Under the deal Ambre Energy will assume all reclamation and other Decker liabilities and replace Cloud Peak’s $US66.7 million ($A71.4 million) outstanding reclamation and lease bonds.
Cloud Peak has an option for up to 7 million tonnes per annum through Ambre’s majority-owned, proposed Millennium Bulk Terminals facility on the US Pacific Northwest coast.
Ambre owns 62% of the port facility, which is in the permitting phase, with the remainder held by Arch Coal.
The facility is being developed in two stages with the first to have a 25Mtpa throughput and the next phase to take annual capacity to 44Mt.
Cloud Peak’s options cover up to 3Mtpa of Ambre’s share of the first stage and 4Mtpa of the second.
The Decker mine is located in Montana’s Big Horn County in the northwest Powder River Basin.
Decker has produced about 300Mt of coal since operations began in the 1970s. It produces about 3Mtpa at the moment.
The coal is being sold to the US domestic market and the mine is serviced by BNSF railways.
Cloud Peak CEO and president Colin Marshall said the agreement positioned both companies to meet anticipated future growth in Asian thermal coal demand.
“We look forward to completing the transaction in the near future and, longer term, to shipping our low sulphur Spring Creek coal to Asian markets through the Millennium Bulk Terminals facility.”
Ambre Energy North America CEO Everett King said the transaction was positive for both companies.
“Decker mine has a sizeable resource and reserve base, produces some of the highest energy coal in the PRB and has the benefit of extensive infrastructure including two rail load-outs and rail connections to existing and proposed west coast export terminals.
“The mine is geographically well positioned for Asian markets via export through the US Pacific Northwest.
“As well as building new port infrastructure, Ambre will now also be able to guarantee the supply of high quality US coal to customers in Korea, Japan and the Asia Pacific region from its own mining operations.”
On the financial front, Cloud Peak has reduced its coal shipment tonnes for its three owned and operated mines to between 83 million short tons and 86Mt, compared to its earlier guidance of 85Mt to 89Mt.
It also downgraded its earnings before interest, tax, depreciation and amortisation for 2014 from the $180-210 million range to a $170-200 million range.
Marshall said the company’s earlier guidance ranges were dependent on an improvement in rail performance through the end of the year.
“While we believe the rail performance issues are being addressed, the reality is that the improvements have not taken place at a sufficiently robust pace to allow us to maintain our previous guidance.
“In addition, in late August our Cordero Rojo mine was impacted by a significant rain storm, causing flooding and damage to some equipment, which will slow shipments and cause us to incur some additional costs.
“Accordingly we are updating our adjusted EBITDA and shipment guidance ranges to reflect these impacts.”
The company is also likely bidding farewell to its chief financial officer and executive vice-president Michael Barrett, who is planning to relocate his family back to Australia and is expected to resign from Cloud Peak by the end of the first quarter of 2015.
Barrett, who joined Cloud Peak from Rio Tinto Energy America, had also held a business development role with Rio Tinto Iron Ore.
