By Lee Buchsbaum, Associate Editor & Photographer
Establishing a new identity in the West, Cloud Peak Energy (CPE) successfully completed an initial public offering and it mined almost 100 million tons in 2010. CPE routinely refers to itself as the only pure PRB play, meaning all of its operations are large surface mines located in the Powder River Basin that extends from Wyoming into Montana. The company is focused on moving massive amounts of coal and overburden very efficiently. It was one of the first PRB miners to export sub-bituminous coal to customers in Asia and in 2011 that slice of the CPE portfolio could build to nearly 4 million tons.
Cloud Peak Energy operates three mines: Spring Creek in southeast Montana, Cordero Rojo south of Gillette, Wyo., and the Antelope mine, which is the southern-most mine in the PRB coalfield. Along with its partner, Level 3 Communications, CPE also has a 50% non-operating interest in the Decker (MT) mine.
Throughout its mines, CPE uses a mixture of draglines and truck/shovel fleets to ensure operating flexibility. To mine coal, CPE uses several P&H 2300 and 2800 shovels. For overburden removal, CPE relies predominately on six draglines and a large P&H shovel fleet: three P&H 4100s at Antelope, a pair of 2800s at Cordero Rojo and several 2300s at Spring Creek. CPE is also preparing to put into service a higher capacity Bucyrus shovel at Spring Creek.
Its largest mine in terms of production, Cordero Rojo is a combination of what was once two different operations: the original Cordero mine and the Caballo Rojo mine. Shipping more than 38.5 million tons in 2010, Cordero has two rail loadout loops, with two silos at the former Caballo Rojo operation and five silos and a large storage barn at the former Cordero mine. The combined mine has three draglines, large covered storage and silo capacity and the ability to load several trains simultaneously.
Of Cloud Peak’s two southern PRB operations, Antelope is the furthest south of all the PRB mines. Using three large shovels, one dragline and a host of other equipment, Antelope’s production has been steadily trending higher over the decade and in 2010 its employees mined a record 35.9 million tons.
Planned Maintenance, Centralized Dispatch Control
At the company’s Cordero Rojo mine, CPE operates a large rebuild center. “We can rebuild heavy iron, be it a truck bed, dozer side frames, dragline buckets, coal and overburden dippers,” said Gary Rivenes, executive vice president and COO. “By having our own large rebuild center, we can lower our cost per ton. About the only thing we won’t rebuild on most pieces of equipment is the engine.”
CPE recently implemented a fuel management system that tracks consumption at the Cordero Rojo mine. After fuel is hauled to the mine, it tracks how it gets distributed around the site. “We’re able to measure exactly how much fuel each piece of equipment burned per shift. The system enables us to make better decisions. We are teaching operators that idling equipment is a waste. The object is not to hold fuel burn to minimum. On a dozer for example, the more fuel it burns in a shift, the more productive it was. With high fuel prices, we should know where all of it is going,” said Rivenes.
CPE also developed a condition monitoring system to intercept potentially catastrophic failures on equipment allowing for extended component life and significant cost savings over time. As part of the company’s maintenance strategy, CPE monitors its fleets for excessive vibration. “If we detect improper vibration, it will most likely lead to a catastrophic failure down the road. With this system, we can detect a looming problem, shut down the machine before it gets worse, and, in a planned manner, remove the vibration. We can do the same thing with excessive heat. We also perform oil analysis. If problems are detected, we know before something catastrophic happens. We’ve realized how vital it is to identify maintenance issues and trends as they are occurring. Then you can schedule repairs and plan when to take your gear down. Catastrophic failures can be costly. Plus, we have to scramble to get everything put back together. Instead, most of the time, we are in control,” said Rivenes.
Inside the Gillette office complex, CPE operates a sophisticated company-wide centralized dispatch and monitoring center. Installed almost four years ago, centralization helps CPE monitor conditions and operations from one point. Each mobile piece of equipment operating at CPE’s mines is connected via wireless hot spots and monitored via computer console. “We have on board almost every piece of equipment, a computer and a GPS system. Linked via Ethernet, we can connect the equipment together and we can bounce signals from transmitter to repeater to create a mesh throughout our mines. Each GPS component on each piece of equipment updates at roughly 10 times per second enabling us to create instant detailed mine maps as we go,” said Jim Long, manager of CPE’s mine monitoring and control group.
Generally CPE has three dispatchers who use voice over Internet protocol (VoIP) to communicate with operators on the in-cab radios. Though overseen by human eyes, CPE’s centralized computer dispatches most of its equipment. “On their in-cab screen, operators get an assignment of where to go and what to pick up. This system manages all of the material they have, where we want it dumped and what’s traveling where. The system knows the length and grade of each of our roads, as well as the time it should take each truck to traverse its assigned route,” said Long.
