Cloud Peak Energy (NYSE: CLD) is looking to explore and potentially lease from Montana’s Crow Tribe up to 1.4 billion tons of additional reserves to the north and west of the recently-acquired Youngs Creek and CX Ranch coal reserves, Cloud Peak said in a Nov. 13 conference presentation.
The company has an exploration agreement and option agreement to lease up to 1.4 billion tons of in-place Northern PRB coal submitted to the Crow Tribal Legislature for requested approval. If approved by the Legislature, the Crow Tribe and Cloud Peak Energy will execute the agreements and Cloud Peak Energy will pay the tribe $2.25m. The executed agreements would then be submitted to the U.S. Department of the Interior for up to 180 days for review and requested approval by the Bureau of Indian Affairs. If approved by the government, Cloud Peak Energy will pay the tribe an additional $1.5m, the presentation noted.
A map in the presentation shows that this exploration area is to the north of the Youngs Creek coal reserves, which are just south of the state line in the Wyoming Powder River Basin and were obtained from CONSOL Energy (NYSE: CNX) and Chevron (NYSE: CVX). It is also west of the CX Ranch reserves in Montana, which were obtained from CONSOL. To the east of the CX Ranch reserves are Cloud Peak’s longtime West Decker and Spring Creek reserve holdings.
The Youngs Creek acquisition is a greenfield surface mine project seven miles south of Spring Creek. It has 450 million in-place tons, of which 291 million tons are included in an existing mining permit. This is a 9,220 Btu/lb, low-sulfur coal with a lower sodium content than Cloud Peak’s existing Spring Creek mine nearby. It is complementary to existing reserves of 311 million tons at Spring Creek. Youngs Creek is permitted at 6 million tons in 2015, increasing to 14 million tons by 2019, Cloud Peak said. Cloud Peak said both Youngs Creek and Spring Creek can produce coal that compete well on the growing export market for PRB coal.