Corner fireplaces are always huge problems for a furniture placement space plan. Just remove it.

There’s a lot of combustible material in that pic that is likely way too close to the heat source if you do keep it. Dig out the manufacturer’s requirements for distance to combustible materials. That wood framing may need to be metal, and all of that tacky beadboard wainscotting for sure needs to disappear, even if its a zero clearance unit.

The cheapest facing would be drywall, with a faux plaster finish. But, if you are going to do stone, or other cladding that has significant depth, that has to be factored into the framing surrounding it, when you reframe it. You cannot frame it for thin drywall, and then put on 3” of stone facing. All of the math on the depths has to work, and you have to design for the size and depth cladding material you want when you reframe it.