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Cloud Peak Energy signs agreement to export coal through planned West Coast terminal

World Coal,

Cloud Peak Energy has signed an agreement with SSA Marine that provides it with an option for up to 16 million tpa of capacity through the planned dry bulk cargo Gateway Pacific Terminal at Cherry Point in Washington. The terminal would accommodate capesize vessels. Cloud Peak Energy’s option is exercisable following future permit completion for the terminal.

US coal to Asia

The Gateway Pacific terminal is intended to be capable of exporting up to 54 million tpa of commodities, including 48 million tpa of coal. Cloud Peak Energy’s potential share of capacity will depend upon the ultimate capacity of the terminal. Subsequent to receiving the required permits, SSA Marine anticipates approximately two years for construction. Commercial operation is currently estimated to commence in 2018.

“With up to 16 million tpa of potential capacity at SSA Marine’s capesize terminal, we are pleased to have completed the next step in furthering our export strategy,” said Colin Marshall, Cloud Peak Energy’s president and CEO. “In addition to our Spring Creek mine in the northern PRB, our Youngs Creek acquisition last year and recently announced option and exploration agreements with the Crow Tribe provide us multiple, long-term development options to meet anticipated Asian demand for our low sulphur coal.”

In a separate press release, the company also said it soon expected to have an option for up to 5 million tpa of capacity at Ambre Energy’s proposed Millennium Bulk terminal as part of the pending sale of its 50% interest in the Decker mine

2012 results

Cloud Peak Energy also announced its 2012 full-year results. Annual shipments totalled were 90.6 million t from the company’s three mines. Exports to Asia were 4.4 million t, down from 4.7 million t in 2011. EBITDA was down to US$ 338.8 million from US$ 351.7 million t in 2011.

“Given the challenging external environment in 2012, I am very pleased with the operational and financial performance of the company,” said Marshall. “Our operations have done a great job of controlling costs in a year when shipments varied significantly from quarter to quarter.”

The company expects relatively flat revenue in 2013 as it does not expect priced to increase. Mine costs are expected to increase, however, reducing 2013 earnings.

“We would have liked to have come into 2013 with a few more tons committed for future years, but the prices were such that additional contracting for 2014 and 2015 would not have been prudent in our view. We are optimistic that with normal winter weather that domestic utility stockpiles will come back into balance by the middle of the year, which should allow prices for PRB coal to rise. The very mild 2011/12 winter and low natural gas prices accelerated the trend we have been seeing of utilities reducing their forward contracting in the face of regulatory uncertainty and substituting low price natural gas when available. We believe that more utilities will be buying coal in-year, and if prices are economic, we will participate in that contracting. We will be responsive to our customers and the market and plan our costs and investments accordingly,” said Marshall. “While 2013 is likely to be a challenging year for US coal producers, I believe market conditions will improve through the year and that Cloud Peak Energy is well placed to prosper as they do, particularly in 2014.”

Adapted from press releases by Jonathan Rowland.

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