Coal Age

DEC 2012

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news Southern Coal Recalls and Hires Appalachian Miners Southern Coal Corp. announced massive call backs and hiring of miners in Southwest Virginia, Southern West Virginia and Eastern Kentucky. Over the last month, the company has worked with several customers to secure coal orders to save jobs as well as reopen mines closed earlier this year. Southern Coal has entered into a multi-year agreement with one of the nation's largest utility providers, American Electric Power (AEP). Jim and Jay Justice, owners of Southern Coal, confirmed that they have been in constant negotiation with AEP officials to save jobs and restart the mines. "AEP is pleased to play a role in supporting economic development in Southwest Virginia, Southern West Virginia and Eastern Kentucky," said Nicholas K. Akins, president and CEO, AEP. "We believe it is important to maintain a diversified fuel mix for power generation, and coal needs to continue to be a part of that mix. This project will not only provide a secure source of reasonably priced fuel for our power plants, but it also will help fuel economic growth throughout Southwest Virginia, Southern West Virginia and Eastern Kentucky." "This effort will save 500 miners jobs, and another 650 new miners will be hired as well," said Virginia Governor Bob McDonnell. "That is great news for those miners, their families and our Commonwealth, as well as our neighboring states of West Virginia and Kentucky." ± B R E A K I N G Peabody Decides to Close Willow Lake Peabody Energy's Willow Lake underground mine near Equality in Saline County, Ill., was in a state of flux in early December. Peabody announced plans to permanently close the N E W S Cloud Peak Energy Sells Decker to Ambre Energy Cloud Peak Energy (CPE) and Ambre Energy Ltd. 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, Wyo. Ambre Energy will purchase CPE's remaining 50% interest in the Decker mine and related assets and assume all reclamation liabilities in 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 (mtpy) of export capacity at the proposed Millennium Bulk Terminals facility, which is (owned 62% by Ambre Energy and 38% by Arch Coal) currently in the permitting phase. It is being developed in two stages. The first stage is planned to have capacity of 25 million mtpy with the second stage taking annual capacity to 44 million mtpy. 6 www.coalage.com "The number of jobs saved and created by this multi-year agreement will benefit our region for generations to come," said Kentucky Governor Steve Beshear. "We wouldn't be here without the commitment of AEP and its ongoing support of the coal industry and economic development growth." "America is the greatest nation the world has ever known, and that nation runs on coal," said West Virginia Governor Earl Ray Tomblin. "The commitment from the Justice Family, Southern Coal and AEP not only mean 1,700 jobs for our regionbut it also will have a tremendous impact on continued economic growth in the surrounding tri-state communities." In a prepared statement, Jim and Jay Justice said: "We are so happy to be able to save the jobs, especially at this time of the year. We hope this will make the holidays a little better for those effected." Based in Roanoke, Va., Southern Coal will employ more than 1,700 people directly, and produce 9 million tons in 2013 from mines in Virginia, Kentucky, West Virginia, Tennessee and Alabama. CPE's options cover up to 2 million mtpy of Ambre's share of the first phase and 3 million mtpy 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. Remaining terms of these transactions were not disclosed. December 2012

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