to keep net cash on hand given the outage at Leer and weak commodity price backdrop. With approximately $200 million of debt on our balance sheet, and any additional cash beyond our debt and reserves for short-term working capital events such as Leer South will be available for deployment. And we recognize that our shareholders have been patient through the merger process, so we'll take this pullback in our equity to put that cash to work. We'll fine-tune this further as we see improvement and progress on Leer South and commodity prices. The good news is that our thermal assets are generating free cash flow right now, which is one of the key strategic rationales for this merger.

We have a solid base of revenue through our thermal contract at Beckley, so while maintaining the potential to have the upside pricing volatility on the met market. So I think we'll be methodical about it, but we will put some of that cash to work.

Nick Giles (Analyst)

Mitesh, that's great to hear. Guys, I really appreciate all the color and continue to best of luck.

Mitesh Thakkar (President and CFO)

Thank you.

Deck Slone (SVP of Strategy)

Thank you.

Paul Lang (CEO)

Thanks so much, Nick.

Operator (participant)

Ladies and gentlemen, this concludes today's question-and-answer session. I would like to turn the call back to Paul Lang for any closing remarks.

Paul Lang (CEO)

As I stated at the outset, this is an exciting time for Core. We believe we've created a truly special company with tremendous potential and value creation. I couldn't be more pleased with the way the teams are working together and more encouraged with the urgency that everyone is approaching the synergies. I look forward to reporting to everybody in the coming months onto our progress, and thank you for your interest. Stay safe and healthy, everyone.

Operator (participant)

Thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.