The coal and land are well suited to support potential increased exports through the Pacific Northwest. Youngs Creek is a permitted but undeveloped surface mine project in the Northern Powder River Basin (PRB) located 13 miles north of Sheridan, Wyo., and just south of Cloud Peak Energy’s Spring Creek mine.
“The significant coal and surface assets we acquired position Cloud Peak Energy well for future growth in our Asian exports as additional terminal capacity becomes available. The location of the coal and surface lands close to the Spring Creek mine and its rail spur should reduce development costs and allow future operating synergies to be realized. The quality of the coal is similar to that of our Spring Creek mine and offers lower sodium levels to further meet the needs of our customers,” said Colin Marshall, president and CEO, Cloud Peak Energy.
Of the approximately 450 million tons of in-place coal, the undeveloped Youngs Creek mine permits cover 291 million recoverable tons of low sulfur, high Btu subbituminous coal. Of this permitted coal, 267 million tons benefit from a royalty rate of 8% payable to CONSOL and Chevron which is below the normal 12.5% of gross proceeds payable on federal coal.
The 38,800 acres of land includes Youngs Creek surface to the south and extends to the border with Cloud Peak Energy’s Spring Creek mine to the north. The property also extends onto the Crow Indian Reservation to the west and abuts the Decker mine, of which Cloud Peak Energy owns 50%, to the east.
“This coal has the same geographic and quality advantages over Southern PRB coal as the Spring Creek mine, which have allowed us to make the majority of PRB export sales in recent years. We now have a large asset base and lots of options as to how we develop our Northern PRB operations to meet future export and domestic coal demand,” said Marshall.
Future development timing and production levels are expected to depend largely on the availability of additional export terminal capacity on the West Coast and continued strong Asian demand for thermal coal. The mine would be served exclusively by the BNSF railroad. Because Cloud Peak Energy has not completed detailed mine development planning, the acquired coal is not expected to be reported as reserves at year-end 2012.