Cloud Peak’s GPS system is accurate down to a centimeter. It also helps tell dragline and mobile equipment operators where to place spoils and how to shape them. “One of the things an operator sees on their screen is a cross section of what a particular pit looks like in real time. From inside the cab, you can see where that spoil is so it’s not going to slough back in the pit or be undercut. A dragline operator can place his bucket on the edge of the spoil and see how we have designed that spoil pile so he can build it exactly as we want. It’s also measuring what it weighs. With dragline buckets, you’re concerned with weight. You want to take the maximum amount, but you don’t want to overload it because you don’t want to damage the rig,” said Long.
The system also creates and stores data points throughout each mine. “If you can imagine a data point every meter for the whole site of the mine, we have an elevation for each one of those points. We can enter that data into our system and create a simulation of what the actual topography looks like currently,” said Long. Using the same system, Long’s team also has the ability to create a 3-D map of any of the mines at any precise date going back several years.
Management can access the system from remote locations at any time. “You can see each truck, each piece of equipment, who’s operating it, and get a sense of what each person is doing. You can also see the tonnage that the mine sites ran as well as coal quality. From here in Gillette we can set blend rates for our coals as well as ensure that we’re delivering coal to our silos at the optimum rates,” said Long.
CPE Cements Long-term Export Deal
Shrewdly taking advantage of the market, in 2008 CPE began supplying Asian customers via Vancouver’s Westshore Terminal. In 2010, CPE exported more than 3 million tons from Westshore, all of which was mined at the Spring Creek operation.
Continuing into the first quarter of 2011, Asian export shipments were up approximately 12% to 887,000 tons year -on-year. “Demand from our customers continues to be strong,” said Colin Marshall, president and CEO. Cloud Peak continues to export PRB coal mostly through Westshore with some tonnage being moved out of the more northerly Ridley Terminal in Prince Rupert, B.C.
“Though most of it’s going to the West Coast through Westshore, we’re trying some shipments out of Ridley. It’s
obviously longer and more costly as much of that route is through the Canadian Rockies. Westshore is a bigger opportunity for us,” said Rivenes. CPE is estimating total 2011 export shipments could be around 4 million tons.
On June 14, 2011, CPE announced it had agreed with Westshore Terminals on terms for the shipment of coal through Westshore for a period of 10 years. Though the details of the agreement are not public, it will commence in 2013 when the current contract ends. This will allow CPE to retain a long-term position at one of the largest West Coast coal terminals in North America.
The Spring Creek mine, located in the northern PRB just over the border in Montana, produced more than 19 million tons of premium (9,350 Btu/lb) product in 2010. The export tonnage has become “a nice addition to our facility. It’s allowed us to do some expansion,” said Rivenes. With the mine’s more northerly location, Spring Creek “has a transportation advantage and the calorific value of the coal is higher. As far as exporting coal from some of our other mines, that’s not a big play for us. At this time, we’re focusing our export opportunities at Spring Creek,” said Rivenes. CPE blends a small amount of Antelope’s coal with Spring Creek’s to bring down the sodium content of the exported coal.
Antelope Mine Turns 25, Sets a Production Record
Though coal mining began on what is now the Antelope mine almost a century ago, large-scale surface mining commenced at Antelope in 1985 when the mine extracted just over 2 million tons. Rio Tinto Energy acquired the operation in 1993 and steadily increased production throughout the years. In 2010, the first full year of production as CPE, Antelope produced a record 35.9 million tons.
With more than 252 million tons of proven and probable reserves as of December 31, 2010 (not including the newly awarded Federal tracts), Antelope mines from three separate pits. Typical mining methods include cast blasting, production dozing, dragline stripping and truck-shovel operations. “Being on the southern end of the basin, we have some of the best quality coal. We’re low cost and high quality. We’re the first mine coming into the Basin from the south which gives us a rail transportation advantage. It’s easier to get the trains in here than trying to work all the way through the rest of the congested PRB Joint Line,” said Steve Cowan, general manager, Antelope mine.
One of Antelope’s major challenges is the general lack of raw coal storage. However, even with the one rail loop and two silos, the mine is still producing almost as much tonnage as the better-equipped Cordero Rojo. “We don’t have a coal barn. We only have about 27,000 tons of storage between the two silos,” said Cowan. Key to Antelope’s success is getting coal into trains. “We have to have a steady stream of trains cycling through the loadout, otherwise we fill up in about four hours. If we have to shift our operations away from coal production and loading, it’s so many coal tons an hour that we are not able to get back,” said Cowan.
On its busy rail loop, Antelope has two dedicated inbound tracks, two dedicated outbound tracks, and there’s a fifth track that can switch between inbound and outbound. “We can actually get three trains in here on an empty cycle system. The silos are in line with each other so normally when we run it, we flood load the first silo and top off the train with the second silo,” said Cowan. The feed rate out of the silo allows them to load a train in approximately an hour and a half.
Antelope is one of the few mines in the PRB with split seams. Though the Anderson and Canyon seams are roughly of the same coal quality, the amount of interburden varies from area to area from 0- to 30-ft to between 90- to 100-ft. To access the coal and remove the over and interburdens, the mine has a mixed fleet of mobile equipment and the one Marion 8200 dragline. For overburden removal, Antelope uses three P&H 4100 XPB or XPC shovels and a P&H 2300 shovel. The newer XPB and XPC shovels came on site starting in 2004 and the last one was commissioned in 2009. It also uses two P&H 2300 coal shovels, two LeTourneau 1850 loaders and several large excavators. The haulage fleet includes 26 Komatsu 830E 240-ton trucks and 13 Komatsu 930E 340-ton trucks.
