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Cloud Peak earnings fall on weak coal demand

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World Coal,

Powder River Basin (PRB) coal miner, Cloud Peak Energy, has announced earnings of US$39 million in 3Q15 – down from US$45.7 million in 3Q14 as shipments fall from 21.5 million short t last year to 20.8 million short t. Average price per short ton was US$9.15/short t, falling from US$10.44/short t in 3Q14.

Despite the fall in shipments, 3Q15 was the strongest of the year so far for Cloud Peak as rail performance remained steady and customers took their contracted volumes.

“Overall, power demand for the first nine months is slightly higher compared to 2014,” said the company. “But competition from low priced natural gas and increased renewable generation capacity continues to reduce coal consumption.”

Looking forward, the company expects natural gas prices, as well as weather-related demand, to remain key in determining coal demand.

“Currently, US thermal demand for the nine months ended 30 September 2015 from electric generators is estimated to be down 67 million short t from 654 million short t compared to the same period in 2014,” the company said. However, shipments from the PRB – where the company has its mines – are only down 6 million short t, “which demonstrates the the PRB’s competitiveness even in this challenging market environment.”

Internationally, US coal producers continue to be disadvantaged by the strong US dollar when compared to producers in Australia and Indonesia. Cloud Peak will export 4 million short t through Westshore Terminal in Canada this year, a cut of 1.9 million short t on previously announced volumes.

If low prices continue in the seaborne thermal coal market, next year’s export volumes a likely to be lower again with the company saying it was in negotiations with its rail and port partners to reduce its contracted export volumes in 2016 and beyond.

“While the external environment continues to be challenging, we will maintain our focus to produce coal in a safe and efficient manner,” said Colin Marshall, President and CEO of Cloud Peak. “While we are not sure when prices will recover, we believe our low-cost operations will enable us to manage through these difficult times.”

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