Cloud Peak Energy (CPE) and Ambre Energy announced in early December that they have reached an agreement that would allow them to settle their differences over the Decker mine, located in Montana, near Sheridan, Wyoming. Ambre Energy will purchase CPE’s remaining 50% interest in the Decker mine and related assets, and assume all reclamation liabilities in a deal valued at more than $128 million. CPE will gain access to Ambre’s export capacity at Millennium Bulk Terminals.

The deal is expected to close quickly (first quarter of 2013) and is subject to certain conditions. Ambre Energy will replace CPE’s $70.7 million in outstanding reclamation and lease bonds for the Decker mine. This will give Ambre Energy 100% ownership of the Decker mine.

Upon completion of the transaction, Ambre Energy will also grant CPE an option for up to 5 million metric tons per year (mt/y) of export capacity at the proposed Millennium Bulk Terminals facility, which is currently in the permitting phase. (The facility is owned 62% by Ambre Energy and 38% by Arch Coal.) It is being developed in two stages. The first stage is planned to have capacity of 25 million mt/y with the second stage taking annual capacity to 44 million mt/y.

CPE’s options cover up to 2 million mt/y of Ambre’s share of the first phase and 3 million mt/y of its share of the second phase. CPE’s throughput capacity would have an initial term of 10 years, with four renewal options for five-year renewal terms.

In addition to the bond replacement, the deal also includes a A$57 million cash component, if paid by Ambre Energy by March 31, 2013. Alternatively, Ambre will issue a promissory note to Cloud Peak for A$64 million payable at a later date.

The companies also entered into other agreements related to mining activities at the Decker mine and at CPE’s adjacent Spring Creek mine and Youngs Creek development project. Mutual overstrip and ambient air quality cooperation agreements will facilitate each mine’s development of coal along the mines’ mutual boundaries. Overstrip lands allow each company to access their leased coal within designated areas for a variety of customary surface mining and incidental activities. Access for water pipelines and monitoring has also been agreed. The sale also includes transfer of more than 1,200 acres of land and grants of rail easements that will improve CPE’s potential rail access to the Youngs Creek project.

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