The Canadian Press - ONLINE EDITION

Coal mine deal aims to boost US exports to Asia to make up for weak domestic demand

  • Print

BILLINGS, Mont. - Coal companies announced an agreement Thursday to consolidate ownership of a Montana mine in a deal aimed at boosting exports of the fuel to Asia through ports on the U.S. West Coast.

Under terms of the deal, Wyoming-based Cloud Peak Energy would give up its 50 per cent stake in the Decker Mine to co-owner Ambre Energy of Australia.

Ambre would take over liability for $67 million in reclamation and lease bonds for the mine. Cloud Peak gains the option to move almost 8 million tons of coal annually through a port proposed by Ambre in Longview, Washington.

The deal is expected to close later this year.

Ambre, Cloud Peak and other companies want to increase coal shipments from the Mountain West to Asia as domestic demand falters. But that goal has so far eluded the industry, as proposals for new export terminals in Washington and Oregon run into strong resistance from regulators and environmentalists, prompting some projects to be dropped.

U.S. coal exports are forecast to drop below 100 million tons in 2014 after hitting a record 125 million tons in 2012, according to the U.S. Energy Information Administration.

An early version of the Decker mine deal had Ambre also paying Cloud Peak $64 million in cash. The payment was not included in the final agreement.

That suggests privately-held Ambre was able to negotiate a significant discount for a mine with production costs up to five times greater than those of some competing mines, according to court documents filed by Cloud Peak in a 2012 dispute with Ambre over how the mine was being run.

Ambre spokeswoman Liz Fuller declined to explain the change in terms.

By selling Decker, Cloud Peak will avoid losses of $3 million to $5 million annually, according to a Thursday company disclosure to the U.S. Securities and Exchange Commission.

Cloud Peak shares on the New York Stock Exchange rose briefly on Thursday's announcement but finished the day unchanged at $14.23.

A deal on the 120-worker Decker mine has been in the works since 2012. Negotiations hit a roadblock last year when Ambre could not come up with financing to cover the reclamation and lease bonds.

Cloud Peak President Colin Marshall said in a statement Thursday that the deal with Ambre positions both companies to meet future growth in Asian markets for so-called thermal coal that is burned to generate electricity.

Ambre Energy North America Chief Executive Officer Everett King hailed the deal as "a significant step" in the company's ambitions to develop the export market.

"As well as building new port infrastructure, Ambre will now also be able to guarantee the supply of high-quality U.S. coal to customers in Korea, Japan and the Asia Pacific region from its own mining operations," King said.

Regulators last month rejected a proposal for a second Ambre-backed coal port along the Columbia River in Oregon. The Oregon Department of State Lands said the terminal would interfere with a longstanding fishery in the state's waters.

Fuller said an appeal of the rejection is likely.

In 2011, the privately-held Ambre bought 50 per cent stakes in Decker and a second mine, Wyoming's Black Butte, which it owns with Anadarko Petroleum. But a year later, Decker laid off 59 employees — more than one-third of its workforce.

The number of workers has since rebounded somewhat. Still, last year's 3.1 million tons mined from Decker considerably lagged the roughly 10 million tons annually in prior years.

Ambre racked up losses of more than $124 million from 2005 through 2012, according to the Sightline Institute, a Seattle-based environmental think-tank .

Fact Check

Fact Check

Have you found an error, or know of something we’ve missed in one of our stories?
Please use the form below and let us know.

* Required
  • Please post the headline of the story or the title of the video with the error.

  • Please post exactly what was wrong with the story.

  • Please indicate your source for the correct information.

  • Yes

    No

  • This will only be used to contact you if we have a question about your submission, it will not be used to identify you or be published.

  • Cancel

Having problems with the form?

Contact Us Directly
  • Print

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

Have Your Say

New to commenting? Check out our Frequently Asked Questions.

Have Your Say

Comments are open to Winnipeg Free Press print or e-edition subscribers only. why?

Have Your Say

Comments are open to Winnipeg Free Press Subscribers only. why?

The Winnipeg Free Press does not necessarily endorse any of the views posted. By submitting your comment, you agree to our Terms and Conditions. These terms were revised effective April 16, 2010.

letters

Make text: Larger | Smaller

LATEST VIDEO

Exclusive architectural tour of CMHR with Antoine Predock

View more like this

Photo Store Gallery

  • May 22, 2012 - 120522  - Westminster United Church photographed Tuesday May 22, 2012 .  John Woods / Winnipeg Free Press
  • Marc Gallant/Winnipeg Free Press. Gardening Column- Assiniboine Park English Garden. July 19, 2002.

View More Gallery Photos

Poll

Do you plan on attending any of the CMHR opening weekend events? (select all that apply)

View Results

View Related Story

Ads by Google