Cloud Peak Energy

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Cloud Peak Energy is a spin off of the world's largest mining company, Rio Tinto.

Rio Tinto exits

In its 2009 Annual Report Rio Tinto stated that it held a 48.3% stake in Cloud Peak Energy and its directly owned mines.[1] Cloud Peak Energy also has a 50% stake in the Decker Coal Company, which operates the Decker Mine in Montana. (Rio Tinto's indirect stake in the Decker mine was 24.1%).[1]

However, in December 2010 Rio Tinto announced that it had succeeded in "100 per cent divestment of its equity holdings in Cloud Peak Energy Inc. through a fully exercised over allotment in connection with a recently announced secondary offering."[2] Cloud Peak Energy stated that the result of the divestment was that Cloud Peak Energy Resources LLC "is now a wholly owned subsidiary of Cloud Peak Energy Inc."[3]

Dow Jones reported that "Cloud Peak will use proceeds from the IPO [initial public offering] to buy 52 per cent of the Rio Tinto's assets it operates and Rio Tinto will own the rest." The wirte service also reported that early in November Standard & Poor's Ratings Services "assigned Cloud Peak a junk rating of BB minus, three steps below investment grade, citing its need for more reserves among potential risks."[4]

Company Background

In 2007 Rio Tinto announced that "as part of the Groupwide strategic review" it had decided to "explore options for the sale of some or all of Rio Tinto Energy America" (RTEA).[5] In August 2008 Rio Tinto announced that had filed a registration statement with the U.S. Securities and Exchange Commission (SEC) forshadowing a proposed initial public offering (IPO) of the common stock in Cloud Peak Energy. At the time Rio Tinto stated that CPE would comprise "most of the North American coal assets of Rio Tinto Energy America and that it expected to "make a final decision on whether to pursue a listing of the shares of Cloud Peak Energy or to pursue another form of divestment once these options have been more fully explored." (The lead underwriter for the IPO was Credit Suisse Securities.)[6]

In its August 2008 prospectus for its Initial Public Offering, Cloud Peak Energy stated that "we are the second largest producer of coal in the U.S. and in the Powder River Basin, or PRB, based on 2007 coal production. We operate some of the safest mines in the industry. According to data from the Mine Safety and Health Administration, or MSHA, in 2007 we had the lowest employee all injury incident rate among the 5 largest U.S. coal producing companies. We operate solely in the PRB, the lowest cost coal producing region of the major coal producing regions in the U.S., and operate three of the five largest coal mines in the region and in the U.S. Our operations include four wholly−owned surface coal mines, three of which are in Wyoming and one in Montana, and we own a 50.0% interest in another surface coal mine in Montana. We produce sub−bituminous steam coal with low sulfur content and sell our coal primarily to electric utilities. Steam coal is primarily consumed by electric utilities and industrial customers as fuel for electricity generation. In 2007, the coal we produced generated approximately 6.0% of the electricity produced in the U.S."[7]

CPE stated in its prospectus that "prior to the completion of this offering, various corporate reorganization transactions will be taken to separate certain Colorado−based coal, certain non−coal and other U.S. assets from Rio Tinto plc's western U.S. coal business. We will own Rio Tinto plc's western U.S. coal business except for the Colowyo coal mine in Colorado, which will remain with Rio Tinto plc."[7]

Operating mines

The float of Cloud Peak Energy resulted in it holding RTEA's five open cut coal mines in the Powder River Basin of Montana and Wyoming. These were:

Click on the locations shown on the map for mine details:

Loading map...

In May 2012 it was announced that Cloud Peak Energy was to face state and federal violations after blasters earlier in the month ignited an explosion that was more than three times its intended size.[9]

In June 2012 it was announced that Cloud Peak Energy purchased Chevron and Consol's Powder River Basin (PRB) assets for $300-million. It was reported that "of the purchase price, $195-million was allocated to the lease of about 450-million tons of in-place coal and $105-million to the purchase and lease of 38 800 acres of land."[10]

Cloud Peak Energy to ship more Powder River Basin coal to Asia

In June, 2011 Cloud Peak Energy signed a 10-year deal to ship basin coal to Asia from a port on Canada’s Pacific Coast. Cloud Peak Energy Inc. signed the deal with Westshore Terminals to ship coal through its Westshore Terminal in Vancouver, British Columbia. The company shipped 3.3 million tons of coal through the terminal to Asian customers in 2010.[11]

In July 2012 a new trade group alliance was formed and included the three largest coal mining companies in the West. The group, called Alliance for Northwest Jobs & Exports, rolled out a campaign with television, radio and print ads to support exporting coal from Northwest ports.

The group is made of up 22 members including coal terminal developers, railroads, business and union groups as well as the three largest mining companies in the Powder River Basin: Peabody Energy, Arch Coal and Cloud Peak Energy.[12]

Cloud Peak sues Ambre Energy

Ambre Energy was sued by Cloud Peak Energy in July 2012. In a lawsuit filed in U.S. District Court in Montana, the company alleged that Ambre's export plans to ship coal to Asian markets from the company's Decker Mine were developed without Cloud Peak's approval. The company is asking the court to remove Ambre as the mine's manager.[13]

Cloud Peak wins bid to expand Antelope mine

On June 3, 2011, Cloud Peak Energy placed a successful bid for the West Antelope II North Coal Tract, which was previously nominated by the company’s Antelope Coal Mine. The bid for the lease sale was $297.7 million, or approximately $0.85/ton, based on the Bureau of Land Management’s (BLM’s) estimate of 350 million mineable tons. The West Antelope II Lease by Application (LBA) is subject to pending legal challenges filed by environmental organizations against the BLM and the Secretary of the Interior.

