Cloud Peak Energy Inc.
) has received approvals from the Crow Tribal Legislature to
jointly work with the Crow Tribe of Indians. This sanction is
primarily based on the idea to obtain the exploration rights, and
options to lease and develop up to 1.4 billion tons of Northern
Powder River Basin ("NPRB") coal by the company. The operation is
located in Crow Indian Reservation of the southeast Montana.
Per the contract, Cloud Peak will get exploration along with
three options to lease three separate coal reserves in the Crow
Indian Reservation over an initial five-year term, with two
extension periods through 2035, if some conditions are fulfilled.
During the initial option period, the company intends to perform
exploration activities at the prospective coal tonnages.
The Crow Tribe of Indians is a federally-acknowledged Indian
tribe, having 13,000 members. This community occupies a 2.2
million acre Reservation in southeastern Montana.
During the Tribal approvals and execution of the agreements,
Cloud Peak will pay $2.25 million to the Crow Tribe of Indians.
Later, the company will pay another $1.5 million after receiving
approval from the Department of the Interior, and will
subsequently make additional annual payments of approximately $10
million, through the initial option period.
In addition, Cloud Peak will pay 8 - 15 cents per ton to the Crow
Tribe of Indians on the basis of the lease and coal deposits,
coal production taxes, and inflation and royalty rate
adjustments. The company will annually invest additional $50,000,
as scholarship, for the qualified Crow Tribal members.
As on September 30, 2012, Cloud Peak had cash balance of $185.5
million and its first nine months of 2012 cash flow from
operating activities were $202 million. The company's strong
financial position allows it to continue with inorganic growth
In the last one year, the company has completed a number of
acquisitions including purchase of Youngs Creek Mining Company,
LLC. As this new plant is located nearer to Cloud Peak's Spring
Creek mine and its newly acquired Youngs Creek Mining Company,
LLC and CX Ranch assets, enabling the company to optimize its
mine development activities in the region and will subsequently
strengthen its footprint in NPRB.
We consider the company's recent transactions as a positive move
for its future growth. These factors will reinforce the company's
holdings in the PRB and meet the increase in demands of coal for
both domestic and international customers. At the same time, this
agreement will create new employment opportunities for the local
people, which will consequently improve economic condition of the
However, impacts of the environmental regulations will increase
the company's costs. In addition, uncertainty associated with the
company's agreement in the NPRB and risks to hedging programs are
a matter of concern.
Like its peer
Alliance Resource Partners LP
), Cloud Peak Energy Inc. also has a short-term Zacks Rank #3
Gillette, Wyoming-based Cloud Peak Energy Inc. through its
subsidiaries engages in coal mining operations in the PRB. The
company produces and sells sub-bituminous thermal coal with low
sulfur content, primarily to electric utilities.
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