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Cloud Peak and Westshore amend throughput agreement

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World Coal,

US coal company, Cloud Peak Energy, and Canadian port, Westshore Terminals, have amended their throughput agreement to eliminate both parties’ volume obligations for the period 2016 – 2018.

Under the amended agreement, Cloud Peak Energy is to make an upfront payment to Westshore and then quarterly payments from 2016 – 2018 in lieu of the previous take-or-pay commitments. The original throughput agreement remains place from 2018 through to 2024.

“Westshore is a critical part of our effort to build a viable Asian export business,” said Colin Marshall, President and CEO of Cloud Peak. “We value our strong relationship with Westshore and appreciate their willingness to work with us in recognition of extremely depressed international prices.”

As a result of the revised agreement, Westshore expects its 2016 throughput to drop to 26 million t from its original forecast of 30 million t.

Should Cloud Peak decide to ship coal to the export market in the period covered by the amended agreement, the terms and conditions would be agreed on an ad hoc basis with Westshore, the terminal said in a press statement.

If export shipments do not occur, production volumes at Cloud Peak’s Spring Creek mine will be reduced.

The mining company also said it was in negotiations with rail company, BNSF, on potential modifications to its rail take-or-pay agreements.

Despite the current downturn, Cloud Peak remained positive on its long-term plans to export coal to Asia, said Marshall, “as oversupplies of seaborne thermal coal are rationalsed.

Cloud Peak Energy owns three opencast mines in the Power River Basin: the Antelope and Cordero Rojo mines in Wyoming and Spring Creek mine in Montana. It recently announced a fall in earnings in 3Q15 on the back of weaker US demand and a fall in forecast exports of 1.9 million short t.

US coal exports have been hit by a strong US dollar against other producer currencies – particularly the Australian dollar and Indonesian rupiah.

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