U.S. coal producer
Cloud Peak Energy Inc.
) received approval to start exploration and development work in
a coal mine located in Crow Indian Reservation. The U.S.
government wing, The Bureau of Indian Affairs ("BIA"), approved
the development of up to 1.4 billion tons of Northern Powder
River Basin ("NPRB") coal located in the Reservation area.
On Jan 24, 2013, Cloud Peak Energy and the Crow Tribe signed an
agreement and submitted it to BIA for final approval. Cloud Peak
paid $2.25 million to the Crow Tribe at the time of executing the
agreement and paid another $1.5 million after receiving the BIA
nod, as agreed previously.
Cloud Peak Energy will also make further annual payments to Crow
Tribe during the first five-year option period. The option
payment will come to $10 million, including the $3.75 million
paid earlier. The company will also pay $75,000 a year in
scholarships for the tribe beginning with the 2013-2014 academic
We believe this approval will allow the company to cater to the
ever increasing demand for coal in the Asian countries. This
reserve is located near its Spring Creek mine and Youngs Creek
Mining Company, LLC and CX Ranch properties. Close vicinity to
its other mines will help the company to develop and transport
the coal mined to the nearby ports.
Cloud Peak Energy expects the development of this mine to take 5
years and production to touch 10 million tons annually. Moreover,
the company is also developing a property in Young Creek situated
in the PRB. In fact, Cloud Peak Energy is a pure-play PRB coal
The PRB holds a significant volume of coal. As per a recent
report from U.S. Geological Survey, the states of Wyoming and
Montana in the PRB contain about 162 billion short tons (BST) of
recoverable coal. The report also says out of the total
recoverable coal, 25 BST is currently economically viable to
recover. We believe with the improvement in mining techniques a
larger portion of the reserves would be recovered at a cheaper
In 2012, Cloud Peak Energy exported nearly 4.4 million tons of
coal to Asian countries. The coal came from its Spring Creek
mine. For 2013, the company expects its coal exports to Asian
countries to touch 4.5 million tons.
We appreciate the company's decision to develop mining operations
in the PRB area. This in way will allow the company to meet
domestic as well as international demand for coal.
Cloud Peak Energy retains a Zacks Rank #3 (Hold). Other
companies in the industry worth considering are
Alliance Holdings GP L.P.
Alliance Resource Partners LP
Hallador Energy Company
). All of them presently hold a Zacks Rank #2 (Buy).
Gillette, Wyo-based Cloud Peak Energy Inc. through its
subsidiaries engages in coal mining operations in the PRB.
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