Montana coal mine deal aims to boost Asian exports

Staff Writer
Columbus CEO

BILLINGS, Mont. (AP) — 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 percent 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 percent 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.