Antelope has two different coal crusher systems. The smaller West Conveyor system which conveys from the West flows coal at 3,000 tons per hour (tph). The larger East Conveyor system is capable of 5,500 tph conveyed on a 72-inch belt line. Normally the East system reports to Silo No. 2, and the West system reports to Silo No. 1, “but we can flip-flop coal back and forth as needed. Our crusher is set to a minus 3-inch product,” said Cowan. Between the two systems, Antelope can run coal into the silos at about 7,000 tph. “We can crush enough coal to load the next train in about the same amount of time it takes us to load one,” said Cowan.
On average coal travels roughly 2.5 miles from pit to crusher depending on which pit the coal was extracted from. However, “if we’re mining out of the SMA in the west pit, the SMA crusher does not have the capacity to handle a lot of production, so we have to haul it off to the other crusher,” said Cowan.
The NEMA pit is Antelope’s dragline pit. “We’ll do pre-strip with our truck-shovel fleet on the inside and ends of the cut. Usually we use one of the smaller shovels, but sometimes we’ll bring a 4100 over. But this is strictly our dragline pit. The dragline stays here. In the early 1990s, this area was designed as a dragline pit. We haven’t changed it since,” said David Hamlin, manager of production.
The Antelope Mine Successfully Bids on Two New Tracts
On June 15, 2011, CPE successful bid for the West Antelope II South Coal Tract, which was previously nominated by the company’s Antelope mine. The Bureau of Land Management (BLM) estimates this tract contains approximately 56 million tons of mineable coal. Not including the new LBA, at year-end 2010, the company’s Antelope mine had an estimated 252 million tons of coal reserves, and CPE had an estimated total reserve of 970 million tons of coal.
CPE successfully won the lease sale with a bid of approximately $49.3 million, or $0.875/ton, based on the BLM’s estimate of 56 million mineable tons. The company submitted a payment for approximately $9.8 million, which is the first of five equal payments for the federal coal lease. The BLM typically awards the lease within several months after selecting a winning bidder. Like all coal related projects anymore, the West Antelope II Lease by Application (LBA) is subject to pending legal challenges filed by certain environmental organizations against the BLM and the Secretary of the Interior.
A month earlier, on May 11, 2011, CPE was the successful bidder for the West Antelope II North Coal Tract, which the BLM estimates contains approximately 350 million tons of mineable coal. “We’re very pleased with our acquisition of the West Antelope II South Coal Tract. Together with our recent successful bid for the West Antelope II North Coal Tract, these tracts are expected to more than double the reserves at the Antelope mine and, along with the additional coal within an existing State of Wyoming lease near our Antelope mine, add more than 12 years of production,” said Marshall.
The new mining areas at Antelope are not expected to be much different than current mining areas other than the strip ratio does climb at a steady pace. Both tracts contain coal of roughly the same quality as most of the coal mined at Antelope, with a calorific value that ranges between 8,800 to 8,900 Btu/lb.
Safety and Environmental Excellence
A very safe and productive mine, with more than 545 employees, in May, Antelope celebrated a milestone—6 million man hours without a single lost-time accident. With a record of excellence going back to 2000, Antelope won the prestigious Sentinel of Safety Award for a Large Surface Coal Mine. In 2007-2008, while still part of Rio Tinto, Antelope received the Rio Tinto’s Chief Executives Safety Award two years in a row. In addition, in 2008 and 2009, the mine earned both the Wyoming Governor’s Safety Award for Safety and the State Mine Inspector’s Award for Safety.
Going back to 2003, Antelope has also received numerous awards for various environmental achievements. In 2003, it won awards from the Wyoming Department of Environmental Quality, Wyoming Game & Fish Department and the National Office of Surface Mining for its leadership in prairie dog relocation. In 2009, the mine was honored by the Wyoming Game and Fish Department for accomplishments in Mountain Plover habitat restoration. In 2010, it was also awarded the National Excellence in Surface Mining and Reclamation Award from the Office of Surface Mining, the National Mining Association and the Wyoming Game and Fish Department for shrub development on reclaimed lands establishing wildlife habitat.
“The mountain plover bird needs the bare ground the prairie dogs create to survive on. They have a symbiotic relationship we help to sustain,” said Cowan. Overall, 32% of Antelope’s disturbed land has been reclaimed at this point (8,484 acres disturbed with 2,744 acres reclaimed).
“That is seeded, it’s not just regraded,” said Kyle Wendtland, senior environmental engineer.
Capitalizing on the strength of this great group of operations, which have immense mining experience, and launching the IPO, CPE has rebranded itself successfully. The company has quickly positioned itself as one of the leaders in the PRB and a star among U.S. coal producers.