JOHANNESBURG (miningweekly.com) – US coal miner Cloud Peak Energy said on Monday that it had acquired the Powder River Basin (PRB) assets from Chevron and Consol Energy for $300-million.
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.
The PRB assets included Youngs Creek Mining Company and CX Ranch, both of which were 50% owned by Chevron and Consol Energy, and additional related properties in and around Sheridan, Wyoming.
Cloud Peak stated that the coal and land were well suited to support potential increased exports through the Pacific Northwest.
“The significant coal and surface assets we acquired position Cloud Peak Energy well for future growth in our Asian exports as additional terminal capacity becomes available. The location of the coal and surface lands close to the Spring Creek mine and its rail spur should reduce development costs and allow future operating synergies to be realized. The quality of the coal is similar to that of our Spring Creek mine and offers lower sodium levels to further meet the needs of our customers,” Cloud Peak Energy president and CEO Colin Marshall said.
Of the estimated 450-million tons of in-place coal, the undeveloped Youngs Creek mine permitted over 291-million recoverable tons of low-sulfur, high-btu sub-bituminous coal. Of this permitted coal, 267-million tons benefited from a royalty rate of 8% payable to Consol and Chevron, which was below the normal 12.5% of gross proceeds payable on federal coal.
“This coal has the same geographic and quality advantages over Southern PRB coal as the Spring Creek mine, which has allowed us to make the majority of PRB export sales in recent years. We now have a large asset base and lots of options as to how we develop our Northern PRB operations to meet future export and domestic coal demand,” Marshall added.
Future development timing and production levels were expected to depend largely on the availability of additional export terminal capacity on the West Coast and continued strong Asian demand for thermal coal.
The mine would be served exclusively by the Burlington Northern Santa Fe Railway. As Cloud Peak Energy had not completed detailed mine development planning, the acquired coal was not expected to be reported as reserves at year-end 2012.
Meanwhile, New York-listed Consol chairperson and CEO Brett Harvey commented that the transaction brought Consol's asset divestitures for 2012 to $224-million to date.
"Since the 2010 acquisition of the Dominion Appalachian gas assets, Consol Energy has been able to pull value forward and focus on its near-term opportunity set. As a result, we have been organically growing our coal and gas businesses in Appalachia, while divesting properties that are more naturally suited to others,” he stated.
Consol would receive $170-million for the assets and planned to deploy the cash towards its 2012 capital expenditure programme, which included growth and maintenance projects.