Cloud Peak Energy reduces PRB coal forecast, strikes mine deal with Ambre Energy

Powder River Basin coal miner Cloud Peak Energy Inc. recently lowered its production forecast for the remainder of 2014 primarily due to rail service issues.

The company's three mines in the basin now are projected to produce between 83 million and 86 million tons of coal compared with a July 29 forecast of between 85 million and 89 million tons.

"Our earlier guidance ranges were dependent upon an improvement in rail performance through the end of the year. While we believe the rail performance issues are being addressed, the reality is that the improvements have not taken place at a sufficiently robust pace to allow us to maintain our previous guidance," said Cloud Peak President and Chief Executive Officer Colin Marshall in a press release. "In addition, in late August our Cordero Rojo Mine was impacted by a significant rain storm causing flooding and damage to some equipment, which will slow shipments and cause us to incur some additional costs."

Looking ahead to 2015 and 2016, the company anticipates annual coal shipments to range between 78 million and 84 million tons.

Meanwhile, Cloud Peak also entered into an agreement with Australian and U.S. thermal coal mining and export company Ambre Energy Ltd. to purchase its half interest in the Decker mine in Montana and other related assets.

The deal would give Ambre Energy full ownership of the Decker mine, which is served by BNSF Railway Co. and produces about 3 million metric tons of coal annually. The transaction is anticipated to close by year's end, subject to various terms and conditions.

The agreement also calls for Ambre Energy to grant Cloud Peak an option for up to 7 million metric tons of throughput capacity each year at the proposed Millennium Bulk Terminals coal export facility in Longview, Wash. Currently in the permitting stage, the facility would be 62 percent-owned by Ambre Energy and 38 percent-owned by Arch Coal.