President and CEO of CPE Colin Marshall said: “This tract is expected to more than double the reserves at the Antelope mine and, along with the additional coal within the State of Wyoming lease, add about 12 years of production.” At year-end 2010, the company’s Antelope mine had an estimated 252 million tons of coal reserves, and CPE had an estimated total reserve of 970 million tons of coal.[14]

On June 15, 2011, CPE successful bid for the West Antelope II South Coal Tract, which was previously nominated by the company’s Antelope mine. The Bureau of Land Management (BLM) estimates this tract contains approximately 56 million tons of mineable coal. CPE successfully won the lease sale with a bid of approximately $49.3 million, or $0.875/ton, based on the BLM’s estimate of 56 million mineable tons.[15]

Cloud Peak purchases untapped coal land from Youngs Creek Mining in Wyoming

In July 2012 Youngs Creek Mining company sold Cloud Peak Energy a $300 million parcel of undeveloped land near the Wyoming/Montana border that possessed a permit to extract coal.[16]

Cloud Peak and Crow tribe reach 1.4 billion ton coal deal

In July 2012 it was reported that Wyoming mining company Cloud Peak Energy reached a tentative option agreements to lease and mine an estimated 1.4 billion tons of coal on southeastern Montana's Crow Indian Reservation.

The reported deal will cover three coal deposits near Cloud Peak's existing Spring Creek mine near the Wyoming border in the Powder River Basin. The deal must be next be approved by the Crow Tribal Legislature and federal officials with the Department of Interior.[17]

Federal Court Rejects Challenge to 400-Million Ton Coal Lease in Wyoming’s Powder River Basin

On August 1, 2012 a Federal District court judge in Washington, D.C. ruled against environmental groups WildEarth Guardians, the Sierra Club and the Powder River Basin Resource Council’s challenge to the BLM's decision to lease more than 400 million tons of coal to Cloud Peak Energy, the current operator of the Antelope Coal Mine in Wyoming.

The case was the first in a series of lawsuits brought by the conservation groups over BLM’s coal leasing program in the Powder River Basin. The groups were disappointed with the decision but vowed to continue legal and other efforts to challenge BLM’s coal leases.[18]

Industry affiliations

Cloud Peak Energy is a member of the:

Contact details

Phone: Phone: 307 687 6000
Website:http://www.cloudpeakenergy.com

Articles and resources

References

  1. 1.0 1.1 Rio Tinto, 2009 Annual Report: Production & reserves: Group mines: Energy", Rio Tinto website, 2010.
  2. Rio Tinto, "Rio Tinto completes 100 per cent divestment of Cloud Peak Energy with fully exercised over allotment", Media Release, December 22, 2010.
  3. Cloud Peak Energy, "Cloud Peak Energy Inc. Announces Full Exercise of Over-Allotment Option by Underwriters in Secondary Offering of Common Stock on Behalf of Selling Shareholders", Media Release, December 21, 2010.
  4. Kathy Shwiff, "Rio Tinto spin-off Cloud Peak Energy IPO prices below expectations", The Australian, November 20, 2009.
  5. Rio Tinto, "Rio Tinto explores options to sell Rio Tinto Energy America", Media Release, November 8, 2007.
  6. Rio Tinto, "Filing of a Registration Statement by Cloud Peak Energy Inc. for a Proposed Initial Public Offering", Media Release, August 8, 2008.
  7. 7.0 7.1 Cloud Peak Energy, "General form of registration statement for all companies including face−amount certificate companies", Securities and Exchange Commission, August 8, 2008, page 7. (Large pdf)
  8. Cloud Peak Energy, "Cloud Peak Energy Inc. Announces Results for Full Year and Fourth Quarter 2009", Cloud Peak Energy website, March 16, 2010.
  9. "Mine faces state, federal fines for massive blast" Jeremy Pelzer Star-Tribune, May 22, 2012.
  10. "Cloud Peak buys Powder River Basin coal assets for $300m" Idéle Esterhuizen, Mining Weekly, July 2, 2012.
  11. "Cloud Peak Energy to send more Powder River Basin coal to Asia" Jeremy Fugleberg, Star-Tribune, June 15, 2011.
  12. "New pro-coal alliance will run television ads promoting coal export from the Northwest" Scott Learn, The Oregonian, July 26, 2012.
  13. "Lawsuit clouds Ambre Energy's plans to export coal from Columbia River ports" Scott Learn, The Oregonian, July 16, 2012.
  14. "CPE Successful Bidder for Latest PRB Tract" Coal Age, June 3, 2011.
  15. Lee Buchsbaum, "Cloud Peak Energy Prepares for the Long Run" Coal Age, June 24, 2011.
  16. "Undeveloped coal mine sold" Associated Press, July 5, 2012.
  17. "Cloud Peak, Crow Tribe reach 1.4B ton coal deal" Associated Press, July 25, 2012.
  18. "Federal Court Rejects Challenge to 400 Million Ton Coal Lease on Public Lands" EcoWatch, August 1, 2012.
  19. American Coal Council, "2011 Board of Directors", American Coal Council website, accessed July 2011.
  20. National Mining Association, "NMA Membership", National Mining Association website, accessed July 2011.
  21. American Legislative Exchange Council, Energy, Environment, and Agriculture Task Force Meeting 2010 States and Nation Policy Summit December 2, 2010 Meeting Minutes, organizational document, March 31, 2011, p. 43, obtained and released by Common Cause April 2012

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